<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended JUNE 30, 1998
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
------- -------
COMMISSION FILE NUMBER 0-27288
-----------
EAGLE USA AIRFREIGHT, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
TEXAS 76-0094895
- -------------------------------------------------------------- ---------------------------------------
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification Number)
</TABLE>
15350 VICKERY DRIVE, HOUSTON, TEXAS 77032
(281) 618-3100
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices, Including Registrant's Zip Code,
and Telephone Number, Including Area Code)
NONE
- --------------------------------------------------------------------------------
Former Name, Former Address and former Fiscal Year, if Changed Since Last Report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
The number of shares of the registrant's common stock as of July 31, 1998:
19,078,112 shares.
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EAGLE USA AIRFREIGHT, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheet as of
June 30, 1998 (unaudited) and September 30, 1997 (audited) ................................................... 3
Condensed Consolidated Statement of Income for the Nine
Months ended June 30, 1998 and 1997 (unaudited) ........................................................... 4
Condensed Consolidated Statement of Income for the Three
Months ended June 30, 1998 and 1997 (unaudited) ........................................................... 5
Condensed Consolidated Statement of Cash Flows for
the Nine Months ended June 30, 1998 and 1997 (unaudited) ..................................................... 6
Condensed Consolidated Statement of Shareholders'
Equity for the Nine Months ended June 30, 1998 (unaudited) ................................................... 7
Notes to Condensed Consolidated Financial Statements (unaudited) .............................................. 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS .................................................................................. 10
PART II. OTHER INFORMATION ...................................................................................... 17
SIGNATURES........................................................................................................ 20
INDEX TO EXHIBITS................................................................................................. 21
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EAGLE USA AIRFREIGHT, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PAR VALUES)
<TABLE>
<CAPTION>
June 30, September 30,
1998 1997
(unaudited) (audited)
----------- -------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 33,880 $ 25,107
Short-term investments 14,076 2,679
Accounts receivable - trade, net 57,239 54,662
Prepaid expenses and other 4,837 4,557
-------- --------
Total current assets 110,032 87,005
Property and equipment, net 20,167 14,090
Other assets 10,104 5,776
-------- --------
$140,303 $106,871
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable - trade $ 4,687 $ 7,757
Accrued transportation costs 11,591 6,062
Accrued compensation and employee benefits 8,550 10,454
Other current liabilities 2,357 2,094
-------- --------
Total current liabilities 27,185 26,367
-------- --------
Long-term indebtedness
-------- --------
Shareholders' equity:
Preferred Stock, $0.001 par value, 10,000 shares
authorized
Common stock, $0.001 par value, 100,000 and 30,000
shares authorized, 19,063 and 18,210 shares issued 19 18
Additional paid-in capital 69,476 52,387
Retained earnings 43,623 28,099
-------- --------
113,118 80,504
-------- --------
$140,303 $106,871
======== ========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
3
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EAGLE USA AIRFREIGHT, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
---------------------
1998 1997
-------- --------
<S> <C> <C>
Revenues $295,239 $200,376
Cost of transportation 164,525 112,858
-------- --------
130,714 87,518
-------- --------
Operating expenses:
Personnel costs 69,071 46,084
Other selling, general and administrative expenses 37,758 23,859
-------- --------
106,829 69,943
-------- --------
Operating income 23,885 17,575
-------- --------
Interest and other income 1,259 1,348
Interest expense
-------- --------
Nonoperating income 1,259 1,348
-------- --------
Income before provision for income taxes 25,144 18,923
Provision for income taxes 9,620 7,357
-------- --------
Net income $ 15,524 $ 11,566
======== ========
Basic weighted average common shares outstanding 18,617 17,716
======== ========
Diluted weighted average common and common
equivalent shares outstanding 19,322 18,614
======== ========
Basic earnings per share (Note 2) $ 0.83 $ 0.65
======== ========
Diluted earnings per share (Note 2) $ 0.80 $ 0.62
======== ========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
4
<PAGE> 5
EAGLE USA AIRFREIGHT, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
---------------------
1998 1997
-------- --------
<S> <C> <C>
Revenues $107,050 $ 71,301
Cost of transportation 60,343 39,981
-------- --------
46,707 31,320
-------- --------
Operating expenses:
Personnel costs 24,135 16,911
Other selling, general and administrative expenses 14,100 8,057
-------- --------
38,235 24,968
-------- --------
Operating income 8,472 6,352
-------- --------
Interest and other income 486 374
Interest expense
-------- --------
Nonoperating income 486 374
-------- --------
Income before provision for income taxes 8,958 6,726
Provision for income taxes 3,313 2,622
-------- --------
Net income $ 5,645 $ 4,104
======== ========
Basic weighted average common shares outstanding 19,008 17,906
======== ========
Diluted weighted average common and common
equivalent shares outstanding 19,674 18,673
======== ========
Basic earnings per share (Note 2) $ 0.30 $ 0.23
======== ========
Diluted earnings per share (Note 2) $ 0.29 $ 0.22
======== ========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
5
<PAGE> 6
EAGLE USA AIRFREIGHT, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
----------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities $ 19,191 $ 1,504
-------- --------
Cash flows from investing activities:
Purchase of investments (13,897) (11,051)
Maturity of investments 2,500 4,281
Acquisition of property and equipment, net (8,081) (4,305)
Acquisitions, net of cash (2,988)
-------- --------
Net cash used by investing activities (22,466) (11,075)
-------- --------
Cash flows from financing activities:
Issuance of common stock, net of related costs 6,623 6,165
Offering fee paid by selling shareholder 375
Proceeds from exercise of stock options 5,425 869
Payments on shareholder distribution notes (635)
-------- --------
Net cash provided by financing activities 12,048 6,774
-------- --------
Net increase (decrease) in cash and cash equivalents 8,773 (2,797)
Cash and cash equivalents, beginning of period 25,107 26,696
-------- --------
Cash and cash equivalents, end of period $ 33,880 $ 23,899
======== ========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
6
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EAGLE USA AIRFREIGHT, INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1997 18,210 $ 18 $ 52,387 $ 28,099 $ 80,504
Issuance of Common Stock, net
of related costs (Note 1) 263 6,623 6,623
Issuance of Common Stock for
acquisition (Note 1) 28 750 750
Exercise of stock options 562 1 5,424 5,425
Tax benefit from exercise of stock
options 4,292 4,292
Net income 15,524 15,524
-------- -------- -------- -------- --------
Balance at June 30, 1998 19,063 $ 19 $ 69,476 $ 43,623 $113,118
======== ======== ======== ======== ========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
7
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EAGLE USA AIRFREIGHT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
The accompanying unaudited condensed consolidated financial statements
have been prepared by Eagle USA Airfreight, Inc. (the Company) in accordance
with the rules and regulations of the Securities and Exchange Commission (the
SEC) for interim financial statements and accordingly do not include all
information and footnotes required under generally accepted accounting
principles for complete financial statements. The financial statements have been
prepared in conformity with the accounting principles and practices disclosed
in, and should be read in conjunction with, the annual financial statements of
the Company included in the Company's Annual Report on Form 10-K (File No.
0-27288). In the opinion of management, these interim financial statements
contain all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the Company's financial position at June
30, 1998 and the results of its operations for the nine and three months ended
June 30, 1998 and 1997. Results of operations for the nine and three months
ended June 30, 1998 are not necessarily indicative of the results that may be
expected for the fiscal year ending September 30, 1998.
NOTE 1- ORGANIZATION, OPERATIONS, AND SIGNIFICANT ACCOUNTING POLICIES:
Eagle USA Airfreight, Inc. (the Company) was organized in 1984 to
provide ground and air freight forwarding services. The Company maintains
operating facilities throughout the United States, Mexico, Canada, and three
acquired facilities in the United Kingdom on April 14, 1998. The Company
operates in one principal industry segment.
In February 1997, the Company completed an underwritten secondary
public offering of 1,779,922 shares of its Common Stock at a price to the public
of $28.25 per share. The Company sold 232,164 of these shares, and the net
proceeds received by the Company after deducting underwriting discounts and
commissions were $6.2 million and will be used for general corporate purposes.
The Company did not receive any of the proceeds from the sale of the 1,547,758
of these shares sold by Daniel S. Swannie, a former executive officer and
director of the Company. Pursuant to an agreement between the Company and Mr.
Swannie entered into in connection with the offering, Mr. Swannie reimbursed the
Company for all of its out-of-pocket expenses incurred in connection with the
offering and made a payment to the Company of $375,000 for the Company's
estimated internal costs relating to the offering. The agreement also restricts
Mr. Swannie's ability to compete against the Company for a three-year term and
places certain other limitations on his ability to act against the interests of
the Company.
On September 19, 1997, the Company acquired the operating assets and
assumed certain liabilities of Michael Burton Enterprises, Inc., a
transportation and value-added logistics service provider in Columbus, Ohio. The
Company paid approximately $5.6 million in cash and issued 33,362 shares of
Common Stock in this transaction. The acquisition agreement also provides for
three contingent payments if certain annual sales goals are achieved. The
acquisition was accounted for as a purchase; accordingly, the purchase price was
allocated based on the estimated fair market value of the net assets acquired
with the excess being recorded as goodwill. The results of operations for the
acquired operations were included in the consolidated statement of income from
the acquisition date forward.
On January 30, 1998, the Company completed an underwritten secondary
public offering of 2,012,500 shares of its Common Stock at a price to the public
of $27.75 per share. The Company sold 262,500 of these shares and the net
proceeds received by the Company after deducting underwriting discounts and
commissions and offering expenses were approximately $6.6 million and will be
used for general corporate purposes. The Company did not receive any of the
proceeds from the sale of 1,750,000 of these shares sold by James R. Crane, the
Company's Chairman of the Board of Directors, President and Chief Executive
Officer.
8
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EAGLE USA AIRFREIGHT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
On April 3, 1998, the Company acquired substantially all of the
operating assets of Eagle Transfer, Inc. ("Eagle Companies"), a privately-held
international freight forwarder based in Miami, Florida. Eagle Companies was a
full-service forwarder whose services included customs clearing services, ocean
forwarding and airfreight import and export. Eagle Companies' revenues were
generated principally from Argentina, Brazil and Chile and other South American
countries. Sales for Eagle Companies totaled approximately $19.8 million in the
twelve-month period ended December 31, 1997. Despite the similarity in names,
the Company and Eagle Companies have had no prior affiliation. The acquisition
was accounted for as a purchase; accordingly, the purchase price was allocated
based on the estimated fair market value of the net assets acquired with the
excess being recorded as goodwill. The results of operations for the acquired
operations were included in the consolidated statement of income from the
acquisition date forward.
On April 14, 1998, the Company acquired all of the stock of S. Boardman
(Air Services) Limited and Subsidiaries (S. Boardman), a privately-held full
service forwarder based in London, England. S. Boardman serves the international
freight forwarding market from three facilities in London, Manchester and
Birmingham, England. For the twelve-month period ended March 31, 1997, gross
revenues for S. Boardman were approximately $25 million, and revenues excluding
customs, duties and value added taxes were approximately $13 million. The
acquisition was accounted for as a purchase; accordingly, the purchase price was
allocated based on the estimated fair market value of the net assets acquired
with the excess being recorded as goodwill. The results of operations for the
acquired operations were included in the consolidated statement of income from
the acquisition date forward. For the two April 1998 acquisitions, the Company
paid $4.4 million of cash, $750,000 of Common Stock and a three-year contingent
earnout payable in cash and Common Stock if certain performance benchmarks are
met.
NOTE 2 - EARNINGS PER SHARE:
The Company has adopted Statement of Financial Accounting Standard No.
128 (SFAS 128), "Earnings Per Share". Adoption of SFAS 128 has resulted in the
retroactive restatement of earnings per share. Basic earnings per share excludes
dilution and is computed by dividing income available to common shareholders by
the weighted average number of common shares outstanding for the period. Diluted
earnings per share includes potential dilution that could occur if securities to
issue common stock were exercised.
The computation of basic and diluted earnings per share are as follows:
<TABLE>
<CAPTION>
Nine Months Ended June 30,
--------------------------
1998 1997
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<S> <C> <C>
Net income $15,524 $11,566
Shares used in basic calculation:
Weighted average shares outstanding 18,617 17,716
------- -------
Total basic shares 18,617 17,716
Additional shares for diluted computation:
Effect of stock options 705 898
------- -------
Total diluted shares 19,322 18,614
======= =======
Basic earnings per share $ 0.83 $ 0.65
======= =======
Diluted earnings per share $ 0.80 $ 0.62
======= =======
</TABLE>
9
<PAGE> 10
EAGLE USA AIRFREIGHT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
1998 1997
------- -------
<S> <C> <C>
Net income $ 5,645 $ 4,104
Shares used in basic calculation:
Weighted average shares outstanding 19,008 17,906
------- -------
Total basic shares 19,008 17,906
Additional shares for diluted computation:
Effect of stock options 666 767
------- -------
Total diluted shares 19,674 18,673
======= =======
Basic earnings per share $ 0.30 $ 0.23
======= =======
Diluted earnings per share $ 0.29 $ 0.22
======= =======
</TABLE>
NOTE 3- NEW ACCOUNTING PRONOUNCEMENTS:
In February 1997, the Financial Accounting Standards Board issued SFAS
129 "Disclosure of Information About Capital Structure" for all periods ending
after December 15, 1997. SFAS 129 contains no changes in the disclosure
requirements for the Company because it was previously subject to such
requirements pursuant to other Statements and Opinions.
In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income," and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." The adoption of both
statements are required for fiscal years beginning after December 15, 1997.
Under SFAS No. 130, companies are required to report in the financial
statements, in addition to net income, comprehensive income including, as
applicable, foreign currency items, minimum pension liability adjustments and
unrealized gains and losses on certain investments in debt and equity
securities. SFAS No. 131 requires that companies report separately, in the
financial statements, certain financial and descriptive information about
operating segments, if applicable. The Company does not expect the adoption of
SFAS No. 130 or SFAS No. 131 to have a material impact on its consolidated
financial statements and related disclosures.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected certain aspects of the Company's
financial position and operating results during the periods included in the
accompanying unaudited condensed consolidated financial statements. This
discussion should be read in conjunction with the discussion under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the annual financial statements included in the Company's Annual Report on Form
10-K (File No. 0-27288) and the accompanying unaudited condensed consolidated
financial statements.
10
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EAGLE USA AIRFREIGHT, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
General
The Company's revenues have increased to $291.8 million in the fiscal
year ended September 30, 1997 from $126.2 million in the fiscal year ended
September 30, 1995, and its operating income has increased to $25.7 million in
fiscal 1997 from $12.2 million in fiscal 1995. The Company's recent growth has
been generated almost exclusively by increasing the number of terminals operated
by the Company and growth in revenue produced by existing terminals. The opening
of a new terminal generally has an initial negative impact on profitability due
to operating losses of the new terminal. The opening of a new terminal generally
does not require significant capital expenditures. Additionally, personnel costs
are contained at the time of the opening of a new terminal because commissions
are generally not paid until salesmen achieve minimum targeted sales levels and
until terminals achieve profitability. Although future new terminals may be
opened in cities smaller than those in which the Company's more mature terminals
are located, the Company believes the results of new terminals should benefit
from a ready base of business provided by its existing customers. Historically,
the Company's operating results have been subject to a limited degree to
seasonal trends when measured on a quarterly basis. The second quarter has
traditionally been the weakest and the fourth quarter has traditionally been the
strongest.
The Company intends to continue to expand its international freight
forwarding business. International shipments typically generate higher revenues
per shipment than domestic shipments. The Company anticipates that the costs of
transportation for international freight will be higher than for domestic
freight as a percentage of such revenues, resulting in lower gross margins than
domestic shipments; however, the Company does not expect its operating expenses
to increase in proportion to such revenues. In April 1998, the Company expanded
its international operations through the completion of the acquisition of
substantially all of the assets of Eagle Transfer, Inc. and the stock of S.
Boardman (Air Services Limited). The Company also intends to continue the growth
of its local pick-up and delivery operations. By providing local pick-up and
delivery services with respect to shipments for which it is the freight
forwarder, the Company has been able to increase its gross margin with respect
to such shipments because it captures margins which were previously paid to
third parties. However, the Company's local pick-up and delivery services
provided to other (non-forwarding) customers generate a lower gross margin than
the Company's domestic forwarding operations due to their higher transportation
costs as a percentage of revenues.
Nine Months Ended June 30, 1998 compared to the Nine Months Ended June 30, 1997
Revenues increased 47.3% to $295.2 million for the nine months ended
June 30, 1998 from $200.4 million for the nine months ended June 30, 1997
primarily due to increases in the number of shipments and the total weight of
cargo shipped, which in turn resulted from an increase in the number of
terminals open during such period, an increase in penetration in existing
markets, the addition of significant national account customers and the effect
of three acquisitions.
Operating data for the period were as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30,
--------------------------
1998 1997
---- ----
<S> <C> <C>
Freight forwarding terminals at end of period 66 57
Local delivery locations at end of period 58 43
Freight forwarding shipments 747,811 541,960
Average weight (lbs.) per freight forwarding shipment 597 568
</TABLE>
11
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EAGLE USA AIRFREIGHT, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
For those freight forwarding terminals open as of the beginning of
fiscal 1997 (47 terminals), revenues increased 30.0% to $241.4 million for the
nine months ended June 30, 1998 from $185.7 million for the nine months ended
June 30, 1997.
Revenues for the nine months ended June 30, 1998 were comprised of
$272.3 million of forwarding revenues, $22.5 million of local pick-up and
delivery revenues and $408,000 of other freight forwarding service revenues, as
compared to $188.4 million, $11.5 million and $523,000, respectively, for the
corresponding period in 1997.
Cost of transportation decreased as a percentage of revenues to 55.7%
in the first nine months of fiscal 1998 from 56.3% in the comparable period in
fiscal 1997. This was primarily attributable to the continued expansion of the
Company's local pick-up and delivery operations, enabling the Company to capture
margins previously paid to third parties. Cost of transportation increased in
absolute terms by 45.8% to $164.5 million for the nine months ended June 30,
1998 from $112.9 million in the same period in fiscal 1997 as a result of
increases in volume of freight shipped. Gross margin increased to 44.3% in the
nine months ended June 30, 1998 from 43.7% in the same period in fiscal 1997.
The primary reasons for the margin improvement were increased shipping volumes
and the continued expansion of pickup and delivery operations. Gross profit
increased 49.4% to $130.7 million for the nine months ended June 30, 1998 from
$87.5 million in the same period in fiscal 1997.
Operating expenses increased as a percentage of revenues to 36.2% in
the first nine months of fiscal 1998 from 34.9% in the same period in fiscal
1997. The $36.9 million of increased costs in absolute terms was attributable
primarily to continued growth in the level of operations from additional
terminals, expansion of local delivery operations and the effect of
acquisitions. Personnel costs increased as a percentage of revenues to 23.4% for
the nine months ended June 30, 1998 from 23.0% in the same period in fiscal
1997, and increased in absolute terms by 49.9% to $69.1 million due to increased
staffing needs associated with the opening of 9 new terminals, the opening of 15
new local delivery operations, expanded operations at existing terminals, the
Company's acquisitions and increased revenues, which resulted in increased
commissions and expanded corporate infrastructure. Such personnel costs include
all compensation expenses, including those relating to sales commission and
salaries and to headquarters employees and executive officers. The Company has
added personnel to build corporate infrastructure, to keep pace with its recent
significant growth, to deepen the staff of its domestic, international and local
delivery operating units and to prepare for expected growth during fiscal 1998.
Other selling, general and administrative expenses increased as a percentage of
revenues to 12.8% for the nine months ended June 30, 1998 from 11.9% in the same
period in fiscal 1997, and increased in absolute terms by 58.3% to $37.8 million
in the first nine months ended June 30, 1998 from $23.9 million in the same
period in fiscal 1997. For the nine months ended June 30, 1998, selling expenses
as a percentage of revenues decreased by 0.2% and other general and
administrative expenses as a percentage of revenue increased 1.1% compared to
the same period in fiscal 1997. The absolute increases in selling, general and
administrative expenses were due to the Company's acquisitions, the Company's
new headquarters facility, increased professional fees and overall increases in
the level of the Company's activities in the fiscal 1998 period.
Operating income increased 35.9% to $23.9 million in the first nine
months of fiscal 1998 from $17.6 million in the comparable period in fiscal
1997. Operating margin for the first nine months of fiscal 1998 was 8.1% down
from 8.8% for the same period in fiscal 1997 primarily due to the higher
operating expenses as a percentage of revenues during the nine months ended June
30, 1998.
Interest and other income decreased to $1.3 million in the first nine
months of fiscal 1998 from $1.4 million in the comparable period in fiscal 1997
as a result of a one-time payment of $375,000 made in the second quarter of
fiscal 1997 by Daniel S. Swannie, a former executive officer and director of the
Company, in connection with the reimbursement of the Company's internal costs
related to the February 1997 secondary public offering.
12
<PAGE> 13
EAGLE USA AIRFREIGHT, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Income before provision for income taxes increased 32.9% to $25.1
million for the first nine months of fiscal 1998 from $18.9 million in the
comparable period of fiscal 1997. Provision for income taxes increased 30.8% to
$9.6 million for the nine months ended June 30, 1998 from $7.4 million for the
nine months ended June 30, 1997. Net income increased 34.2% to $15.5 million for
the nine months ended June 30, 1998 from net income of $11.6 million in the same
period in fiscal 1997. Diluted earnings per share increased 29.0% to $0.80 for
the nine months ended June 30, 1998 from $0.62 in the same period in fiscal
1997.
Three Months Ended June 30, 1998 compared to the Three Months Ended June 30,
1997
Revenues increased 50.1% to $107.1 million in the three months ended
June 30, 1998 from $71.3 million in the same period of fiscal 1997 primarily due
to increases in the number of shipments and the total weight of cargo shipped,
which in turn resulted from an increase in the number of terminals open during
such period, penetration in existing markets, the addition of significant
national account customers and the effect of acquisitions.
Operating data for the period were as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
1998 1997
---- ----
<S> <C> <C>
Freight forwarding terminals at end of period 66 57
Local delivery locations at end of period 58 43
Freight forwarding shipments 270,955 183,085
Average weight (lbs.) per freight forwarding shipment 634 598
</TABLE>
For those freight forwarding terminals opened as of the beginning of
fiscal 1997 (47 terminals), revenues increased 25.9% to $81.9 million for the
three months ended June 30, 1998 from $65.0 million for the three months ended
June 30, 1997.
Revenues for the three months ended June 30, 1998 were comprised of
$98.5 million of forwarding revenues, $8.5 million of local pick and delivery
revenues and $105,000 of other freight forwarding service revenues, as compared
to $66.8 million, $4.3 million and $196,000, respectively, for the three months
ended June 30, 1997.
Cost of transportation increased during the quarter as a percentage of
revenues to 56.4% from 56.1% in the comparable period in fiscal 1997. The
increase was primarily attributable to the two April 1998 international
acquisitions which contributed a higher cost of transportation as a percentage
of revenues. Cost of transportation increased in absolute terms by 50.9% to
$60.3 million in the fiscal 1998 quarter from $39.9 million in the fiscal 1997
quarter as a result of increases in volume of freight shipped. Gross margin
decreased to 43.6% in the third quarter of fiscal 1998 from 43.9% in the same
period in fiscal 1997. The primary reasons for the margin decline was primarily
attributable to the April 1998 acquisitions which contributed a higher cost of
transportation as a percentage of revenues. Gross profit increased 49.1% to
$46.7 million in the third quarter of fiscal 1998 from $31.3 million in the same
period in fiscal 1997.
Operating expenses increased as a percentage of revenues to 35.7% in
the third quarter of fiscal 1998 from 35.0% for the same period in fiscal 1997.
The $13.3 million increased costs in absolute terms was attributable primarily
to continued growth in the level of operations from additional terminals,
expansion of local delivery operations and the Company's acquisitions. Personnel
costs decreased as a percentage of revenues to 22.5% in the third quarter of
fiscal 1998 from 23.7% in the same period in fiscal 1997, and increased in
absolute terms by 42.7% to $24.1 million due to increased staffing needs
associated with the opening of 9 new terminals, the opening of 15 new local
delivery locations, expanded operations at existing terminals, the effect of
acquisitions and increased revenues, which resulted in an increase in
commissions and expanded corporate infrastructure. Such personnel costs include
all compensation expenses, including those relating to sales commissions and
salaries and to headquarters employees and executive officers. The Company has
13
<PAGE> 14
EAGLE USA AIRFREIGHT, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
added personnel to build corporate infrastructure, to keep pace with its recent
significant growth, to deepen the staff of its domestic, international and local
delivery operating units and to prepare for expected growth during fiscal 1998.
Other selling, general and administrative expenses increased as a percentage of
revenues to 13.2% in the third quarter of fiscal 1998 from 11.3% in the third
quarter of fiscal 1997, and increased in absolute terms by 75.0% to $14.1
million in the fiscal 1998 period from $8.1 million in the fiscal 1997 period.
In the third quarter of fiscal 1998, selling expenses as a percentage of
revenues decreased by 0.4% and other general and administrative expenses as a
percentage of revenues increased by 2.3% compared to the third quarter of fiscal
1997. The absolute increases in selling, general and administrative expenses
were due to the Company's acquisitions, the Company's new headquarter facility,
increased professional fees and overall increases in the level of the Company's
activities in the fiscal 1998 period.
Operating income increased 33.4% to $8.5 million in the third quarter
of fiscal 1998 from $6.4 million in the comparable period in fiscal 1997.
Operating margin for the quarter ended June 30, 1998 was 7.9%, down from 8.9%
for the three months ended June 30, 1997. Interest and other income increased to
$486,000 from $374,000 in the comparable period in fiscal 1997 as a result of
increased levels of investment earnings.
Income before provision for income taxes increased 33.2% to $9.0
million in the third quarter of fiscal 1998 from $6.7 million in the comparable
period of fiscal 1997. Provision for income taxes increased 26.4% to $3.3
million for the three months ended June 30, 1998 from $2.6 for the three months
ended June 30, 1997. Net income increased 37.5% to $5.6 million in the third
quarter of fiscal 1998 from net income of $4.1 million in the same period in
fiscal 1997. Diluted earnings per share increased 31.8% to $0.29 per share for
the quarter ended June 30, 1998 from $0.22 in the same period in fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and short-term investments increased $20.2 million
to $48.0 million at June 30, 1998 from $27.8 million at September 30, 1997. At
June 30, 1998, the Company had working capital of $82.8 million and a current
ratio of 4.05 compared to working capital of $60.6 million and a current ratio
of 3.30 at September 30, 1997. The Company's working capital has increased
during this period primarily as a result of proceeds from the January 1998
secondary offering , profitable growth associated with the expansion of the
Company's operations and increased accounts receivable collections. Capital
expenditures for the nine months ended June 30, 1998 were approximately $8.1
million. The Company believes that cash flow from operations and the remaining
proceeds from its public offerings will be adequate to support its normal
working capital and capital expenditures requirements for at least the next 12
months.
Other than its initial and 1997 and 1998 public offerings, the
Company's cash generated from operations has been its primary source of
liquidity, although it has from time to time made limited use of bank borrowing
and lease or purchase arrangements. The Company had a $10 million revolving
credit facility with NationsBank of Texas, N.A. which expired in January 1998.
The Company is currently considering implementing alternative facilities. The
Company expects to retain all available earnings generated by its operations for
the development and growth of its business and does not anticipate paying any
cash dividends on its Common Stock in the foreseeable future.
As of June 30, 1998, the Company had outstanding non-qualified stock
options to purchase an aggregate of 3,019,153 shares of Common Stock at exercise
prices equal to the fair market value of the underlying Common Stock on the
dates of grant (prices ranging from $1.25 to $35.125). At the time a
non-qualified stock option is exercised, the Company will generally be entitled
to a deduction for federal and state income tax purposes equal to the difference
between the fair market value of the common stock on the date of exercise and
the option price. As a result of exercises for the nine
14
<PAGE> 15
EAGLE USA AIRFREIGHT, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
months ended June 30, 1998 of non-qualified stock options to purchase an
aggregate of 562,434 shares of Common Stock, the Company is entitled to a
federal income tax deduction of approximately $11.9 million. Assuming an
effective tax rate of 40%, the Company expects to realize a tax benefit of
approximately $4.8 million with respect to the nine months ended June 30, 1998,
accordingly, the Company recorded such an increase in additional paid-in capital
and a decrease in current income taxes payable pursuant to the provisions of FAS
No. 109, "Accounting for Income Taxes." Any exercises for non-qualified stock
options in the future at exercise prices below the then fair market value of the
common stock may also result in tax benefits for the difference between such
amounts, although there can be no assurance as to whether or not such exercises
will occur, the amount of any deductions or the Company's ability to fully
utilize such tax deductions.
On January 10, 1997, the Company entered into a five-year operating
lease agreement with two unrelated parties for financing the construction of its
recently completed Houston terminal, warehouse and headquarters facility (the
Houston facility). The cost of the Houston facility was approximately $8.5
million. Under the terms of the lease agreement, average monthly lease payments
are approximately $60,000 (including monthly interest costs based upon LIBOR
rate plus 200 basis points) beginning upon the completion of the construction of
the facility and continuing for a term of 52 months with a balloon payment equal
to the outstanding lease balance (initially equal to the cost of the facility)
due at the end of the lease term. The Company has an option, exercisable at
anytime during the lease term, and under certain circumstances may be obligated,
to acquire the facility for an amount equal to the outstanding lease balance. In
the event the Company does not exercise the purchase option, and is not
otherwise required to acquire the facility, it is subject to a deficiency
payment computed as the amount equal to the outstanding lease balance minus the
then current fair market value of the Houston facility. The Company expects that
the amount of any such deficiency payment, if made, would be expensed. As of
June 30, 1998, the lease balance was approximately $8.5 million.
In February 1997, the Company completed an underwritten secondary
public offering of 1,779,922 shares of its Common Stock at a price to the public
of $28.25 per share. The Company sold 232,164 of these shares, and the net
proceeds received by the Company after deducting underwriting discounts and
commissions were $6.2 million and will be used for general corporate purposes.
The Company did not receive any of the proceeds from the sale of the 1,547,758
of these shares sold by Daniel S. Swannie, a former executive officer and
director of the Company. Pursuant to an agreement between the Company and Mr.
Swannie entered into in connection with the offering, Mr. Swannie reimbursed the
Company for all of its out-of-pocket expenses incurred in connection with the
offering and made a payment to the Company of $375,000 for the Company's
estimated internal costs relating to the offering. The agreement also restricts
Mr. Swannie's ability to compete against the Company for a three-year term and
places certain other limitations on his ability to act against the interest of
the Company.
On January 30, 1998, the Company completed an underwritten secondary
public offering of 2,012,500 shares of its Common Stock at a price to the public
of $27.75 per share. The Company sold 262,500 of these shares and the net
proceeds received by the Company after deducting underwriting discounts and
commissions and offering expenses were approximately $6.6 million and will be
used for general corporate purposes. The Company did not receive any of the
proceeds from the sale of 1,750,000 of these shares sold by James R. Crane, the
Company's Chairman of the Board of Directors, President and Chief Executive
Officer.
On April 3, 1998, the Company acquired substantially all of the
operating assets of Eagle Transfer, Inc. ("Eagle Companies"), a privately-held
international freight forwarder based in Miami, Florida. Eagle Companies was a
full-service forwarder whose services included customs clearing services, ocean
forwarding and airfreight import and export. Eagle Companies' revenues were
generated principally from Argentina, Brazil and Chile and other South American
countries. Sales for Eagle Companies totaled approximately $19.8 million in the
twelve-month period ended December 31, 1997. Despite the similarity in names,
the Company and Eagle Companies have had no prior affiliation. The acquisition
was
15
<PAGE> 16
EAGLE USA AIRFREIGHT, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
accounted for as a purchase; accordingly, the purchase price was allocated over
the basis of the estimated fair market value of the net assets acquired with the
excess being recorded as goodwill. The results of operations for the acquired
operations were included in the consolidated statement of income from the
acquisition date forward.
On April 14, 1998, the Company acquired all of the outstanding stock of
S. Boardman (Air Services) Limited and Subsidiaries ("S. Boardman"), a
privately-held full service forwarder based in London, England. S. Boardman
serves the international freight forwarding market from three facilities in
London, Manchester and Birmingham, England. For the twelve-month period ended
March 31, 1997, gross revenues for S. Boardman were approximately $25 million
and revenues excluding customs, duties and value added taxes were approximately
$13 million. The acquisition was accounted for as a purchase; accordingly, the
purchase price was allocated over the basis of the estimated fair market value
of the net assets acquired with the excess being recorded as goodwill. The
results of operations for the acquired operations were included in the
consolidated statement of income from the acquisition date forward. For the two
April 1998 acquisitions, the Company paid $4.4 million of cash, $750,000 of
Common Stock and a three-year contingent earnout payable in cash and Common
Stock if certain performance benchmarks are met.
On April 3, 1998, the Company entered into a five-year $20 million
master operating lease agreement with two unrelated parties for financing the
acquisition and construction of terminal and warehouse facilities throughout the
United States designated by the Company from time to time (each, a "Financed
Facility"). Under the terms of the master operating lease agreement, average
monthly lease payments (including monthly interest costs based upon LIBOR rate
plus 150 basis points) begin upon the completion of the construction of each
Financed Facility and continue for a term of 52 months with a balloon payment
equal to the outstanding lease balance (initially equal to the cost of the
facility) due at the end of the lease term. The Company has an option,
exercisable at anytime during the lease term, and under certain circumstances
may be obligated, to acquire each Financed Facility for an amount equal to the
outstanding lease balance. In the event the Company does not exercise the
purchase option, and does not otherwise met its obligations, it is subject to a
deficiency payment computed as the amount equal to the outstanding lease balance
minus the then current fair market value of each Financed Facility. The Company
expects that the amount of any such deficiency payment would be expensed. As of
June 30, 1998, the aggregate lease balance was approximately $710,000 under the
master operating lease agreement.
The Securities and Exchange Commission has published guidance
regarding the effect of "Year 2000" issues on companies. The "Year 2000" (or
Y2K) problem arose because some computer programs use only the last two digits
of a year to refer to a date, causing them to not properly recognize a year
that does not begin with "19."
The Company has completed its initial assessment of possible exposure
to Y2K issues. The Company believes that its primary operating and accounting
information systems are and have always been compliant with the century factor.
Based upon the Company's assessment of its other critical components and
processes, including relationships with vendors, suppliers, customers and
banks, the Company does not believe that a material uncertainty exists which
would significantly affect its business or results of operations. However, the
Company has not tested certain assertions made by its critical service
providers, including that aircraft will be in service and sufficient air lift
will be available to the Company. Without sufficient air lift, the Company's
air freight forwarding operations would be curtailed and the Company might also
be unable to provide sufficient alternative services such as ground, rail or
ocean cargo capacity to meet its expected levels of operation. There can be no
assurance that the global transportation industry and regulatory authorities,
including but not limited to the United States Department of Transportation and
related agencies, will not be affected in a way that negatively affects the
Company's business, results of operations or financial condition. The Company
is unable to determine the potential business interruption costs which might be
incurred as a result of Y2K issues including the costs if the cargo capacity of
airline, trucks, rail and ocean vessels is insufficient to meet the Company's
then operating requirements in any of its geographic regions. The Company is
currently exploring risk management alternatives with respect to possible
business interruption which may result if certain of the Company's critical
vendors and suppliers are not ready for the Y2K problem by January 1, 2000 but
has not set a timetable for the completion of these contingency plans. The
Company's internal Y2K assessment is largely complete; however, the Company's
assessment of Y2K issues caused by its relationships with third parties is
expected to continue until and through the year 2000. The Company has not to
date expended any significant funds for Y2K issues. Despite the Company's
assessment to date, there can be no assurance as to the ultimate effect that
the Y2K issue will have on the Company.
16
<PAGE> 17
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
USE OF PROCEEDS
The Company's Registration Statement on Form S-1 (Registration No.
33-97606), as amended, with respect to the initial public offering (the
"Offering") of shares of Company's Common Stock, par value $0.001 per
share (the "Common Stock"), was declared effective by the Securities
and Exchange Commission on November 30, 1995. The Offering commenced on
December 1, 1995 and has since terminated, resulting in the sale by the
Company of 2,300,000 shares of Common Stock on December 6, 1995
(including 300,000 shares of Common Stock sold pursuant to the exercise
of the underwriters' over-allotment option). The shares sold constitute
all of the shares of Common Stock covered by the Registration
Statement. The managing underwriters for the Offering were Donaldson,
Lufkin & Jenrette Securities Corporation and the Robinson-Humphrey
Company, Inc.
The aggregate price to the public for the shares sold in the Offering
was $37,950,000. The expenses incurred by the Company with respect to
the Offering were as follows:
<TABLE>
<S> <C>
Underwriter Discounts and Commissions .................. $2,656,500
Other Expenses ......................................... 734,000
Total .................................................. $3,390,500
</TABLE>
Approximately $22,000 of Other Expenses consisted of payments to a
corporation owned by the Company's Chairman of Board in reimbursement
for expenses related to the use of that corporation's owned aircraft in
the Offering. None of the other amounts set forth above as Other
Expenses were direct or indirect payments to directors or officers of
the Company or their associates, to persons owning ten percent or more
of any class of equity securities of the Company or to affiliates of
the Company.
The net proceeds to the Company from the Offering were $34.6 million.
As of June 30, 1998, the Company has used such net proceeds as follows:
(i) to repay $2.1 million of indebtedness outstanding under the
Company's revolving credit facility, (ii) to repay $11.6 million of
promissory notes outstanding to certain of the Company's directors and
officers, (iii) to pay $4.1 million of expenses relating to the upgrade
of the Company's information systems, (iv) to pay $5.6 million for a
fiscal 1997 acquisition, (v) to pay $900,000 to purchase the site of
the Company's Newark terminal, (vi) to pay $2.5 million of costs
related to the Company's new headquarters facility, (vii) to pay $4.4
million for two fiscal 1998 acquisitions and (viii) to make $3.4
million in cash equivalents and short-term investments. Except as set
forth in clause (ii), none of such payments were direct or indirect
payments to directors or officers of the Company or their associates,
to persons owning ten percent or more of any class of equity securities
of the Company or to affiliates of the Company.
RECENT SALES OF UNREGISTERED SECURITIES.
As described under "Management's Discussion and Analysis of Financial
Condition and Results of Operations- Liquidity and Capital Resources"
the Company issued 27,999 shares of Common Stock on April 3, 1998 as
partial consideration for the acquisition of substantially all of the
operating assets of Eagle Transfer, Inc. Such transaction is exempt
from the registration requirements of the Securities Act by virtue of
Section 4(2) thereof as a transaction not involving any public
offering.
17
<PAGE> 18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES, NONE
ITEM 4. SUBMISSION OF MATTERS OF A VOTE OF SECURITY-HOLDERS, NONE
ITEM 5. OTHER INFORMATION
FORWARD LOOKING STATEMENTS
The statements contained in all parts of this document, including, but
not limited to, those relating to the Company's plans for international
air freight forwarding services; the future expansion and results of
the Company's terminal network; plans for local delivery services;
expected growth; future marketing; construction of new facilities;
future operating expenses; any seasonality of the Company's business;
future margins; future dividend plans; use of offering proceeds; future
acquisitions, and any effects, benefits, results, terms or other
aspects of such acquisitions; effects of the Year 2000 issue; ability
to continue growth and implement growth and business strategy; the
ability of expected sources of liquidity and offering proceeds to
support working capital and capital expenditure requirements; the tax
benefit of any stock option exercises; and any other statements
regarding future growth, cash needs, terminals, operations, business
plans and financial results and any other statements which are not
historical facts are forward-looking statements. When used in this
documents, the words "anticipate," "estimate," "expect," "may,"
"plans," "project," and similar expressions are intended to be among
the statements that identify forward-looking statements. Such
statements involve risks and uncertainties, including, but not limited
to, those relating to the Company's dependence on its ability to
attract and retain skilled managers and other personnel; the intense
competition within the freight industry; the uncertainty of the
Company's ability to manage and continue its growth and implement its
business strategy; the Company's dependence on the availability of
cargo space to serve its customers; the potential for liabilities if
certain independent owner/operators that serve the Company are
determined to be employees; effects of regulation; results of
litigation; the Company's vulnerability to general economic conditions
and dependence on its principal customers; the control by the Company's
principal shareholder; the Company's potential exposure to claims
involving its local pick-up and delivery operations; the Company's
future financial and operating results, cash needs and demand for its
services; and the Company's ability to maintain and comply with permits
and licenses; as well as other factors detailed in the Company's
filings with the Securities and Exchange Commission. Should one or more
of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual outcomes may vary materially from
those indicated. The Company undertakes no responsibility to update for
changes related to these or any other factors that may occur subsequent
to this filing.
ELECTION OF DIRECTOR
Effective May 18, 1998, the Board of Directors elected Dr. Norwood W.
Knight-Richardson as a director to serve until the next annual
shareholders meeting or until his successor has been duly elected and
qualified.
18
<PAGE> 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(A) EXHIBITS.
<TABLE>
<S> <C>
*3(i) Second Amended and Restated Articles of Incorporation of the
Company, as amended. (Exhibit 3(i) to the Company's Form 10-Q
for the fiscal quarter ended March 31, 1998)
*3(ii) Amended and Restated Bylaws of the Company, as amended
(Exhibit 3.2 to the Company's Registration Statement on from
S-1 (Registration No. 33-97606)).
10(iii)A Master Lease and Development Agreement dated as of April 3,
1998 between Asset XVI Holdings Company, L.L.C. and Eagle USA
Airfreight, Inc.
10(iii)B Master Participation Agreement dated as of April 3, 1998 among
Asset XVI Holdings Company, L.L.C., Eagle USA Airfreight, Inc.
and Bank One, Texas, N.A.
10(iii)C Loan Agreement dated as of April 3, 1998 between Asset
Holdings Company, L.L.C. and Bank One, Texas, N.A.
10(iii)D Appendix I to Master Participation Agreement, Master Lease and
Development Agreement and Loan Agreement.
11(i) Computation of Per Share Earnings for the Nine Months ended
June 30, 1998 and 1997.
11(ii) Computation of Per Share Earnings for the Three Months ended
June 30, 1998 and 1997.
27 Financial Data Schedule.
</TABLE>
- ------------------
* Incorporated by reference as indicated.
(B) No reports on Form 8-K were filed during the quarter ended June 30,
1998.
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
EAGLE USA AIRFREIGHT, INC.
(Registrant)
Date: August 14, 1998 BY: /s/ James R. Crane
------------------------ ----------------------------
James R. Crane
President
Date: August 14, 1998 BY: /s/ Douglas A. Seckel
------------------------ ----------------------------
Douglas A. Seckel
Chief Financial Officer
20
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
EXHIBITS DESCRIPTION
- -------- -----------
<S> <C>
*3(i) Second Amended and Restated Articles of Incorporation of the Company as amended.
(Exhibit 3(i) to the Company's Form 10-Q for the fiscal quarter ended March 31, 1998)
*3(ii) Amended and Restated Bylaws of the Company, as amended (Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (Registration No. 33-97606).
10(iii)A Master Lease and Development Agreement dated as of April 3, 1998 between Asset XVI
Holdings Company, L.L.C. and Eagle USA Airfreight, Inc.
10(iii)B Master Participation Agreement dated as of April 3, 1998 among Asset XVI Holdings
Company, L.L.C., Eagle USA Airfreight, Inc. and Bank One, Texas, N.A.
10(iii)C Loan Agreement dated as of April 3, 1998 between Asset Holdings Company, L.L.C. and
Bank One, Texas, N.A.
10(iii)D Appendix I to Master Participation Agreement, Master Lease and Development Agreement
and Loan Agreement.
11(i) Computation of Per Share Earnings for the Nine Months ended June 30, 1998 and 1997.
11(ii) Computation of Per Share Earnings for the Three Months ended June 30, 1998 and 1997.
27 Financial Data Schedule.
</TABLE>
- ------------------
*Incorporated by reference as indicated.
21
<PAGE> 1
EXHIBIT 10(iii)A
================================================================================
MASTER LEASE AND DEVELOPMENT AGREEMENT
Dated as of April 3, 1998
between
ASSET XVI HOLDINGS COMPANY, L.L.C., as Lessor
and
EAGLE USA AIRFREIGHT, INC., as Lessee
-----------------------------------------------
Lease Financing
for Eagle USA Airfreight, Inc.
Corporate Real Estate Program
================================================================================
<PAGE> 2
TABLE OF CONTENTS
(Master Lease and Development Agreement)
<TABLE>
<CAPTION>
Page
----
<S> <C>
PRELIMINARY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I DEFINITIONS; INTERPRETATION . . . . . . . . . . . . . . . 1
ARTICLE II LEASE OF LEASED PROPERTY . . . . . . . . . . . . . . . . . 1
SECTION 2.1 Lease of the Land . . . . . . . . . . . . . . . . 1
SECTION 2.2 Lease of Improvements . . . . . . . . . . . . . . 2
SECTION 2.3 Other Property . . . . . . . . . . . . . . . . . 2
SECTION 2.4 Nature of Transaction . . . . . . . . . . . . . . 3
ARTICLE III CONSTRUCTION AND EQUIPPING OF THE IMPROVEMENTS . . . . . . 3
SECTION 3.1 Construction of Improvements . . . . . . . . . . 3
SECTION 3.2 Completion of Construction . . . . . . . . . . . 3
SECTION 3.3 Permits; Approvals; Storage. . . . . . . . . . . 4
SECTION 3.4 Inspection. . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 4.1 Basic Rent . . . . . . . . . . . . . . . . . . . 4
SECTION 4.2 Supplemental Rent. . . . . . . . . . . . . . . . 6
SECTION 4.3 Method of Payment . . . . . . . . . . . . . . . . 6
SECTION 4.4 Late Payment . . . . . . . . . . . . . . . . . . 7
SECTION 4.5 Net Lease; No Setoff, Etc . . . . . . . . . . . . 7
SECTION 4.6 Lessee to Cooperate with Lessor . . . . . . . . . 8
ARTICLE V CONDITION AND USE OF LEASED PROPERTY . . . . . . . . . . . 8
ARTICLE VI LIENS; EASEMENTS; PARTIAL CONVEYANCES . . . . . . . . . . . . . 9
SECTION 6.1 No Liens . . . . . . . . . . . . . . . . . . . . 9
SECTION 6.2 Easements and Related Conveyances . . . . . . . . 9
ARTICLE VII MAINTENANCE AND REPAIR; ALTERATIONS;
MODIFICATIONS AND ADDITIONS . . . . . . . . . . . . . . . . . . . 10
SECTION 7.1 Maintenance and Repair; Compliance With Law . . . 10
SECTION 7.2 Alterations . . . . . . . . . . . . . . . . . . . 11
SECTION 7.3 Title to Alterations. . . . . . . . . . . . . . . 12
ARTICLE VIII USE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IX INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 9.1 Insurance Coverages . . . . . . . . . . . . . . . 12
SECTION 9.2 Liability Insurance . . . . . . . . . . . . . . . 13
SECTION 9.3 Policies . . . . . . . . . . . . . . . . . . . . 13
SECTION 9.4 Loss Payee Provisions . . . . . . . . . . . . . . 14
SECTION 9.5 Other Insurance . . . . . . . . . . . . . . . . . 14
SECTION 9.6 Loss Deductibles . . . . . . . . . . . . . . . . 14
ARTICLE X ASSIGNMENT AND SUBLEASING . . . . . . . . . . . . . . . . 15
ARTICLE XI LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE . . . . . . . . . . . 15
SECTION 11.1 Event of Loss . . . . . . . . . . . . . . . . . . 15
SECTION 11.2 Event of Taking . . . . . . . . . . . . . . . . . 16
SECTION 11.3 Casualty . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.4 Condemnation . . . . . . . . . . . . . . . . . . 17
SECTION 11.5 Verification of Restoration and Rebuilding . . . 18
SECTION 11.6 Application of Payments . . . . . . . . . . . . . 18
SECTION 11.7 Prosecution of Awards . . . . . . . . . . . . . . 19
SECTION 11.8 Application of Certain Payments
Not Relating to an Event of Taking . . . . . . . 19
SECTION 11.9 Other Dispositions . . . . . . . . . . . . . . . 19
SECTION 11.10 No Rent Abatement . . . . . . . . . . . . . . . . 20
ARTICLE XII INTEREST CONVEYED TO LESSEE . . . . . . . . . . . . . . . . . . 20
ARTICLE XIII EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE XIV ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 14.1 Remedies . . . . . . . . . . . . . . . . . . . . 22
SECTION 14.2 Remedies Cumulative; No Waiver; Consents . . . . 24
ARTICLE XV SALE, RETURN OR PURCHASE OF LEASED PROPERTY . . . . . . . . . . 25
SECTION 15.1 Lessee's Option to Purchase . . . . . . . . . . . 25
SECTION 15.2 Purchase Obligation . . . . . . . . . . . . . . . 25
SECTION 15.3 Acceleration of Purchase Obligation . . . . . . . 26
SECTION 15.4 Determination of Purchase Price . . . . . . . . . 26
SECTION 15.5 Purchase Procedure . . . . . . . . . . . . . . . 26
SECTION 15.6 Option to Remarket . . . . . . . . . . . . . . . 27
SECTION 15.7 Rejection of Sale . . . . . . . . . . . . . . . . 30
SECTION 15.8 Return of Leased Property . . . . . . . . . . . . 31
SECTION 15.9 Effect of Conveyance to Lessee . . . . . . . . . 32
ARTICLE XVI LESSEE'S EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
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<TABLE>
<S> <C>
ARTICLE XVII RIGHT TO PERFORM FOR LESSEE . . . . . . . . . . . . . . . . . 33
ARTICLE XVIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 18.1 Reports . . . . . . . . . . . . . . . . . . . . . 33
SECTION 18.2 Binding Effect; Successors and Assigns . . . . . 33
SECTION 18.3 Quiet Enjoyment . . . . . . . . . . . . . . . . . 33
SECTION 18.4 Notices . . . . . . . . . . . . . . . . . . . . . 34
SECTION 18.5 Severability . . . . . . . . . . . . . . . . . . 34
SECTION 18.6 Amendment; Complete Agreements . . . . . . . . . 34
SECTION 18.7 Construction. . . . . . . . . . . . . . . . . . . 34
SECTION 18.8 Headings . . . . . . . . . . . . . . . . . . . . 34
SECTION 18.9 Counterparts . . . . . . . . . . . . . . . . . . 34
SECTION 18.10 Governing Law . . . . . . . . . . . . . . . . . . 35
SECTION 18.11 Discharge of Lessee's Obligations
by its Affiliates . . . . . . . . . . . . . . . . 35
SECTION 18.12 Liability of Lessor Limited . . . . . . . . . . . 35
SECTION 18.13 Estoppel Certificates . . . . . . . . . . . . . . 35
SECTION 18.14 No Joint Venture . . . . . . . . . . . . . . . . 36
SECTION 18.15 No Accord and Satisfaction . . . . . . . . . . . 36
SECTION 18.16 No Merger . . . . . . . . . . . . . . . . . . . . 36
SECTION 18.17 Survival . . . . . . . . . . . . . . . . . . . . 36
SECTION 18.18 Chattel Paper . . . . . . . . . . . . . . . . . . 36
SECTION 18.19 Time of Essence . . . . . . . . . . . . . . . . . 37
SECTION 18.20 Recordation of Lease . . . . . . . . . . . . . . 37
SECTION 18.21 Investment of Security Funds . . . . . . . . . . 37
SECTION 18.22 No Illegal Interest to be Charged . . . . . . . . 37
</TABLE>
APPENDIX I Definitions and Interpretation
APPENDIX II Form of Parcel Lease Supplement
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MASTER LEASE AND DEVELOPMENT AGREEMENT
THIS MASTER LEASE AND DEVELOPMENT AGREEMENT (this "Lease"), dated as
of April 3, 1998, is between ASSET XVI HOLDINGS COMPANY, L.L.C., a
Massachusetts limited liability company, as Lessor, and EAGLE USA AIRFREIGHT,
INC., a Texas corporation, as Lessee.
PRELIMINARY STATEMENT
In accordance with and subject to the terms and provisions of this
Lease and the other Operative Documents, (i) the Lessor has agreed to acquire
Parcels of the Land pursuant to Parcel Lease Supplements as hereinafter
provided, (ii) the Lessor has agreed to lease Parcels of the Land to the
Lessee, (iii) to the extent not otherwise improved to meet the Lessee's needs,
the Lessee has agreed to develop and construct Improvements thereon, (iv) the
Lessor has agreed to lease and demise the Improvements to the Lessee and the
Lessee has agreed to rent and hire the Improvements from the Lessor as part of
the Leased Property, (v) the Lessor and the Lessee wish to obtain, and the
Lender has agreed to provide, a Loan in an amount up to the Loan Commitment for
the payment of Property Costs in connection with the acquisition of the Land
and the Construction of the Improvements, and (vi) Lessor has agreed to make
Contribution Advances from its own equity resources in an amount up to the
Equity Commitment to pay a portion of the Property Costs in connection with the
construction of the Improvements.
NOW, THEREFORE, in consideration of the mutual agreements contained in
this Lease and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS; INTERPRETATION
Unless the context shall otherwise require, capitalized terms used and
not defined herein shall have the meanings assigned thereto in Appendix I
hereto for all purposes hereof and the rules of interpretation set forth in
Appendix I hereto shall apply to this Lease.
ARTICLE II
LEASE OF LEASED PROPERTY
SECTION 2.1 Lease of the Land. Prior to the Completion Deadline,
Lessee, as agent for the Lessor, shall identify, purchase and acquire on behalf
and in the name of Lessor, title in fee simple, or by leasehold estate, in and
to one or more Parcels of the Land, subject only to Permitted Liens, as
follows:
(a) Lessee shall prepare and submit to the Lessor and the Lender
counterparts of an appropriately completed Parcel Lease Supplement
substantially in the form of Appendix II hereto,
<PAGE> 6
with all blanks appropriately completed, for each such Parcel of the Land, and
counterparts of the related Operative Documents or supplemental Operative
Documents for each such Parcel the execution and delivery of which are required
to satisfy the Parcel Conditions with respect to such Parcel, each duly signed
and acknowledged, where appropriate, by the Lessee, ready for execution.
(b) Lessee shall simultaneously deliver to the Lessor and the
Lender evidence of the satisfaction of the Parcel Conditions for such Parcel in
Section 3.2 of the Participation Agreement.
(c) Lessor and the Lender, respectively, shall thereupon cause the
Parcel Lease Supplement and the related Operative Documents and supplemental
Operative Documents for such Parcel to which the Lessor or the Lender,
respectively, are a party, to be signed by their respective duly authorized
officers and, where requested by the Lessee, to cause such documents to be
acknowledged, signed by subscribing witnesses, or otherwise executed with the
formalities necessary for such documents to be duly recorded in the appropriate
land records of the County or other municipality where such Parcel is located.
(d) Not less than three Business Days prior to the related Parcel
Closing Date, Lessee shall submit a Funding Requisition in the amount of the
purchase price and other costs of acquisition of such Parcel, including without
limitation, the cost of recording, in the name and on behalf of Lessor the Deed
therefor.
(e) Pursuant to each Parcel Lease Supplement, the Lessor shall and
hereby does demise and lease its interest in and to each such Parcel of the
Land to the Lessee, and the Lessee shall, and hereby does, rent and lease such
Parcel of the Land from the Lessor, upon and subject to the terms and
conditions of this Lease, the Participation Agreement and each of the Operative
Documents, including the supplements thereto.
SECTION 2.2 Lease of Improvements. Lessor hereby demises and
leases Lessor's interest in the Improvements (whether or not the Construction
thereof has been completed) to Lessee, and Lessee hereby rents and leases
Lessor's interest in the Improvements (whether or not the Construction thereof
has been completed) from Lessor, for the Lease Term. The demise and lease of
the Improvements pursuant to this Section shall include any additional right,
title or interest in the Improvements which may at any time be acquired by
Lessor, whether in connection with the Construction of such Improvement on an
additional Parcel of the Land, as the result of an Alteration, or otherwise,
the intent being that all right, title and interest of Lessor in and to all of
the Improvements whenever constructed, and wherever located, shall at all times
be demised and leased hereunder.
SECTION 2.3 Other Property. Lessee may from time to time own or
hold under lease from Persons other than Lessor, furniture, trade fixtures and
equipment located on or about the Leased Property which is not subject to this
Lease.
SECTION 2.4 Nature of Transaction. It is the intent of the
parties hereto that: (a) for Federal, State and local income tax purposes, this
Lease shall be treated as the repayment and
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security provisions of a loan by Lessor to Lessee, and that Lessee shall be
treated as the legal and beneficial owner entitled to any and all benefits of
ownership of the Leased Property or any part thereof; and that all payments of
Basic Rent during the Lease Term shall be treated as payments of interest and
principal, as the case may be, in respect of such loan; (b) if a bankruptcy
court or other court of competent jurisdiction shall at any time determine that
the transactions represented by this Lease and the other Operative Documents
either (i) do not constitute a true leasing transaction or (ii) shall be
treated as a financing or other transaction, then in any such event, this Lease
shall be treated as a deed of trust and security agreement, mortgage and
security agreement or other similar instrument with a power of sale from
Lessee, as mortgagor to Lessor for the benefit of the Lender, as mortgagee,
encumbering the Leased Property, and the payment by Lessee of the Basic Rent
(other than Scheduled Rent) shall be treated as payments of interest and the
payment of Lessee of Scheduled Rent and any other amounts in respect of the
Lease Balance shall be treated as repayments of principal (all such payments
are obligatory and shall, to the fullest extent permitted by law, have priority
over any and all mechanics' liens and other liens and encumbrances arising
after the respective Memorandum of Lease is recorded); and (c) the Mortgages
upon each Parcel, and the Assignment of Lease and Rents will create a lien and
security interest in the Collateral (as defined in the Mortgages) and this
Lease, subject to certain limited exceptions.
ARTICLE III
CONSTRUCTION AND EQUIPPING OF THE IMPROVEMENTS
SECTION 3.1 Construction of Improvements. In the event that a
Parcel Lease Supplement provides for Improvements to be constructed by Lessee
for the account of the Lessor on the related Parcel, Lessee shall, for the
benefit of Lessor, cause the Construction of the Improvements to be commenced
on such Parcel following the Parcel Closing Date, and to cause such
Construction to be performed and completed by the General Contractor therefor
in general conformance with and pursuant to the Construction Contract therefor.
Until the Construction is completed, the portions of the Improvements under
construction shall, and upon completion of Construction the completed
Improvements shall, be a part of the Leased Property.
SECTION 3.2 Completion of Construction. Lessee shall endeavor to
achieve satisfactory performance from each General Contractor under each
Construction Contract. Lessee shall cause the Construction of all Improvements
to occur on or prior to the related Completion Deadline. Lessee may make
changes to the Plans and Specifications, shall review requests for changes,
shall negotiate proposals for changes made by the General Contractor and shall
prepare and sign change orders. Lessee shall develop and implement procedures
for the review and processing of applications by the General Contractor,
subcontractors, materialmen and other Persons involved in the Construction for
progress and final payments, and shall provide to Lessor such certifications
for payment as are required under the Participation Agreement. Lessee's
obligations under this Section shall not be diminished or affected by any
insufficiency of the proceeds of the Loan, or the amount of the Contribution,
or as the result of the costs of acquisition of the Land or the Construction of
the Improvements or any part thereof exceeding amounts received as Loan
Advances or Contribution Advances from the Lender or the Lessor. In the event
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that Property Costs which are due and payable exceed the aggregate amount of
Loan Advances and Contribution Advances, such excess shall be paid by Lessee
from Lessee's own funds.
SECTION 3.3 Permits; Approvals; Storage. Lessee shall be
responsible for obtaining or causing each General Contractor to obtain all
applicable zoning, wetlands, subdivision, building and other permits for the
Construction, and shall also be responsible for obtaining or causing each
General Contractor to obtain all other approvals from authorities having
jurisdiction over the Construction, the Land or the Improvements. Lessee shall
monitor the progress of the Construction. Lessee shall arrange for the
delivery and storage, protection and security of materials, systems and
equipment which are to be incorporated into the Improvements until such items
are incorporated into the Improvements.
SECTION 3.4 Inspection. At any time upon three (3) Business Days
prior notice to Lessee, Lessor, the Lender and their authorized
representatives, at their sole risk, may inspect the Leased Property and the
books and records of Lessee relating to the Leased Property and make copies and
abstracts therefrom. All reasonable and documented out-of-pocket costs of such
inspection incurred by Lessor or Lender shall be paid by Lessee promptly after
receipt by Lessee of a written request for such payment. No inspection shall
unreasonably interfere with Lessee's operations or the operations of any other
occupant of the Leased Property. None of the inspecting parties shall have any
duty to make any such inspection or inquiry and none of the inspecting parties
shall incur any liability or obligation by reason of not making any such
inspection or inquiry. None of the inspecting parties shall incur any
liability or obligation by reason of making any such inspection or inquiry
unless and to the extent such inspecting party, during the course of such
inspection, causes damage to either the Leased Property, any property of Lessee
or any property of any other Person or injury to a Person, whereupon, provided
that the Lessee shall not have been negligent or acted intentionally or with
gross recklessness, such inspecting party shall be liable for any such damage
or injury, as may be applicable, shall indemnify and hold Lessee harmless from
and against all claims, losses and liability as to such damage or injury.
ARTICLE IV
RENT
SECTION 4.1 (a) Basic Rent. The first Rent Payment Date for
each Property shall be the first Loan Payment Date which next follows the
earlier to occur of the Parcel Completion Date for such Property or the related
Completion Deadline, as the case may be, and beginning on that date, Lessee
shall commence making payments of Basic Rent with respect to such Property to
Lessor in installments payable in arrears on each Rent Payment Date and on any
date (if not a Rent Payment Date) which is the Lease Termination Date.
Notwithstanding the foregoing, the Lessee shall pay no Basic Rent with respect
to any Property for the period from the related Parcel Closing Date to and
including the earlier to occur of the related Parcel Completion Date or the
related Completion Deadline. On each Rent Payment Date, Lessee shall pay the
installment of Basic Rent then due and payable pursuant to this Lease and all
Parcel Lease Supplements then in force. Basic Rent shall equal the sum of all
installments of the Facility Rent, the Index Rent and the Scheduled Rent
payable with respect to each Property and shall be payable in the respective
amounts set forth
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below and in each Parcel Lease Supplement. In addition, Basic Rent shall be
payable on the related Parcel Completion Date in certain circumstances as set
forth below.
(b) Facility Rent. On each Rent Payment Date, the Lessee
shall, until (i) the total Lease Balance shall be paid in full on the Lease
Termination Date, or (ii) the payment by Lessee of the Recourse Deficiency
Amount on the Scheduled Termination Date and the fulfillment of the provisions
of clauses (i) through (xiii) of Section 15.6, pay installments of Facility
Rent in respect of each Property in arrears with respect to the period elapsed
since, in the case of the first Rent Payment Date for such Property, the
related Parcel Completion Date, and in the case of each subsequent Rent Payment
Date, the immediately preceding Rent Payment Date, and each such installment
shall be in an amount which equals the Contribution Return accrued and unpaid
in respect of the Parcel Contribution Tranche for such Property. In addition,
the Lessee agrees to pay as Facility Rent (i) on the Final Completion Date, all
accrued and unpaid Contribution Return, if any, which shall not have been added
to the balance of the Contribution in accordance with Section 2.2(d) of the
Participation Agreement as the result of the total funding of the Equity
Commitment, and (ii) an amount equal to the Lessor's Breakage Costs in the
event of the imposition of such Lessor's Breakage Costs.
(c) Index Rent. On the Final Completion Date, the Lessee
shall pay as Index Rent an amount equal to the sum of all interest accrued and
unpaid on the Loan for which a Loan Advance shall not have been made pursuant
to Section 2.2(c) of the Participation Agreement on or prior to such date as
the result of the prior total funding of the Loan Commitment. On each Rent
Payment Date on which Basic Rent is payable, the Lessee shall pay as Index Rent
for each Property an amount equal to the sum of all interest accrued and unpaid
with respect to the Parcel Tranche for such Property.
(d) Scheduled Rent. On each Rent Payment Date, Lessee
shall pay the installment of Scheduled Rent for each Property, if any, then due
and payable. There shall be attached to each Parcel Lease Supplement as
Appendix II a schedule of the respective installments of Scheduled Rent due and
payable on each Rent Payment Date with respect to the related Property. It is
the intention of the parties hereto and the Lender that the respective
installments of Scheduled Rent set forth on all such schedules of Scheduled
Rent shall be in an aggregate amount sufficient (but not in excess) to pay
required payments of principal on the Loan and the Note, and the proceeds of
each such installment shall be applied by the Lender in reduction of the Parcel
Tranche for the related Property; provided, however, that the Lessee, in order
to avoid Breakage Costs, hereby directs the Lender to deposit payments of
Scheduled Rent in the Reinvestment Account maintained pursuant to Section 3.7
of the Loan Agreement for payment of principal on the Rent Payment Date at the
end of the Interest Period; provided, further, that until amounts in the
Reinvestment Account shall be applied to pay the Loan, interest will continue
to accrue with respect to 100% of the principal balance of the Loan without any
setoff or deduction relating to the amounts so deposited. The parties hereto
agree to adjust the schedule of Scheduled Rent set forth in each such Appendix
II to the extent necessary to reflect the actual outstanding principal amount
of the Loan, in the event of (i) a partial prepayment of the Loan, or (ii) that
the aggregate total of the Loan Advances made under the Loan as of the
Completion Deadline equals less than the Loan Commitment. Any such
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adjustment shall be made (i) in the case of a partial prepayment, by
multiplying the remaining unpaid installments of Scheduled Rent on by a
fraction, the numerator of which is the aggregate total of Loan Advances made
under the Loan less the amount of principal prepaid on the Loan, and the
denominator of which is the amount of the Loan Commitment, and (ii) in the
event that the aggregate total of Loan Advances equals less than the Loan
Commitment as of the Completion Date, by multiplying each of the installments
of Scheduled Rent as set forth on each such Appendix II by a fraction, the
numerator of which is the aggregate total of Loan Advances under the Loan, and
the denominator of which is the Loan Commitment. Notwithstanding the
foregoing, on the Scheduled Termination Date, the Lessee shall pay an amount
equal to the Recourse Deficiency Amount or the Lease Balance, as the case may
be, in accordance with the provisions of Article XV hereof, in addition to the
installment of Scheduled Rent due hereunder.
SECTION 4.2 Supplemental Rent. Lessee shall pay to Lessor, or to
whomever shall be entitled thereto as expressly provided herein or in any other
Operative Document or in the Facilitation Agreement dated the date hereof
between the Lessee, the Lessor and JH Management Corporation (the "Facilitation
Agreement"), any and all Supplemental Rent promptly as the same shall become
due and payable. In particular, the Lessee agrees to pay to the Lessor or its
designee as Supplemental Rent (i) on the Closing Date and on July 1st of each
succeeding year during the Lease Term, the annual Facilitation Fee in the sum
of $__________, (ii) amounts necessary to reimburse Lessor for reasonable legal
fees and expenses in connection with the transaction contemplated by the
Operative Documents; and (iii) such other amounts as Lessor and Lessee shall
mutually agree upon. In the event of any failure on the part of Lessee to pay
any Supplemental Rent, which failure constitutes an Event of Default, Lessor
shall have all rights, powers and remedies provided for herein or by law or in
equity or otherwise in the case of nonpayment of Basic Rent. All Supplemental
Rent to be paid pursuant to this Section shall be payable in the type of funds
and in the manner set forth in Section 4.3.
SECTION 4.3 Method of Payment. All Basic Rent shall be paid by
the Lessee directly to the Lender. Supplemental Rent (including amounts due
under Article XV hereof) shall be paid to Lessor (or to such Person as may be
entitled thereto) or, in each case, to such Person as Lessor (or such other
Person) shall specify in writing to Lessee, and at such place as Lessor (or
such other Person) shall specify in writing to Lessee, which specifications by
Lessor shall be given by Lessor at least ten Business Days prior to the due
date therefor. Each payment of Rent (including all payments under Article XV
hereof) shall be made by Lessee prior to 10:00 a.m. Houston, Texas time on the
date due, at the place of payment in funds consisting of lawful currency of the
United States of America which shall be immediately available on the scheduled
date when such payment shall be due, unless such scheduled date shall not be a
Business Day, in which case such payment shall be made on the next succeeding
Business Day.
SECTION 4.4 Late Payment. If any Rent (other than Supplemental
Rent payable by reason of this Section) shall not be paid when due, Lessee
shall pay to Lessor, as Supplemental Rent, interest (to the maximum extent
permitted by law) on such overdue amount from and including the due date
thereof to but excluding the Business Day of payment thereof at the Overdue
Rate.
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SECTION 4.5 Net Lease; No Setoff, Etc. This Lease is a net lease
and, notwithstanding any other provision of this Lease, Lessee shall pay all
Basic Rent and Supplemental Rent, and all costs, charges, taxes, assessments
and other expenses (foreseen or unforeseen) for which Lessee or any Indemnitee
is or shall become liable by reason of Lessee's or such Indemnitee's estate,
right, title or interest in the Leased Property, or that are connected with or
arise out of the acquisition, installation, possession, use, occupancy,
maintenance, ownership, leasing, repairs and rebuilding of, or addition to, the
Leased Property or any portion thereof, including, without limitation, the
Construction or the financing of the Construction and any other amounts payable
hereunder shall be paid, without counterclaim, setoff, deduction or defense and
without abatement, suspension, deferment, diminution or reduction, and Lessee's
obligation to pay all such amounts throughout the Lease Term is absolute and
unconditional. The obligations and liabilities of Lessee hereunder shall in no
way be released, discharged or otherwise affected for any reason, including
without limitation (i) any defect in the condition, merchantability, design,
quality or fitness for use of the Leased Property or any part thereof, or the
failure of the Leased Property to comply with all Applicable Law, including any
inability to occupy or use the Leased Property by reason of such
non-compliance, (ii) any damage to, removal, abandonment, salvage, loss,
contamination of or Release from, scrapping or destruction of or any
requisition or taking of the Leased Property or any part thereof, (iii) any
restriction, prevention or curtailment of or interference with any use of the
Leased Property or any part thereof including eviction, (iv) any defect in
title to or rights to the Leased Property or any Lien on such title or rights
or on the Leased Property, (v) any change, waiver, extension, indulgence or
other action or omission or breach in respect of any obligation or liability of
any Person requested or consented to by Lessee, (vi) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation
or other like proceedings relating to Lessee, Lessor, the Lender or any other
Person, or any action taken with respect to this Lease by any trustee or
receiver of Lessee, Lessor, the Lender or any other Person, or by any court, in
any such proceeding, (vii) any failure on the part of the Lessor to perform or
comply with any of the terms of this Lease, any other Operative Document or of
any other agreement where such failure was caused by Lessee's failure to
perform its obligations under the Operative Documents, (viii) any disaffirmance
of this Lease or any provision hereof or any of the other Operative Documents
or any provision of any thereof by Lessee, (ix) any action by any court,
administrative agency or other Governmental Authority, (x) any restriction,
prevention or curtailment of or interference with the Construction or any use
of the Leased Property or any part thereof or (xi) any other occurrence
whatsoever, whether similar or dissimilar to the foregoing, whether or not
either Lessee shall have notice or knowledge of any of the foregoing. Except
as specifically set forth in Articles XV or XI of this Lease, this Lease shall
be noncancellable by Lessee for any reason whatsoever and Lessee, to the extent
permitted by Applicable Law, waives all rights now or hereafter conferred by
statute or otherwise to quit, terminate or surrender this Lease, or to any
diminution, abatement or reduction of Rent payable by Lessee hereunder. Lessee
assumes the sole responsibility for the condition, use, operation, maintenance,
and management of the Leased Property and Lessor shall have no responsibility
in respect thereof and shall have no liability for damage to the property of
either Lessee or any subtenant of Lessee on any account or for any reason
whatsoever other than by reason of Lessor's willful misconduct or breach of any
of its express obligations under any Operative Document.
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SECTION 4.6 Lessee to Cooperate with Lessor. The Lessee hereby
agrees to use its best efforts to supply Lessor with all such information
necessary in order for Lessor to maintain its books and accounts and prepare
all required federal, state and local tax returns.
ARTICLE V
CONDITION AND USE OF LEASED PROPERTY
During the Lease Term, Lessor's interest in the Improvements (whether
or not completed) and the Land is demised and let by Lessor "AS IS" and that
Lessor's interest is subject to, among other things, (i) the rights of any
parties in possession thereof, (ii) the state of the title thereto existing at
the time Lessor acquired its interest in the Leased Property, (iii) any state
of facts which an accurate survey or physical inspection might show (including
each survey delivered on each Parcel Closing Date), (iv) all Applicable Law and
(v) any violations of Applicable Law which may exist upon or subsequent to the
commencement of the Lease Term. LESSEE ACKNOWLEDGES THAT, ALTHOUGH LESSOR WILL
OWN AND HOLD TITLE TO THE LEASED PROPERTY, LESSEE IS SOLELY RESPONSIBLE FOR THE
DESIGN, DEVELOPMENT, BUDGETING AND CONSTRUCTION OF THE IMPROVEMENTS AND ANY
ALTERATIONS. NEITHER LESSOR NOR THE LENDER HAVE MADE OR SHALL BE DEEMED TO
HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OR SHALL BE
DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE VALUE, MERCHANTABILITY,
TITLE, HABITABILITY, CONDITION, DESIGN, OPERATION, OR FITNESS FOR USE OF THE
LEASED PROPERTY (OR ANY PART THEREOF), OR ANY OTHER REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED PROPERTY (OR ANY
PART THEREOF), ALL SUCH WARRANTIES BEING HEREBY DISCLAIMED, AND NEITHER LESSOR
NOR THE LENDER SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN
OR THE FAILURE OF THE LEASED PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY
APPLICABLE LAW except that Lessor hereby represents and warrants that the
Leased Property shall at all times remain free of Lessor Liens. As between
Lessor and Lessee, Lessee shall be afforded full opportunity to inspect the
related Parcel prior to each Parcel Closing Date, and shall enter into each
Parcel Lease Supplement solely on the basis of the results of its own
inspections and all risks incident to the matters discussed in the two
preceding sentences, as between Lessor or the Lender, on the one hand, and
Lessee, on the other, are to be borne by Lessee. The provisions of this
Article have been negotiated and, except to the extent otherwise expressly
stated, the foregoing provisions are intended to be a complete exclusion and
negation of any representations or warranties by Lessor or the Lender, express
or implied, with respect to the Leased Property that may arise pursuant to any
law now or hereafter in effect or otherwise.
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ARTICLE VI
LIENS; EASEMENTS; PARTIAL CONVEYANCES
SECTION 6.1 No Liens. Commencing on each Parcel Completion Date
and thereafter, Lessee shall not directly or indirectly create, incur or
assume, any Lien on or with respect to the related Parcel of the Leased
Property, the Construction, title thereto, or any interest therein, including
any Liens which arise out of the possession, use, occupancy, construction,
repair or rebuilding of the Leased Property or by reason of labor or materials
furnished or claimed to have been furnished to Lessee, or any of its
contractors or agents or by reason of the financing of any personalty or
equipment purchased or leased by Lessee or Alterations constructed by Lessee,
except in all cases Permitted Liens.
SECTION 6.2 Easements and Related Conveyances. Notwithstanding
Section 6.1, at the request of Lessee, Lessor shall, from time to time during
the Lease Term and upon reasonable advance written notice from Lessee and
receipt of the materials specified in the next succeeding sentence, consent to
and join in any (i) grant of easements, licenses, rights of way and other
rights in the nature of easements, including, without limitation, utility
easements to facilitate Lessee's use, development and construction of the
Leased Property, (ii) release or termination of easements, licenses, rights of
way or other rights in the nature of easements which are for the benefit of the
Land, the Improvements or any portion thereof, (iii) dedication or transfer of
portions of the Land, not improved with a building, for road, highway or other
public purposes, (iv) execution of agreements for ingress and egress and
amendments to any covenants and restrictions affecting the Land, the
Improvements or any portion thereof and (v) request to any Governmental
Authority for platting or subdivision or replatting or resubdivision approval
with respect to the Land or any portion thereof or any parcel of land of which
the Land or any portion thereof forms a part or a request for any variance from
zoning or other governmental requirements. Lessor's obligations pursuant to
the preceding sentence shall be subject to the requirements that:
(a) any such action shall be at the sole cost and expense
of Lessee, and Lessee shall pay all reasonable and documented out-of-pocket
costs of Lessor in connection therewith (including, without limitation, the
reasonable and documented fees of attorneys, architects, engineers, planners,
appraisers and other professionals reasonably retained by Lessor in connection
with any such action);
(b) Lessee shall have delivered to Lessor a certificate
of a Responsible Officer of Lessee stating that (1) such action will not cause
the Land, the Improvements or any portion thereof to fail to comply in any
respect with the provisions of this Lease or any other Operative Documents or
in any respect with Applicable Law and (2) such action will not materially
reduce the Fair Market Sales Value of the Land or the Improvements nor Lessor's
interest therein;
(c) all consideration received in connection with such
action (net of all reasonable out-of-pocket expenses incurred by Lessee in
connection therewith) shall be paid to Lender within thirty (30) Business Days
following receipt thereof and shall constitute a Qualified Payment (to the
extent consistent with the definition thereof) and be applied to reduce the
Loan; and
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(d) in the case of any release or conveyance, if Lessor
so requests and to the extent available without undue expense, Lessee will
cause to be issued and delivered to Lessor by the Title Insurance Company an
indorsement to the related Title Policy pursuant to which the Title Insurance
Company agrees that its liability for the payment of any loss or damage under
the terms and provisions of the related Title Policy will not be affected by
reason of the fact that a portion of the real property referred to in Schedule
A of the related Title Policy has been released or conveyed by Lessor.
ARTICLE VII
MAINTENANCE AND REPAIR;
ALTERATIONS; MODIFICATIONS AND ADDITIONS
SECTION 7.1 Maintenance and Repair; Compliance With Law. Lessee,
at its own expense, shall after each Parcel Closing Date with respect to each
Parcel (i) maintain the Leased Property in good repair and condition (subject
to ordinary wear and tear), in accordance with prudent industry standards and,
in any event, in no less a manner as other similar facilities owned or leased
by Lessee, (ii) make all Alterations in accordance with, and maintain (whether
or not such maintenance requires structural modifications or Alterations) and
operate and otherwise keep the Leased Property in compliance with, all
Applicable Laws and (iii) make all material repairs, replacements and renewals
of the Leased Property or any part thereof which may be required to keep the
Leased Property in the condition required by the preceding clauses (i) and
(ii). Lessee shall perform the foregoing maintenance obligations regardless of
whether the Leased Property is occupied or unoccupied. Lessee waives any right
that it may now have or hereafter acquire to (i) require Lessor to maintain,
repair, replace, alter, remove or rebuild all or any part of the Leased
Property or (ii) make repairs at the expense of Lessor pursuant to any
Applicable Law or other agreements or otherwise. Lessor shall not be liable to
Lessee or to any contractors, subcontractors, laborers, materialmen, suppliers
or vendors for services performed or material provided on or in connection with
the Leased Property or any part thereof. Lessor shall not be required to
maintain, alter, repair, rebuild or replace the Leased Property in any way.
SECTION 7.2 Alterations. The Lessee shall have the right, at any
time and from time to time, to make such Alterations, structural or otherwise,
to the Leased Property as the Lessee shall deem necessary or desirable, subject
to the following conditions:
(a) No Alterations shall be undertaken until the Lessee
shall have procured and paid for, so far as the same may be required
from time to time, all required municipal and other governmental
permits and authorizations of the various municipal departments and
governmental subdivisions having jurisdiction, and the Lessor, at the
Lessee's expense, shall join in the application for such permits or
authorizations whenever such action is necessary;
(b) Any structural Alterations, or any Alterations
undertaken as a single project and involving an estimated cost
aggregating more than $200,000,
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shall, if requested by the Lender, be conducted under the supervision
of an architect or engineer licensed as such in the State; selected by
the Lessee and reasonably acceptable to the Lender, and no such work
shall be undertaken until preliminary plans and outline specifications
and budget estimates therefor, prepared and approved in writing by
such architect or engineer, stating that the same comply with the
provisions of this Article, shall have been submitted to and approved
by the Lessor and the Lender, which approval shall be deemed to have
been given if no notice of disapproval of the same is given by either
of Lessor or Lender within ten (10) Business Days after receipt of the
foregoing items for approval in accordance with Section 7.2(b);
(c) All Alterations will comply in all respects with the
provisions of the Operative Documents and shall be of such a character
that, when completed, the Fair Market Sales Value of the Improvements
shall be not less than the Fair Market Sales Value of the Improvements
immediately before any such Alterations.
(d) All work done in connection with any Alterations
shall be done in a good and workmanlike manner and in compliance with
applicable building and zoning laws and with all other Applicable
Laws; the cost of any such Alterations shall be paid in cash or its
equivalent, so that the Leased Property shall at all times be free of
Liens for labor and materials supplied or claimed to have been
supplied (other than inchoate liens or liens bonded off in accordance
with Applicable Law and with Lender's consent); and the work of any
Alterations shall be prosecuted with reasonable dispatch, unavoidable
delays excepted;
(e) Worker's compensation insurance covering all persons
employed in connection therewith and with respect to whom death or
bodily injury claims could be asserted against the Lessor, the Lender
or the Lessee or the Leased Property and general liability and
property damage insurance (which may be effected by indorsement, if
obtainable, on the insurance required to be carried pursuant to
Section 9.2) for the mutual benefit of the Lessor, the Lender or the
Lessee with limits of not less than those required to be carried
pursuant to said Section 9.2 shall be maintained by the Lessee at all
times when any work is in process in connection with any Alterations.
SECTION 7.3 Title to Alterations. Title to all Alterations shall
without further act vest in Lessor (subject to Lessee's right to remove trade
fixtures, personal property and equipment which were not acquired with funds
advanced by Lessor or Lender) and shall be deemed to constitute a part of the
Leased Property and be subject to this Lease.
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ARTICLE VIII
USE
Lessee shall use the Leased Property or any part thereof only for the
purpose of warehouse and distribution purposes and related office uses, and
such other uses that may be available under the zoning applicable to the Land
or any applicable part thereof from time to time.
ARTICLE IX
INSURANCE
SECTION 9.1 Insurance Coverages. At all times (except as
otherwise indicated) the Lessee, at its sole cost and expense, shall keep the
Improvements insured for the mutual benefit of the Lender, Lessor and Lessee
against:
(a) loss or damage by fire, and such other risks as may
be included in the so-called "All Risk" form of insurance providing
coverage against all risks of physical loss, in an amount satisfactory
to Lender, but in any event not less than the then Full Replacement
Cost of the Improvements;
(b) loss or damage from leakage of sprinkler systems now
or hereafter installed in the Improvements, in such amount as Lender
may reasonably require;
(c) loss of rental from the Improvements, under a rental
value insurance policy indorsement or policy provision 9.2 covering
risk of loss due to any of the hazards described in clauses (a) and (b)
of this Section 9.1 in an amount not less than the aggregate
requirements for the period of 12 months following the occurrence of
the insured casualty for Basic Rent and Supplemental Rent;
(d) loss or damage by explosion of high pressure steam
boilers, air conditioning equipment, pressure vessels, motors or
similar apparatus, now or hereafter installed in the Improvements in
such limits with respect to any one accident as may reasonably be
required by Lender from time to time, but not less than $100,000;
(e) flood hazard coverage, if available under any
applicable federal flood insurance program, in an amount reasonably
satisfactory to Lender;
(f) during the Construction and at any time during which
any part of the Improvements or any Alteration are under construction,
and as to any part of the Improvements or any Alteration under
construction, builder's risk coverage under a so-called "all risk"
non- reporting completed value form of policy; and
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(g) such other hazards and in such amounts as Lender may
reasonably require provided that such insurance is then customarily
maintained with respect to similar properties in the State in which
such Improvements are located.
The term "Full Replacement Cost" shall mean the actual replacement cost of the
Improvements (excluding foundation and excavation costs) without physical
depreciation. Full Replacement Cost shall be determined at the request of
Lender by an architect, appraiser, appraisal company or one of the insurers,
selected and paid by the Lessee and reasonably acceptable to Lender, but such
determination shall not be required to be made more frequently than once every
24 months.
SECTION 9.2 Liability Insurance. The Lessee shall also maintain
insurance for the mutual benefit of the Lessor, the Lender, each other
Indemnitee, and the Lessee against claims for bodily injury or property damage,
under a policy of commercial general liability insurance, with such limits as
may reasonably be required by the Lessor or the Lender from time to time, but
not less than $1,000,000 per occurrence, with excess umbrella liability
coverage of not less than $5,000,000 per occurrence.
SECTION 9.3 Policies. All insurance provided for under this
Lease shall be effected under valid enforceable policies issued by insurers of
recognized responsibility and acceptable to the Lessor and the Lender. Upon
the execution of this Lease, the Lessee shall deliver to the Lender and the
Lessor original certificates of such insurance and copies of such policies in
form reasonably satisfactory to the Lender. At least 30 days prior to the
expiration date of any policy, a copy of the renewal policy for such insurance
shall be delivered by the Lessee to the Lessor and the Lender, and certificates
thereof in form reasonably satisfactory to the Lender shall be delivered as
aforesaid, together with satisfactory evidence of payment of the premium
thereon. All policies referred to in Section 9.1 shall contain agreements by
the insurers that (i) any loss shall be payable to the Lessor and the Lender,
notwithstanding any act or negligence of the Lessee which might otherwise
result in forfeiture of said insurance, (ii) such policies shall not be
canceled except upon 30 days' prior written notice to each named insured and
loss payee, (iii) the coverage afforded thereby shall not be affected by the
performance of any work in or about the Leased Property and (iv) waiving all
rights of subrogation against the Lessor, Lender, Lessee and their respective
officers, employees, directors, incorporates, shareholders and agents.
SECTION 9.4 Loss Payee Provisions. The rental value policy
referred to in Section 9.1 (c) shall name Lender as the loss-payee thereunder.
Upon the receipt of same, the Lender shall apply the proceeds of such rental
value insurance paid to it first to the payment of Basic Rent and then to the
payment of taxes, insurance premiums and other items of Supplemental Rent
becoming due during the rebuilding and restoration of the Leased Property, and
any balance of such proceeds after the completion of such rebuilding and
restoration shall be paid to Lessee. Except as provided above in this Section
9.4, all policies of insurance required herein shall name the Lender, Lessor,
and Lessee as the insureds as their respective interests may appear. Subject
to the provisions and limitations of this Section, all policies referred to in
Section 9.1 shall also provide for any loss to be payable to Lender as its
interest may appear, pursuant to a standard mortgagee clause or indorsement.
The loss, if any, under the policies referred to in Section 9.1 shall be
adjusted with the
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insurance companies by the Lessee except that no loss shall be adjusted without
the prior written approval of the Lender. The loss, if any, under all policies
referred to in Section 9.1 shall be payable to the Lender. All such policies
shall expressly provide that loss thereunder shall be adjusted and paid as
provided in this Section. Any loss paid to the Lessee under any insurance
policy referred to in Section 9.1 shall be held by the Lessee in trust for
application to the cost of restoring, repairing, replacing or rebuilding the
Improvements. Any loss paid to the Lender shall be disbursed by it in
accordance with the provisions of Section 11.6 of this Lease.
SECTION 9.5 Other Insurance. Nothing in this Article shall
prevent the Lessee from taking out insurance of the kind and in the amounts
provided for under Section 9.1 and 9.2 under a blanket insurance policy or
policies which can cover other properties owned or operated by the Lessee as
well as the Leased Property; provided, however, that any such policy of
insurance provided for under Section 9.1 shall (a) specify therein, or the
Lessee shall furnish the Lessor and the Lender with a written statement from
the insurers under such policies specifying, the amount of the total insurance
allocated to the Improvements, which amount shall be not less than the amount
required by said Section 9.1 to be carried, and (b) not contain any clause
which would result in the insured thereunder being required to carry insurance
with respect to the property covered thereby in an amount equal to a minimum
specific percentage of the value of such property in order to prevent the
insured therein named from becoming a co-insurer of any loss with the insurer
under such policy. The Lessee shall furnish to the Lessor and the Lender,
within 30 days after the filing thereof with any insurance rate-making body,
copies of the schedule or make-up of all property covered by every such policy
of blanket insurance.
SECTION 9.6 Loss Deductibles. All insurance provided for under
this Agreement may contain loss deductible clauses in such commercially
reasonable maximum amounts as the Lender shall approve from time to time.
ARTICLE X
ASSIGNMENT AND SUBLEASING
Except as provided in the next following sentence, Lessee may not
assign any of its right, title or interest in, to or under this Lease. Lessee
may assign or sublease all or any portion of the Leased Property; provided,
however, that (i) all obligations of Lessee (or, in the case of a merger,
consolidation or sale of all or substantially all of Lessee's assets, Lessee's
successor if (A) such successor has a net worth, determined in accordance with
GAAP, at least equal to that of Lessee as of the end of the most recent fiscal
quarter of Lessee, (B) such successor assumes in writing all of Lessee's
obligations under the Operative Documents without qualification or reservation
and (C) immediately after giving effect to such merger, consolidation or sale,
no Event of Default exists) shall continue in full effect as obligations of a
principal and not of a guarantor or surety, as though no assignment or sublease
had been made, (ii) any such sublease shall be expressly subject and
subordinate to this Lease, the Loan Agreement, the Mortgages and the other
Operative Documents except to the extent the Lease remains effective under the
applicable Non-Disturbance and Attornment Agreement and (iii) each such
sublease shall terminate on or before the Lease Termination Date.
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ARTICLE XI
LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE
SECTION 11.1 Event of Loss. Any event (i) which would otherwise
constitute a Casualty during the Lease Term, (ii) which, in the good-faith
judgement of Lessee, renders repair and restoration of any Property impractical
or uneconomical and (iii) as to which Lessee, within thirty (30) days after the
occurrence of such event, delivers to Lessor and the Lender an Officer's
Certificate notifying Lessor and the Lender of such event and of such
judgement, shall constitute an "Event of Loss". In the case of any other event
which constitutes a Casualty, Lessee shall restore and rebuild the affected
Property pursuant to Section 11.3. If an Event of Loss other than an Event of
Taking shall occur, Lessee shall pay to Lessor on the next Rent Payment Date
following delivery of the Officer's Certificate pursuant to clause (iii) of the
preceding sentence, in addition to all Basic Rent and Supplement Rent otherwise
due on such date, an amount equal to the Lease Balance of the affected Property
as of such date. Upon Lessor's receipt of such Lease Balance on such date,
Lessor shall cause Lessor's interest in the Leased Property to be conveyed to
Lessee in accordance with and subject to the provisions of Section 15.5
("Purchase Procedure") hereof, provided, however, that (A) such conveyance may
be by special warranty deed, but free and clear of Lessor's Liens and the lien
of the related Mortgage, (B) Lessor shall have no obligation to remove title
defects other than Lessor Liens and the lien of the related Mortgage affecting
such Property and (C) Lessee's ability to obtain a title insurance policy shall
not affect Lessee's obligation to purchase Lessor's interest in the affected
Property. Upon completion of such purchase, but not prior thereto, the
affected Property shall be deemed released from this Lease and all obligations
of the Lessee and Lessor with respect to such Property (including the
obligation to make further payments of Basic Rent) shall terminate, except with
respect to obligations and liabilities hereunder, actual or contingent, that
have arisen or relate to events occurring on or prior to such date of purchase,
or which are expressly stated herein to survive termination of this Lease.
Upon the consummation of the purchase of the affected Property pursuant to this
Section, any proceeds derived from insurance required to be maintained by
Lessee pursuant to this Lease for Leased Property remaining after payment of
such purchase price shall be paid over to, or retained by, Lessee or as it may
direct, and Lessor shall assign to Lessee, without warranty, all of Lessor's
rights to and interest in insurance required to be maintained by Lessee
pursuant to this Lease.
SECTION 11.2 Event of Taking. Any event (a) which constitutes a
taking of title to any Property or (b) (i) which would otherwise constitute a
Condemnation, (ii) which, in the good-faith judgement of Lessee, renders
restoration and rebuilding of such Property impossible, impractical or
uneconomical and (iii) as to which Lessee, within thirty (30) days after the
occurrence of such event, delivers to Lessor and Lender an Officer's
Certificate notifying Lessor and the Lender of such event, of such judgement
and of the date (or Lessee's best estimate thereof) on which Lessee shall be
required to relinquish possession of the affected Property (or the affected
portion thereof), shall constitute an "Event of Taking". In the case of any
other event which constitutes a Condemnation Lessee shall restore and rebuild
the affected Property pursuant to Section 11.4. If an Event of Taking shall
occur, Lessee shall pay to the Lender for the account of the Lessor (i) on the
next Rent Payment Date following the occurrence of such Event of Taking, in the
case of an Event
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of Taking described in clause (a) of the second preceding sentence or (ii) on
the Rent Payment Date next preceding the date on which Lessee is required to
relinquish possession of the Leased Property (or the affected portion thereof),
in the case of an Event of Taking described in clause (b) of the second
preceding sentence, in addition to all Basic Rent and Supplemental Rent
otherwise due on such date, an amount equal to the Lease Balance of the
affected Property. Upon the Lender's receipt of such amount on such date, the
Lessor shall cause the Lessor's interest in the affected Property to be
conveyed to Lessee in accordance with and subject to the provisions of Section
15.5 ("Purchase Procedure") hereof; provided, however, that (A) such conveyance
may be by special warranty deed, but free and clear of Lessor's Liens and the
lien of the related Mortgage, (B) such conveyance shall be subject to all
rights of the condemning authority, (C) Lessor shall have no obligation to
remove title defects other than Lessor Liens and the lien of the related
Mortgage affecting such Property and (D) Lessee's ability to obtain a title
insurance policy shall not affect Lessee's obligation to purchase Lessor's
interest in the affected Property. Upon completion of such purchase, but not
prior thereto, the affected Property shall be deemed released from this Lease
and all obligations of the Lessee and the Lessor under this Lease with respect
to such Property (including the obligation to make further payments of Basic
Rent) shall terminate, except with respect to obligations and liabilities
hereunder, actual or contingent, that have arisen or relate to events occurring
on or prior to the date of such purchase, or which are expressly stated herein
to survive termination of this Lease. Upon the consummation of the purchase of
the affected Property pursuant to this Section, all Awards received by Lessor,
after deducting any reasonable and documented costs incurred by Lessor in
collecting such Awards, received or payable on account of an Event of Taking
during the Lease Term shall be paid to Lessee, and all rights of Lessor in
Awards not then received shall be assigned to Lessee by Lessor. If no Event of
Default has occurred and is then continuing, Lessee shall have the right to
negotiate with the condemning authority and receive all Awards, subject to the
terms of this Lease.
SECTION 11.3 Casualty. If a Casualty shall occur, Lessee shall
rebuild and restore the affected Property, will complete the same prior to the
Lease Termination Date (provided that sufficient time to do so exists at the
time such Casualty occurs) and will cause the conditions set forth in Section
3.3 of the Participation Agreement to be fulfilled with respect to such
restoration and rebuilding prior to the Lease Termination Date; provided,
however, that with respect to any such Casualty occurring after the original
satisfaction of the Construction Conditions, such restoration and rebuilding
will be performed, and the Improvements, as applicable, will be restored and
rebuilt, in accordance with the Plans and Specifications as in existence on the
date on which the certificate of occupancy for the affected Improvements was
issued, as such Plans and Specifications may have been modified in respect of
Alterations completed prior to the occurrence of such Casualty pursuant to
Section 7.2, with such additional modifications to such Plans and
Specifications as Lessor shall consent to in writing, which consent shall not
be unreasonably withheld or delayed.
SECTION 11.4 Condemnation. If a Condemnation shall occur, Lessee
shall rebuild and restore the affected Property to the extent practicable, will
complete the same prior to the Lease Termination Date (provided that sufficient
time to do so exists at the time such Condemnation occurs), and will cause the
conditions set forth in Section 3.3 of the Participation Agreement to be
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fulfilled with respect to such restoration and rebuilding prior to the Lease
Termination Date; provided, however, that within sixty (60) days after Lessee's
receipt of any Awards with respect to such Condemnation, Lessee shall pay to
the Lender, which amounts shall be applied as a Qualified Payment to the
prepayment of the Note, (a) the portion, if any, of such Awards which are
identified, by the condemner, as being allocable to the Land or (b) if no such
identification is made by the condemner, the portion, if any, of such Awards
which are, in Lessee's good-faith and reasonable judgment, allocable to the
Land; and provided, further, that with respect to any such Condemnation
occurring after the original satisfaction of the Construction Conditions, such
restoration and rebuilding will be performed, and the Improvements, as
applicable, will be restored and rebuilt, in accordance with the Plans and
Specifications as in existence on the date on which the certificate of
occupancy for the affected Improvements, as applicable, was issued, as such
Plans and Specifications may have been modified in respect of Alterations
completed prior to the occurrence of such Condemnation pursuant to Section 7.2
or modified to adjust for a Casualty of the Leased Property pursuant to Section
11.3, with such additional modifications to such Plans and Specifications as
Lessor shall consent to in writing, which consent shall not be unreasonably
withheld or delayed.
SECTION 11.5 Verification of Restoration and Rebuilding. Lessee
will promptly notify Lender and Lessor of the completion of the restoration or
rebuilding of the Improvements, as applicable, after a Casualty or
Condemnation. After completion of such restoration and rebuilding and in order
to verify Lessee's compliance with the foregoing Sections 11.3 and 11.4,
Lessor, the Lender and their authorized representatives may, at their own risk
and upon three (3) Business Days' notice to Lessee, inspect the Leased Property
and the completion of the restoration and rebuilding of the Improvements, as
applicable. All reasonable and documented out-of-pocket costs of such
inspection incurred by Lessor and the Lender will be paid by Lessee promptly
after written request. No such inspection shall unreasonably interfere with
Lessee's operations or the operations of any other occupant of the Leased
Property. None of the inspecting parties shall have any duty to make any such
inspection or inquiry and none of the inspecting parties shall incur any
liability or obligation by reason of not making any such inspection or inquiry.
None of the inspecting parties shall incur any liability or obligation by
reason of making any such inspection or inquiry unless and to the extent such
inspecting party causes damage to the Leased Property or any property of Lessee
or any other Person during the course of such inspection, whereupon, provided
that the Lessee shall not have been negligent or acted intentionally or with
gross recklessness, such inspecting party shall be liable for any such damage
or injury, as may be applicable, shall indemnify and hold Lessee harmless from
and against all claims, losses and liability as to such damage or injury.
SECTION 11.6 Application of Payments. (a) All proceeds (except
for payments under insurance policies maintained other than pursuant to Article
IX of this Lease) received at any time by Lessor, Lessee or the Lender from any
Governmental Authority or other Person with respect to any Condemnation or
Casualty to the Leased Property or any part thereof or with respect to an Event
of Loss or an Event of Taking, plus the amount of any payment that would have
been due from an insurer but for Lessee's self-insurance or deductibles ("Loss
Proceeds"), shall (except to the extent Section 11.9 applies) be applied as
follows:
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(i) In the event Lessee purchases the affected Property
pursuant to Section 11.1 or Section 11.2, such Loss Proceeds shall be
applied as set forth in Section 11.1 or Section 11.2, as the case may
be;
(ii) In the event of a Casualty at such time when an Event
of Default has occurred and is continuing and Lessee is obligated to
repair and rebuild the Leased Property pursuant to Section 11.3,
Lessee may, in good faith and subsequent to the date of such Casualty,
certify to the Lender and to the applicable insurer that no Default or
Event of Default has occurred, in which event the applicable insurer
shall pay the Loss Proceeds to Lessee and, if requested by Lessee, the
Lender and Lessor shall so direct the insurer;
(iii) In the event of a Condemnation at such time when an
Event of Default has occurred and is continuing and Lessee is
obligated to repair and rebuild the Leased Property pursuant to
Section 11.4, Lessor and Lender (if required) shall upon Lessee's
request assign to Lessee Lessor's and the Lender's (if applicable)
interest in any applicable Awards except for Awards (or portions
thereof) described in Section 11.4(a) or (b); and
(iv) As provided in Section 11.8 if such Section is
applicable.
(b) During any period of repair or rebuilding pursuant to this
Article, this Lease will remain in full force and effect and Basic Rent shall
continue to accrue and be payable without abatement or reduction. Lessee shall
maintain records setting forth information relating to the receipt and
application of payments in accordance with this Section. Such records shall be
kept on file by Lessee at its offices and shall be made available to Lessor and
the Lender upon request.
SECTION 11.7 Prosecution of Awards. (a) If, during the
continuance of any Event of Default, any Condemnation shall occur, Lessee shall
give to Lessor and the Lender promptly, but in any event within sixty (60) days
after the occurrence of such Condemnation, written notice of such occurrence
and the date thereof, generally describing the nature and extent of such
Condemnation. With respect to any Event of Taking or any Condemnation, Lessee
shall control the negotiations with the relevant Governmental Authority as to
any proceeding in respect of which Awards are required, under Section 11.6, to
be assigned or released to Lessee; provided, however, that if an Event of
Default shall have occurred and be continuing Lessor shall control such
negotiations. Lessee hereby irrevocably assigns, transfers and sets over to
Lessor all rights of Lessee to any Award made during the continuance of an
Event of Default on account of any Event of Taking or any Condemnation and, if
there will not be separate Awards to the Lessor and the Lessee on account of
such Event of Taking or Condemnation, irrevocably authorizes and empowers
Lessor during the continuance of an Event of Default, with full power of
substitution in the name of Lessee or otherwise (but without limiting the
obligations of Lessee under this Article), to file and prosecute what would
otherwise be Lessee's claim for any such Award and, in the case of Lessor, to
collect, receipt for and retain the same; provided, however, that in any event
Lessor may participate
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in any such negotiations, and no settlement will be made without Lessor's prior
consent, not to be unreasonably withheld or delayed.
(b) Notwithstanding the foregoing, Lessee may prosecute, and
Lessor shall have no interest in, any claim with respect to Lessee's trade
fixtures, other personal property and equipment and Lessee's relocation
expenses.
SECTION 11.8 Application of Certain Payments Not Relating to an
Event of Taking. In case of a requisition for temporary use of all or a
portion of the Leased Property which is not an Event of Taking, this Lease
shall remain in full force and effect, without any abatement or reduction of
Basic Rent, and the Awards for the Leased Property shall, unless an Event of
Default has occurred and is continuing, be paid to Lessee.
SECTION 11.9 Other Dispositions. Notwithstanding the foregoing
provisions of this Article, so long as an Event of Default shall have occurred
and be continuing, any amount that would otherwise be payable to or for the
account of, or that would otherwise be retained by, Lessee pursuant to this
Article shall be paid to Lessor as security for the obligations of Lessee under
this Lease and, at such time thereafter as no Event of Default shall be
continuing, such amount shall be paid promptly to Lessee to the extent not
previously applied by Lessor in accordance with the terms of this Lease or the
other Operative Documents.
SECTION 11.10 No Rent Abatement. Rent shall not abate hereunder by
reason of any Casualty, any Event of Loss, any Event of Taking or any
Condemnation of the Leased Property, and Lessee shall continue to perform and
fulfill all of Lessee's obligations, covenants and agreements hereunder
notwithstanding such Casualty, Event of Loss, Event of Taking or Condemnation
until the Lease Termination Date. The foregoing notwithstanding, if and to the
extent that, pursuant to the provisions of this Lease and the other Operative
Documents, Loss Proceeds or Awards are paid over to and permanently retained by
the Lender or Lessor, Lessee shall receive as a credit against its obligation
to pay Basic Rent or, as applicable, the Lease Balance, in the amount of any
such Loss Proceeds or Awards.
ARTICLE XII
INTEREST CONVEYED TO LESSEE
If a bankruptcy court or other court of competent jurisdiction
determines that the transaction represented by this Lease will not be enforced
as a true lease, or will be treated as a financing or other transaction, then
in such event it is the intention of the parties hereto (i) that this Lease be
treated as a mortgage and security agreement, deed of trust and security
agreement, or other similar instrument encumbering the Leased Property, (ii)
that Lessor shall have, as a result of such determination, all of the rights,
powers and remedies of a mortgagee or trustee under a deed of trust available
under Applicable Law to take possession of and sell upon the occurrence of an
Event of Default (whether by foreclosure or otherwise) the Leased Property,
(iii) that the effective date of such mortgage and security agreement, deed of
trust and security agreement, or other similar instrument shall be the
effective date of this Lease, (iv) that the recording of this Lease, each
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Memorandum of Lease, or any other instrument referencing this provision shall
be deemed to be the recording of such mortgage and security agreement, deed of
trust and security agreement, or other similar instrument and (v) that the
obligations secured by such mortgage and security agreement, deed of trust and
security agreement, or other similar instrument shall include the payment of
all Basic Rent and Supplemental Rent, the Lease Balance and all other
obligations of and amounts due from Lessee hereunder and under the Operative
Documents but without duplication.
ARTICLE XIII
EVENTS OF DEFAULT
The following events shall constitute Events of Default (whether any
such event shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any administrative or
governmental body):
(a) Lessee shall fail to make any payment of Basic Rent when due
and such failure shall continue for a period of three (3) days after such
failure;
(b) Lessee shall fail to make any payment of Supplemental Rent
when due and such failure shall continue for a period of ten (10) days after
Lessee's receipt of written notice of such failure from Lessor;
(c) Lessee shall fail to pay (i) the amount required for purchase
of the affected Property when due pursuant to Sections 11.1, or 11.2 or when
due in connection with the exercise of the Purchase Option pursuant to Section
15.1, or (ii) the Total Lease Balance when due for the purchase of the Leased
Property pursuant to Section 15.2, or (iii) the Recourse Deficiency Amount when
required pursuant to Article XV;
(d) Lessee shall fail to maintain insurance as required by Article
IX hereof;
(e) The occurrence of any breach of the financial covenants set
forth in Section 5.4 of the Participation Agreement;
(f) Lessee shall fail to satisfy the conditions set forth in
Section 3.3 of the Participation Agreement on or before the Completion
Deadline;
(g) The filing by Lessee of any petition for dissolution or
liquidation of Lessee, or the commencement by Lessee of a voluntary case under
any applicable bankruptcy, insolvency or other similar law for the relief of
debtors, foreign or domestic, now or hereafter in effect, or Lessee shall have
consented to the entry of an order for relief in an involuntary case under any
such law, or the appointment of or taking possession by a receiver, custodian
or trustee (or other similar official) for Lessee or any substantial part of
its property, or a general assignment by Lessee for the benefit of its
creditors, or Lessee shall have taken any corporate action in furtherance of
any of the foregoing; or the filing against Lessee of an involuntary petition
in bankruptcy which results in an order for relief
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being entered or, notwithstanding that an order for relief has not been
entered, the petition is not dismissed within ninety (90) days of the date of
the filing of the petition, or the filing under any law relating to bankruptcy,
insolvency or relief of debtors of any petition against Lessee which either (i)
results in a finding or adjudication of insolvency of Lessee or (ii) is not
dismissed within ninety (90) days of the date of the filing of such petition;
(h) A "Default", "Event of Default", or other similar occurrence
shall have occurred and be continuing under the Lease and Development Agreement
dated as of January 10, 1997 between Lessee and Asset XI Holdings Company,
L.L.C., a Massachusetts limited liability company affecting property located in
Harris County, Texas, or under any of the Operative Documents, as defined
therein.
(i) A "default", "event of default" or other similar occurrence
shall have occurred and be continuing under any other loan agreement, credit
agreement, revolving credit agreement, mortgage, security agreement, lease
agreement, participation agreement or other agreement between Lessee, or any
Affiliate of Lessee, and Lender or between Lessee, or any Affiliate of Lessee,
and Lessor, or any Affiliate of Lessor, evidencing or securing any Indebtedness
of Lessee exceeding $5,000,000;
(j) Any representation or warranty by Lessee in any Operative
Document or in any certificate or document delivered to Lessor pursuant to any
Operative Document shall have been incorrect in any material respect when made
and has resulted in a Material Adverse Effect on Lessee; or
(k) Lessee shall fail in any material respect to timely perform or
observe any covenant, condition or agreement (not included in clause (a), (b),
(c), (d), (e), (f), (g), (h), (i) or (j) of this Article) to be performed or
observed by it hereunder or under the other Operative Documents and such
failure shall continue for a period of 30 days after the earlier to occur of a
Responsible Officer becoming aware of such failure or the Lessee's receipt of
written notice thereof from Lessor (provided, however, if such failure is other
than the payment of money and is of such nature that it can be corrected but
not within the applicable period, then that failure shall not constitute an
Event of Default so long as Lessee institutes curative action within the
applicable period and diligently pursues that action to completion).
ARTICLE XIV
ENFORCEMENT
SECTION 14.1 Remedies. Upon the occurrence of any Event of
Default and at any time thereafter, Lessor may, so long as such Event of
Default is continuing, do one or more of the following as Lessor in its sole
discretion shall determine, without limiting any other right or remedy Lessor
may have on account of such Event of Default (including, without limitation,
the obligation of Lessee to purchase the Leased Property as set forth in
Sections 15.2 and 15.3):
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(a) Lessor may, by notice to Lessee, rescind or terminate this
Lease as of the date specified in such notice; provided, however, that (i) no
reletting, reentry or taking of possession of the Leased Property by Lessor
will be construed as an election on Lessor's part to terminate this Lease
unless written notice of such intention is given to Lessee, (ii)
notwithstanding any reletting, reentry or taking of possession, Lessor may at
any time thereafter elect to terminate this Lease for a continuing Event of
Default, (iii) Lessor shall be under no obligation whatsoever to mitigate its
damages hereunder but shall be entitled to maintain an action for the payment
in full of all amounts due hereunder (including but not limited to payment of
the Recourse Deficiency Amount, but subject to the terms and provisions of this
Section 14.1) and (iv) no act or thing done by Lessor or any of its agents,
representatives or employees and no agreement accepting a surrender of the
Leased Property shall be valid unless the same be made in writing and executed
by Lessor.
(b) Lessor may (i) demand that Lessee, and Lessee shall upon the
written demand of Lessor, return the Leased Property promptly to Lessor in the
manner and condition required by, and otherwise in accordance with all of the
provisions of, Articles VII and XV hereof as if the Leased Property were being
returned at the end of the Lease Term, and Lessor shall not be liable for the
reimbursement of Lessee for any costs and expenses incurred by Lessee in
connection therewith and (ii) without prejudice to any other remedy which
Lessor may have for possession of the Leased Property, and to the extent and in
the manner permitted by Applicable Law, enter upon the Leased Property and take
immediate possession of (to the exclusion of Lessee) the Leased Property or any
part thereof and expel or remove Lessee and any other Person who may be
occupying the Leased Property, by summary proceedings or otherwise, all without
liability to Lessee for or by reason of such entry or taking of possession,
whether for the restoration of damage to property caused by such taking or
otherwise and, in addition to Lessor's other damages, Lessee shall be
responsible for the reasonable and documented costs and expenses of reletting,
including brokers fees and the reasonable and documented costs of any
alterations or repairs made by Lessor.
(c) Lessor may (i) sell all or any part of the Leased Property at
public or private sale, as Lessor may determine, free and clear of any rights
of Lessee and without any duty to account to Lessee with respect to such action
or inaction or any proceeds with respect thereto (except to the extent required
by clause (ii) of this subsection if Lessor shall elect to exercise its rights
thereunder) in which event Lessee's obligation to pay Basic Rent hereunder for
periods commencing after the date of such sale shall be terminated or
proportionately reduced, as the case may be and (ii) if Lessor shall so elect,
demand that Lessee pay to Lessor, and Lessee shall pay to Lessor, on the date
of such sale, as liquidated damages for loss of a bargain and not as a penalty
(the parties agreeing that Lessor's actual damages would be difficult to
predict, but the aforementioned liquidated damages represent a reasonable
approximation of such amount) (in lieu of Basic Rent due for periods commencing
on or after the Rent Payment Date coinciding with such date of sale (or, if the
sale date is not a Rent Payment Date, the Rent Payment Date next preceding the
date of such sale)), an amount equal to (A) the excess, if any, of (1) the sum
of all Rent due and unpaid to and including such Rent Payment Date plus an
amount equal to the Total Lease Balance as of the date of sale (or, if the
Event of Default occurs prior to the Completion Date, an amount equal to the
sum of the principal of and all interest accrued on, and Breakage Costs, if
any, in respect of, the Note plus an amount equal to the outstanding balance of
the Contribution plus all accrued and unpaid
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Contribution Returns) over (2) the net proceeds of such sale (that is, after
deducting all costs and expenses incurred by Lessor incident to such conveyance
(including, without limitation, all costs, expenses, fees, premiums and taxes
described in Section 15.5(b)), plus (B) interest at the Overdue Rate on the
foregoing amount from such Rent Payment Date until the date of payment. Any
amounts so collected pursuant to this subsection shall be applied (after first
deducting amounts expended by Lessor in connection with the Leased Property and
the Operative Documents and not then reimbursed) to reduce the Total Lease
Balance. Lessor agrees, upon Lessee's written request and at Lessee's sole
expense, to provide Lessee with an accounting showing in reasonable detail the
application of amounts collected pursuant to this subsection.
(d) Lessor may, at its option, elect not to terminate the Lease,
and continue to collect all Basic Rent, Supplemental Rent and all other amounts
due Lessor (together with all costs of collection) and enforce Lessee's
obligations under this Lease as and when the same become due, or are to be
performed, and at the option of Lessor, upon any abandonment of the Leased
Property by Lessee and re-entry of same by Lessor, Lessor may, in its sole and
absolute discretion, elect not to terminate this Lease and may make such
reasonable alterations and necessary repairs in order to relet the Leased
Property, and relet the Leased Property or any part thereof for such term or
terms (which may be for a long term extending beyond the term of this Lease)
and at such rental or rentals and upon such other terms and conditions as
Lessor in its reasonable discretion may deem advisable. Upon each such
reletting all rentals actually received by Lessor from such reletting shall be
applied to Lessee's obligations hereunder in such order, proportion and
priority as Lessor may elect in Lessor's sole and absolute discretion, and if
such rentals received from such reletting during any Rent Period are less than
the Rent to be paid during that Rent Period by Lessee hereunder, Lessee shall
pay any deficiency, as calculated by Lessor, to Lessor on the Rent Payment Date
in such Rent Period.
(e) If the Leased Property has not been sold, the Lessor may,
whether or not the Lessor shall have exercised or shall thereafter at any time
exercise any of its rights under paragraph (b), (c) or (d) of this Section with
respect to the Leased Property, demand, by written notice to the Lessee
specifying a date (the "Final Rent Payment Date") not earlier than ten (10)
days after the date of such notice, that the Lessee purchase, on the Final Rent
Payment Date, the Leased Property in accordance with the provisions of Sections
15.2, 15.4 and 15.5; provided, however, that (i) such purchase shall occur on
the date set forth in such notice, notwithstanding the provision in Section
15.3 calling for such purchase to occur on the Lease Termination Date and (ii)
the Lessor's obligations under Section 15.5(a) shall be limited to delivery of
a deed without warranty and bill of sale without warranty of the Leased
Property, without recourse or warranty, but free and clear of the Lessor's
Liens.
(f) To the extent not inconsistent with subsection (e), Lessor may
exercise any other right or remedy that may be available to it under Applicable
Law, or proceed by appropriate court action (legal or equitable) to enforce the
terms hereof or to recover damages for the breach hereof. Separate suits may
be brought to collect any such damages for any Rent Period(s), and such suits
shall not in any manner prejudice Lessor's right to collect any such damages
for any subsequent
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Rent Period(s), or Lessor may defer any such suit until after the expiration of
the Lease Term, in which event such suit shall be deemed not to have accrued
until the expiration of the Lease Term.
(g) Lessor may retain and apply against Lessor's damages all sums
which Lessor would, absent such Event of Default, be required to pay, or turn
over, to Lessee pursuant to the terms of this Lease.
SECTION 14.2 Remedies Cumulative; No Waiver; Consents. To the
extent permitted by, and subject to the mandatory requirements of, Applicable
Law (subject in all events to Section 14.1(e) hereof), each and every right,
power and remedy herein specifically given to Lessor or otherwise in this Lease
shall be cumulative and shall be in addition to every other right, power and
remedy herein specifically given or now or hereafter existing at law, in equity
or by statute, and each and every right, power and remedy whether specifically
herein given or otherwise existing may be exercised from time to time and as
often and in such order as may be deemed expedient by Lessor, and the exercise
or the beginning of the exercise of any power or remedy shall not be construed
to be a waiver of the right to exercise at the same time or thereafter any
right, power or remedy. No delay or omission by Lessor in the exercise of any
right, power or remedy or in the pursuit of any remedy shall impair any such
right, power or remedy or be construed to be a waiver of any default on the
part of Lessee or to be an acquiescence therein. Lessor's consent to any
request made by Lessee shall not be deemed to constitute or preclude the
necessity for obtaining Lessor's consent, in the future, to all similar
requests. No express or implied waiver by Lessor of any Event of Default shall
in any way be, or be construed to be, a waiver of any future Event of Default.
To the extent permitted by Applicable Law, Lessee hereby waives any rights now
or hereafter conferred by statute or otherwise that may require Lessor to sell,
lease or otherwise use the Leased Property or part thereof in mitigation of
Lessor's damages upon the occurrence of an Event of Default or that may
otherwise limit or modify any of Lessor's rights or remedies under this
Article.
ARTICLE XV
SALE, RETURN OR PURCHASE OF LEASED PROPERTY
SECTION 15.1 Lessee's Option to Purchase. Subject to the terms
and conditions and provisions set forth in this Article, Lessee shall have the
option (the "Purchase Option"), exercisable at any time during the Lease Term
on or prior to the tenth Business Day next preceding the Lease Termination
Date, to purchase from Lessor, Lessor's entire interest in all, but not less
than all, of any Property at the purchase price equal to the Purchase Option
Price for such Property. Such option must be exercised by written notice to
the Lessor and the Lender, which exercise shall be irrevocable, and such notice
shall specify the closing date for Lessee's purchase of such Property, which
date shall be (i) not less than ten (10) Business Days or more than 90 calendar
days following the Lessor's receipt of such notice and (ii) in any event not
later the Lease Termination Date. If the Purchase Option is exercised pursuant
to the foregoing, then, subject to the provisions set forth in this Article, on
such closing date, Lessor shall convey to Lessee, and Lessee shall purchase
from Lessor, Lessor's interest in all, but not less than all, of such Property.
If Lessee fails to exercise the Purchase Option in a timely manner, then the
Purchase Option shall thereupon automatically
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terminate without any further action of Lessor, and the Purchase Option shall
thereafter be of no force or effect. The Purchase Option granted to Lessee
pursuant to this Section is exclusive of the purchase option provided to Lessee
pursuant to Section 14.1(e).
SECTION 15.2 Purchase Obligation. Unless (i) the Lessee and the
Lessor shall have extended the Lease Term pursuant to a supplement to this
Lease containing conditions and terms mutually agreeable to the Lessee and the
Lessor and approved by the Lender, (ii) Lessee shall have properly exercised
the Purchase Option and purchased all of the Leased Property pursuant thereto,
(iii) Lessee shall have properly exercised the Remarketing Option and shall
have fulfilled the conditions of Section 15.6 hereof and Lessor shall have sold
its entire interest in the Leased Property pursuant thereto or (iv) Lessee
shall have properly exercised the Remarketing Option and shall have fulfilled
the conditions of Section 15.6 hereof but the Lessor shall have rejected such
sale pursuant to Section 15.6(xi) and Lessee shall then have timely fulfilled
all of its obligations under Section 15.7 and 15.8 hereof, then, subject to the
terms, conditions and provisions set forth in this Article, Lessee shall
purchase from Lessor, and Lessor shall convey to Lessee, on the Lease
Termination Date Lessor's entire interest in all, but not less than all, of the
Leased Property. Lessee may designate, in a notice given to Lessor not less
than ten (10) Business Days prior to the closing of such purchase (time being
of the essence), the transferee to whom the conveyance shall be made (if other
than to Lessee), in which case such conveyance shall (subject to the terms and
conditions set forth herein) be made to such designee; provided, however, that
such designation of a transferee shall not cause Lessee to be released, fully
or partially, from any of its obligations under this Lease.
SECTION 15.3 Acceleration of Purchase Obligation. Lessee shall be
obligated to purchase Lessor's entire interest in all, but not less than all,
of the Leased Property immediately, automatically and without notice upon the
occurrence of any Event of Default specified in clause (g) of Article XIII;
provided, however, that (without affecting any of Lessee's obligations under
Section 15.5 or otherwise) Lessor's obligations under Section 15.5 (a) shall be
limited to delivery of a quit claim deed of the Leased Property.
SECTION 15.4 Determination of Purchase Price. Upon the purchase
by Lessee of the Leased Property pursuant to Sections 15.2 or 15.3, the
purchase price therefor shall be an amount equal to the Total Lease Balance as
of the closing date therefor.
SECTION 15.5 Purchase Procedure.
(a) If Lessee shall purchase Lessor's interest in the Leased
Property pursuant to any provision of this Lease (other than as provided in
Section 15.3), (i) Lessee shall accept from Lessor, and Lessor shall convey to
Lessee, such Leased Property by one or more duly executed and acknowledged
special warranty deeds of such Leased Property in recordable form, (ii) upon
the date fixed for any purchase of Lessor's interest in such Leased Property
hereunder, Lessee shall pay to the order of Lessor the Total Lease Balance by
wire transfer of federal funds and (iii) Lessor shall convey to Lessee Lessor's
entire interest in all of the Leased Property via the special warranty deed or
deeds described above and Lessor will execute and deliver to Lessee such other
documents as may be legally required in order to effect such conveyance, and
such other documents as may be
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required by any escrow agent in order to close escrow in connection with such
conveyance and issue to Lessee an ALTA owner's title policy subject only to (A)
the exceptions set forth on Schedule B of the Title Policy for each Property
other than the Mortgage therefor and the Assignment of Lease and Rents, (B)
such exceptions created or caused by Lessee, or otherwise resulting from any
act or failure to act by Lessee, or consented to by Lessee and (C) taxes and
assessments not yet due and payable. Notwithstanding the foregoing, the
procedures set forth in this Section 15.5(a) shall apply to transfers of one or
more Parcels constituting less than Lessor's entire interest in the Leased
Property, but only to the extent that such Parcels are affected by an Event of
Loss, pursuant to Section 11.1 hereof, or to an Event of Taking, pursuant to
Section 11.2 hereof.
(b) In the event that Lessee exercises the Remarketing Option
pursuant to Section 15.6 and fulfills all of the conditions set forth in
clauses (i) through (xiii) thereof, and if Lessor does not reject the purchase
offer for the Leased Property as provided in Section 15.6 (xi), then upon
payment of the purchase price and the satisfaction by such purchaser of all of
the applicable closing conditions, Lessor shall convey to such purchaser
Lessor's interest in the Leased Property by a duly executed special warranty
deed or deeds in recordable form, and Lessor will execute and deliver to such
purchaser (or the Lessee, as appropriate) such other documents as may be
legally required in order to effect such conveyance, and such other documents
as may be required by such purchaser's title insurance company in order to
issue to such purchaser an ALTA owner's title insurance policy subject only to
(i) the exceptions set forth on Schedule B of the Title Policy, other than the
Mortgage therefor and the Assignment of Lease and Rents, (ii) such exceptions
created or caused by Lessee, or otherwise resulting from any act or failure to
act by the Lessee, or consented to by the Lessee and (iii) taxes and
assessments not yet due and payable.
(c) Lessee shall, at Lessee's sole cost and expense, obtain all
required governmental and regulatory approval and consents and shall make such
filings as required by Applicable Law. In the event that Lessor is required by
Applicable Law to take any action in connection with such purchase and sale,
Lessee shall pay all costs incurred by Lessor in connection therewith. In
addition, all charges incident to such conveyance, including, without
limitation, Lessee's attorneys' fees, Lessor's reasonable attorneys' fees,
commissions, Lessee's and Lessor's escrow fees, recording fees, title insurance
premiums and all applicable documentary transfer or other transfer taxes and
other taxes required to be paid in order to record the transfer documents that
might be imposed by reason of such conveyance and the delivery of such deed
shall be borne entirely and paid by Lessee.
(d) Upon expiration or termination of this Lease resulting in
conveyance of Lessor's interest in the title to the Leased Property to Lessee,
there shall be no apportionment of taxes, insurance, utility charges or other
charges payable with respect to the Leased Property, all of such taxes,
insurance, utility or other charges due and payable with respect to the Leased
Property prior to termination being payable by Lessee hereunder and all due
after such time being payable by Lessee as the then owner of the Leased
Property.
SECTION 15.6 Option to Remarket. Subject to the fulfillment of
each of the conditions set forth in this Section, Lessee shall have the option
(the "Remarketing Option") to market all, but not less than all, of the Leased
Property and to procure a purchaser therefor. Lessee's effective
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exercise and consummation of the Remarketing Option shall be subject to the due
and timely fulfillment of each of the following provisions, the failure of any
of which shall render the Remarketing Option and Lessee's exercise thereof null
and void, in which event, Lessee shall remain obligated to perform all of its
obligations under Section 15.2 ("Purchase Obligation"):
(i) Not earlier than six months before the Scheduled
Termination Date, Lessee shall give to Lessor written notice of
Lessee's exercise of the Remarketing Option, which exercise shall be
irrevocable unless otherwise agreed in writing by the Lender.
(ii) Not later than thirty (30) Business Days prior to the
Scheduled Termination Date, Lessee shall deliver to Lessor an
environmental assessment of each Parcel of the Leased Property dated
not later than forty-five (45) days prior to the Scheduled Termination
Date. Each such environmental assessment shall be prepared by an
environmental consultant selected by Lessee and reasonably acceptable
to Lessor and the Lender, shall be in form, detail and substance
reasonably acceptable to Lessor and the Lender, and shall otherwise
indicate the environmental condition of the Leased Property to be the
same as described in the Environmental Audit delivered pursuant to
Section 3.2 of the Participation Agreement.
(iii) On the date of Lessee's notice to Lessor of Lessee's
exercise of the Remarketing Option, each of the Construction
Conditions shall have been timely satisfied and no Event of Default
shall exist, and thereafter, no Event of Default shall exist under
this Lease.
(iv) Lessee shall have completed all Alterations,
restoration and rebuilding of the Leased Property pursuant to Sections
7.2, 11.3 and 11.4 (as the case may be) and shall have fulfilled all
of the conditions and requirements in connection therewith pursuant to
said Sections, in each case by the date on which Lessor receives
Lessee's notice of Lessee's exercise of the Remarketing Option (time
being of the essence), regardless of whether the same shall be within
Lessee's control.
(v) Once Lessee has exercised the Remarketing Option as
provided in clause (i) hereof, Lessee shall, as nonexclusive agent for
Lessor, use commercially reasonable efforts to sell Lessor's interest
in each Parcel of the Leased Property and will attempt to obtain the
highest purchase price therefor. Lessee will be responsible for
hiring brokers and making the Leased Property available for inspection
by prospective purchasers. Lessee shall promptly provide any
maintenance records relating to each Parcel of the Leased Property to
Lessor and any potential purchaser thereof upon request, and shall
otherwise do all things necessary to sell and deliver possession of
each Parcel of the Leased Property to the purchaser thereof. All such
marketing of the Leased Property shall be at Lessee's sole expense.
Lessee shall allow Lessor, the Lender and any potential qualified
purchaser access to each Parcel of the Leased Property for the purpose
of inspecting the same.
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(vi) Lessee shall submit all bids to Lessor and the Lender
and Lessor and the Lender will have the right to review the same and
the right to submit any one or more bids. All bids shall be on an
"all-cash" basis (at least up to the Total Lease Balance amount).
Lessee shall procure bids from one or more bona fide prospective
purchasers of any Parcel of the Leased Property and shall deliver to
Lessor and the Lender not less than ninety (90) days prior to the
Lease Termination Date a binding written irrevocable offer by such
purchaser offering (subject to customary conditions which do not
violate the provisions of clause viii, below) the highest "all-cash"
bid to purchase the Leased Property. Such purchaser shall not be
Lessee or any Subsidiary or Affiliate of Lessee. The written offer
must specify the Lease Termination Date as the closing date.
(vii) On the Lease Termination Date, Lessee shall surrender
the Leased Property in accordance with Section 15.8 hereof.
(viii) In connection with any such sale of the Leased
Property, Lessee may provide to the purchaser any such customary
"seller's" indemnities, representations and warranties regarding
title, absence of Liens (except Lessor's Liens) and the condition of
the Leased Property, including, without limitation, an environmental
indemnity, as Lessee may determine to provide in the exercise of its
business judgment and sole discretion, provided, however, that no such
indemnities, representations or warranties shall be binding on Lessor,
nor shall they create liabilities, charges, offsets or Claims,
contingent or otherwise, which could diminish, offset or impose a lien
upon the amount of the cash proceeds payable to Lessor under such
purchase offer, nor shall Lessor be under any obligation to join in or
become obligated for the same, except that Lessor shall fulfill all of
the requirements set forth in clause (b) of Section 15.5, and such
requirements are incorporated herein by reference. As to Lessor, any
such sale shall be made on an "as is, with all faults" basis without
representation or warranty by Lessor other than the absence of
Lessor's Liens.
(ix) Lessor shall pay from the sale proceeds, all
prorations, credits, costs and expenses of the sale of the Leased
Property, including without limitation the cost of all title
insurance, surveys, environmental reports, appraisals, transfer taxes,
Lessor's reasonable attorneys' fees, commissions, escrow fees,
recording fees, and all applicable documentary and other transfer
taxes.
(x) Lessee shall pay to the Lender on the Lease
Termination Date (or to such other Person as Lessor shall notify
Lessee in writing or, in the case of Supplemental Rent, to the Person
entitled thereto) an amount equal to the Recourse Deficiency Amount in
the type of funds specified in Section 4.3 hereof.
(xi) If the aggregate selling price (net of closing costs
and prorations and other amounts payable by Lessor under clause (ix)
above, as reasonably estimated by Lessor) for all Parcels plus the
Recourse Deficiency Amount is less than the Total Lease Balance, then
Lessor may, by notice to Lessee and in Lessor's sole and absolute
discretion, reject such
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offer to purchase, in which event the parties will proceed according
to the provisions of Section 15.7 "Rejection of Sale" hereof.
(xii) If Lessor does not reject such purchase offer as
provided above, the closing of such purchase of the Leased Property by
such purchaser must occur on or immediately before the Lease
Termination Date, contemporaneously with Lessee's surrender of the
Leased Property in accordance with Section 15.8 hereof.
(xiii) If Lessor does not reject the purchase offer as
provided above, then the purchase shall be consummated on the Lease
Termination Date and the gross proceeds of the sale (i.e., without
deduction for any marketing, closing or other costs, prorations or
commissions) shall be paid directly to Lessor; provided, however, that
if the sum of the gross proceeds from such sale plus the Recourse
Deficiency Amount exceeds the Total Lease Balance, as of such date,
then the excess shall be paid to Lessee on the Lease Termination Date.
If one or more of the foregoing provisions shall not be fulfilled as of the
Lease Termination Date or if the Leased Property is not purchased as aforesaid
for any other reason whatsoever other than solely due to rejection by Lessor of
such sale pursuant to subsection (xi) above, then Lessor may, at Lessor's
option and in Lessor's sole discretion, (i) declare by written notice to Lessee
the Remarketing Option to be null and void (whether or not it has been
theretofore exercised by Lessee), in which event all of Lessee's rights under
this Section shall immediately terminate and Lessee shall be obligated to
purchase the Leased Property pursuant to Section 15.2 on the Lease Termination
Date or (ii) permit and require Lessee on behalf of Lessor to consummate the
sale of the Leased Property to such purchaser, in which event the gross
proceeds shall be paid as set forth in Section 15.6(xiii) above and all of
Lessor's rights and remedies set forth herein, in the other Operative
Documents, at law or in equity or otherwise shall be preserved as set forth in
Section 14.2 hereof. If the prospective purchaser breaches its offer to
purchase, then Lessor may, in Lessor's sole discretion, declare the Remarketing
Option to be null and void, in which event all of Lessee's rights under this
Section shall immediately terminate and Lessee shall be obligated to purchase
the Leased Property pursuant to Section 15.2. The Lessee shall have no right,
power or authority to bind the Lessor in connection with any proposed sale of
the Leased Property.
SECTION 15.7 Rejection of Sale. (a) Notwithstanding anything
contained herein to the contrary, if Lessor rejects the purchase offer(s) for
the Leased Property as provided in Section 15.6(a)(xi) then (i) Lessee shall
pay to the Lender (or to such other person as Lessor shall direct) the Recourse
Deficiency Amount pursuant to Section 15.6(xi), (ii) Lessor shall retain title
to the Leased Property and (iii) in addition to Lessee's other obligations
hereunder, Lessee will reimburse Lessor within ten (10) Business Days after
written request, for all reasonable costs and expenses incurred by Lessor,
during the period ending on the first anniversary of the Remarketing Date in
connection with the marketing, sale, closing or transfer of such Series of
Properties, which obligation shall survive the Lease Termination Date and the
termination or expiration of this Lease with respect thereto.
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(b) Following any rejection by the Lessor of the purchase
offer(s) for the Leased Property pursuant to the provisions of Section
15.6(xi), subject to the condition that Lessee shall have:
(i) timely paid the Recourse Deficiency Amount to
Lessor on or before the Lease Termination Date,
(ii) duly and timely fulfilled each of the other
provisions of clauses (i) through (xiii) of Section 15.6 on or
before the Lease Termination Date, and
(iii) on and after the Lease Termination Date, timely
fulfilled each and every obligation of the Lessee under the
Lease, the Participation Agreement and the other Operative
Documents on its part to be performed, and no Event of Default
shall have occurred,
then,
upon the subsequent sale of all, but not less than all, of the Leased Property
by Lessor to one or more third parties, Lessor shall pay to Lessee an amount
equal to the Lessor's gain (if any) on the sales, computed taking into account
Lessor's total investment in the Leased Property (including, without
limitation, the unpaid balance of the Loan, if any, and the unrecovered balance
of the Contribution) plus all of Lessor's unreimbursed costs and expenses
(capital or otherwise) relating to the Leased Property, plus an annual return
thereon for up to 12 months following the Lease Termination Date (but not
thereafter) computed at the Overdue Rate, less the net avails of any reletting
of such Leased Property or any part thereof. To the extent that Lessor shall
receive payment in the form of purchase-money indebtedness in connection with
any such sale, Lessor's duty to account to Lessee pursuant to this Section
15.7(b) shall be suspended until such time as Lessor receives payment thereon.
SECTION 15.8 Return of Leased Property. If Lessor retains title
to the Leased Property pursuant to Section 15.7 hereof, then Lessee shall, on
the Lease Termination Date, and at its own expense, return possession of the
Leased Property to Lessor for retention by Lessor. If Lessee properly
exercises the Remarketing Option and fulfills all of the conditions of Section
15.6 hereof and the Lessor does not reject such purchase offers pursuant to
Section 15.6(xi), then Lessee shall (unless by agreement with the purchaser
Lessee is to remain in possession of the Leased Property), on the Lease
Termination Date and at its own cost, transfer possession of the Leased
Property to the independent purchaser thereof, in each case by surrendering the
same into the possession of Lessor or such purchaser, as the case may be, free
and clear of all Liens other than Lessor Liens, Liens for Taxes not yet payable
and Liens described in clause (vi) of the definition of Permitted Liens, in as
good condition as it was on the Completion Date (as modified by Alterations
permitted by this Lease), ordinary wear and tear excepted, and in compliance
with Applicable Law. Lessee shall, on and within a reasonable time before and
after the Lease Termination Date, cooperate with Lessor and the independent
purchaser of the Leased Property in order to facilitate the ownership and
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operation by such purchaser of the Leased Property after the Lease Termination
Date, which cooperation shall include the following, all of which Lessee shall
do on or before the Lease Termination Date or as soon thereafter as is
reasonably practicable: providing all books and records regarding the
maintenance and ownership of the Leased Property and all know-how, data and
technical information relating thereto to the extent in Lessee's possession,
providing a current copy of the Plans and Specifications for the Leased
Property, assigning all licenses necessary for the operation and maintenance of
the Leased Property to the extent Lessee has the legal right to do so and
cooperating in seeking and obtaining all necessary Governmental Action relating
to occupancy but not special use by the purchaser thereof. Lessee shall have
also paid the cost of all Alterations with respect to the Leased Property
commenced prior to the Lease Termination Date. The obligation of Lessee under
this Article shall survive the expiration or termination of this Lease.
SECTION 15.9 Effect of Conveyance to Lessee. Upon conveyance of
the Leased Property after the exercise by Lessee of any of its rights to
purchase the Leased Property, including its rights under Section 14.1(e), or
after exercise of the Remarketing Option and the fulfillment of the applicable
conditions of clauses (i) through (x) of Section 15.6, this Lease shall
automatically terminate unless Lessee otherwise elects in writing.
ARTICLE XVI
LESSEE'S EQUIPMENT
After any repossession of the Leased Property (whether or not this
Lease has been terminated), Lessee, at its expense and so long as such removal
of such Alteration shall not result in a violation of Applicable Law, shall,
within a reasonable time after such repossession or within sixty (60) days
after Lessee's receipt of Lessor's written request (whichever shall first
occur), remove all of Lessee's trade fixtures, personal property and equipment
from the Leased Property (to the extent that the same can be readily removed
from the Leased Property without causing material damage to or materially
impairing the value of the Leased Property); provided, however, that Lessee
shall not remove any fixture, equipment or personal property which constitutes
part of the Leased Property. Any of Lessee's trade fixtures, personal property
and equipment not so removed by Lessee within such period shall be considered
abandoned by Lessee, and title thereto shall without further act vest to
Lessor, and may be appropriated, sold, destroyed or otherwise disposed of by
Lessor without notice to Lessee and without obligation to account therefor and
Lessee will pay Lessor, upon written demand, all reasonable and documented
costs and expenses incurred by Lessor in removing, storing or disposing of the
same and all costs and expenses incurred by Lessor to repair any damage to the
Leased Property caused by such removal. Lessee will immediately repair at its
expense all damage to the Leased Property caused by any such removal (unless
such removal is effected by Lessor, in which event Lessee shall pay all
reasonable costs and expenses incurred by Lessor for such repairs). Lessor
shall have no liability in exercising Lessor's rights under this Article, nor
shall Lessor be responsible for any loss of or damage to Lessee's personal
property and equipment in connection therewith.
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ARTICLE XVII
RIGHT TO PERFORM FOR LESSEE
If Lessee shall fail to perform or comply with any of its agreements
contained herein Lessor may, on thirty (30) days' prior notice (or such lesser
period afforded by Applicable Law or any third party, except that no notice
shall be required in the case of a default in the observance of the obligations
to maintain insurance pursuant to Article IX, or in the event of emergency) to
Lessee, perform or comply with such agreement, and Lessor shall not thereby be
deemed to have waived any default caused by such failure, and the amount of
such payment and the amount of the expenses of Lessor (including reasonable
attorney's fees and expenses) incurred in connection with such payment or the
performance of or compliance with such agreement, as the case may be, shall be
deemed Supplemental Rent, payable by Lessee to Lessor within ten (10) days'
after written demand therefor.
ARTICLE XVIII
MISCELLANEOUS
SECTION 18.1 Reports. To the extent required under Applicable Law
and to the extent it is reasonably practical for Lessee to do so, Lessee shall
prepare and file in timely fashion, or, where such filing is required to be
made by Lessor or it is otherwise not reasonably practical for Lessee to make
such filing, Lessee shall prepare and deliver to Lessor (with a copy to the
Lender) within a reasonable time prior to the date for filing and Lessor shall
file, any material reports with respect to the condition or operation of the
Leased Property that shall be required to be filed with any Governmental
Authority.
SECTION 18.2 Binding Effect; Successors and Assigns; Survival.
The terms and provisions of this Lease, and the respective rights and
obligations hereunder of Lessor and Lessee, shall be binding upon their
respective successors, legal representatives and assigns (including, in the
case of Lessor, any Person to whom Lessor may transfer the Leased Property or
any interest therein in accordance with the provisions of the Operative
Documents), and inure to the benefit of their respective permitted successors
and assigns, and the rights hereunder of the Lender shall inure (subject to
such conditions as are contained herein) to the benefit of the Lender's
permitted successors and assigns.
SECTION 18.3 Quiet Enjoyment. Lessor covenants that, so long as
no Event of Default has occurred and is continuing, it will not interfere in
Lessee's or any of its sublessees' quiet enjoyment of the Leased Property in
accordance with this Lease during the Lease Term.
SECTION 18.4 Notices. Unless otherwise specified herein, all
notices, offers, acceptances, rejections, consents, requests, demands or other
communications to or upon the respective parties hereto shall be in accordance
with Section 8.2 of the Participation Agreement.
SECTION 18.5 Severability. Any provision of this Lease that shall
be prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such
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prohibition or unenforceability without invalidating the remaining provisions
hereof and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction, and Lessee shall remain liable to perform its obligations
hereunder except to the extent of such unenforceability. To the extent
permitted by Applicable Law, the parties hereby waive any provision of law that
renders any provision hereof prohibited or unenforceable in any respect.
SECTION 18.6 Amendment; Complete Agreements. Neither this Lease
nor any of the terms hereof may be terminated, amended, supplemented, waived or
modified orally, except pursuant to Parcel Lease Supplements executed and
delivered pursuant to the provisions of the Operative Documents, or by other
instrument in writing signed by Lessor and the Lessee in accordance with the
provisions of Section 8.4 of the Participation Agreement. This Lease, together
with the other Operative Documents, is intended by the parties as a final
expression of their lease agreement and as a complete and exclusive statement
of the terms thereof, all negotiations, considerations and representations
between the parties having been incorporated herein and therein. No course of
prior dealings between the parties or their officers, employees, agents or
Affiliates shall be relevant or admissible to supplement, explain, or vary any
of the terms of this Lease or any other Operative Document. Acceptance of, or
acquiescence in, a course of performance rendered under this or any prior
agreement between the parties or their Affiliates shall not be relevant or
admissible to determine the meaning of any of the terms of this Lease or any
other Operative Document. No representations, undertakings, or agreements have
been made or relied upon in the making of this Lease other than those
specifically set forth in the Operative Documents.
SECTION 18.7 Construction. This Lease shall not be construed more
strictly against any one party, it being recognized that both of the parties
hereto have contributed substantially and materially to the preparation and
negotiation of this Lease.
SECTION 18.8 Headings. The Table of Contents and headings of the
various Articles and Sections of this Lease are for convenience of reference
only and shall not modify, define or limit any of the terms or provisions
hereof.
SECTION 18.9 Counterparts. This Lease may be executed in any
number of counterparts as may be convenient or necessary, and it shall not be
necessary that the signatures of all parties hereto or thereto be contained on
any one counterpart hereof or thereof. Additionally, the parties hereto agree
that for purposes of facilitating the execution of this lease, (a) the
signature pages taken from the separate individually executed counterparts of
this lease may be combined to form multiple fully executed counterparts and (b)
a facsimile transmission shall be deemed to be an original signature for all
purposes. All executed counterparts of this Lease shall be deemed to be
originals, but all such counterparts taken together or collectively, as the
case may be, shall constitute one and the same agreement.
SECTION 18.10 Governing Law. THIS LEASE SHALL IN ALL RESPECTS BE
GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF TEXAS EXCEPT, WITH RESPECT TO LEASED PROPERTY LOCATED
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IN ANY STATE OTHER THAN TEXAS, FOR ISSUES WHICH ARE MANDATORILY SUBJECT TO THE
LAWS OF THE STATE IN WHICH ANY PART THE LEASED PROPERTY IS LOCATED, WHICH
ISSUES SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS
OF THE STATE IN WHICH SUCH PART OF THE LEASED PROPERTY IS LOCATED.
SECTION 18.11 Discharge of Lessee's Obligations by its Affiliates.
Lessor agrees that performance of any of Lessee's obligations hereunder by one
or more of Lessee's Affiliates or one or more of Lessee's sublessees of the
Leased Property or any part thereof shall constitute performance by Lessee of
such obligations to the same extent and with the same effect hereunder as if
such obligations were performed by Lessee, but no such performance shall excuse
Lessee from any obligation not performed by it or on its behalf under the
Operative Documents.
SECTION 18.12 Liability of Lessor Limited. Except as otherwise
expressly provided in this Lease or below in this Section, it is expressly
understood and agreed by and between Lessee, Lessor and their respective
successors and assigns that nothing herein contained shall be construed as
creating any personal liability of Lessor (other than for its intentional
misrepresentations of willful misconduct) or any of its constituent members or
other Affiliates, or JH Management Corporation, or any of their respective
incorporators, stockholders, officers, directors, employees or agents,
individually or personally, to perform any covenant, either express or implied,
contained herein, all such personal liability, if any, being expressly waived
by Lessee and by each and every Person now or hereafter claiming by, through or
under Lessee, and that, so far as Lessor or any of its constituent members or
other Affiliates, or JH Management Corporation, or any of their respective
incorporators, stockholders, officers, directors, employees or agents,
individually or personally, is concerned, Lessee and any Person claiming by,
through or under Lessee shall look solely to, and the liability of Lessor
hereunder shall be limited to, the right, title and interest of Lessor in the
Leased Property, any proceeds from Lessor's sale or encumbrance thereof, and
any Awards or Loss Proceeds (provided, however, that Lessee shall not be
entitled to any double recovery) for the performance of any obligation under
this Lease and under the Operative Documents and the satisfaction of any
liability arising therefrom.
SECTION 18.13 Estoppel Certificates. Each party hereto agrees that
at any time and from time to time during the Lease Term, it will promptly, but
in no event later than thirty (30) days after request by the other party
hereto, execute, acknowledge and deliver to such other party or to the Lender,
any prospective purchaser (if such prospective purchaser has signed a
commitment or letter of intent to purchase the Leased Property or any part
thereof), assignee or mortgagee or third party designated by such other party,
a certificate stating (i) that this Lease is unmodified and in force and effect
(or if there have been modifications, that this Lease is in force and effect as
modified, and identifying the modification agreements), (ii) the date to which
Basic Rent has been paid, (iii) whether or not there is any existing default by
Lessee in the payment of Basic Rent or any Supplemental Rent, and whether or
not there is any other existing default by either party with respect to which a
notice of default has been served, and, if there is any such default,
specifying the nature and extent thereof, (iv) whether or not, to the knowledge
of the signer, there are any setoffs, defenses or counterclaims against
enforcement of the obligations to be performed hereunder
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existing in favor of the party executing such certificate and (v) other matters
concerning the status of this Lease and of any of the Operative Documents to
which the Lessee is a party that may be reasonably requested; provided,
however, that no such certificate may be requested unless the requesting party
has a good faith reason for such request.
SECTION 18.14 No Joint Venture. Any intention to create a joint
venture or partnership relation between Lessor and Lessee is hereby expressly
disclaimed.
SECTION 18.15 No Accord and Satisfaction. The acceptance by Lessor
of any sums from Lessee (whether as Basic Rent or otherwise) in amounts which
are less than the amounts due and payable by Lessee hereunder is not intended,
nor shall any such acceptance be construed, to constitute an accord and
satisfaction of any dispute between Lessor and Lessee regarding sums due and
payable by Lessee hereunder, unless Lessor specifically deems it as such in
writing.
SECTION 18.16 No Merger. In no event shall the leasehold
interests, estates or rights of Lessee hereunder merge with any interests,
estates or rights of Lessor in or to the Leased Property, it being understood
that such leasehold interests, estates and rights of Lessee hereunder shall be
deemed to be separate and distinct from Lessor's interests, estates and rights
in or to the Leased Property, notwithstanding that any such interests, estates
or rights shall at any time or times be held by or vested in the same person,
corporation or other entity.
SECTION 18.17 Survival. The obligations of Lessee to be performed
under this Lease prior to the Lease Termination Date and the obligations of
Lessee pursuant to Articles IV, XI, XII, XIV, Sections 15.2, 15.3, 15.4, 15.5
and 15.8, Articles XVI, XVII, and Sections 18.09 and 18.11 shall survive the
expiration or termination of this Lease. The extension of any applicable
statute of limitations by Lessor, Lessee, the Lender or any Indemnitee shall
not affect such survival.
SECTION 18.18 Chattel Paper. To the extent that this Lease
constitutes chattel paper (as such term is defined in the Uniform Commercial
Code in any applicable jurisdiction), no security interest in this Lease may be
created through the transfer or possession of any counterpart other than the
original counterpart, which shall be identified as the original counterpart by
the receipt of Lessor on its signature page.
SECTION 18.19 Time of Essence. Time is of the essence of this
Lease.
SECTION 18.20 Recordation of Lease. Lessee will, at its expense,
cause either the Lease or each Memorandum of Lease to be recorded in the proper
office or offices in the State and the municipality in which the Land is
located.
SECTION 18.21 Investment of Security Funds. Any amounts not
payable to Lessee (which amounts shall be paid to or retained by Lessor),
pursuant to any provision of Article IX, XI or XV or this Section solely
because an Event of Default shall have occurred and be continuing, shall be
held by the Lender, on behalf of Lessee, as security for the obligations of
Lessee under this Lease and the Participation Agreement. At such time as no
Event of Default shall be continuing,
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such amounts, net of any amounts previously applied to Lessee's obligations
hereunder or under the Participation Agreement, shall be paid to Lessee or such
sublessee or transferee, as the case may be. Any such amounts which are held
by the Lender pending payment to Lessee or such sublessee or transferee, as the
case may be, shall until paid to Lessee or such sublessee or transferee, as the
case may be, as provided hereunder or, as long as the Loan Agreement is in
effect, until applied against Lessee's obligations herein and under the
Participation Agreement and distributed as provided in Section 3 of the Loan
Agreement or (after the Loan Agreement is no longer in effect) in connection
with any exercise of remedies hereunder, be invested by the Lender as directed
from time to time in writing by Lessee (provided, however, if an Event of
Default has occurred and is continuing such investment will be directed by
Lessor) and at the expense and risk of Lessee, in investments reasonably
approved by the Lender. Any gain (including interest received) realized as the
result of any such investment (net of any fees, commissions and other expenses,
if any, incurred in connection with such investment) shall be applied in the
same manner as the principal invested.
SECTION 18.22 No Illegal Interest to be Charged. All agreements
between the Lessee and the Lessee under this Lease or the Participation
Agreement are expressly limited so that in no contingency or event whatsoever
shall the amount paid or agreed to be paid to the Lessor or its successors or
assigns for the use, forbearance or detention of the money to be advanced to
the Lessee exceed the highest rate permissible under law applicable thereto by
a court of competent jurisdiction. If, from any circumstances whatever,
fulfillment of any provisions of this Lease or any of the Operative Documents
at the time performance of such provision shall be due, shall involve payment
of interest at a rate that exceeds the highest lawful rate as so determined,
then ipso facto the obligation to be fulfilled shall be reduced to such highest
lawful rate. If from any circumstances whatsoever, the Lessor or its
successors or assigns shall ever receive interest, the amount of which would
exceed such highest lawful rate, the portion thereof that would be excessive
interest shall be applied to the reduction of the unpaid Scheduled Rent;
provided, however, that nothing contained herein, in the Participation
Agreement, this Lease or any of the Operative Documents shall be deemed to
create a defense, contractual or otherwise, to any sums due or to become due or
coming due under this Lease, the Participation Agreement or any of the
Operative Documents where no such defense exists at law, as for example, where
corporations are barred from asserting the defense of usury or in a case
wherein no limit exists upon the rate of interest that may be charged.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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<PAGE> 41
IN WITNESS WHEREOF, the parties hereto have caused this Lease and
Development Agreement to be executed by their respective duly authorized
officers as of the day and year first above written.
<TABLE>
<S> <C>
WITNESSES: ASSET XVI HOLDINGS COMPANY, L.L.C., as Lessor
By: Asset Holdings Corporation I, as
Managing Member
- ----------------------------------------------------
Print Name:
-----------------------------------------
By:
------------------------------
Name:
- ---------------------------------------------------- ----------------------------
Print Name: Title:
----------------------------------------- ---------------------------
EAGLE USA AIRFREIGHT, INC., as Lessee
- ---------------------------------------------------- By:
Print Name: -----------------------------------------------
Name: Douglas A. Seckel
Title: Chief Financial Officer
- ----------------------------------------------------
Print Name:
</TABLE>
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<PAGE> 42
COMMONWEALTH OF MASSACHUSETTS )
) ss:
COUNTY OF SUFFOLK )
The foregoing instrument was acknowledged before me this _____ day of
_______________, 1998, by ____________________________, the
______________________ of Asset Holdings Corporation I, a Delaware corporation,
on behalf of Asset XVI Holdings Company, L.L.C., as such person's and its free
act and deed.
(SEAL)
-----------------------------
Notary Public
My commission expires:
- ----------------------------------
STATE OF OHIO )
) ss:
COUNTY OF _____________ )
The foregoing instrument was acknowledged before me this _____ day of
_______________, 1998, by _______________________, the __________________, of
Eagle USA Airfreight, Inc., a Texas corporation, on behalf of the corporation,
as each such person's and its free act and deed.
---------------------------
(SEAL) Notary Public
My commission expires:
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<PAGE> 43
APPENDIX I
TO
MASTER PARTICIPATION AGREEMENT, MASTER LEASE AND
DEVELOPMENT AGREEMENT AND MASTER TRUST INDENTURE
DEFINITIONS AND INTERPRETATION
<PAGE> 44
[See separate text]
APPENDIX II
Form of Parcel Lease Supplement
PARCEL ______ LEASE SUPPLEMENT
THIS PARCEL _____ LEASE SUPPLEMENT dated as of __________________,
199__ (this "Parcel Lease Supplement"), between ASSET XVI HOLDINGS COMPANY,
L.L.C., a Massachusetts limited liability company, as Lessor, and EAGLE USA
AIRFREIGHT, INC., a Texas corporation, as Lessee. Unless the context shall
otherwise require, capitalized terms used and not defined herein shall have the
meanings assigned thereto in the Lease (defined below) for all purposes hereof
and the rules of interpretation set forth in Appendix I to the Lease shall
apply to this Parcel Lease Supplement.
Preliminary Statement
In accordance with and subject to the terms and provisions of that
certain Master Lease and Development Agreement, dated as of April 3, 1998, (i)
the Lessor agreed, inter alia, to acquire Parcels of Land, (ii) the Lessor has
agreed to lease such Parcels of Land to the Lessee pursuant to the Lease and
Parcel Lease Supplements, (iii) the Lessee has agreed to construct Improvements
thereon for the Lessor, (iv) Lessor has agreed to lease and demise the same to
Lessee and Lessee has agreed to rent and hire the same from the Lessor as part
of the Leased Property, (v) the Lessor and the Lessee wish to obtain, and the
Lender has agreed to provide, in accordance with the Loan Agreement, funding
pursuant to a loan in the amount of up to $19,000,000 for a portion of the
costs of the acquisition of the Land and the development and construction of
the Improvements, (vi) Lessor has agreed to make Contribution Advances from its
own equity resources in an aggregate sum not to exceed $1,000,000 to pay a
portion of the cost of acquisition of the Land and the development and
construction of the Improvements; and (vii) the Lessee has identified, on
behalf of the Lessor, Parcel __ of the Land [upon which Improvements may be
constructed and] which the parties hereto desire to become part of the Leased
Property.
NOW, THEREFORE, in consideration of the mutual agreements contained in
this Parcel Lease Supplement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. Definitions. As used herein:
"Lease" means that certain Master Lease and Development Agreement,
dated as of April 3, 1998, between the Lessor and the Lessee, as amended by
[previous Lease Supplements and] this Parcel Lease Supplement, which may be
further amended, supplemented or restated from time to time.
<PAGE> 45
"Lease Term" means, with respect to Property ________, the period
commencing on the date hereof and ending on the Scheduled Termination Date.
"Parcel______" means the Parcel located in ______________, a
description of which is attached hereto as Appendix I.
"Parcel _____ Completion Date" means the Parcel Completion Date for
Parcel ____.
"Parcel ______ Improvements" means those Improvements located,
installed and constructed, [and to be located, installed and constructed] on
the Parcel.
"Property ______" means, together, Parcel ______ and the Parcel ____
Improvements.
SECTION 2. Lease of Parcel _______. In accordance with and subject to
the terms and provisions of this Parcel Lease Supplement, of the Lease (in
particular Section 2.3 thereof), of the Participation Agreement (in particular
Section 3.24 thereof) and the other Operative Documents, Lessor does hereby
demise and lease Lessor's interest in Parcel ____ to Lessee, and Lessee hereby
rents and leases Lessor's interest in Parcel ___ from Lessor, for the Lease
Term.
SECTION 3. Lease of Parcel _______ Improvements. Lessor hereby
demises and leases Lessor's interest in the Parcel _______ Improvements
(whether or not the Construction thereof has been completed) to Lessee and
Lessee hereby rents and leases Lessor's interest in the Parcel _______
Improvements (whether or not the Construction thereof has been completed) from
Lessor, for the Lease Term. The demise and lease of the Parcel _______
Improvements pursuant to this Section 3 shall include any additional right,
title and interest in the Parcel _______ Improvements which may at any time may
be acquired by Lessor, whether in connection with the Construction of such
Improvements on an additional Parcel of the Land, as the result of an
Alteration, or otherwise, the intent being that all right, title and interest
of Lessor in and to all of the Parcel _____ Improvements, whenever constructed,
and wherever located, shall at all times be demised and leased hereunder.
SECTION 4. Construction of Parcel _______ Improvements. (a) Lessee
shall, for the benefit of Lessor, cause the Construction of the Parcel _______
Improvements, if any, to be commenced with reasonable diligence and to cause
such Construction to be performed and completed in accordance with the Plans
and Specifications pursuant to the provisions of subsection (b) below. Until
such Construction is completed, the portions of the Parcel ________
Improvements under Construction, and upon completion of Construction the
completed Parcel _______ Improvements, shall be a part of the Leased Property
(and in particular Property _______).
(b) Lessee shall cause the Construction of the Parcel _______
Improvements to occur on or prior to the Completion Deadline, subject to
extension as provided in the Lease. Lessee's obligations under this Section 4
shall not be diminished or affected by any insufficiency of the proceeds of
Loan, or as the result of the costs of acquisition of the Land or the
Construction of the Improvements or any part thereof exceeding amounts received
from the sale of the Note. In the event that the cost of acquisition of the
Land and the Construction of the Improvements, or any part thereof, exceeds the
proceeds of the Loan, such excess shall be paid by Lessee from Lessee's own
funds.
<PAGE> 46
SECTION 5 Payment of Rent.
5.1 Basic Rent. Lessee shall pay Basic Rent in accordance with the
Lease. Lessee shall pay Index Rent and Facility Rent with respect to the
Property (subject to Section 4.1(b) of the Lease) beginning on [IN THE EVENT
CONSTRUCTION IS CONTEMPLATED: BEGINNING WITH THE FIRST RENT PAYMENT DATE
FOLLOWING THE PARCEL ___ COMPLETION DATE] [IN THE EVENT NO CONSTRUCTION IS
CONTEMPLATED: BEGINNING WITH THE FIRST RENT PAYMENT DATE FOLLOWING THE DATE
HEREOF]. Lessee shall pay installments of Scheduled Rent with respect to the
Property on the dates and in the respective amounts set forth on Appendix II
hereof.
5.2 Supplemental Rent. Lessee shall pay Supplemental Rent in
accordance with the provisions of Section 4.2 of the Lease.
SECTION 6. Condition of Parcel ________. Lessee acknowledges that
(as of the Commencement Date), Parcel ______ is [vacant and unimproved and no
part of the [parcel] Improvements has been constructed thereon, nor has such
Construction commenced.] [IMPROVED] During the Lease Term, Lessor's interest
in the Parcel _______ Improvements (whether or not completed) and Parcel _____
is demised and let by Lessor "AS IS" subject to (i) the rights of any parties
in possession thereof, (ii) the state of the title thereto existing at the time
Lessor acquired its interest in Parcel ______, (iii) any state of facts which
an accurate survey or physical inspection might show (including the survey
delivered on the Commencement Date), (iv) all applicable law and (v) any
violations of Applicable Law which may exist upon or subsequent to the
commencement of the Lease Term. LESSEE ACKNOWLEDGES THAT, ALTHOUGH LESSOR WILL
OWN AND HOLD TITLE TO PARCEL _______ PROPERTY, LESSEE IS SOLELY RESPONSIBLE FOR
THE DESIGN, DEVELOPMENT, BUDGETING AND CONSTRUCTION OF THE IMPROVEMENTS AND ANY
ALTERATIONS. NEITHER LESSOR NOR THE TRUSTEE HAVE MADE OR SHALL BE DEEMED TO
HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OR SHALL BE
DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE VALUE, MERCHANTABILITY,
TITLE, HABITABILITY, CONDITION, DESIGN, OPERATION, OR FITNESS FOR USE OF
PROPERTY _______ (OR ANY PART THEREOF) OR ANY OTHER REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO PROPERTY _______ (OR ANY PART
THEREOF), ALL SUCH WARRANTIES BEING HEREBY DISCLAIMED, AND NEITHER LESSOR NOR
THE TRUSTEE SHALL BE LIABLE FOR ANY LATENT, HIDDEN OR PATENT DEFECT THEREIN OR
THE FAILURE OF PROPERTY ________, OR ANY PART THEREOF, TO COMPLY WITH ANY
APPLICABLE LAW except that Lessor hereby represents and warrants Property
________ is and shall at all times remain free of Lessor Liens. As between
Lessor and Lessee, Lessee has been afforded full opportunity to inspect Parcel
_____, is satisfied with the results of its inspections of Parcel _____ and is
entering into this Parcel Lease Supplement solely on the basis of the results
of its own inspections and all risks incident to the matters discussed in the
two preceding sentences, as between Lessor, on the one hand, and Lessee, on the
other, are to be borne by Lessee. The provisions of this Section 6 have been
negotiated and, except to the extent otherwise expressly stated, the foregoing
provisions are intended to be a complete exclusion and negation of any
representations or warranties by Lessor or the Trustee, express or implied,
with respect to Property ________ that may arise pursuant to any law now or
hereafter in effect or otherwise.
<PAGE> 47
SECTION 7. Relationship of Lease and Parcel Lease Supplement. This
Parcel Lease Supplement shall form a part of the Lease. All terms and
conditions contained in this Parcel Lease Supplement shall be deemed to be a
part of the terms and conditions of the Lease for any and all purposes.
Property _______ shall be deemed to be demised and leased under and subject to
the burdens and benefits of the Lease.
SECTION 8. Binding Effect. This Parcel Lease Supplement shall inure
to the benefit of and shall be binding upon the Lessor and Lessee and their
respective successors and assigns, subject, however to the limitations set
forth in the Lease and other Operative Documents.
SECTION 9. Counterparts. This Parcel Lease Supplement may be
executed in any number of counterparts as may be convenient or necessary, and
it shall not be necessary that the signatures of all parties hereto or thereto
be contained on any one counterpart hereof or thereof. Additionally, the
parties hereto agree that for purposes of facilitating the execution of this
Parcel Lease Supplement, (a) the signature pages taken from the separate
individually executed counterparts of this Parcel Lease Supplement may be
combined to form multiple fully executed counterparts and (b) a facsimile
transmission shall be deemed to be an original signature for all purposes. All
executed counterparts of this Parcel Lease Supplement shall be deemed to be
originals, but all such counterparts taken together or collectively, as the
case may be, shall constitute one and the same Parcel Lease Supplement.
SECTION 10. Severability. Any provision of this Parcel Lease
Supplement that shall be prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction, and Lessee
shall remain liable to perform its obligations hereunder except to the extent
of such unenforceability. To the extent permitted by Applicable Law, the
parties hereby waive any provision of law that renders any provision hereof
prohibited or unenforceable in any respect.
SECTION 11. Amendment; Complete Agreements. Neither this Parcel
Lease Supplement nor any of the terms hereof may be terminated, amended,
supplemented, waived or modified orally, except by an instrument in writing
signed by Lessor and Lessee in accordance with the provisions of Section 8.4 of
the Participation Agreement. This Parcel Lease Supplement, together with the
other Operative Documents, is intended by the parties as a final expression of
their lease agreement in respect of Property _________ and as a complete and
exclusive statement of the terms thereof, all negotiations, considerations and
representations between the parties having been incorporated herein and
therein. No course of prior dealings between the parties or their officers,
employees, agents or Affiliates shall be relevant or admissible to supplement,
explain, or vary any of the terms of the Lease or any other Operative Document.
Acceptance of, or acquiescence in, a course of performance rendered under this
or any prior agreement between the parties or their Affiliates shall not be
relevant or admissible to determine the meaning of any of the terms of this
Lease or any other Operative Document. No representations, undertakings, or
agreements have been made or relied upon in the making of this Parcel Lease
Supplement other than those specifically set forth in the Operative Documents.
<PAGE> 48
SECTION 12. Governing Law. THIS AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF TEXAS, EXCEPT, WITH RESPECT TO LEASED PROPERTY LOCATED IN ANY OTHER STATE
THAN TEXAS, FOR ISSUES THAT ARE MANDATORILY SUBJECT TO THE LAWS OF THE STATE IN
WHICH ANY PART OF THE LEASED PROPERTY IS LOCATED, WHICH ISSUES SHALL BE
INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE IN
WHICH SUCH PART OF THE LEASED PROPERTY IS LOCATED.
SECTION 13. Memorandum of Lease. A Memorandum of Lease
(substantially in the form of Exhibit ____ of the Participation Agreement)
relating to this Parcel Lease Supplement shall be recorded in the office of the
___________________ of ___________ County, ______________.
SECTION 14. Recourse Deficiency Amount. From and after the
Parcel __ Closing Date, the Recourse Deficiency Amount shall be
$___________________, subject to adjustment in accordance with the terms and
provisions of Appendix I to the Lease.
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE> 49
IN WITNESS WHEREOF, the parties hereto have caused this Parcel _____
Lease Supplement to be executed by their respective duly authorized officers as
of the day and year first above written.
<TABLE>
<S> <C>
WITNESSES: ASSET XVI HOLDINGS COMPANY, L.L.C., as Lessor
By: Asset Holdings Corporation I, as Managing
Member
- ---------------------------------------------------
Print Name:
----------------------------------------
By:
------------------------------------------------
Name:
- --------------------------------------------------- ----------------------------------------------
Print Name: Title:
---------------------------------------- ---------------------------------------------
EAGLE USA AIRFREIGHT, INC., as Lessee
- --------------------------------------------------- By:
Print Name: ------------------------------------------------
Name: Douglas A. Seckel
Title: Chief Financial Officer
- ---------------------------------------------------
Print Name:
</TABLE>
<PAGE> 50
COMMONWEALTH OF MASSACHUSETTS )
) ss:
COUNTY OF SUFFOLK )
The foregoing instrument was acknowledged before me this _____ day of
____________, 199__, by ______________, the Secretary of Asset Holdings
Corporation I, a Delaware corporation, on behalf of Asset XVI Holdings Company,
L.L.C., as such person's and its free act and deed.
(SEAL)
-----------------------------
Notary Public
My commission expires:
- ----------------------------------
STATE OF TEXAS )
) ss:
COUNTY OF _____________ )
The foregoing instrument was acknowledged before me this _____ day of
_______________, 19___, by _______________________, the __________________, of
Eagle USA Airfreight, Inc., a Texas corporation, on behalf of the corporation,
as each such person's and its free act and deed.
-----------------------------
(SEAL) Notary Public
My commission expires:
<PAGE> 51
APPENDIX I
DESCRIPTION OF PARCEL________
Appendix II-1
<PAGE> 52
APPENDIX II
SCHEDULE OF SCHEDULED RENT FOR PARCEL _______
Appendix II-1
<PAGE> 1
EXHIBIT 10(iii)B
================================================================================
LOAN AGREEMENT
Dated as of April 3, 1998
between
ASSET XVI HOLDINGS COMPANY, L.L.C.,
as Lessor and Borrower
and
BANK ONE, TEXAS, N.A.,
as Lender
-----------------------------------------------
Lease Financing
for Eagle USA Airfreight, Inc.
Corporate Real Estate Program
================================================================================
<PAGE> 2
TABLE OF CONTENTS
(Loan Agreement)
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1 DEFINITIONS; INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2 AMOUNT AND TERMS OF COMMITMENT; REPAYMENT AND PREPAYMENT OF LOAN . . . . . . . . . . . . . . . . . . 1
SECTION 2.1 Commitment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2.2 Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2.3 Scheduled Principal Repayment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.4 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.5 Interest on Overdue Amounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.6 Discretion of Lender as to Manner of Funding . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3 RECEIPT, DISTRIBUTION AND APPLICATION OF CERTAIN PAYMENTS IN RESPECT OF LEASE AND LEASED PROPERTY . 7
SECTION 3.1 Distribution and Application of Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 3.2 Distribution and Application of Certain Payments. . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 3.3 Distribution and Application of Lessee Payment
of a Recourse Deficiency Amount Upon Exercise of
Remarketing Option. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.4 Distribution and Application of Remarketing
Proceeds of Leased Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.5 Distribution and Application of Payments
Received When an Event of Default Exists or Has
Ceased to Exist Following Rejection of the Lease. . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.6 Distribution of Other Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.7 Reinvestment Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 4 THE LESSOR; EXERCISE OF REMEDIES UNDER LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 4.1 Covenant of Lessor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 4.2 Lessor Obligations Nonrecourse; Payment from
Certain Lease Obligations and Certain Proceeds
of Leased Property Only. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 4.3 Exercise of Remedies Under Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 5 LOAN EVENTS OF DEFAULT; REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 5.1 Loan Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 5.2 Loan Event of Default; Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 6 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6.1 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6.3 No Waiver; Cumulative Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.4 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.5 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.6 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.7 Survival and Termination of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.8 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.9 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.10 No Recourse. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 6.11 Limitation on Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 6.12 Waiver of Consumer Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
APPENDIX I Definitions and Interpretation
APPENDIX II Form of Note
</TABLE>
<PAGE> 4
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of April 3, 1998, is between ASSET XVI
HOLDINGS COMPANY, L.L.C., a Massachusetts limited liability company, as Lessor
and Borrower, and BANK ONE, TEXAS, N.A., a national banking association, as
Lender.
PRELIMINARY STATEMENT
In accordance with the terms and provisions of this Loan Agreement,
the Participation Agreement, the Lease and the other Operative Documents, (i)
the Lessor intends to acquire Parcels of the Land and lease the Parcels to the
Lessee, (ii) the Lessee has agreed to construct Improvements on certain of the
Parcels for the Lessor and to lease all Improvements from the Lessor as part of
the Leased Property under the Lease, (iii) the Lessor now wishes to obtain, and
the Lender is willing to provide, funding in the amount of up to $19,000,000
for the acquisition of the Parcels and certain Improvements and the
construction of certain Improvements thereon.
NOW, THEREFORE, in consideration of the mutual agreements contained in
this Loan Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1 DEFINITIONS; INTERPRETATION
Unless the context shall otherwise require, capitalized terms used and
not defined herein shall have the meanings assigned thereto in Appendix I
hereto for all purposes hereof and the rules of interpretation set forth in
Appendix I hereto shall apply to this Loan Agreement.
SECTION 2 AMOUNT AND TERMS OF COMMITMENT; REPAYMENT AND
PREPAYMENT OF LOAN
SECTION 2.1 Commitment. Subject to the terms and conditions hereof and
of the Participation Agreement, the Lender agrees to make available to the
Lessor a construction and term loan in the principal amount of up to
$19,000,000 (the "Loan"). The Loan shall be divided into separate Parcel
Tranches for each of the Properties, consisting of the aggregate amount of Loan
Advances made with respect to each Property in order to fund the Property Costs
thereof. The Lessor shall apply the proceeds of the Loan to the payment of the
Property Costs of the Leased Property in accordance with the Participation
Agreement. As provided in Section 2.2 of the Participation Agreement, the
Lender shall from time to time make Loan Advances to the Lessee acting on
behalf of the Lessor, either pursuant to a Funding Requisition substantially in
the form attached to the Participation Agreement as Appendix II or, in the case
of interest due on the Loan in respect of each Parcel on each Loan Payment Date
to and including the related Parcel Completion Date, pursuant to the procedure
provided in Section 2.2(c) of the Participation Agreement. Loan Advances shall
be allocated by the Lender to the Parcel Tranche for the Property identified in
each Funding Requisition, provided that, in the case of the initial Funding
Requisition hereunder and in
<PAGE> 5
any case in which the Lender determines that any proceeds of a Loan Advance
should be allocated to a Parcel Tranche other than the Parcel Tranche for the
Property identified in the related Funding Requisition, the allocation shall be
made in accordance with the Lender's determination, in the absence of manifest
error, and notice of which determination shall be given to Lessee and Lessor.
SECTION 2.2 Note. The Loan shall be evidenced by the promissory note
of the Lessor (the "Note"), substantially in the form of Appendix II hereto
with appropriate insertions, duly executed by the Lessor, payable to the order
of the Lender. The Note shall be dated as of the date hereof and delivered to
the Lender on the Closing Date in accordance with Section 3.1 of the
Participation Agreement. The Note, each Parcel Tranche and all Loan Advances
made from time to time in respect thereof, shall (i) be stated to mature on the
Lease Termination Date, (ii) bear interest on the unpaid principal amount
thereof from time to time outstanding at the interest rates determined as
provided, and payable as specified, in Section 2.4 and (iii) be payable as to
principal as provided in Section 2.3. Upon the occurrence of an Event of
Default under clause (g) of Article XIII of the Lease, or upon an Acceleration
as described in Section 15.3 of the Lease, the Note shall automatically become
due and payable in full.
SECTION 2.3 Scheduled Principal Repayment. The principal amount of the
Loan shall be divided into one or more Parcel Tranches corresponding to the
number of Properties then comprising the Leased Property. The Lessor shall make
payments on account of each such Parcel Tranche beginning on the first Loan
Payment Date which is 24 months after the related Parcel Closing Date. The
amount of each such principal payment shall be in accordance with the Parcel
Tranche Payment Schedule to be delivered by the Lender to the Lessor and the
Lessee on each Parcel Closing Date, as amended by Lender on the related Parcel
Completion Date, as necessary. If any such Loan Payment Date is not also the
last day of an Interest Period (i.e. with respect to an Interest Period having
a duration longer than one month), the Lender shall deposit such funds in the
Reinvestment Account and hold such funds for application in reduction of the
principal balance of the Loan on the last day of the then-current Interest
Period. Pursuant to the Lease, the Lessee is obligated to pay Scheduled Rent in
respect of such principal as the same becomes due under this Loan Agreement.
The Lender shall apply such amounts as determined in Section 3.1 hereof. Lender
shall maintain each Parcel Tranche Payment Schedule, each of which is subject
to revision by the parties hereto in the circumstances and according to the
guidelines for adjustments to Appendix II of each Parcel Lease Supplement set
forth in Section 4.1 of the Lease. Except in connection with an early payment
or acceleration of Basic Rent or the Lease Termination Date under the Lease due
to (i) an Event of Default under the Lease, (ii) an Acceleration, (iii) the
Lessee's exercise of the Purchase Option, (iv) the Lessee's exercise of the
Remarketing Option, or (v) the receipt of amounts under the Lease in respect of
a Casualty or a Condemnation, the Lessor shall have no option or right, without
the prior consent of the Lender, to prepay the Loan whether in whole or in
part.
- 2 -
<PAGE> 6
SECTION 2.4 Interest.
(a) Loan Advances. Except as otherwise provided with respect to
Loan Advances made in relation to interest due and payable on the Note pursuant
to Section 2.2 (c) of the Participation Agreement, each Loan Advance shall be
made in the form of a LIBOR Rate Loan, unless (i) the Lessee shall make an
election pursuant to a Funding Requisition for the Loan Advance to be in the
form of a Base Rate Loan, (ii) the Funding Date requested therein shall be a
date other than the first day of an Interest Period, or (iii) the Lender shall
have given notice of the occurrence of the circumstances described in Section
2.4 (f)(i) or Section 2.4 (f)(iii) hereof, in any of which cases such Loan
Advance will be in the form of a Base Rate Loan. The aggregate unpaid principal
amount of the Base Rate Loans and the LIBOR Rate Loans at any one time
outstanding shall not exceed the Loan Commitment.
Each Loan Advance shall be made pursuant to a Funding Requisition
executed and delivered by Lessee to Lender pursuant to Section 2.2 of the
Participation Agreement, which Funding Requisition shall specify (a) the total
amount of the Loan Advance (b) the Funding Date of the Loan Advance, (c) the
Parcel(s) to which it relates, and (d) if applicable, whether the Lessee elects
that the Loan Advance is to be a Base Rate Loan.
(b) Interest. Subject to the provisions of Section 6.11 hereof,
the Lessor shall pay interest (computed, to the extent such computation would
not result in interest in excess of that which is permitted by Applicable Law,
using the actual number of days elapsed and a 360-day year) on the unpaid
principal amount of each Loan Advance from the Funding Date of each such Loan
Advance, at the following rates per annum, not exceeding in either case the
highest rate permitted by Applicable Law:
(i) Base Rate Loans. With respect to each Base Rate Loan,
a rate per annum equal at all times to the Base Rate in effect from
time to time, payable monthly on each Loan Payment Date; and
(ii) LIBOR Rate Loans. With respect to each LIBOR Rate
Loan, a rate per annum (the "Applicable LIBOR Rate") (A) during each
Interest Period commencing prior to the Final Completion Date, equal
to the Interim LIBOR Rate and (B) during each Interest Period
commencing on and after the Final Completion Date, equal to the sum of
the Adjusted LIBOR Rate for such Interest Period plus (I) 1.45% per
annum, payable monthly on each Loan Payment Date.
(c) Conversion and Continuation of Loan. Five Business Days prior
to the beginning of each Interest Period, the Lessee may request that the
Lender determine the Adjusted LIBOR Rate applicable to such Interest Period and
the Lender shall notify the Lessee of such Adjusted LIBOR Rate. Each LIBOR Rate
Loan shall automatically be continued for another Interest Period of the same
duration, unless the Lessee shall elect to convert all or any part thereof to a
Base Rate Loan by written notice to the Lender given on any day which is at
least three Business Days before the
- 3 -
<PAGE> 7
beginning of the next succeeding Interest Period. Except to the extent that the
Base Rate applies as a result of any circumstance described in Section 2.4 (f)
hereof, the Lessee may elect to convert any Base Rate Loan to a LIBOR Rate
Loan, (i) if a LIBOR Rate Loan shall be outstanding at the time of such
election, effective on the first day of the next succeeding Interest Period, or
(ii) if no LIBOR Rate Loan shall be outstanding at the time of such election,
effective on any date at least three but not more than five Business Days after
such election. Prior to the Final Completion Date, unless the Lessee shall
notify the Lender to the contrary and except in the event that the Base Rate
applies as a result of any circumstance described in Section 2.4 (f) hereof,
each Base Rate Loan shall be automatically converted to a LIBOR Rate Loan on
the next Loan Payment Date. The Lessee may elect at the end of any Interest
Period with respect thereto to convert a LIBOR Rate Loan into a Base Rate Loan.
Notwithstanding the foregoing, (i) there shall be only one Interest Period
applicable at any time for all Loan Advances outstanding hereunder as LIBOR
Rate Loans, (ii) the first such Interest Period shall commence on the Funding
Date of the first LIBOR Rate Loan borrowed hereunder and (iii) any Loan
Advances thereafter requested as or converted to LIBOR Rate Loans may only be
so requested or converted effective on the first day of the subsequent Interest
Period. Effective as of the Final Completion Date, all of the Parcel Tranches
shall be coordinated for the purpose of setting interest rates hereunder as if
all of them, together were a single Loan, which (unless the Lessee shall
otherwise elect a conversion to a Base Rate Loan, and except in the event that
the Base Rate applies a result of any of the circumstances set forth in Section
2.4 (f) below) shall be a LIBOR Rate Loan having an Interest Period commencing
on the Final Completion Date and having a duration of one, two, three or six
months, as the Lessee may select. Each such election and selection made under
this Section 2.4 (c) shall be made by giving the Lender at least three Business
Days' prior irrevocable written notice thereof, which notice shall specify (1)
in the case of a conversion to, or a continuation of, a LIBOR Rate Loan, the
Interest Period therefor, (2) in the case of a conversion, the date of
conversion (which date shall in any event be a Business Day), and (3) in the
case of a conversion or continuation prior to the Completion Date affecting
less than 100% of the principal amount of a Loan Advance, the amounts of such
Loan Advance which are to be LIBOR Rate Loans and Base Rate Loans,
respectively. If, at any time prior to the date a conversion to, or
continuation of, a LIBOR Rate Loan is effective, the Lessee has received notice
that any of the circumstances described in Sections 2.4(f)(i) or (iii) exist,
the right of the Lessee to convert all or a portion of Base Rate Loans to LIBOR
Rate Loans or to continue LIBOR Rate Loans for an additional Interest Period
shall be suspended until the Lessee receives notice that the circumstances
causing such suspension no longer exist.
(d) Interest Period Determination. Notwithstanding the foregoing
provisions of this Section 2.4:
(i) The Lessee may not select any Interest Period which ends
after the Scheduled Termination Date;
(ii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next succeeding
Business Day, provided, however, that if such extension would cause the
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last day of such Interest Period to occur in the next following
calendar month, the last day of such Interest Period shall occur on the
next preceding Business Day; and
(iii) After the Final Completion Date, if the Lessee shall
fail to notify the Lender of its election of the duration of an
Interest Period within the time period required under the terms of
Section 2.4(c), then (subject to the provisions of Section 2.4(f)
below) the subsequent Interest Period will automatically, on the last
day of the then existing Interest Period therefor, be continued as an
Interest Period having a duration of one month.
(e) Appointment of Agents for Interest Rate Elections. The Lessee
may, from time to time, and at any time upon notice to the Lender, appoint one
or more agents for the limited purpose of making interest rate and Interest
Period elections under this Section 2.4 below. The acts of such agent(s) shall
be binding upon the Lessee unless and until such time as the Lessee shall
notify the Lender that any such agent no longer has the authority to act on
behalf of the Lessee. Unless and until the Lessee notifies the Lender
otherwise, each of Douglas Seckel and Kelly Biar, acting alone, is hereby
authorized by the Lessee to act as the Lessee's agent in accordance with this
Section 2.4.
(f) Interest Rate Protection.
(i) Suspension of LIBOR Rate Loans. If, with respect to
any Interest Period, the Lender notifies the Lessee that the Applicable
LIBOR Rate for such Interest Period will not adequately reflect the
cost to the Lender of maintaining the Loan or any Loan Advance subject
to such Interest Period, the obligation of the Lender to continue the
Loan for an additional Interest Period shall be suspended until the
Lender shall notify the Lessee that the circumstances causing such
suspension no longer exist, and during the period of suspension the
principal amount of the Loan shall bear interest at the Base Rate as in
effect from time to time, payable monthly in advance on each Loan
Payment Date during the period of suspension.
(ii) Increased Costs. Subject to the provisions of Section
6.11 hereof, if, due to either (A) the introduction of or any change
(including any change by way of imposition or increase of reserve
requirements) in or in the interpretation of any law or regulation or
(B) the compliance with any guideline or request from any central bank
or other governmental authority (whether or not having the force of
law), there shall be any increase in the cost to the Lender of agreeing
to make or making, funding or maintaining the Loan or any Loan Advance
at the Applicable LIBOR Rate for any Interest Period, then the Lessee
shall from time to time, upon demand by the Lender, pay to the Lender
additional amounts sufficient to compensate the Lender for such
increased cost. A certificate in reasonable detail as to the amount of
such increased cost, submitted to the Lessee by the Lender, shall be
conclusive and binding for all purposes, absent manifest error.
(iii) Illegality. Notwithstanding any other provision of
this Loan Agreement, if the Lender shall notify the Lessee that the
introduction of or any change in or in the
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<PAGE> 9
interpretation of any law or regulation makes it unlawful, or any
central bank or other governmental authority asserts that it is
unlawful, for the Lender to perform its obligations hereunder to make,
or any Loan Advance at the Applicable LIBOR Rate for any Interest
Period or to fund or maintain, the Loan or any Loan Advance at the
Applicable LIBOR Rate for any Interest Period (A) the obligation of the
Lender to continue the Loan, or any Loan Advance, for an additional
Interest Period shall be suspended until the Lender shall notify the
Lessee that the circumstances causing such suspension no longer exist
and (B) during the period of suspension, the Loan, or such Loan
Advances, as the case may be, then outstanding shall be automatically
converted to bear interest at a rate per annum equal to the Base Rate
then and thereafter in effect from time to time, payable on the last
day of each month during which the Base Rate applies.
(iv) Indemnification for Breakage Costs. If (a) any
payment of principal of the Loan or any Loan Advance is made other than
on a Loan Payment Date that is also the last day of an Interest Period
relating to such Loan or Loan Advance, as a result of (i) a payment or
conversion pursuant to Section 2.4(f)(iii), above, (ii) a prepayment of
the Loan in whole or in part for any reason, or (iii) for any other
reason, or (b) the Lessor shall fail to create, borrow or effect a Loan
Advance on the Funding Date specified in a Funding Requisition, then
the Lessor shall, upon demand by the Lender, pay Breakage Costs to the
Lender.
SECTION 2.5 Interest on Overdue Amounts. If all or a portion of the
principal amount of or interest on the Loan shall not be paid when due (whether
at the stated maturity, by acceleration or otherwise), such overdue amount
shall, without limiting the rights of the Lender under Section 5, bear interest
at the Overdue Rate, but not exceeding the highest rate permitted by Applicable
Law, in each case from the date of nonpayment until paid in full (as well after
as before judgment).
SECTION 2.6 Discretion of Lender as to Manner of Funding.
Notwithstanding any provision of this Loan Agreement to the contrary, the
Lender shall be entitled to fund and maintain its funding of all or any part of
the Loan in any manner it sees fit, subject in all respects to Applicable Law,
it being understood however, that for the purposes of this Loan Agreement all
determinations hereunder shall be made as if the Lender had actually funded and
maintained each Loan Advance to which the Applicable LIBOR Rate applies during
each Interest Period applicable thereto through the purchase of deposits having
a maturity corresponding to such Interest Period and bearing an interest rate
equal to the Applicable LIBOR Rate for such Interest Period.
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SECTION 3 RECEIPT, DISTRIBUTION AND APPLICATION OF CERTAIN PAYMENTS IN
RESPECT OF LEASE AND LEASED PROPERTY
SECTION 3.1 Distribution and Application of Rent Payments.
(a) Basic Rent. Each payment of Basic Rent (and any payment of
interest on overdue installments of Basic Rent) received by the Lender shall be
applied by Lender, or caused to be applied, in the following order of priority:
first, to the Lender for the accrued and unpaid
interest (including overdue interest) on the Note;
second, to the Lender, to the extent of Scheduled
Rent received from the Lessee, to the outstanding
principal of the Note then due; and
third, to the order of the Lessor, in an amount equal
to the sum of all accrued and unpaid Contribution
Return then due.
Payments of Scheduled Rent so received from the Lessee shall be allocated in
reduction of the outstanding principal balance of each Parcel Tranche in
accordance with the Parcel Tranche Payment Schedule for each Property.
(b) Supplemental Rent. Each payment of Supplemental Rent received
by the Lender shall be paid to or upon the order of the Person owed the same.
SECTION 3.2 Distribution and Application of Certain Payments.
(a) With respect to any individual Property, upon the Lender's receipt
of:
(i) the net proceeds for a consummated sale of such
Property received by the Lender in connection with the Lessee's
exercise of the Purchase Option under Section 15.1 of the Lease, or
(ii) the receipt of insurance proceeds or other payments
in respect of an Event of Loss or Event of Taking in respect of such
Property,
the Lender shall apply or cause the same to be applied in the following order
of priority:
first, to the Lender for the accrued and unpaid
interest (including overdue interest) on the Parcel
Tranche for such Property;
second, to the Lender for Breakage Costs, if any;
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<PAGE> 11
third, to the Lender for the outstanding principal of
the Parcel Tranche for such Property; and
fourth, to the order of the Lessor, in an amount
equal to the sum of all accrued and unpaid
Contribution Return with respect to the Parcel
Contribution Tranche for such Property plus the
amount of the Parcel Contribution Tranche for such
Property,
Any remaining amount shall be applied by the Lender and the Lessor, pari passu,
to the payment of accrued and unpaid interest on the Note and accrued and
unpaid Contribution Return until each is paid in full, and then pari passu, to
the payment of the unpaid balance of the Note and the Contribution,
respectively.
(b) With respect to all the Leased Property, upon the Lender's receipt
of:
(i) the net proceeds for a consummated sale of the Leased
Property in connection with the Lessee's exercise of the Purchase
Option under Section 15.1 of the Lease, or
(ii) the net proceeds for a consummated sale of the Leased
Property received by the Lender in connection with the Lessee's
exercise of the Purchase Obligation under Section 15.2 of the Lease,
the Lender shall apply or cause the same to be applied in the following order
of priority:
first, to the Lender for accrued and unpaid interest
(including overdue interest) on the Note;
second, to the Lender for Breakage Costs, if any;
third, to the Lender for the outstanding principal of
the Note; and
fourth, to the Lessor in an amount up to the sum of
(i) all accrued and unpaid Contribution Return as of
and prorated to the date of payment, plus (ii) the
outstanding balance of the Contribution, plus (iii)
any unpaid Supplemental Rent or unpaid portion of the
Lease Balance.
Any remaining amount shall, so long as there shall exist no outstanding Event
of Default, be paid to Lessee.
SECTION 3.3 Distribution and Application of Lessee Payment of Recourse
Deficiency Amount Upon Exercise of Remarketing Option. The payment by the
Lessee of the Recourse Deficiency Amount to the Lender on the Scheduled
Termination Date, in accordance with Section
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<PAGE> 12
15.6 or 15.7 of the Lease upon the Lessee's exercise of the Remarketing Option,
shall be applied by the Lender as follows:
first, to the Lender for the accrued and unpaid
interest on the Note;
second, to the Lender for Breakage Costs, if any;
third, to the Lender for the outstanding principal of
the Note;
fourth, to the Lessor in an amount up to the sum of
(i) all accrued and unpaid Contribution Return as of
and prorated to the date of payment, plus (ii) the
outstanding balance of the Contribution, plus (iii)
any unpaid Supplemental Rent or unpaid portion of the
Lease Balance; and
SECTION 3.4 Distribution and Application of Remarketing Proceeds of
Leased Property. Any payments received by the Lessor as proceeds from the sale
of the Leased Property sold pursuant to the Lessee's exercise of the
Remarketing Option pursuant to Section 15.6 or 15.7 of the Lease, shall be
distributed by the Lessor as promptly as possible (it being understood that any
such payment received by the Lessor on a timely basis and in accordance with
the provisions of the Lease shall be distributed on the date received in the
funds so received) in the following order of priority:
first, to the Lender for the accrued and unpaid interest on
the Note;
second, to the Lender for Breakage Costs, if any;
third, to the Lender for the outstanding principal of the
Note;
fourth, to the Lessor in an amount equal to the sum of (i) all
accrued and unpaid Contribution Return as of and prorated to
the date of payment, plus (ii) the outstanding balance of the
Contribution, plus (iii) any unpaid Supplemental Rent or
unpaid portion of the Lease Balance; and
fifth, (i) if sold by the Lessee pursuant to Section 15.6 of
the Lease, to the Lessee, the excess of such proceeds of sale,
if any, and (ii) otherwise, to the Lessor.
SECTION 3.5 Distribution and Application of Payments Received When an
Event of Default Exists or Has Ceased to Exist Following Rejection of the
Lease.
(a) Proceeds of Leased Property. Any payments received by the
Lessor or the Lender when an Event of Default exists (or has ceased to exist by
reason of a rejection of the Lease in a proceeding with respect to the Lessee
described in Article XIII(g) of the Lease), as either or both:
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<PAGE> 13
(i) proceeds from the sale of any or all of the Leased
Property sold pursuant to the exercise of the Lessor's remedies
pursuant to Article XIV of the Lease; or
(ii) proceeds of any amounts from any insurer or any
Governmental Authority in connection with an Event of Loss or Event of
Taking;
shall, if received by Lessor, be paid to the Lender as promptly as possible,
and shall be distributed or applied in the following order of priority prior to
the Release Date:
first, to the Lender for any amounts expended by it in
connection with the Leased Property or the Operative Documents
and not previously reimbursed to it;
second, to the Lender for the accrued and unpaid interest on
the Note;
third, to the Lender for Breakage Costs, if any,
fourth, to the Lender for the outstanding principal of the
Note;
fifth, to the Lessor in an amount equal to the sum of (i) all
accrued and unpaid Contribution Return prorated to the date of
payment, plus (ii) the outstanding balance of the
Contribution, plus (iii) any unpaid Supplemental Rent or
unpaid portion of the Lease Balance; and
sixth, to the Person or Persons legally entitled thereto, the
excess, if any; and
on and after the Release Date such amounts shall be paid over to the Lessor and
shall be distributed by the Lessor first, to the Lessor for application to any
unpaid amounts owing to the Lessor under the Operative Documents, and second,
to the Person or Persons legally entitled thereto, the excess, if any.
(b) Proceeds of Recoveries from Lessee. Any payments received by
the Lender when an Event of Default exists (or has ceased to exist by reason of
a rejection of the Lease in a proceeding with respect to the Lessee described
in Article XIII(g) of the Lease), from the Lessee as a payment in accordance
with the Lease, shall be paid to the Lender as promptly as possible, and shall
then be applied by the Lender as promptly as possible in the order of priority
set forth in subsection (a) of this Section.
SECTION 3.6 Distribution of Other Payments. All payments under Section
7.6 of the Participation Agreement shall be made first, to the Lender until the
principal of, Breakage Costs, if any, and interest on, the Loan has been paid
in full, and second, to Lessor who shall be entitled to retain all such
remaining amounts. Except as otherwise provided in this Section, any payment
received by the Lessor which is to be paid to the Lender pursuant hereto or for
which provision as to the application thereof is made in an Operative Document
but not elsewhere in this Section shall, if
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<PAGE> 14
received by Lessor, be paid forthwith to the Lender and when received shall be
distributed forthwith by the Lender to the Person and for the purpose for which
such payment was made in accordance with the terms of such Operative Document.
SECTION 3.7 Reinvestment Account. If on any date the Lender or
the Lessor shall receive any amount in respect of (a) any Qualified Payment, or
(b) payments of Scheduled Rent in accordance with a Parcel Tranche Payment
Schedule, or other principal payments, with respect to a Loan Payment Date
which is not the last day of an Interest Period, then in any such case, the
Lender or the Lessor, as the case may be, shall be required to pay such amount
received (i) if no Event of Default shall have occurred and remain outstanding,
to the Reinvestment Account (as hereinafter defined) to pay the principal
balance of the Loan, or the respective Parcel Tranche, on the next Loan Payment
Date which is also the last day of an Interest Period or (ii) if an Event of
Default shall have occurred and remain outstanding, to apply and allocate the
proceeds respecting this Section 3.7 in accordance with Section 3.5 hereof.
Moneys received by the Lender in respect of amounts described in clauses (a) or
(b) above shall be deposited into a separate account which the Lender shall
establish in the name of the Lessor for the benefit of the Lender and the
Lessee (the "Reinvestment Account"). Pending application as herein provided,
such funds shall be invested in Permitted Investments as directed by the
Lessee. Interest earned on the moneys held in the Reinvestment Account shall be
for the account of the Lessee and shall be paid to the Lender and deposited in
the Reinvestment Account. Funds held in the Reinvestment Account shall be
applied, to the reduction (or payment in full) of the Parcel Tranche to which
such payment relates (and any balance, and any amount so received which is not
identified by the Lender to any Parcel Tranche, shall be applied to some or all
of the Parcel Tranches as the Lender shall determine in its sole discretion) on
the next succeeding Loan Payment Date which is the end of an Interest Period.
SECTION 4 THE LESSOR; EXERCISE OF REMEDIES UNDER LEASE
SECTION 4.1 Covenant of Lessor. So long as the Loan remains outstanding
and unpaid or any other amount is owing to Lender hereunder or under the other
Operative Documents, the Lessor will promptly pay all amounts payable by it
under this Loan Agreement and the Note in accordance with the terms hereof and
thereof and shall duly perform each of its obligations under this Loan
Agreement and the Note. The Lessor agrees to provide to the Lender a copy of
each estoppel certificate that the Lessor proposes to deliver pursuant to
Section 18.13 of the Lease at least five (5) days prior to such delivery and to
make any corrections thereto reasonably requested by the Lender prior to such
delivery. The Lessor shall keep the Leased Property free and clear of all
Lessor Liens. The Lessor shall not reject any sale of the Leased Property
pursuant to Section 15.6 of the Lease unless the Loan has not been paid in full
or the Lender consents to such rejection. In the event that the Lender directs
the Lessor to reject any sale of the Leased Property pursuant to Section 15.6
of the Lease, the Lessor agrees to take such action as Lender reasonably
requests to effect a sale or other disposition of the Leased Property. If a
Loan Event of Default under Section 5.1(e) hereof occurs, the Lessor will not
reject the Lease but shall assign the same to the Lender and the Lender agrees
to assume the Lessor's obligations thereunder.
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<PAGE> 15
SECTION 4.2 Lessor Obligations Nonrecourse; Payment from Certain Lease
Obligations and Certain Proceeds of Leased Property Only. All payments to be
made by the Lessor in respect of the Loan, the Note and this Loan Agreement
shall be made only from certain payments received under the Lease and certain
proceeds of the Leased Property and only to the extent that the Lessor or the
Lender shall have received sufficient payments from such sources to make
payments in respect of the Loan in accordance with Section 3. The Lender agrees
that it will look solely to such sources of payments to the extent available
for distribution to the Lender as herein provided and that neither the Lessor
nor any of its members or other Affiliates, or JH Management Corporation, or
any of their respective incorporators, stockholders, directors, employees,
officers or agents, shall be personally liable to the Lender for any amount
payable hereunder or under the Note. Nothing in this Loan Agreement, the Note
or any other Operative Document shall be construed as creating any liability
(other than for willful misconduct) of the Lessor individually to pay any sum
or to perform any covenant, either express or implied, in this Loan Agreement,
the Note or any other Operative Document (all such liability, if any, being
expressly waived by the Lender). The Lender, on behalf of itself and its
successors and assigns, agrees in the case of any liability of the Lessor
hereunder or under any of the Operative Documents (except for such liability
attributable to its willful misconduct) that it will look solely to those
certain payments received under the Lease and those certain proceeds of the
Leased Property; provided, however, that the Lessor in its individual capacity
(but not the Lessor, its members or other Affiliates, or JH Management
Corporation, or any of their respective incorporators, stockholders, directors,
employees, officers and agents) shall in any event be liable with respect to
(i) the removal of Lessor's Liens or liabilities involving its willful
misconduct or (ii) failure to turn over payments the Lessor has received in
accordance with Section 3; and provided, further that the foregoing exculpation
of the Lessor shall not be deemed to be exculpations of the Lessee or any other
Person.
SECTION 4.3 Exercise of Remedies Under Lease.
(a) Event of Default. With respect to any Event of Default as to
which notice thereof by the Lessor to the Lessee is a requirement to cause such
Event of Default to become an Event of Default, the Lessor may at any time in
its discretion give such notice; provided, however, that the Lessor agrees to
give such notice to the Lessee promptly upon receipt of a written request by
the Lender.
(b) Acceleration of Lease Balance. When an Event of Default
exists, the Lessor, upon the direction of the Lender, shall exercise remedies
under Article XIV of the Lease to demand payment in full of the Lease Balance
by the Lessee (an "Acceleration"). Following an Acceleration, the Lessor shall
consult with the Lender regarding actions to be taken in response to such Event
of Default. The Lessor shall not, without the prior written consent of Lender,
and shall (subject to the provisions of this Section), if so directed by the
Lender, do any of the following: commence eviction or foreclosure proceedings,
or file a lawsuit against the Lessee under the Lease, or sell the Leased
Property, or exercise other remedies against the Lessee under the Operative
Documents in respect of such Event of Default; provided, however, that any
payments received by the Lessor shall
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<PAGE> 16
be distributed in accordance with Section 3. Notwithstanding any such consent,
direction or approval by the Lender of any such action or omission, the Lessor
shall have no obligation to follow such direction if the same would, in the
Lessor's reasonable judgment, require the Lessor to expend its own funds or
expose the Lessor to liability, expense, loss or damages unless and until the
Lender advances to the Lessor an amount or offers the Lessor an indemnity in an
amount, in either case, which is sufficient, in Lessor's reasonable judgment,
to cover such liability, expense, loss or damage. Notwithstanding the
foregoing, on and after the Release Date, the Lender shall have no rights to
the Leased Property or any proceeds thereof, the Lender shall have no rights to
direct or give consent to any actions with respect to the Leased Property and
the proceeds thereof, the Lessor shall have absolute discretion as to the
exercise of remedies with respect to the Leased Property, and the proceeds
thereof, including, without limitation, any foreclosure or sale of the Leased
Property, and the Lessor shall have no liability to the Lender with respect to
the Lessor's actions or failure to take any action with respect to the Leased
Property.
SECTION 5 LOAN EVENTS OF DEFAULT; REMEDIES
SECTION 5.1 Loan Events of Default. Each of the following events shall
constitute a Loan Event of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any Governmental Authority) and each such Loan Event of
Default shall continue so long as, but only as long as, it shall not have been
remedied:
(a) The Lessor shall fail to distribute in accordance
with the provisions of Section 3 any amount received by the Lessor
pursuant to the Lease or the Participation Agreement within three (3)
Business Days of receipt thereof if and to the extent that the Lender
is entitled to such amount or a portion thereof;
(b) The Lessor shall fail to pay to the Lender, within
two (2) Business Days of the Lessor's receipt thereof, any amount which
the Lessee is required, pursuant to the Operative Documents, to pay to
the Lender but erroneously pays to the Lessor;
(c) The default by Lessor in the making of any payment in
respect of the Loan, the Note or this Loan Agreement for 5 days after
receipt by Lessor of written notice thereof from the Lender;
(d) The default by the Lessor in the performance of any
other covenant or condition herein or in any other Operative Document
to which the Lessor is a party, which failure shall continue unremedied
for 10 days after receipt by the Lessor of written notice thereof from
the Lender;
(e) Any representation or warranty of the Lessor
contained in any Operative Document or in any certificate required to
be delivered thereunder shall prove to have been
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<PAGE> 17
incorrect in a material respect when made and shall not have been cured
within 10 days of receipt by the Lessor of written notice thereof from
the Lender; or
(f) The Lessor shall become bankrupt or make an
assignment for the benefit of creditors or consent to the appointment
of a trustee or receiver; or a trustee or a receiver shall be appointed
for the Lessor or for substantially all of its respective property
without its consent and shall not be dismissed or stayed within a
period of 30 days; or bankruptcy, reorganization or insolvency
proceedings shall be instituted by or against the Lessor and, if
instituted against the Lessor, shall not be dismissed or stayed for a
period of 30 days.
SECTION 5.2 Loan Event of Default; Remedies.
(a) Upon the occurrence of a Loan Event of Default hereunder, (i)
if such event is a Loan Event of Default specified in clause (f) of Section 5.1
with respect to the Lessor, automatically, and without the necessity of any
notice or declaration by or to the Lender, or the Lessor, the outstanding
principal of, and accrued interest on, the Loan shall be immediately due and
payable and (ii) if such event is any other Loan Event of Default, the Lender
may, by notice of default to the Lessor, declare the outstanding principal of,
and accrued interest on, the Loan to be immediately due and payable, whereupon
the outstanding principal of, and accrued interest on, the Loan shall become
and be immediately due and payable.
(b) When a Loan Event of Default exists, the Lender may exercise
any or all of the rights and powers and pursue any and all of the remedies
available to it hereunder, under the Note, the Mortgages, and the Assignment of
Lease and Rents and shall have and may exercise any and all rights and remedies
available under the UCC or any other provision of law or in equity. When a Loan
Event of Default exists, the Lender may have the right to exercise all rights
of the Lessor under the Lease pursuant to the terms and in the manner provided
for in the Mortgages and the Assignment of Lease and Rents.
(c) Except as expressly provided above, no remedy under this
Section is intended to be exclusive, but each shall be cumulative and in
addition to any other remedy provided under this Section or under the other
Operative Documents or otherwise available at law or in equity. The exercise by
the Lender of any one or more of such remedies shall not preclude the
simultaneous or later exercise of any other remedy or remedies. No express or
implied waiver by the Lender of any Loan Event of Default shall in any way be,
or be construed to be, a waiver of any future or subsequent Loan Event of
Default. The failure or delay of the Lender in exercising any rights granted it
hereunder or under any of the other Operative Documents upon any occurrence of
any of the contingencies set forth herein shall not constitute a waiver of any
such right upon the continuation or recurrence of any such contingencies or
similar contingencies and any single or partial exercise of any particular
right by the Lender shall not exhaust the same or constitute a waiver of any
other right provided herein or in any of the other Operative Documents.
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SECTION 6 MISCELLANEOUS
SECTION 6.1 Amendments and Waivers. Neither this Loan Agreement, the
Note nor any terms hereof or thereof may be amended, supplemented or modified
except in accordance with the provisions of Section 8.4 of the Participation
Agreement.
SECTION 6.2 Notices. Unless otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be given in accordance with Section 8.2 of the Participation
Agreement.
SECTION 6.3 No Waiver; Cumulative Remedies. No failure to exercise and
no delay in exercising, on the part of the Lender, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges herein
provided are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
SECTION 6.4 Successors and Assigns. This Loan Agreement shall be
binding upon and inure to the benefit of the Lessor, the Lender and their
respective successors and permitted assigns.
SECTION 6.5 Counterparts. This Loan Agreement may be executed in any
number of counterparts as may be convenient or necessary, and it shall not be
necessary that the signatures of all parties hereto or thereto be contained on
any one counterpart hereof or thereof. Additionally, the parties hereto agree
that for purposes of facilitating the execution of this Loan Agreement, (a) the
signature pages taken from separate individually executed counterparts of this
Loan Agreement may be combined to form multiple fully executed counterparts and
(b) a facsimile transmission shall be deemed to be an original signature. All
executed counterparts of this Loan Agreement shall be deemed to be originals,
but all such counterparts taken together or collectively, as the case may be,
shall constitute one and the same agreement.
SECTION 6.6 Governing Law. THIS LOAN AGREEMENT AND THE NOTE AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS LOAN AGREEMENT AND THE NOTE
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF TEXAS.
SECTION 6.7 Survival and Termination of Agreement. All covenants,
agreements, representations and warranties made herein and in any certificate,
document or statement delivered pursuant hereto or in connection herewith shall
survive the execution and delivery of this Loan Agreement and the Note and
shall continue in full force and effect so long as the Note or any amount
payable to Lender under or in connection with this Loan Agreement or the Note
is unpaid, at which time this Loan Agreement shall terminate.
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<PAGE> 19
SECTION 6.8 Entire Agreement. This Loan Agreement sets forth the entire
agreement of the parties hereto with respect to its subject matter, and
supersedes all previous understandings, written or oral, with respect thereto.
SECTION 6.9 Severability. Any provision of this Loan Agreement or of
the Note which is prohibited, unenforceable or not authorized in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition, unenforceability or non-authorization without invalidating
the remaining provisions hereof or thereof or affecting the validity,
enforceability or legality of any such provision in any other jurisdiction.
SECTION 6.10 No Recourse. Except as provided in Section 4.2 hereof, no
recourse shall be had for any claims under this Loan Agreement against any
incorporator, shareholder, officer, or director, past, present or future, of
the Lessor or of any successor corporation, or against JH Management
Corporation, either directly or through the Lessor or any successor
corporation, whether by virtue of any constitution, statute or rule of law or
by the enforcement of any assessment or penalty or otherwise, all such
liability being, by acceptance hereof and as part of the consideration for the
acceptance hereof, expressly waived and released.
SECTION 6.11 Limitation on Interest. Any provision to the contrary
contained in this Loan Agreement or in any of the other Operative Documents
notwithstanding, it is expressly provided that in no case or event shall the
aggregate of (i) all interest payable by the Lessee or the Lessor and (ii) the
aggregate of any other amounts accrued or paid pursuant to this Loan Agreement
or any of the other Operative Documents, which under applicable laws are or may
be deemed to constitute interest, ever exceed the maximum rate of interest
which could lawfully be contracted for, charged or received. In this
connection, it is expressly stipulated and agreed that it is the intent of the
Lessee, the Lessor and the Lender to contract in strict compliance with the
applicable usury laws of the State of Texas and of the United States (whichever
permit the higher rate of interest) from time to time in effect. In furtherance
thereof, none of the terms of this Loan Agreement or any of the other Operative
Documents shall ever be construed to create a contract to pay, as consideration
for the use, forbearance or detention of money, interest at a rate in excess of
the maximum contract interest rate permitted to be contracted for, charged or
received by the applicable laws of the United States or the State of Texas
(whichever permit the higher rate of interest). The Lessee, the Lessor and any
other parties now or hereafter becoming liable for payment of any indebtedness
under this Loan Agreement or any other Operative Documents shall never be
liable for interest in excess of the maximum rate that may be lawfully
contracted for or charged under the laws of the State of Texas and of the
United States (whichever permit the higher rate of interest). If under any
circumstances the aggregate amounts paid include amounts which by law are
deemed interest which would exceed the maximum amount of interest which could
lawfully have been contracted for, charged or received, the parties stipulate
that such amounts will be deemed to have been paid as a result of an error on
the part of the parties, and the party receiving such excess payment shall
promptly, upon discovery of such error or upon notice thereof from the party
making such payment, refund the amount of such excess or at the Lender's
option, credit such excess against any unpaid principal balance owing. To the
maximum extent permitted by applicable law, all amounts contracted for,
- 16 -
<PAGE> 20
charged or received for the use, forbearance, or detention of money shall, to
the extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of the Loan. The provisions of this Section
shall control all of the Operative Documents.
SECTION 6.12 Waiver of Consumer Rights. The Lessor and the Lender do
each hereby represent and warrant to one another that (a) it is not in a
significantly disparate bargaining position, (b) it is represented by legal
counsel in seeking or acquiring goods or services and such legal counsel was
not directly nor indirectly identified, suggested or selected by the other, (c)
it has knowledge and experience in financial and business matters that enable
it to evaluate the merits and risks of a transaction, including the transaction
evidenced by the Operative Documents, and (d) the Operative Documents are not a
result of any disparity in bargaining position among the Lessee, the Lessor and
the Lender and were negotiated on an arms-length basis and represent the
bargained-for agreement of parties. THE LESSOR AND THE LENDER EACH WAIVES ITS
RIGHTS UNDER THE DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT, SECTION
17.41 ET SEQ., BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL
RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF ITS OWN
SELECTION, THE LESSOR AND THE LENDER EACH VOLUNTARILY CONSENTS TO THIS WAIVER.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
- 17 -
<PAGE> 21
IN WITNESS THEREOF, the parties hereto have caused this Loan Agreement
to be executed by their duly authorized officers as of the day and year first
above written.
ASSET XVI HOLDINGS COMPANY, L.L.C.,
as Lessor and Borrower
by Asset Holdings Corporation I,
a Delaware corporation,
its managing member
By:
--------------------------------
Name: Anne Brennan
Title: Secretary
BANK ONE, TEXAS, N.A., as Lender
By:
------------------------------
Name: John E. Elam, Jr.
Title: Vice President
- 18 -
<PAGE> 22
APPENDIX I
TO
MASTER PARTICIPATION AGREEMENT
MASTER LEASE AND DEVELOPMENT AGREEMENT AND LOAN AGREEMENT
DEFINITIONS AND INTERPRETATION
[See separate text]
<PAGE> 23
APPENDIX II
PROMISSORY NOTE
$19,000,000 April ___, 1998
FOR VALUE RECEIVED, the undersigned ASSET XVI HOLDINGS COMPANY,
L.L.C., a Massachusetts limited liability company, as Lessor (the "Lessor")
under that certain Loan Agreement, dated as of April 3, 1998 (the "Loan
Agreement"), between the Lessor and Bank One, Texas, N.A. (the "Lender"),
promises to pay to the order of the Lender at its address located at Bank One
Center, 910 Travis, 7th Floor, Houston, Texas 77002 or such other address as
the Lender shall hereafter designate in writing to the Lessor, the aggregate
unpaid principal amount of all Loan Advances made by the Lender to, or for the
benefit of, the Lessor, as recorded in the records of the Lender (and such
recordation shall constitute prima facie evidence of the information so
recorded; provided, however, that the failure to make any such recordation
shall not in any way affect the Lessor's obligation to repay this Note). The
principal amount of this Note in respect of each Parcel Tranche shall be
payable in installments on each Loan Payment Date from and after the twenty-
fifth (25th) Loan Payment Date after the related Parcel Closing Date in
accordance with the Loan Agreement and the Parcel Tranche Payment Schedule
therefor delivered in accordance therewith and, in any event, on or prior to
the Lease Termination Date as provided in the Loan Agreement.
The Lessor further promises to pay interest (computed, to the extent
such computation would not result in interest in excess of that which is
permitted by Applicable Law, using the actual number of days elapsed and a
360-day year), on each Loan Payment Date, on the unpaid principal amount of
this Note from time to time outstanding, payable as provided in the Loan
Agreement, at the interest rates determined in accordance with the provisions
of Section 2.4 of the Loan Agreement and to pay interest on amounts not paid
when due under this Note at the Overdue Rate, not exceeding the highest rate
permitted by Applicable Law. All payments of principal of and interest on this
Note shall be payable in lawful currency of the United States of America at the
office of the Lender as provided above or such other address as the Lender
shall have designated to the Lessor, in immediately available funds.
All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest, and notice of
dishonor, notice of the existence, creation or nonpayment of all or any of the
Loan Advances and all other notices whatsoever.
ALL PAYMENTS TO BE MADE BY THE LESSOR IN RESPECT OF THE LOAN AND THIS
NOTE SHALL BE MADE ONLY FROM CERTAIN PAYMENTS RECEIVED UNDER THE LEASE AND
PROCEEDS OF THE LEASED PROPERTY AND ONLY TO THE EXTENT THAT THE LESSOR SHALL
HAVE RECEIVED SUFFICIENT PAYMENTS FROM SUCH SOURCES TO MAKE PAYMENTS IN RESPECT
OF THE LOAN IN ACCORDANCE WITH AND SUBJECT TO THE PRIORITIES SET FORTH IN
SECTION 3 OF THE LOAN AGREEMENT. THE LENDER BY ITS ACCEPTANCE HEREOF AGREES
THAT IT WILL LOOK SOLELY TO SUCH SOURCES OF PAYMENT TO THE EXTENT AVAILABLE FOR
DISTRIBUTION TO THE LENDER AS PROVIDED IN THE LOAN AGREEMENT AND THAT NEITHER
THE LESSOR NOR ANY OF ITS CONSTITUENT MEMBERS OR AFFILIATES, NOR JH MANAGEMENT
CORPORATION, NOR THEIR INCORPORATORS, STOCKHOLDERS, DIRECTORS, OFFICERS,
MEMBERS, MANAGERS, EMPLOYEES OR AGENTS
<PAGE> 24
SHALL BE PERSONALLY LIABLE TO THE LENDER FOR ANY AMOUNT PAYABLE HEREUNDER OR
UNDER THE LOAN AGREEMENT. NOTHING IN THIS NOTE, THE LOAN AGREEMENT OR ANY OTHER
OPERATIVE DOCUMENT SHALL BE CONSTRUED AS CREATING ANY LIABILITY (OTHER THAN FOR
WILLFUL MISCONDUCT) OF THE LESSOR INDIVIDUALLY TO PAY ANY SUM OR TO PERFORM ANY
COVENANT, EITHER EXPRESS OR IMPLIED, IN THIS NOTE, THE LOAN AGREEMENT OR ANY
OTHER OPERATIVE DOCUMENT (ALL SUCH LIABILITY, IF ANY, BEING EXPRESSLY WAIVED BY
THE LENDER BY ITS ACCEPTANCE HEREOF) AND THAT THE LENDER AND EACH OTHER HOLDER
OF THIS NOTE BY ITS ACCEPTANCE HEREOF, ON BEHALF OF ITSELF AND ITS SUCCESSORS
AND ASSIGNS, AGREES IN THE CASE OF ANY LIABILITY OF THE LESSOR HEREUNDER OR
THEREUNDER (EXCEPT FOR SUCH LIABILITY ATTRIBUTABLE TO LESSOR'S WILLFUL
MISCONDUCT) THAT IT WILL LOOK SOLELY TO THOSE CERTAIN PAYMENTS RECEIVED UNDER
THE LEASE AND THOSE CERTAIN PROCEEDS OF THE LEASED PROPERTY AS PROVIDED IN
SECTION 3 OF THE LOAN AGREEMENT; PROVIDED, HOWEVER, THAT THE LESSOR IN ITS
INDIVIDUAL CAPACITY (BUT NOT THE LESSOR'S INCORPORATORS, STOCKHOLDERS,
DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS) SHALL IN ANY EVENT BE LIABLE WITH
RESPECT TO (i) THE REMOVAL OF LESSOR LIENS RESULTING FROM CLAIMS AGAINST OR
ACTS OR BREACHES BY THE LESSOR IN EACH CASE IN ITS INDIVIDUAL CAPACITY AND
INVOLVING ITS WILLFUL MISCONDUCT OR (ii) FAILURE TO TURN OVER PAYMENTS THE
LESSOR HAS RECEIVED IN ACCORDANCE WITH SECTION 3 OF THE LOAN AGREEMENT; AND
PROVIDED, FURTHER, THAT THE FOREGOING EXCULPATION OF THE LESSOR SHALL NOT BE
DEEMED TO BE EXCULPATIONS OF THE LESSEE OR ANY OTHER PERSON.
Any provision to the contrary contained in this Note or in any of the
other Operative Documents notwithstanding, it is expressly provided that in no
case or event shall the aggregate of (i) all Interest payable by the Lessor and
(ii) the aggregate of any other amounts accrued or paid pursuant to this Note
or any of the other Operative Documents, which under applicable laws are or may
be deemed to constitute interest, ever exceed the maximum rate of interest
which could lawfully be contracted for, charged or received. In this
connection, it is expressly stipulated and agreed that it is the intent of the
Lessor and the Lender to contract in strict compliance with the applicable
usury laws of the State of Texas and of the United States (whichever permit the
higher rate of interest) from time to time in effect. In furtherance thereof,
none of the terms of this Note or any of the other Operative Documents shall
ever be construed to create a contract to pay, as consideration for the use,
forbearance or detention of money, interest at a rate in excess of the maximum
contract interest rate permitted to be contracted for, charged or received by
the applicable laws of the United States or the State of Texas (whichever
permit the higher rate of interest). The Lessor and any other parties now or
hereafter becoming liable for payment of any indebtedness under this Note or
any other Operative Documents shall never be liable for interest in excess of
the maximum rate that may be lawfully contracted for or charged under the laws
of the State of Texas and of the United States (whichever permit the higher
rate of interest). If under any circumstances the aggregate amounts paid
include amounts which by law are deemed interest which would exceed the maximum
amount of interest which could lawfully have been contracted for, charged or
received, the parties stipulate that such amounts will be deemed to have been
paid as a result of an error on the part of the parties, and the party
receiving such excess payment shall promptly, upon discovery of such error or
upon notice thereof from the party making such payment, refund the amount of
such excess or at the Lender's option, credit such excess against any unpaid
principal balance owing. To the maximum extent permitted by applicable law, all
amounts contracted for,
- 2 -
<PAGE> 25
charged or received for the use, forbearance, or detention of money shall, to
the extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of this Note.
This Note shall be governed by and construed in accordance with the
laws of the State of Texas, without regard to conflicts of law principles.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Loan Agreement.
ASSET XVI HOLDINGS COMPANY, L.L.C.,
as Lessor
By Asset Holdings Corporation I,
its Managing Member
By:
------------------------------
Name: Anne Brennan
Title: Secretary
- 3 -
<PAGE> 1
EXHIBIT 10(iii)C
================================================================================
MASTER PARTICIPATION AGREEMENT
Dated as of April 3, 1998
among
ASSET XVI HOLDINGS COMPANY, L.L.C., as Lessor
EAGLE USA AIRFREIGHT, INC., as Lessee
and
BANK ONE, TEXAS, N.A., as Lender
---------------------------------------------
Lease Financing
for Eagle USA Airfreight, Inc.
Corporate Real Estate Program
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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<S> <C>
SECTION 1 DEFINITIONS; INTERPRETATION...........................................................................1
SECTION 2 ACQUISITION, CONSTRUCTION AND LEASE; LOAN; NATURE OF TRANSACTION......................................1
SECTION 2.1 Agreement to Acquire, Construct, Fund and Lease.............................................1
SECTION 2.2 Funding of Property Costs; Loan and Contribution............................................2
SECTION 2.3 Nature of Transaction.......................................................................4
SECTION 2.4 Amounts Due Hereunder and Under Lease and Loan
Agreement.............................................................................5
SECTION 2.5 Controlling Agreements......................................................................6
SECTION 2.6 Permitted Applications of Loan Advances and Contribution
Advances..............................................................................6
SECTION 2.7 Covenants Concerning Construction...........................................................6
SECTION 3 CONDITIONS PRECEDENT; DOCUMENTS.......................................................................9
SECTION 3.1 Conditions to the Obligations of the Lessor and the Lender on
the Closing Date......................................................................9
SECTION 3.2 Conditions to the Obligations of the Lessor and the Lender on
each Parcel Closing Date.............................................................11
SECTION 3.3 Conditions to Subsequent Fundings..........................................................16
SECTION 3.4 Completion Date Conditions.................................................................19
SECTION 3.5 Conditions to the Obligations of the Lessee................................................21
SECTION 3.6 Appraisal..................................................................................21
SECTION 4 REPRESENTATIONS AND COVENANTS........................................................................22
SECTION 4.1 Representations of the Lessee..............................................................22
SECTION 4.2 Representations and Covenants of the Lessor................................................24
SECTION 4.3 Covenant of Lender.........................................................................26
SECTION 4.4 Tax Treatment..............................................................................26
SECTION 4.5 Repayment Obligation of Closing Date Costs.................................................27
SECTION 5 COVENANTS OF THE LESSEE..............................................................................27
SECTION 5.1 Qualification as to Corporate Status.......................................................27
SECTION 5.2 Further Assurances.........................................................................27
SECTION 5.3 Reporting..................................................................................27
SECTION 5.4 Financial Covenants of Lessee..............................................................29
SECTION 5.5 Affirmative Covenants of Lessee............................................................30
</TABLE>
<PAGE> 3
<TABLE>
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SECTION 6 TRANSFERS BY LESSOR AND LENDER.......................................................................31
SECTION 6.1 Lessor Transfers...........................................................................31
SECTION 6.2 Lender Transfers...........................................................................31
SECTION 7 INDEMNIFICATION......................................................................................31
SECTION 7.1 General Indemnification....................................................................31
SECTION 7.2 Environmental Indemnity....................................................................33
SECTION 7.3 Proceedings in Respect of Claims...........................................................34
SECTION 7.4 General Tax Indemnity......................................................................36
SECTION 7.5 Increased Costs, etc.......................................................................41
SECTION 7.6 End of Term Indemnity......................................................................42
SECTION 7.7 Exculpation................................................................................43
SECTION 7.8 Role of Lender.............................................................................44
SECTION 7.9 Lender's Benefits..........................................................................44
SECTION 7.10 Lessor's Benefits.........................................................................44
SECTION 8 MISCELLANEOUS........................................................................................45
SECTION 8.1 Survival of Agreements.....................................................................45
SECTION 8.2 Notices....................................................................................45
SECTION 8.3 Counterparts...............................................................................46
SECTION 8.4 Amendments.................................................................................46
SECTION 8.5 Headings, Etc..............................................................................46
SECTION 8.6 Parties in Interest........................................................................46
SECTION 8.7 Governing Law..............................................................................46
SECTION 8.8 No Recourse................................................................................47
SECTION 8.9 Expenses...................................................................................47
SECTION 8.10 Severability..............................................................................47
SECTION 8.11 Submission to Jurisdiction; Waivers.......................................................47
SECTION 8.12 Limitation on Interest....................................................................48
SECTION 8.13 Waiver of Consumer Rights.................................................................48
</TABLE>
APPENDIX I Definitions and Interpretation
APPENDIX II Form of Funding Requisition
EXHIBIT A Form of Lease
EXHIBIT B Form of Loan Agreement
EXHIBIT C Form of Assignment of Lease and Rents
EXHIBIT D Form of Opinion of Counsel to the Lessee (Closing Date)
EXHIBIT E Form of Opinion of Counsel to the Lessor (Closing Date)
EXHIBIT F Form of Mortgage
EXHIBIT G Form of Non-Disturbance and Attornment Agreement
EXHIBIT H Form of Security Agreement and Assignment
EXHIBIT I Form of Opinion of Counsel to the Lessee (Parcel Closing Date)
<PAGE> 4
<TABLE>
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<S> <C>
EXHIBIT J Form of Opinion of Counsel to the Lessor (Parcel Closing Date)
EXHIBIT K Form of Architect's Certificate
</TABLE>
<PAGE> 5
MASTER PARTICIPATION AGREEMENT
THIS MASTER PARTICIPATION AGREEMENT (this "Participation Agreement"),
dated as of April 3, 1998, is among ASSET XVI HOLDINGS COMPANY, L.L.C., a
Massachusetts limited liability company, as Lessor, EAGLE USA AIRFREIGHT, INC.,
a Texas corporation, as Lessee, and BANK ONE, TEXAS, N.A., a national banking
association, as Lender.
W I T N E S S E T H:
WHEREAS, in accordance with the terms and provisions of this
Participation Agreement, the Lease, the Loan Agreement, the Note and the other
Operative Documents, (i) the Lessor will acquire the Land and has agreed to
lease the Land to the Lessee, (ii) the Lessee has agreed to construct
Improvements on the Land for the Lessor and has agreed to lease the Improvements
from the Lessor as part of the Leased Property under the Lease, (iii) the Lessor
and the Lessee wish to obtain, and the Lender has agreed to provide, funding
pursuant to a loan in the amount of up to $19,000,000 for the acquisition of the
Land and the development and construction of the Improvements, and (iv) Lessor
has agreed to make Contribution Advances from its own equity resources in an
aggregate sum not to exceed $1,000,000 to pay a portion of the cost of
acquisition of the Land and the development and construction of the
Improvements;
NOW, THEREFORE, in consideration of the mutual agreements contained in
this Participation Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1
DEFINITIONS; INTERPRETATION
Unless the context shall otherwise require, capitalized terms used and
not defined herein shall have the meanings assigned thereto in Appendix I hereto
for all purposes hereof and the rules of interpretation set forth in Appendix I
hereto shall apply to this Participation Agreement.
SECTION 2
ACQUISITION, CONSTRUCTION AND LEASE; LOAN;
NATURE OF TRANSACTION
SECTION 2.1 Agreement to Acquire, Construct, Fund and Lease.
(a) Land. Subject to the terms and conditions of this
Participation Agreement and the other Operative Documents, on each Parcel
Closing Date, (i) the Lessor shall acquire an interest in the related Parcel of
Land, (ii) the Lessor has agreed to provide funding for the Property Costs
associated with the acquisition of such interest, (iii) the Lessor shall lease
such Parcel of the Land to the Lessee pursuant to the Lease and the related
Parcel Lease Supplement and (iv) the Lessee shall lease such Parcel of the Land
from the Lessor pursuant to the Lease and the related Parcel Lease Supplement.
<PAGE> 6
(b) Improvements. Subject to the terms and conditions of this
Participation Agreement and the other Operative Documents, and to the extent any
parcel is not otherwise satisfactorily improved, (i) the Lessee has agreed,
pursuant to the terms of the Lease, to construct and install Improvements on the
Land for the Lessor, (ii) the Lessor has agreed to obtain funding for all or a
portion of the Property Costs of the Leased Property associated with such
construction and installation of such Improvements, (iii) the Lessor has agreed
to lease the Improvements as part of the Leased Property to the Lessee pursuant
to the Lease and (iv) the Lessee has agreed to lease the Improvements from the
Lessor pursuant to the Lease.
SECTION 2.2 Funding of Property Costs; Loan and Contribution.
(a) Subject to the terms and conditions of this Participation
Agreement and the Loan Agreement, the Lender has agreed to make the Loan to the
Lessor up to the amount of its Loan Commitment in order finance Property Costs
of the Leased Property. Subject to the terms and conditions of this
Participation Agreement, the Lessor has agreed to make available to the Lessee
Contribution Advances up to the amount of its Equity Commitment for the payment
of Property Costs from and after the Closing Date through the Commitment
Deadline. As provided in subsection (b) below, the Lender shall from time to
time, upon the receipt of a Funding Requisition from the Lessee, make Loan
Advances as requested in such Funding Requisition, and the Lessor shall from
time to time, make Contribution Advances as requested in such Funding
Requisition. Except as provided in subsection (c) of this Section, Lessor, in
turn, shall remit the proceeds of each Loan Advance and each Contribution
Advance to Lessee, and Lessee shall use the proceeds of each such Loan Advance
and each such Contribution Advance to pay, or reimburse itself for paying,
Property Costs, as provided in Section 2.6 hereof. Except as provided in
Sections 2.2 (c) and 2.2 (d), Lessor hereby directs the Lender to make
disbursements of each Loan Advance and each Contribution Advance directly to the
Lessee or as otherwise directed in the applicable Funding Requisition. Lessor
will only direct the Lender otherwise if an Event of Default has occurred and is
continuing. The Loan shall (i) be a term and construction loan consisting of the
aggregate total of the Loan Advances, (ii) be in an amount not to exceed the
Loan Commitment, (iii) bear interest as to each Loan Advance from the date such
Loan Advance was made in accordance with Section 2.4 of the Loan Agreement,
payable on each Loan Payment Date, (iv) bear interest as to overdue amounts at
the Overdue Rate, (v) be repayable as to principal as provided in to the Loan
Agreement with a final scheduled Loan Payment Date on the Scheduled Termination
Date, (vi) be evidenced by the Note, and (vii) have the other terms and
conditions as provided in the Loan Agreement and the Note. The Contribution
shall (i) be in an amount not to exceed the Equity Commitment, (ii) be repayable
in full (subject to the provisions of Section 15.6 of the Lease) on the
Scheduled Termination Date, (iii) bear a pre-tax cumulative return equal to the
Contribution Return, and (iv) be subject to such other terms and conditions as
the Lessor and the Lessee shall agree. Under the Lease, the Lessee agrees to pay
the Facility Rent for each Parcel to Lessor in respect of the Contribution
Return on each Rent Payment Date after the related Parcel Completion Date.
-2-
<PAGE> 7
(b) On the Closing Date, upon the Lessee's satisfaction of the
conditions set forth in Section 3.1 hereof, Lender agrees to make a Loan Advance
and Lessor agrees to make a Contribution Advance, as the case may be, in the
respective amounts equal to 95%, and 5% of the amount described in Section 3.1
(g) hereof. Beginning with a date at least three Business Days prior to the
Parcel Closing Date for each Property, and on any date thereafter to and
including the third Business Day next preceding the Commitment Deadline, the
Lessee, acting for itself and on behalf of the Lessor, shall have the right to
submit to the Lessor and the Lender a Funding Requisition requesting a Loan
Advance and a Contribution Advance (together, a "Funding") for Property Costs
related to such Property; provided, however, that neither the Lender nor the
Lessor shall be obligated to honor any Funding Requisition with respect to any
Property as to which the Parcel Closing Date did not occur prior to April 1,
1999. Each Funding Requisition shall be addressed jointly to the Lessor and the
Lender and be substantially in the form attached hereto as Appendix II. Each
Funding Requisition shall (i) request that the Lender make a Loan Advance and
that the Lessor make a Contribution Advance, as the case may be, for Property
Costs with respect to a Property incurred and not previously reimbursed or paid,
(ii) specify the Property to which it relates (provided that no Funding shall be
made in respect of a Property before its related Parcel Closing Date), (iii)
specify the date not less than three Business Days later than the delivery of
the Funding Requisition on which the Funding is to be made (the "Funding Date")
(provided that if a Funding Requisition requests a Loan Advance for a Base Rate
Loan and the stated Funding Date therein is not a Loan Payment Date, the Funding
Date for the related Contribution Advance shall be deferred until the next Loan
Payment Date), (iv) specify the respective amounts of the Loan Advance and
Contribution Advance to be made with respect to such Funding, and the aggregate
principal amounts of the related Parcel Tranche and Parcel Contribution Tranche
immediately following the requested Funding, (v) be irrevocable, and (vi)
request a Funding of at least $100,000 or such lesser amount as shall be equal
to the difference between the Total Commitments and the sum of the outstanding
principal balance of the Note and the Contribution (the "Remaining
Commitments"). Each Funding Requisition shall constitute a representation and
warranty by the Lessee to the Lender and the Lessor that all the conditions
precedent to such Funding have been satisfied, including but not limited to
those contained in Section 3.3 hereof. Notwithstanding anything to the contrary
contained herein, the Funding Date with respect to any Funding Requisition shall
be a Loan Payment Date, except that a Funding Requisition which requests a Loan
Advance for a Base Rate Loan may request a Funding Date with respect to such
Loan Advance on any Business Day. The Lender and the Lessor hereby severally
(but not jointly) promise and agree that, to the extent of the Remaining
Commitments, (i) upon the receipt by the Lender of a properly completed Funding
Requisition and so long as all conditions precedent to the Lender's obligation
to make Loan Advances shall have been satisfied or waived by the Lender
(including the Parcel Requirements), the Lender shall, on the Funding Date, make
a Loan Advance in an amount equal to the product of the Funding
-3-
<PAGE> 8
requested therein multiplied by the Lender Ratio, each in immediately available
funds (for the account of the Lessor) to the Lessee or to such other Person or
Persons as may be specified in such written Funding Requisition, and (ii) upon
the receipt by the Lessor of a properly completed Funding Requisition and so
long as all conditions precedent to the Lessor's obligation to make Contribution
Advances shall have been satisfied or waived by the Lessor, the Lessor shall, on
the Funding Date, make a Contribution Advance in an amount equal to the product
of the Funding requested therein, multiplied by the Equity Ratio, plus any
deferred and unfunded Contribution Advances related to a Funding which included
a Loan Advance for a Base Rate Loan borrowed since the immediately preceding
Loan Payment Date, all in immediately available funds to Lessee or to such other
Person or Persons as may be specified in the applicable Funding Requisition.
(c) For each Property, on each Loan Payment Date to and
including the earlier to occur of the Completion Deadline for such Property or
the related Parcel Completion Date, the Lender, without the necessity or
requirement of (i) the submission of a Funding Requisition, (ii) satisfaction of
the conditions precedent set forth in Section 3.3 hereof, or (iii) any notice to
or consent of Lessor or Lessee, shall make a Loan Advance in respect of the
related Property (which shall be added to the outstanding amount of the related
Parcel Tranche) in an amount equal to the interest due and payable to the Lender
on the related Parcel Tranche on such Loan Payment Date, and the proceeds of
such Loan Advance shall be retained by the Lender to pay all of the interest
then due and payable under such Parcel Tranche; provided, however, that the
Lender shall not be obligated to make a Loan Advance in respect of interest if
an Event of Default shall have occurred and is then continuing. The Lender shall
promptly notify the Lessee of the date and amount of each such Loan Advance made
in respect of this Section 2.2(c).
(d) For each Property, on each Loan Payment Date to and
including the earlier to occur of the Completion Deadline for such Property or
the related Parcel Completion Date, the Lessor, without the necessity or
requirement of (i) the submission of a Funding Requisition, (ii) satisfaction of
the conditions precedent set forth in Section 3.3 hereof, or (iii) any notice to
or consent of the Lessee, shall be deemed to have made a Contribution Advance in
respect of such Property in an amount equal to the Contribution Return then
accrued and unpaid with respect to the related Parcel Contribution Tranche, and
such Parcel Contribution Tranche (and the Contribution) shall be increased by
such amount as payment of the Contribution Return then so accrued and unpaid in
respect of such Parcel Contribution Tranche. The Lessor shall promptly notify
the Lessee of the date and amount of each such Contribution Advance deemed to
have been made in respect of this Section 2.2(d).
(e) Notwithstanding the foregoing, neither the Lender nor the
Lessor shall be obligated to make an Advance with respect to any Property if the
sum of all Advances made, or deemed to have been made, with respect to such
Property exceeds the appraised value of such Property stated in the appraisal
therefor delivered pursuant to Section 3.2 hereof. Furthermore, in no event
shall the aggregate of all Loan Advances in respect of the Loan at any time
outstanding exceed the Loan Commitment, nor shall the Contribution at any time
outstanding exceed the Equity Commitment.
SECTION 2.3 Nature of Transaction. Notwithstanding the provisions of
Section 4.4 and Section 7.4 hereof, each party hereto acknowledges and agrees
that none of the Lessee, the Lender, the Lessor, the Financial Advisor nor any
other Person has made any representations or warranties to such party concerning
the tax, financial, accounting or legal characteristics or treatment of the
Operative Documents and that each party has obtained and relied solely upon the
advice of its own
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tax, accounting and legal advisors concerning the Operative Documents and the
accounting, tax, financial and legal consequences of the transactions
contemplated therein.
SECTION 2.4 Amounts Due Hereunder and Under Lease and Loan Agreement.
Anything else herein, in the Loan Agreement or elsewhere to the contrary
notwithstanding, it is the intention of the Lessee, the Lessor and the Lender
that, (i) during the period from the Parcel Closing Date to the earlier to occur
of the Completion Deadline for each Property or the Parcel Completion Date
therefor, payment of interest on each Parcel Tranche on each Loan Payment Date
shall be made from a Loan Advance automatically made by the Lender, as provided
in Section 2.2(c) of this Participation Agreement, (ii) during the period from
the Parcel Closing Date to the earlier to occur of the Completion Deadline for
each Property or the Parcel Completion Date therefor, payment of Contribution
Return on the related Parcel Contribution Tranche on each Loan Payment Date
shall be made from a Contribution Advance automatically deemed to have been made
by the Lessor, as provided in Section 2.2(d) of this Participation Agreement,
(iii) from and after the earlier to occur of the Completion Deadline for each
Property or the related Parcel Completion Date, the Lessee shall be obligated,
pursuant to the terms of the Lease, to pay Basic Rent in respect of such
Property on each Rent Payment Date in respect of principal, if any, and interest
due on the related Parcel Tranche and the Contribution Return on the related
Parcel Contribution Tranche, (iv) if the Lessee becomes obligated to purchase
the Leased Property under the Lease, the sum of (A) the principal amount of the
Note, all interest thereon and Breakage Costs, if any, with respect thereto and
all other obligations of the Lessee owing to the Lender under the Operative
Documents plus (B) the outstanding Contribution, all accrued and unpaid
Contribution Return prorated to the date of payment, Lessor's Breakage Costs, if
any, and all other obligations of the Lessee owing to the Lessor under the
Operative Documents, shall be paid in full by the Lessee, (v) if the Lessee
elects to exercised the Purchase Option with respect to any Property, Lessee
shall be obligated to pay the Lease Balance for such Property in full in
accordance with Sections 15.1, 15.3 15.4 and 15.5 hereof, (vi) upon an Event of
Default resulting in an acceleration of the Lessee's obligation to purchase the
Leased Property under the Lease, the amounts then due and payable by the Lessee
under the Lease shall include the sum of (A) all amounts necessary to pay in
full the Loan, accrued interest and Breakage Costs, if any, and all other
obligations of the Lessee owing to the Lender under the Operative Documents plus
(B) the outstanding Contribution, all accrued and unpaid Contribution Return
prorated to the date of payment, Lessor's Breakage Costs, if any, and all other
obligations of the Lessee owing to the Lessor under the Operative Documents,
provided that (vii) in the event Lessee effectively exercises the Remarketing
Option pursuant to the provisions of Section 15.6 of the Lease and duly and
timely fulfills the provisions of clauses (i) through (xiii) of Section 15.6 of
the Lease, Lessee's obligations shall be limited as provided in Section 15.6 of
the Lease. The foregoing notwithstanding, the parties hereto acknowledge and
agree that the obligations of the Lessor (including its members, incorporators,
stockholders, directors, officers, employees and agents) hereunder, under the
Loan Agreement, the Lease and the other Operative Documents are non-recourse as
provided in Section 4.2 of the Loan Agreement and Section 18.12 of the Lease.
SECTION 2.5 Controlling Agreements. In the event of any conflict
between this Participation Agreement and any other Operative Document, this
Participation Agreement shall
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control. In the event of any conflict between the Lease and any other Operative
Document to which the Lessee is not a party, the Lease shall control.
SECTION 2.6 Permitted Applications of Loan Advances and Contribution
Advances. The parties hereto agree that the Lessee may apply the proceeds of
Loan Advances and Contribution Advances made under the Loan Agreement for the
payment (or the reimbursement by the Lessee of itself for the payment) of any or
all of the following items (any combination or all of the items together, the
"Property Costs"): (i) the purchase price of any Parcel or Property and all
related costs of development and acquisition of such Parcel or Property, (ii)
costs of Construction of the Improvements for each Property, including costs
related to letters of credit, surety bonds, security deposits or other security
in connection with the Construction, each Construction Contract, any municipal
sewer or utility contract, any permit or consent for any Governmental Authority
or other Person, or any other obligation or requirement relating to the
Construction, (iii) capitalized interest on the Loan and capitalized
Contribution Return with respect to the Contribution (but only to the extent and
pursuant to the procedures set forth in Section 2.2(c) and Section 2.2(d)) and
(iv) "soft costs" related to the foregoing, including, without limitation,
architect's fees, engineering fees, permit and license fees and charges,
testing, survey costs, title charges and attorneys' fees and expenses payable
pursuant to Section 3.1(g) hereof and other related costs and expenses properly
attributable to any of the foregoing Property Costs. The Lessee covenants not to
use any Loan Advances or Contribution Advances to pay, or reimburse itself for
paying, for trade fixtures, personal property or equipment which does not
constitute part of the Improvements or to use the proceeds of Loan Advances or
Contribution Advances for working capital.
SECTION 2.7 Covenants Concerning Construction.
(a) Changes in Construction Documents. No change will be made in any
Plans and Specifications, the terms and conditions of any Construction Contract,
or the identity of any General Contractor without the prior written consent of
the Lender, which consent shall not be unreasonably withheld and a decision
shall be communicated to Lessee within thirty (30) days of Lender's receipt of
Lessee's request for consent; provided, however, that so long as no Default or
Event of Default shall have occurred and is then outstanding, no such consent
relating to Improvements to a Property the Property Costs of which are
reasonably estimated by the Lessee to cost in the aggregate less than $500,000,
shall be required. The Lender's approval of the Plans and Specifications shall
be for lending purposes only and shall not constitute an assumption of liability
by the Lender with respect to the Lessee, any General Contractor, or any other
present or future tenant, occupant or purchaser of the Leased Property.
(b) Conduct of the Construction. If Improvements are to be constructed
on any Parcel, such Construction shall commence within 120 days after the Parcel
Closing Date therefor. All Improvements shall be completed prior to the
Completion Deadline for such Property. In the event of a Construction Force
Majeure Event, the Completion Deadline therefor shall be extended by a period of
time equal to the Construction Force Majeure Event, but in no event to a date
later than April 1, 2000. All Improvements will be constructed substantially in
accordance with the related
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<PAGE> 11
Plans and Specifications and in compliance with all Applicable Laws. All
Improvements to a Parcel will be located entirely upon the related Parcel. Title
to each Property will, during the Construction and on the related Parcel
Completion Date, be free from all liens, claims, and encumbrances, except for
those created by or arising under the Operative Documents, taxes and assessments
which are a lien but not yet due and payable, liens that are bonded off in
accordance with Applicable Law within 30 days of the filing of such lien, and in
any event prior to the commencement of an action to foreclose on such lien, any
Permitted Exceptions and any other liens or exceptions which are approved in
writing by the Lender.
(c) Inspections of Construction Records. During normal business hours
and at any time an Event of Default has occurred as is continuing, the Lessee
will make available for inspection by a duly authorized representative of the
Lender any of the Lessee's and each General Contractor's books and records
insofar as they relate to the Leased Property at such times as requested by the
Lender when requested to do so and will furnish to the Lender any information
regarding its business affairs and its financial condition.
(d) Reimbursements. The Lessee will reimburse the Lender promptly for
all construction loan costs paid by the Lender in accordance with the Operative
Documents, including but not limited to the costs of title insurance policies,
title examinations, recording fees, surveys, fees of counsel for services
rendered and out-of-pocket expenses for which the Lender is entitled to be
reimbursed pursuant to the Operative Documents, all of which the Lender is
authorized to deduct from the proceeds of disbursements hereunder.
(e) Fixtures and Equipment. No personal property of any kind intended
to be part of the Improvements or paid for with the proceeds of Advances will be
purchased or acquired by the Lessee under any conditional sales contract or
security agreement or any lease agreement, and all such personal property will
be fully paid for before payment therefor becomes past due or in any event
within 30 days after delivery thereof; provided, however, that the foregoing
shall not apply to amounts withheld and unpaid on account of bona fide disputes
with the suppliers thereof.
(f) Inspections of the Construction. The Lessee shall allow the Lender
and its agents, at all times during normal business hours and at any time that
an Event of Default has occurred and is continuing, (i) the right of entry and
free access to the site of the Improvements and the right to inspect all work
done, labor performed and materials furnished in and about the Improvements; and
(ii) to require to be replaced or otherwise corrected any material or work that
does not comply with the Plans and Specifications therefor.
(g) Insurance Prior to the Parcel Completion Date. The Lessee shall
submit to the Lender for its review and approval evidence of builder's risk
insurance coverage or permanent insurance coverage appropriate and satisfactory
to the Lender, on the Leased Property. All insurance policies shall name the
Lessee and the Lender as an additional insured and shall be issued by carriers
with a Best's Insurance Reports policy holder's rating of A+ and a financial
size category of VIII or better and shall include a standard mortgagee clause
(without contribution) in
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<PAGE> 12
favor of and acceptable to the Lender. The policies shall provide for the
following coverages and any other coverages that the Lender may from time to
time reasonably require:
(1) Builder's "all risk" hazard coverage in the amount of the
replacement cost of the Improvements and all other
improvements and personality on the Leased Property. If the
policy is written on a coinsurance basis, the policy must
contain an agreed amount endorsement as evidence that the
coverage is in an amount sufficient to insure the full amount
of the Loan. Such insurance shall be 100% non-reporting
policies;
(2) Commercial general liability insurance, including
products/completed operation liability and personal injury
with limits of liability of at least $5,000,000 per
occurrence, including that provided by umbrella or excess
liability policies, if any, and with a deductible satisfactory
to the Lender;
(3) Flood hazard coverage, if appropriate, in an amount acceptable
to the Lender and with a deductible acceptable to the Lender;
and
(4) Worker's compensation insurance (including employer's
liability insurance, if available and requested by the Lender)
for all employees, if any, of the Lessee and for all
employees, if any, of the Lessee's managing agent(s) and
contractor(s) engaged on or with respect to the Leased
Property or the Construction in such amounts as are
satisfactory to the Lender, or, if such limits are established
by law, in such amounts. The Lessee may satisfy the
requirements of this clause (4) with respect to employees of
the Lessee's agents and contractors through separate policies
provided by each agent or contractor.
The initial policies for each Property shall be prepaid and the Lessee shall
deliver to the Lender and the Lessee prior to the Parcel Closing Date therefor
copies of all such policies, together with original certificates therefor.
Copies of all renewal policies and original certificates therefor shall be
deposited with the Lender as evidence of such insurance. All policies shall
contain provisions for thirty days' written notice to the Lender prior to
expiration or cancellation. The Lessee expressly agrees to permit the Lender to
maintain insurance in force by payment of premiums from undisbursed Loan
proceeds. The Lender hereby agrees that the insurance coverages required to be
obtained and maintained by the Lessee hereunder may be obtained and maintained
in the form of blanket insurance policies, covering both the Leased Property and
other properties and projects owned by the Lessee. Written evidence satisfactory
to the Lender of the existence and coverage of such blanket policies shall be
delivered to the Lender prior to each Parcel Closing Date.
(h) Notice of Default. The Lessee shall notify the Lender in writing
within three days of the occurrence thereof of any Default or Event of Default
as to which Lessee has knowledge.
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(i) Construction Bank Account. The Lessee may, at its option, maintain
with the Lender a commercial operating account. All Loan Advances made by the
Lender and all Contribution Advances issued by the Lender on behalf of the
Lessor may be made by depositing the amount thereof directly into such operating
account.
SECTION 3
CONDITIONS PRECEDENT; DOCUMENTS
SECTION 3.1 Conditions to the Obligations of the Lessor and the Lender
on the Closing Date. The obligations of the Lessor and the Lender to carry out
their respective obligations under Section 2 of this Participation Agreement to
be performed on the Closing Date shall be subject to the fulfillment to the
satisfaction of, or waiver by, each such party (acting directly or through its
counsel) on or prior to the Closing Date of the following conditions precedent:
(a) Documents. The following documents shall have been
executed and delivered by the respective parties thereto:
(i) Participation Agreement. Counterparts of this
Participation Agreement, duly executed by the parties hereto,
shall have been delivered to each of the parties hereto.
(ii) Lease. Counterparts of the Lease (substantially
in the form of Exhibit A), duly executed by the Lessee and the
Lessor, shall have been delivered to the Lender.
(iii) Loan Agreement. Counterparts of the Loan
Agreement (substantially in the form of Exhibit B), duly
executed by the Lessor and the Lender, shall have been
delivered to each of the Lessor and the Lender.
(iv) Note. The Note (substantially in the form
attached as an exhibit to the Loan Agreement) payable to the
order of the Lender, duly executed by the Lessor, shall have
been delivered to the Lender.
(v) Assignment of Lease and Rents. Counterparts of
the Assignment of Lease and Rents (substantially in the form
of Exhibit C), duly executed by the Lessor, consented to by
the Lessee, shall have been delivered to the Lender;
(vi) Lessee's Resolutions and Incumbency Certificate,
Etc. Each of the Lender and the Lessor shall have received a
certificate of the Secretary or an Assistant Secretary of the
Lessee attaching and certifying as to (1) the resolution of
the Lessee's Board of Directors (or an appropriate committee
of such Board) duly authorizing the execution, delivery and
performance by the Lessee of each Operative Document to which
the Lessee is or will be a party, (2) the incumbency and
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<PAGE> 14
signatures of Persons authorized to execute and deliver
Operative Documents on the Lessee's behalf, (3) the Lessee's
certificate of incorporation, certified as of a recent date by
the Secretary of State of the state of the Lessee's
incorporation and (4) the Lessee's by-laws.
(vii) Opinion of Lessee's Counsel. The opinion of
Franklin, Cardwell & Jones, Lessee's counsel, dated the
Closing Date, and being substantially in the form set forth in
Exhibit D and containing such other matters as the parties to
whom such opinion is addressed shall reasonably request, shall
have been delivered and addressed to each of the Lessor and
the Lender.
(viii) Lessor's Resolution and Incumbency
Certificate. The Lender shall have received a certificate of
the managing member of the Lessor attaching and certifying as
to (A) the managing member's resolution authorizing the
execution, delivery and performance by it of each Operative
Document to which the Lessor is or will be a party and (B) the
incumbency and signatures of Person(s) authorized to execute
and deliver such documents on the Lessor's behalf.
(ix) Opinion of Lessor's Counsel. The Opinion of
Ropes and Gray, Boston, Massachusetts dated the Closing Date,
substantially is the form of Exhibit E shall have been
delivered and addressed to each of the Lessee and the Lender.
(b) Litigation. No action or proceeding shall have been
instituted or, to the Lessee's knowledge, threatened nor shall any governmental
action, suit, proceeding or investigation be instituted or, to the Lessee's
knowledge, threatened before any Governmental Authority, nor shall any order,
judgment or decree have been issued or proposed to be issued by any Governmental
Authority, to set aside, restrain, enjoin or prevent the performance of this
Participation Agreement or any of the other Operative Documents or any
transaction contemplated hereby or thereby or which would materially adversely
affect the Leased Property or any transaction contemplated by the Operative
Documents or which would result in a Material Adverse Effect.
(c) Legality. In the opinion of the Lender, the Lessor or
their respective counsel, the transactions contemplated by the Operative
Documents shall not violate any Applicable Law, and no change shall have
occurred or been proposed in Applicable Law that would make it illegal for the
Lender or the Lessor to participate in any of the transactions contemplated by
the Operative Documents.
(d) No Events. (i) No Default, Event of Default, Event of Loss
or Event of Taking shall have occurred and be continuing and (ii) no action
shall be pending or, to the Lessee's knowledge, threatened by a Governmental
Authority to initiate a Condemnation or an Event of Taking.
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(e) Representations. Each representation and warranty of the
parties hereto or to any other Operative Document contained herein or in any
other Operative Document shall be true and correct in all material respects as
though made on and as of the Closing Date.
(f) No Material Adverse Effect. There shall not have occurred
any event having a Material Adverse Effect since December 31, 1997.
(g) Fees and Transaction Expenses. The Lessee shall have paid,
or caused to be paid the reasonable fees and expenses of the Lessor, the Lender
and their respective counsel.
SECTION 3.2 Conditions to the Obligations of the Lessor and the Lender
on each Parcel Closing Date. The obligations of the Lessor and the Lender to
carry out their respective obligations under Section 2 of this Participation
Agreement to be performed on each Parcel Closing Date shall be subject to the
fulfillment to the satisfaction of, or waiver by, each such party (acting
directly or through its counsel) on or prior to such Parcel Closing Date of the
following conditions precedent (together, the "Parcel Conditions"):
(a) Documents. The following documents shall have been
executed and delivered by the respective parties thereto:
(i) Deed. The Deed concerning the Parcel to the Lessor
from the Person conveying such interest (fee simple or
leasehold, as the case may be) shall have been delivered to
the Lessor in recordable form;
(ii) Lease. A Parcel Lease Supplement (substantially in
the form of Appendix II to the Lease), together with a
Memorandum of Lease, each duly executed by the Lessee and the
Lessor, provided that the Memorandum of Lease shall be
executed in recordable form, shall have been delivered to the
Lender;
(iii) Mortgage. Counterparts of the Mortgage
(substantially in the form of Exhibit F), duly executed by the
Lessee and in recordable form, shall have been delivered to
each of the Lessor and the Lender;
(iv) Notice of Assignment of Lease and Rents. Counterparts
of a Notice of the Assignment of Lease and Rents
(substantially in the form of Exhibit A to the Assignment of
Lease and Rents), duly executed by the Lessor, consented to by
the Lessee and in recordable form, shall have been delivered
to the Lender;
(v) Non-Disturbance and Attornment Agreement. Counterparts
of the Non-Disturbance and Attornment Agreement (substantially
in the form of Exhibit G) duly executed by the Lessee, Lessor
and Lender and in recordable form shall have been delivered to
the Lender, the Lessor and the Lessee;
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(vi) Title and Title Insurance. The Lessor and the Lender
shall receive from the Title Insurance Company, a ALTA form of
Owner's Policy in the amount of the Parcel Estimated Property
Costs (an "Owner's Title Policy") and an ALTA form of Loan
Policy of title insurance in the amount of 97% of the Parcel
Estimated Property Costs (a "Lender's Title Policy"), each
issued by the Title Insurance Company, in each case, each
acceptable in form and substance to Lessee and the Lender
(each Owner's Title Policy and the Lender's Title Policy,
collectively the "Title Policies"). The Title Policies (A)
shall be dated as of the Parcel Closing Date, (B) to the
extent permitted under Applicable Law, shall include coverage
over the general exceptions to such Title Policy and shall
contain such affirmative endorsements as to easements and
rights-of-way, encroachments, the nonviolation of covenants
and restrictions, survey matters and other matters as the
Lender and the Lessor shall reasonably request and (C) shall
not contain a "pending disbursements" exception except as to
mechanics' lien claims and except as to limiting coverage to
the amount of Loan Advances actually disbursed from time to
time.
(vii) Security Agreement and Assignment. If Improvements
having a Property Costs exceeding $500,000 are to be
constructed on the Parcel, the Security Agreement and
Assignment (substantially in the form of Exhibit H), duly
executed by the Lessee, with an acknowledgement and consent
thereto satisfactory to the Lessor and the Lender duly
executed by the General Contractor therefor and complete copy
of the Construction Contract, certified by the Lessee, shall
have been delivered to the Lender.
(viii) Survey. The Lessee shall have delivered, or shall
have caused to be delivered, to the Lessor and the Lender, at
the Lessee's expense, an accurate survey of the Parcel (and
any Improvements thereon) certified to the Lessor and the
Lender in a form satisfactory to the Lessor and the Lender and
showing no state of facts unsatisfactory to the Lessor or the
Lender and prepared within sixty (60) days of the Parcel
Closing Date by a licensed surveyor selected by Lessee and
reasonably satisfactory to Lender. Such survey shall (A) be
acceptable to the Title Insurance Company, (B) show no
encroachments on the Parcel by structures owned by others, and
no encroachments from any part of the Parcel onto any land
owned by others, except for such encroachments which, in the
judgment of the Lender and its counsel, do not impair in any
material respect the value of the Leased Property or the
suitability of the Leased Property for its intended use, and
(C) disclose no state of facts objectionable to the Lessor,
the Lender or the Title Insurance Company.
(ix) Evidence of Insurance. The Lessor and the Lender have
received from the Lessee certificates of insurance evidencing
compliance with the provisions of both Section 2.7 hereof and
Article IX of the Lease (including the naming of the Lessor
and/or the Lender as additional insured or loss payees with
respect to such
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<PAGE> 17
insurance), in form and substance reasonably satisfactory to
the Lessor and the Lender.
(x) Lessee's Resolutions and Incumbency Certificate,
Etc. Each of the Lender and the Lessor shall have received (A)
a certificate of the Secretary or an Assistant Secretary of
the Lessee attaching and certifying as to (1) the resolution
of the Lessee's Board of Directors (or an appropriate
committee of such Board) duly authorizing the execution,
delivery and performance by the Lessee of each Operative
Document to which the Lessee is or will be a party, (2) the
incumbency and signatures of Persons authorized to execute and
deliver Operative Documents on the Lessee's behalf, (3) the
Lessee's certificate of incorporation, certified as of a
recent date by the Secretary of State of the state of the
Lessee's incorporation and (4) the Lessee's by-laws and (B) a
good standing certificate for the Lessee from the appropriate
officer of the state in which the Parcel is located.
(xi) Recording Fees; Transfer Taxes. To the extent
not covered by the Lender's Title Policy, the Lender shall
have received satisfactory evidence of the payment by the
Lessee of all recording and filing fees and taxes with respect
to any recordings or filings made of the Memorandum of Lease,
the Mortgage, the Notice of Assignment of Lease and Rents and
the Subordination and Nondisturbance Agreement for such
Parcel.
(xii) Opinions of Lessee's Counsel. With respect to
any Parcel the Estimated Property Costs in respect thereof
exceed Five Million Dollars ($5,000,000), (a) the opinion of
Franklin, Cardwell & Jones, Lessee's counsel, dated the Parcel
Closing Date, and being substantially in the form set forth in
Exhibit I and containing such other matters as the parties to
whom such opinion is addressed shall reasonably request, shall
have been delivered and addressed to each of the Lessor and
the Lender; and (b) in the event the Parcel shall be located
in a State other than Texas, an opinion of counsel authorized
to practice law in such state, satisfactory to the Lender,
dated the Parcel Closing Date, containing such matters as the
parties to whom such opinion is addressed shall reasonably
request, shall have been delivered and addressed to each of
the Lessor and Lender.
(xiii) Lessor's Resolution and Incumbency
Certificate. The Lender shall have received a certificate of
the managing member of the Lessor attaching and certifying as
to (A) the managing member's resolution authorizing the
execution, delivery and performance by it of each Operative
Document to which the Lessor is or will be a party and (B) the
incumbency and signatures of Person(s) authorized to execute
and deliver such documents on the Lessor's behalf.
(xiv) Opinion of Lessor's Counsel. The Opinion of
Ropes and Gray, Boston, Massachusetts dated the Parcel Closing
Date, substantially is the form of
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Exhibit J shall have been delivered and addressed to each of
the Lessee and the Lender.
(xv) Soil Analysis and Environmental Report. The
Lender and the Lessor shall have received and approved (i) a
soil analysis report relating to the Parcel in form and
content satisfactory to the Lender and (ii) an environmental
report which shall certify results related to toxic and other
hazardous substances on the Parcel. Failure by Lender or
Lessor to approve or disapprove such reports within ten (10)
days of actual receipt thereof by the same by providing notice
in accordance with this Participation Agreement to Lessee
shall be deemed approval of such reports by the party so
failing to give such notice.
(xvi) Plans and Specifications. Copies of the Plans
and Specifications, either "as built" in the event the
Improvement for such Property have been previously completed,
or in final form for use in the Construction of such
Improvements, as the case may be, in either such case in form
satisfactory to the Lender.
(xvii) Architect Certificate. If Improvements are to
be constructed a certification from an Architect approved by
the Lender, substantially is the form of Exhibit K shall have
been delivered to each of the Lessor and the Lender.
(xviii) Utilities. Evidence that all utility services
necessary for construction, if applicable, and use of the
Improvements (including without limitation, electric, gas,
telephone, water and sewer service) are available to the
Parcel, and the Lessee has the right to connect to and use all
utility services without restriction; and that all necessary
easements to provide such utility services to the Improvements
thereon have been obtained.
(xix) Zoning. Evidence of compliance with applicable
zoning ordinances or similar land use restrictions with
respect to the Parcel.
(xx) Governmental Authorizations. All authorizations,
if any, required by an governmental authority for the
operation of the Parcel and the Improvements for the purposes
contemplated by the Plans and Specifications therefor, which
are presently procurable.
(xxi) Appraisal. An appraisal report for the Parcel
and the Improvements (as constructed or to be constructed
thereon), which appraisal report shall be prepared by an
independent appraising firm, and be in form and substance,
acceptable to the Lender in its sole and absolute discretion,
whether in relation to all applicable regulatory requirements
imposed by The Financial Institutions Reform, Recovery and
Enforcement Act of 1989 and the regulations thereunder, or
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otherwise, shall have been delivered to the Lender. Such
appraisal shall state the Fair Market Sales Value of the
Property upon completion of any Construction, which amount
shall be at least equal to the Estimated Parcel Property
Costs. The cost of such appraisal shall be borne solely by the
Lessee.
(xxii) Estimated Parcel Property Costs; Approved
Budget. The Lessee shall deliver an Officer's Certificate
certifying Lessee's best estimate of the Estimated Parcel
Property Costs for such Property, presented in reasonable
detail, in form and substance acceptable to the Lender, and in
the case of any Construction of Improvements contemplated for
the Property, setting forth the Approved Budget for such
Construction.
(xxiii) Fees of the Financial Advisor. On or prior to
the first Parcel Closing Date, the Lessee shall have paid all fees of the
Financial Advisor in connection with the transactions contemplated hereunder.
(b) Litigation. No action or proceeding shall have been
instituted or, to the Lessee's knowledge, threatened nor shall any governmental
action, suit, proceeding or investigation be instituted or, to the Lessee's
knowledge, threatened before any Governmental Authority, nor shall any order,
judgment or decree have been issued or proposed to be issued by any Governmental
Authority, to set aside, restrain, enjoin or prevent the performance of this
Participation Agreement or any of the other Operative Documents or any
transaction contemplated hereby or thereby or which would materially adversely
affect the Leased Property or any transaction contemplated by the Operative
Documents or which would result in a Material Adverse Effect.
(c) Legality. In the opinion of the Lender, the Lessor or
their respective counsel, the transactions contemplated by the Operative
Documents shall not violate any Applicable Law, and no change shall have
occurred or been proposed in Applicable Law that would make it illegal for the
Lender or the Lessor to participate in any of the transactions contemplated by
the Operative Documents.
(d) No Events. (i) No Default, Event of Default, Event of
Loss or Event of Taking shall have occurred and be continuing and (ii) no action
shall be pending or, to the Lessee's knowledge, threatened by a Governmental
Authority to initiate a Condemnation or an Event of Taking.
(e) Representations. Each representation and warranty of
the parties hereto or to any other Operative Document contained herein or in any
other Operative Document shall be true and correct in all material respects as
though made on and as of the Parcel Closing Date.
(f) No Material Adverse Effect. There shall not have
occurred any event having a Material Adverse Effect since the most recent to
occur of (i) the Closing Date or (ii) a Parcel Closing Date.
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(g) Location of Parcel. If the Parcel is not located in a
county in which Lessee, as of the Closing Date, owned or leased real property,
then the Lessee shall have obtained the Lender's prior, written consent as to
the location of the Parcel (it being understood that the Lender may grant or
withhold such consent in its sole and absolute discretion, but once given shall
be irrevocable).
SECTION 3.3 Conditions to Subsequent Fundings. Notwithstanding anything
to the contrary contained herein, or in any other Operative Document, neither
the Lender nor the Lessor shall have any obligation to make any Loan Advance or
Contribution Advance, as the case may be, pursuant to the Funding Requisition
following the Initial Loan Advance, unless each of the following conditions
shall have been satisfied or waived by the Lender with respect to such Funding:
(a) Deliveries. On or prior to each Funding subsequent to
the Initial Loan Advance, the Lessee shall deliver, or cause to be delivered,
the following:
(i) Plans and Specifications. Detailed architectural,
structural, mechanical, and electrical Plans and
Specifications for all Improvements to be constructed, to the
extent not already delivered, to the Lender, provided,
however, that, subject to the following proviso, no Advance
shall be required to be made for any portion of Construction
of the Improvements until the Plans and Specifications for
such portion of the Improvements shall have been delivered to
and approved by the Lender, and provided, further, that with
respect to Improvements on such Parcel the Property Costs,
which are reasonably estimated by the Lessee to be less than
$500,000, the Lender's approval shall not be required;
(ii) Title Policy Endorsement. If applicable, a
endorsement to the Title Policies for each Parcel (A)
indicating that since the last Funding Date as to which a
Funding was made in respect of such Parcel there has been no
change in the state of title and no survey exceptions not
theretofore approved by the Lessor and the Lender and (B)
increasing the coverage of the Title Policies by an amount
equal to the Funding with respect to such Parcel then being
made so that the total amount insured equals, in the case of
the Lender's Title Policy, the total amount of Loan Advances
disbursed by the Lender with respect to such Parcel, and in
the case of Lessor's Title Policy, a like amount plus in
addition, the amount of the Contribution with respect to such
Parcel, and, in each case, changing the effective date of the
Title Policies to the Funding Date. At the Lender's
discretion, any Funding may be made through the Title
Insurance Company. Prior to each Funding Date, the Lessee
shall furnish the Title Insurance Company with lien waivers as
required by the Title Insurance Company through the time of
the Funding. No title indemnities for purposes of insuring
around any objection to or condition of title shall be issued
or provided by
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the Lessee or the Lessor to the Title Insurance Company
without the prior written consent of the Lender;
(iii) Engineer's Certificate. If applicable, a
certification from the Architect or from an engineer approved
by the Lender that the Improvements have been or are being
erected within the property boundaries of the Land and in
accordance with all applicable set back requirements and the
approved site plan;
(iv) Improvements Permit. All building permits or
other authorizations required by any Governmental Authority
for the Construction to the extent not previously obtained;
(b) No Events. (i) No Default, Event of Default, Event
of Loss or Event of Taking shall have occurred and be continuing and (ii) no
action shall be pending or threatened by a Governmental Authority to initiate a
Condemnation or an Event of Taking;
(c) Requisition. If Improvements having estimated
Property Costs in excess of $500,000 are being Constructed on a Parcel, together
with the Funding Requisition, the Lessee shall submit to the Lender a
requisition using AIA Form G702 and 703 accompanied by a cost breakdown, the
accuracy of which shall be certified by the Lessee, the Architect and the
General Contractor, and such other information and documentation required
hereunder. The Approved Budget shall serve as the disbursement control for each
line item. Neither the Lender nor the Lessor shall be required to make a Funding
for any line item in excess of the amount shown in the Approved Budget for such
line item; provided, however, that the Lender shall not unreasonably withhold
its consent to a reallocation of amounts within line items in the Approved
Budget (other than the line item for interest reserve) as long as the total cost
of the Construction does not increase;
(d) Timing. Funding Requisitions after the Initial Loan
Advance shall not be made more often than once a month and the total amount of
all Fundings in respect of Construction shall not at any time exceed an amount
equal to the sum of the hard costs of the work completed to date as certified by
the Architect on the aforesaid AIA draw request forms and the soft costs
incurred. The Lender reserves the right to review and approve invoices for all
hard and soft costs. Prior to each Advance, the Lender or its agents may inspect
the Leased Property to verify that the related Funding Requisition accurately
reflects the amount of the Construction with respect thereto;
(e) Loan Out of Balance. If, in the sole judgment of the
Lender, and determined at any time while the Loan is outstanding, the cost of
the Construction increases, the Lessee shall be required to invest the increased
amount in the Construction or deposit such increased amount with the Lender in
an account pledged to the Lessor as security for the Lease and other Operative
Documents in a manner reasonably satisfactory to the Lender or to provide the
Lender such other assurances as to the availability of the funds as subject to
the Lender's approval prior to any Loan Advance;
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<PAGE> 22
(f) Completion Deadline. If at any time the Lender shall, in
its sole judgment, estimate and give notice to the Lessee that substantial
completion of any Construction will not occur on or before the Completion
Deadline, then neither the Lender nor the Lessor shall have any obligation to
make further Advances until such time as the Lessee shall have delivered to the
Lender evidence satisfactory to Lender that substantial completion of all
Improvements will occur on or before the Completion Deadline;
(g) Approval of Contracts. Neither the Lender nor the Lessor
shall have any obligation to make any Advances for any Property Costs due from
the Lessee under a contract or subcontract for the Construction if such contract
or subcontract is required to be, but has not been, approved by the Lender and
such approval by the Lender has not been unreasonably withheld or delayed.
Although the Lessee shall not be required to provide to the Lender the
subcontracts for the Construction as a condition precedent to making the Initial
Funding, the Lender reserves the right, upon written notice to the Lessee, to
require the Lessee to provide such subcontracts for subsequent Advances;
(h) Compliance with Plans and Specifications. If the Lender or
the Lessor should at any time determine that any part of the work performed on,
or materials incorporated into, any Improvements does not comply in any material
respect with the related Plans and Specifications, whether or not the Property
Costs of any such work or materials shall have been included in a Funding
Requisition theretofore made, then neither the Lender nor the Lessor shall have
any obligation to make any further Advances until such work is corrected, or
material is changed, to comply with such Plans and Specifications and the Lender
and the Lessor have received satisfactory evidence to them of such change and
compliance, and Lender and the Lessor shall respectively have the right to
offset against the amount of any subsequent Advance the cost of the
nonconforming work or materials included in prior Fundings. Notwithstanding the
foregoing, the Lender and the Lessor shall continue to make Advances for other
work and materials if, prior to the determination by the Lender or the Lessor of
such nonconformance, the Lessee and/or the Architect therefor have previously
made a similar determination, and the Lessee has delivered to the Lender and the
Lessor evidence reasonably satisfactory to the Lender and the Lessor that the
General Contractor therefor has agreed to correct such work or to change such
materials without requesting an Advance for the cost thereof, and the General
Contractor diligently pursues such work and changes to completion within 90 days
after the determination of the need for corrective action;
(i) Defects in Construction. If the Lender or the Lessor
should at any time reasonably determine that any part of the work performed on
any Improvements has not been performed in a good and workmanlike manner,
whether or not the Property Costs of any such work shall have been included in a
Funding Requisition theretofore made, neither the Lender nor the Lessor shall
have any obligation to make any further Advances until such work is corrected so
as to have been performed in a good and workmanlike manner and the Lender and
the Lessor have received satisfactory evidence of such correction, and Lender
and the Lessor shall have the right to offset against the amount of any
subsequent Advances by the cost of the nonconforming work or materials included
in prior Fundings. Notwithstanding the foregoing, the Lender and the Lessor
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shall continue to make Advances for other work and materials if, prior to the
determination by the Lender or the Lessor of such nonconformance, the Lessee
and/or the Architect therefor have previously made a similar determination, and
the Lessee has delivered to the Lender and the Lessor evidence reasonably
satisfactory to the Lender and the Lessor that the General Contractor therefor
has agreed to correct such work or to change such materials without requesting
an Advance for the cost thereof, and the General Contractor diligently pursues
such work and changes to completion within 90 days after the determination of
the need for corrective action; and
(j) Compliance with Codes. If the Lender or the Lessor should
at any time determine that any part of the work performed on, or materials
incorporated into, any Improvements does not comply with all applicable building
codes or other Applicable Law, whether or not the Property Costs of any such
work or materials shall have been included in a Funding Requisition theretofore
made, then neither the Lender nor the Lessor shall have any obligation to make
any further Advances until such work is corrected, or material is changed, to
cause the same to comply with all applicable building codes or other Applicable
Law and the Lender and the Lessor have received satisfactory evidence of such
correction or change and of such compliance, and the Lender and the Lessor shall
have the right to offset against the amount of any subsequent Advances for other
work and materials by the cost of the nonconforming work as materials included
in prior Fundings. Notwithstanding the foregoing, the Lender and the Lessor
shall continue to make Advances for other work and materials if, prior to the
determination by the Lender or the Lessor of such nonconformance, the Lessee
and/or the Architect have previously made a similar determination, and the
Lessee has delivered to the Lender and the Lessor evidence reasonably
satisfactory to the Lender and the Lessor that the General Contractor therefor
has agreed to correct such work or to change such materials without requesting
an Advance for the cost thereof, and the General Contractor diligently pursues
such work and changes to completion within 90 days after the determination of
the need for corrective action.
SECTION 3.4 Completion Date Conditions. If Improvements have been
constructed on a Parcel pursuant hereto, the occurrence of the Parcel Completion
Date therefor shall be subject to the fulfillment or satisfaction of, or waiver
by, each party hereto (acting directly or through its counsel) of the following
conditions precedent (the "Completion Date Conditions"):
(a) Title Policy Endorsements. The Lessee shall have furnished
to the Lender the following endorsements to its related Title Policy (each of
which shall be subject to no exceptions other than those set forth in Schedule B
to its Title Policy): (i) a date-down endorsement (redating and confirming the
coverage provided under the related Title Policy and each endorsement thereto)
and (ii) a comprehensive endorsement, in each case, effective as of a date not
earlier than the date of completion of the Construction.
(b) Construction Complete. The Construction on the Parcel
shall have been completed substantially in accordance with the Plans and
Specifications therefor and all Applicable Laws, and the Improvements therein
are ready for occupancy and operation in the ordinary course of Lessee's
business. All fixtures, equipment, materials and other property contemplated
under the
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Plans and Specifications thereof to be incorporated or installed in the Property
shall have been incorporated or installed free and clear of all liens except for
Permitted Liens.
(c) Lessee Certification. The Lessee shall have furnished
the Lessor and the Lender with both (i) a certification of the Lessee that:
(A) all amounts owing to third parties for the
Construction therefor have been paid in full (other than
contingent obligations for which the Lessee has made adequate
reserves or claims being defended in good faith), and to
Lessee's knowledge no litigation or proceedings are pending,
or to the best of the Lessee's knowledge are threatened,
against the Property or the Lessee which would materially
adversely affect (1) the enforceability or priority of this
Participation Agreement or the other Operative Documents and
(2) the ability of the Lessee to fully perform its obligations
pursuant to and as contemplated by the terms and provisions of
this Participation Agreement and the other Operative
Documents;
(B) all consents, licenses and permits and other
governmental authorizations or approvals required for the
Construction and operation of the Property have been obtained;
(C) the Property has available all services of public
facilities and other utilities necessary for use and operation
of the Property for its intended purposes including, without
limitation, adequate water, gas and electrical supply, storm
and sanitary sewerage facilities, telephone and other required
public utilities and means of access between the Improvements
and public highways for pedestrians and motor vehicles;
(D) all agreements, easements and other rights,
public or private, which are necessary to permit the lawful
use and operation of the Property as the Lessee intends to use
the Property under the Lease and which are necessary to permit
the lawful intended use and operation of all then intended
utilities, driveways, roads and other means of egress and
ingress to and from the same have been obtained and are in
full force and effect and the Lessee has no knowledge of any
pending modification or cancellation of any of the same, and
the use of the Property does not depend on any variance,
special exception or other municipal approval, permit or
consent that has not been obtained for its continuing legal
use;
(E) the Construction has been completed substantially
in accordance with the Plans and Specifications and all
Applicable Laws and the Property is ready for occupancy and
operation; and
(F) the Property is in compliance with all applicable
zoning laws and regulations; and
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(ii) copies of (A) all final lien waivers regarding the Construction
thereof, together with sworn statements from contractors, subcontractors and
material suppliers and (B) true and complete copies of an "as built" or "record"
set of the Plans and Specifications therefor, and a plat of survey of the
Property "as built" showing all paving, driveways, fences and exterior
improvements and copies of all licenses and permits required by any Governmental
Authority having jurisdiction over the use and occupancy of the Property and for
the operation thereof, including copies of a certificate or certificates of
occupancy for the Property or other legally equivalent permission to occupy the
Property from the Governmental Authority having jurisdiction.
(d) Cutoff Date. The Parcel Completion Date shall occur on or prior to
the Completion Deadline.
SECTION 3.5 Conditions to the Obligations of the Lessee. The
obligations of the Lessee hereunder are subject to the fulfillment on the
Closing Date to the satisfaction of, or waiver by the Lessee of, conditions set
forth in this Sections 3 that require fulfillment by the Lessor and the Lender
shall have been satisfied.
SECTION 3.6 Appraisal. If Improvements have been constructed on a
Parcel after the related Parcel Closing Date, the Lessee agrees to supply the
Lender at its request made, within 60 days of the Parcel Completion Date
therefor, with an appraisal report for such Property, which appraisal report
shall be prepared by an independent appraising firm, and be in form and
substance, reasonably acceptable to the Lender. In the event that the appraised
Fair Market Sales Value of such Property is less than the amount of the Loan
Advances and the Contribution Advances previously made (or deemed made) in
respect thereof, Lessee agrees to promptly pay to the Lender an amount equal to
the sum of amount by which such Loan Advances exceed the aforesaid appraised
value, which amount shall be applied in accordance with Section 3 of the Loan
Agreement. Any such payment of a portion of the Loan under the circumstances
described in this Section 3.5 shall be without any premium or penalty to Lessee,
but Lessee shall pay Supplemental Rent in an amount of the Breakage Costs, if
any.
SECTION 4
REPRESENTATIONS AND COVENANTS
SECTION 4.1 Representations of the Lessee. Effective as of the date of
execution hereof, as of the Closing Date, and as of each Parcel Closing Date,
the Lessee represents and warrants to each of the other parties hereto as
follows:
(a) Organization; Corporate Powers. The Lessee (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas, (ii) is duly qualified as a foreign corporation and in
good standing under the laws of each other jurisdiction where such qualification
is required and where the failure to be duly qualified and in good standing
would have a Material Adverse Effect and (iii) has all requisite corporate power
and authority to
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own, operate and encumber its property and assets and to conduct its business as
presently conducted and as proposed to be conducted in connection with and
following the consummation of the transactions contemplated by the Operative
Documents.
(b) Authority. The Lessee has the requisite corporate power
and authority to execute, deliver and perform the Operative Documents executed
or to be executed by it. The execution, delivery and performance (or recording
or filing, as the case may be) of the Operative Documents, and the consummation
of the transactions contemplated on the part of the Lessee thereby, have been
duly approved by the Board of Directors of the Lessee and no other corporate
proceedings on the part of the Lessee are necessary to consummate the
transactions so contemplated.
(c) Due Execution and Delivery of Operative Documents. The
Operative Documents executed by the Lessee have been duly executed and delivered
(or recorded or filed, as the case may be) by the Lessee, and, in each case,
constitute its legal, valid and binding obligation, enforceable against it in
accordance with each such Operative Document of its respective terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or other laws relating to or limiting creditors' rights generally or by
equitable principles generally.
(d) No Conflict. The execution, delivery and performance of
each Operative Document to which it is a party by the Lessee and each of the
transactions contemplated thereby do not and will not (i) violate any Applicable
Law or Contractual Obligation of the Lessee the consequences of which violation,
singly or in the aggregate, would have a Material Adverse Effect, (ii) result in
or require the creation or imposition of any Lien whatsoever on the Leased
Property (other than Permitted Liens) or (iii) require any approval of
stockholders which has not been obtained.
(e) Governmental Consents. Except as have been made, obtained
or given, no filing or registration with, consent or approval of, notice to,
with or by any Governmental Authority is required to authorize, or is required
in connection with, the execution, delivery and performance by the Lessee of the
Operative Documents, the use of the proceeds of the Loan made to effect the
acquisition of the interests in the Land and the Construction of the
Improvements, or the legality, validity, binding effect or enforceability of any
Operative Document.
(f) Governmental Regulation. The Lessee is not an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
(g) Requirements of Law. The Lessee is in compliance with all
Requirements of Law applicable to Lessee and its business, in each case where
the failure to so comply would have a Material Adverse Effect, either
individually or together with other such cases.
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(h) Rights in Respect of the Leased Property. The Lessee
is not a party to any contract or agreement to sell any interest in the Leased
Property or any part thereof other than pursuant to the Participation Agreement
and the Lease.
(i) Hazardous Materials.
(i) Except in full compliance with all Applicable Law
there are no Hazardous Materials present at, upon, under or within the Leased
Property or released or transported to or from the Leased Property.
(ii) No Governmental Actions have been taken, or are
in process or have been threatened, which could reasonably be expected to
subject the Leased Property, the Lender or the Lessor to any Claims or Liens
under any Environmental Law which would have a materially adverse effect on the
Lessor, the Lender or the Leased Property.
(iii) The Lessee has all Environmental Permits
necessary to operate the Leased Property in accordance with Environmental Laws
and is complying with and has at all times complied with all such Environmental
Permits.
(iv) With respect to the Leased Property, no notice,
notification, demand, request for information, citations, summons, complaint or
order has been issued or filed to or with respect to the Lessee, and no penalty
has been assessed on the Lessee and no investigation or review is pending or
threatened by any Governmental Authority or other Person with respect to any
alleged violation or liability of the Lessee under any Environmental Law. No
material notice, notification, demand, request for information, citation,
summons, complaint or order has been issued or filed to or with respect to any
other Person, no material penalty has been assessed on any other Person and no
investigation or review is pending or threatened by any Governmental Authority
or other Person relating to the Leased Property with respect to any alleged
material violation or liability under any Environmental Law by any other Person.
(v) The Leased Property and each portion thereof are
presently in compliance with all Environmental Laws, and there are no present or
past facts, circumstances, activities, events, conditions or occurrences
regarding the Leased Property (including, without limitation, the release or
presence of Hazardous Materials) that could reasonably be anticipated to (A)
form the basis of a Claim against the Leased Property, the Lender, the Lender or
the Lessee, (B) cause the Leased Property to be subject to any restrictions on
ownership, occupancy, use or transferability under any Environmental Law, (C)
require the filing or recording of any notice or restriction relating to the
presence of Hazardous Materials in the real estate records in the county or
other appropriate municipality in which the Leased Property is located or (D)
prevent or interfere with the continued operation and maintenance of the Leased
Property as contemplated by the Operative Documents.
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(j) Leased Property. The present condition and use of the
Leased Property conforms with all conditions or requirements of all existing
permits and approvals issued with respect to the Leased Property, and the
present use of the Leased Property and the Lessee's future intended use of the
Leased Property under the Lease does not violate any Applicable Law. No notices,
complaints or orders of violation or non-compliance have been issued or
threatened or contemplated by any Governmental Authority with respect to the
Leased Property or any present or intended future use thereof. All agreements,
easements and other rights, public or private, which are necessary to permit the
lawful use and operation of the Leased Property as the Lessee intends to use the
Leased Property under the Lease and which are necessary to permit the lawful
intended use and operation of all presently intended utilities, driveways, roads
and other means of egress and ingress to and from the same have been, or in the
reasonable judgment of the Lessee will be, obtained and are in full force and
effect and the Lessee has no actual knowledge of any pending modification or
cancellation of any of the same.
(k) Qualification of Lessee Representations. The
representations of the Lessee set forth in this Section are qualified by the
conditions that (i) all representations are made and given to the best of the
Lessee's knowledge after due inquiry, (ii) where a representation involves
compliance by the Lessee with an Applicable Law or an Environmental Law such
representation is deemed to be compliance by the Lessee in all material respects
with any such law and (iii) where a representation involves conduct on the part
of the Lessee that does not violate an Applicable Law or an Environmental Law
such representation is deemed to exclude Lessee's non-material violations of any
such law.
SECTION 4.2 Representations and Covenants of the Lessor. Effective as
of the date of execution hereof, as of the Closing Date, and as of each Parcel
Closing Date, the Lessor represents and warrants to the Lender and the Lessee as
follows:
(a) Due Organization; Limited Purpose. The Lessor is a limited
liability company duly organized and validly existing in good standing under the
laws of the State of Massachusetts; is duly qualified as a foreign limited
liability company and in good standing under the laws of the State of Texas and
each other state in which a Parcel of the Land is located; and has full power,
authority and legal right as a limited liability company to execute, deliver and
perform its obligations under this Participation Agreement and each other
Operative Document to which it is or will be a party. The Lessor further
represents, covenants and warrants that (i) it has been formed and exists for
the sole purpose of, and will not engage in any business or other activity
except as necessary in connection with, acquiring and owning the Leased Property
and taking the actions contemplated on the Lessor's part under the Operative
Documents and (ii) except for obligations and indebtedness of the Lessor
represented by and set forth in the Operative Documents and except for
obligations or indebtedness of the Lessor arising directly or indirectly from
the Lessee's failure to discharge the Lessee's obligations under the Operative
Documents, the Lessor will not create, incur, suffer to be created or incurred,
or guarantee any obligation or indebtedness.
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(b) Due Authorization; Enforceability, Etc. This Participation
Agreement and each other Operative Document to which the Lessor is or will be a
party have been or will be duly authorized, executed and delivered by or on
behalf of the Lessor and are, or upon execution and delivery will be, legal,
valid and binding obligations of the Lessor enforceable against it in accordance
with their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws affecting creditors' rights
generally and by general equitable principles.
(c) No Conflict. The execution and delivery by the Lessor of
this Participation Agreement and each other Operative Document to which the
Lessor is or will be a party are not or will not, and the performance by the
Lessor of its obligations under each and will not, violate its certificate of
formation or Operating Agreement, do not and will not contravene any Applicable
Law and do not and will not contravene any provision of, or constitute a default
under, any Contractual Obligation of the Lessor, and the Lessor possesses all
requisite regulatory authority to undertake and perform its obligations under
the Operative Documents.
(d) Litigation. There are no pending or threatened actions or
proceedings against the Lessor before any court, arbitrator or administrative
agency that would have a material adverse effect upon the ability of the Lessor
to perform its obligations under this Participation Agreement or any other
Operative Documents to which it is or will be a party.
(e) Lessor Liens. No Lessor Liens or other Liens created by
acts or omissions of the Lessor (other than Liens created by the Operative
Documents) exist on the Parcel Closing Date on the related Parcel, or any
portion thereof, and the execution, delivery and performance by the Lessor of
this Participation Agreement or any other Operative Document to which it is or
will be a party will not subject the Leased Property, or any portion thereof, to
any Lessor Liens or other Liens created by the Lessor (other than by the
Operative Documents). Except for Liens against the Leased Property created by
the Operative Documents, Permitted Liens (other than Lessor Liens), Liens
(including Lessor Liens) arising directly or indirectly from the Lessee's
failure to discharge the Lessee's obligations under the Operative Documents, the
Lessor further represents and warrants that it will not create, suffer to be
created or permit any Liens on the Leased Property.
(f) Employee Benefit Plans. The Lessor is not and will not be
making its Contribution Advances hereunder, and is not performing its
obligations under the Operative Documents, with the assets of an "employee
benefit plan" (as defined in Section 3(3) of ERISA) which is subject to Title I
of ERISA, or "plan" (as defined in Section 4975(e)(1) of the Code).
SECTION 4.3 Covenant of Lender. Upon payment by Lessee of the purchase
price for the Leased Property pursuant to Article XV of the Lease, Lender will
release the lien of the Operative Documents against the Leased Property.
SECTION 4.4 Tax Treatment. (a) The parties hereto agree that it is the
Lessee's intention that for Federal, state and local income Tax purposes (i) the
Lease be treated as the repayment and
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security provisions of a loan to the Lessee, all rights to the principal and
interest of which have been assigned by the Lessor to the Lender, (ii) the
Lessee be treated as the legal and beneficial owner entitled to any and all
benefits of ownership of the Property or any part thereof and (iii) all payments
of Basic Rent during the Lease Term be treated as payments of interest and
principal, as the case may be, to the Lender.
(b) The Lessee agrees that neither it nor any member of any affiliated
group of which it is or may become a member (whether or not consolidated or
combined returns are filed for such affiliated group for Federal, state or local
income Tax purposes) will at any time take any action, directly or indirectly,
or file any return or other document inconsistent with the intended income Tax
treatment set forth in Section 4.4 (a) hereof, and the Lessee agrees that the
Lessee and any such Affiliates will file such returns, maintain such records,
take such actions and execute such documents as may be appropriate to facilitate
the realization of such intended income Tax treatment.
(c) The Lessor and the Lender each agree that, except to the extent
required by law, neither it nor any member of any affiliated group of which it
is or may become a member (whether or not consolidated or combined returns are
filed for such affiliated group for Federal, state or local income Tax purposes)
will at any time take any action, directly or indirectly, or file any return or
other document claiming, or asserting that it is entitled to the income Tax
benefits, deductions and/or credits which, pursuant to the intended income Tax
treatment set forth in Section 4.4 (a) hereof, would otherwise be claimed or
claimable by the Lessee, and that it and any such Affiliates will at the expense
of the Lessee file such returns, maintain such records, take such actions, and
execute such documents (as reasonably requested by the Lessee from time to time)
as may be appropriate to facilitate the realization of, and as shall be
consistent with, such intended income Tax treatment, other than engaging in any
contest of such treatment with any taxing authority, and if any such filing,
maintenance, action or execution requested by the Lessee would result in any
additional income Tax liability or expense payable by it or any Affiliate, or
could reasonably be expected to result in liability or expense payable by it or
any Affiliate, then the Lessee will provide an indemnity against such income Tax
liability or other liability satisfactory to the Lessor or the Lender, as the
case may be, in the Lessor's or the Lender's sole opinion, as the case may be.
SECTION 4.5 Repayment Obligation of Closing Date Costs. Pursuant to
Section 2.2 (b) hereof, the Lender and the Lessor have committed to make a
Funding in respect of certain Property Costs on the Closing Date. In the event
that the initial Parcel Closing Date shall not have occurred by July 1, 1998,
the Lessee hereby covenants and agrees to pay the following amounts upon the
demand therefor by the Lender: (i) to the Lender, an amount equal to all
principal and interest then due as of the date of payment on the Note (including
Breakage Costs) and (ii) to the Lessor, an amount equal to the Contribution and
all Contribution Return then due as of the date of payment thereof.
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SECTION 5
COVENANTS OF THE LESSEE
SECTION 5.1 Qualification as to Corporate Status. The Lessee shall
remain a validly existing corporation organized under the laws of the State of
Texas or any other state of the United States of America and shall remain
qualified to do business in all such states.
SECTION 5.2 Further Assurances. Upon the written request of the Lessor
or the Lender, the Lessee, at its own cost and expense, will cause all financing
statements (including precautionary financing statements), fixture filings and
other similar documents to be recorded or filed at such places and times in such
manner as may be necessary to preserve, protect and perfect the interest of the
Lessor and the Lender in the Leased Property as contemplated by the Operative
Documents.
SECTION 5.3 Reporting.
(a) Financial Statements. The Lessee shall deliver or cause to
be delivered to the Lender:
(i) As soon as practicable, and in any event within forty-five
(45) days after the close of each of the first three quarterly
accounting periods in each Fiscal Year, the consolidated condensed
balance sheet of the Lessee and its Subsidiaries as at the end of such
quarterly period and the related consolidated condensed statements of
operations for such quarterly period and for the elapsed portion of the
current Fiscal Year ended with the last day of such quarterly period,
and setting forth comparative consolidated figures for the related
period in the prior Fiscal Year, which financial statements shall be
certified by a duly authorized officer of the Lessee that they fairly
present the consolidated financial condition of the Lessee and its
Subsidiaries as at the dates indicated, subject to changes resulting
from audit and normal year-end adjustments;
(ii) As soon as practicable, and in any event within one
hundred twenty (120) days after the end of each Fiscal Year,
consolidated balance sheets of the Lessee and its Subsidiaries as at
the end of such Fiscal Year and the related consolidated statements of
earnings, stockholders' equity and changes in cash-flows of the Lessee
and its Subsidiaries for such Fiscal Year, setting forth in comparative
form the consolidated figures for the Lessee and its Subsidiaries for
the previous Fiscal Year, all in reasonable detail and accompanied by a
report thereon of Price Waterhouse, L.L.P. or other independent public
accountants of recognized national standing selected by the Lessee
which report shall be unqualified as to the scope of audit and as to
the status of the Lessee and its Subsidiaries as a going concern and
shall state that such consolidated financial statements present fairly
the financial position of the Lessee and its Subsidiaries as at the
dates indicated and the results of their operations and changes in
their financial position for the periods indicated in conformity with
GAAP applied on a basis consistent with prior years (or, in the event
of a change in accounting principles, such accountants' concurrence
with such change) and that
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the examination by such accountants in connection with such
consolidated financial statements has been made in accordance with
generally accepted auditing standards;
(iii) Together with each delivery of any financial statements
pursuant to clauses (i) and (ii) of this subsection, an officer's
certificate of the Lessee, executed by a duly authorized officer of the
Lessee, stating (A) that the signer has instituted procedures for the
review of the terms of this Participation Agreement and the principal
Operative Documents and the review in reasonable detail of the
transactions and conditions of the Lessee and its Subsidiaries taken as
a whole during the accounting period covered by such financial
statements, and that such review has not disclosed the existence during
or at the end of such accounting period, (B) that the signer does not
have knowledge of the existence as at the date of such officer's
certificate, of any condition or event which constitutes an Event of
Default, or, if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action
the Lessee has taken, is taking and proposes to take with respect
thereto, (C) that, to the best of such officer's knowledge, the
financial statements delivered pursuant to clause (i) of this
subsection present fairly the financial position of the Lessee and its
Subsidiaries as at the dates indicated and the results of their
operations and changes in their financial position for the periods
indicated in conformity with GAAP consistently applied, and (D) that
the Lessee is in compliance with each of the covenants contained in
Section 5.4 hereof, and setting out in reasonable detail the data and
calculations upon which the Officer bases such statement;
(iv) Promptly, and in any event within five (5) Business Days
after the Lessee obtains knowledge thereof, notice of (A) the
occurrence of any event which constitutes an Event of Default which
notice shall specify the nature thereof, the period of existence
thereof and what action the Lessee propose to take with respect thereto
and (B) any litigation or governmental proceedings pending against the
Lessee which the Lessee determines it will disclose in the Lessee's
reports filed on Forms 10-K or 10-Q with the SEC (notice being due
within five Business Days of such determination); and
(v) With reasonable promptness, such information with respect
to the financial condition of the Lessee or the Leased Property as from
time to time may be reasonably requested by the Lender; provided,
however, that the Lender shall keep such information confidential,
except in connection with enforcement or exercise of the Lender's
rights under this Participation Agreement or otherwise available at law
or in equity and provided, further, that the Lender may disclose such
information to the extent necessary to respond to inquiries of bank
regulatory authorities or to comply with legal process or any other
legal disclosure obligations, or to the extent such information has
been made publicly available by parties other than the Lender.
(b) Other Reports. Promptly after the same are available to
it, the Lessee shall deliver to the Lessor copies of all regular and periodic
reports and other reports and filings (if any)
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made by the Lessee with the SEC, and promptly upon transmission thereof, copies
of all proxy statements, financial statements, notices and reports as the
Company shall send to its shareholders.
SECTION 5.4 Financial Covenants of Lessee.
(a) The Lessee shall not permit Consolidated Tangible Net
Worth, as determined as of the last day of any fiscal quarter, to be less than
the sum of (i) $45,705,000 plus (ii) an amount equal to 30% of the sum of
Consolidated Net Income for each fiscal quarter from and including the fiscal
quarter beginning January 1, 1998 plus (iii) 100% of all proceeds received by
the Lessee in respect of Lessee's issuance of capital stock from and after the
date hereof (provided that any net loss for any fiscal quarter shall be excluded
from such calculation).
(b) The Lessee shall not permit Consolidated Net Worth, as
determined as of the last day of any fiscal quarter, to be less than (i)
$65,705,000 plus (ii) an amount equal to 30% of the sum of Consolidated Net
Income for each fiscal quarter from and including the fiscal quarter beginning
January 1, 1998 plus (iii) 100% of all proceeds received by the Lessee in
respect of Lessee's issuance of capital stock from and after the date hereof
(provided that any net loss for any fiscal quarter shall be excluded from such
calculation).
(c) The Lessee shall not permit the Fixed Charge Coverage
Ratio as determined as of the last day of any fiscal quarter for the period of
four consecutive fiscal quarters then ended, to be less than 1.50 to 1.00.
(d) The Lessee shall be permitted to incur, assume or in any
manner become or be liable in respect of Debt to any one creditor or one group
of creditors pursuant to a single commitment, to lend not to exceed Fifty
Million Dollars ($50,000,000) provided that such Debt is only to any single
creditor or group of creditors (it being understood that the Debt permitted by
this subsection (d) shall never, individually or in the aggregate, exceed Fifty
Million Dollars ($50,000,000)).
(e) The Lessee shall not incur, assume or in any manner become
or be liable at any time in respect of Debt (other than that permitted by
subsection (d) above or as evidenced by the transactions contemplated hereby)
which, in the aggregate, exceeds Ten Million Dollars ($10,000,000).
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SECTION 5.5 Affirmative Covenants of Lessee.
(a) Compliance with Law. The Lessee will, and will cause each of its
Subsidiaries to, comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, including, without limitation,
Environmental Laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of their respective properties or to the conduct of
their respective businesses, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(b) Payment of Taxes and Claims. The Lessee will, and will cause each
of its Subsidiaries to, file all tax returns required to be filed in any
jurisdiction and to pay and discharge all taxes shown to be due and payable on
such returns and all other taxes, assessments, governmental charges, or levies
imposed on them or any of their properties, assets, income or franchises, to the
extent such taxes and assessments have become due and payable and before they
have become delinquent and all claims for which sums have become due and payable
that have or might become a Lien on properties or assets of the Lessee or any
Subsidiary, provided that neither the Lessee nor any Subsidiary need pay any
such tax or assessment or claims if (i) the amount, applicability or validity
thereof is contested by the Lessee or such Subsidiary on a timely basis in good
faith and in appropriate proceedings, and the Lessee or a Subsidiary has
established adequate reserves therefor in accordance with GAAP on the books of
the Lessee or such Subsidiary or (ii) the nonpayment of all such taxes and
assessments in the aggregate could not reasonably be expected to have a Material
Adverse Effect.
(c) Corporate Existence. The Lessee will at all times preserve and keep
in full force and effect its corporate existence. The Lessee will at all times
preserve and keep in full force and effect the corporate existence of each of
its Subsidiaries (unless merged into the Lessee or a Subsidiary) and all rights
and franchises of the Lessee and its Subsidiaries unless, in the good faith
judgment of the Lessee, the termination of or failure to preserve and keep in
full force and effect such corporate existence, right or franchise could not,
individually or in the aggregate, have a Material Adverse Effect.
(d) Maintenance of Properties. The Lessee will and will cause each of
its Subsidiaries to maintain and keep, or cause to be maintained and kept, their
respective properties in good repair, working order and condition (other than
ordinary wear and tear), so that the business carried on in connection therewith
may be properly conducted at all times, provided that this Section 5.5(d) shall
not prevent the Lessee or any Subsidiary from discontinuing the operation and
the maintenance of any of its properties if such discontinuance is desirable in
the conduct of its business and the Lessee has concluded that such
discontinuance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
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SECTION 6
TRANSFERS BY LESSOR AND LENDER
SECTION 6.1 Lessor Transfers. The Lessor shall not assign, convey,
encumber or otherwise transfer all or any portion of its right, title or
interest in, to or under the Leased Property or the Lease (except pursuant to
the Mortgages, the Assignment of Lease and Rents or pursuant to Article VI of
the Lease) or any of the Operative Documents without obtaining the prior written
consent of the Lender and the Lessee.
SECTION 6.2 Lender Transfers. The Lender shall not assign, convey or
otherwise transfer all or any portion of its right, title or interest in, to or
under any of the Operative Documents without the prior written consent of the
Lessee and the Lessor (such consent not to be unreasonably withheld); provided,
however, that without the prior written consent of or notice to the Lessor or
the Lessee, the Lender may sell participating interests in the Loans, subject to
all rights and obligations hereunder, to such banks and other financial
institutions as the Lender shall, in its sole discretion, determine; provided,
however, that the rights of Lessee hereunder shall in no way be diminished nor
any of its obligations be increased.
SECTION 7
INDEMNIFICATION
SECTION 7.1 General Indemnification. The Lessee agrees, whether or not
any of the transactions contemplated hereby shall be consummated, to assume
liability for, and to indemnify, protect, defend, save and keep harmless each
Indemnitee, on an After-Tax Basis, from and against, any and all Claims by any
third-party that may be imposed on, incurred by or asserted against such
Indemnitee, whether or not such Indemnitee shall also be indemnified as to any
such Claim by any other Person (except to the extent such claim is covered by
the insurance required by the Lease) and in any way relating to or arising out
of:
(i) any of the Operative Documents or any of the transactions
contemplated thereby, and any amendment, modification or waiver in
respect thereof;
(ii) the Land or any part thereof or interest therein;
(iii) the purchase, design, construction, preparation,
installation, inspection, delivery, non-delivery, acceptance,
rejection, ownership, management, possession, operation, rental, lease,
sublease, repossession, maintenance, repair, alteration, modification,
addition or substitution, storage, transfer or title, redelivery, use,
financing, refinancing, disposition, operation, condition, sale
(including, without limitation, any sale pursuant to the Lease), return
or other disposition of all or any part or any interest in the Leased
Property or the imposition of any Lien (or incurring of any liability
to refund or pay over any amount as a result of any Lien) thereon,
including without limitation (A) Claims or penalties arising
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from any violation of law or in tort (strict liability or otherwise),
(B) latent or other defects, whether or not discoverable, (C) any Claim
based upon a violation or alleged violation of the terms of any
restriction, easement, condition or covenant or other matter affecting
title to the Leased Property, (D) the making of any Alterations in
violation of any standards imposed by any insurance policies required
to be maintained by the Lessee pursuant to the Lease which are in
effect at any time with respect to the Leased Property or any part
thereof, (E) any Claim for patent, trademark or copyright infringement
and (F) Claims arising from any public improvements with respect to the
Leased Property resulting in any change or special assessments being
levied against the Leased Property or any Claim for utility "tap-in"
fees;
(iv) the breach or alleged breach by the Lessee of any
representation or warranty made by it or deemed made by it in any
Operative Document or any certificate required to be delivered under
any Operative Document;
(v) the retaining or employment of any broker, finder or
financial advisor by the Lessee to act on its behalf in connection with
this Participation Agreement, or the authorization of any broker or
financial adviser retained or employed by any other Person who or which
acts on Lessee's behalf, or the incurring of any fees or commissions to
which the Lessor or the Lender might be subjected by virtue of their
entering into the transactions contemplated by this Participation
Agreement;
(vi) the existence of any Lien on or with respect to the
Leased Property, the Construction, any Basic Rent or Supplemental Rent,
including any Liens which arise out of the possession, use, occupancy,
construction, repair or rebuilding of or title to or interest of any
Person in the Leased Property or by reason of labor or materials
furnished or claimed to have been furnished to the Lessee or any of its
contractors or agents or by reason of the financing of any personalty
or equipment purchased or leased by the Lessee or Alterations
constructed by the Lessee, except in all cases the Liens listed as
items (i) and (ii) in the definition of Permitted Liens; or
(vii) any breach of any requirement, condition, restriction or
limitation in any Deed;
provided, however, that the Lessee shall not be required to indemnify any
Indemnitee under this Section for (w) any Claim first asserted after the seventh
(7th) anniversary of the Lease Termination Date, (x) any Claim to the extent
that such Claim results from the willful misconduct or gross negligence of such
Indemnitee (provided that the exception set forth in this clause (x) shall not
apply to Lessor Indemnitees, which the Lessee shall, in any event, be obligated
to indemnify, except as provided in Section 18.12 of the Lease), (y) any Claim
resulting from Lessor Liens which the Lessor is responsible for discharging
under the Operative Documents or (z) any Claim which occurs or arises out of a
time when the Lessee was not an owner, lessee or otherwise using or in
possession of the Leased Property or any part thereof. It is expressly
understood and agreed that the indemnity
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provided for herein shall survive the expiration or termination of and shall be
separate and independent from any remedy under the Lease or any other Operative
Document.
SECTION 7.2 Environmental Indemnity. Without limitation of Section 7.1,
the Lessee agrees to indemnify, hold harmless and defend each Indemnitee from
and against any and all Claims (including without limitation third party Claims
for personal injury or real or personal property damage), losses (including but
not limited to any loss of value of the Leased Property), damages, liabilities,
fines, penalties, charges, administrative and judicial proceedings (including
informal proceedings) and orders, judgments, remedial action, requirements,
enforcement actions of any kind, and all reasonable and documented costs and
expenses incurred in connection therewith (including but not limited to
reasonable and documented attorneys' and/or paralegals' fees and expenses),
including, but not limited to, all costs incurred in connection with any
investigation or monitoring of site conditions or any clean-up, remedial,
removal or restoration work by any federal, state or local government agency,
arising directly or indirectly, in whole or in part, out of:
(i) the presence on or under the Land of any Hazardous
Materials, or any releases or discharges of any Hazardous Materials on,
under, from or onto the Land;
(ii) any activity, including, without limitation,
construction, carried on or undertaken on or off the Land, and whether
by the Lessee, or any predecessor in title or any employees, agents,
contractors or subcontractors of the Lessee, or any predecessor in
title, or any other Persons (including such Indemnitee), in connection
with the handling, treatment, removal, storage, decontamination,
clean-up, transport or disposal of any Hazardous Materials that at any
time are located or present on or under or that at any time migrate,
flow, percolate, diffuse or in any way move onto or under the Land;
(iii) loss of or damage to any property or the environment
(including, without limitation, clean-up costs, response costs,
remediation and removal costs, cost of corrective action, costs of
financial assurance, fines and penalties and natural resource damages),
or death or injury to any Person, and all expenses associated with the
protection of wildlife, aquatic species, vegetation, flora and fauna,
and any mitigative action required by or under Environmental Laws;
(iv) any claim concerning lack of compliance with
Environmental Laws, or any act or omission causing an environmental
condition that requires remediation or would allow any governmental
agency to record a lien or encumbrance on the land records; or
(v) any residual contamination on or under the Land, or
affecting any natural resources, and any contamination of any property
or natural resources arising in connection with the generation, use,
handling, storage, transport or disposal of any such Hazardous
Materials, and irrespective of whether any of such activities were or
will be undertaken in accordance with applicable laws, regulations,
codes and ordinances;
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in any case arising or occurring (y) prior to or during the Lease Term or (z) at
any time during which the Lessee or any Affiliate thereof owns any interest in
or otherwise occupies or possesses the Leased Property or any portion thereof;
provided, however, that the Lessee shall not be required to indemnify any
Indemnitee under this Section for any Claim to the extent that such Claim
results from the willful misconduct or gross negligence of such Indemnitee
(except that the exception set forth in the immediately preceding proviso shall
not apply to Lessor Indemnitees, which the Lessee shall, in any event, be
obligated to indemnify, except as provided in Section 18.12 of the Lease). It is
expressly understood and agreed that the indemnity provided for herein shall
survive the expiration or termination of and shall be separate and independent
from any remedy under the Lease or any other Operative Document.
SECTION 7.3 Proceedings in Respect of Claims. The obligations and
liabilities of the Lessee with respect to any Claims for which, if valid, Lessee
is obligated to provide indemnification pursuant to the provisions of Section
7.1 and Section 7.2 ("Indemnified Claims"), shall be subject to the following
terms and conditions:
(a) Whenever an Indemnitee shall have received notice that an
Indemnified Claim has been asserted or threatened against such Indemnitee, the
Indemnitee shall promptly notify the Lessee of such Claim, together with
supporting facts and data within the possession or knowledge of the Indemnitee
related thereto, provided that the failure to deliver such notice shall not
relieve the Lessee of its indemnification obligations hereunder except to the
extent that such failure prejudices the Lessee. With respect to any amount that
the Lessee is requested by an Indemnitee to pay by reason of Section 7.1 or 7.2,
such Indemnitee shall, if so requested by the Lessee and prior to any payment,
submit such additional information to the Lessee as the Lessee may reasonably
request and which is in the possession of such Indemnitee to substantiate
properly the requested payment.
(b) Lessee shall defend, at its expense, such Indemnified
Claim with counsel of its choice reasonably satisfactory to the Indemnitee,
provided, however, that if an Event of Default has occurred and is continuing,
the Indemnitee shall have the right, upon notice to and at the expense of
Lessee, to undertake the defense of such Claim during the continuance of such
Event of Default. The Indemnitee shall promptly notify the Lessee of any
compromise or settlement proposal with respect to any such Claim and shall not
unreasonably refuse to accept any such proposal if the same is acceptable to the
Lessee. The Indemnitee may participate in a reasonable manner at its own expense
and with its own counsel in any proceeding conducted by the Lessee in accordance
with the foregoing. The Lessee shall not enter into any settlement or other
compromise with respect to any Claim which is entitled to be indemnified under
Section 7.1 or 7.2 without the prior written consent of the Lender acting
individually and on behalf of the affected Indemnitee (and Lessor hereby
irrevocably so authorizes Lender to grant such consent on behalf of Lessor and
the Lessor Indemnitees), which consent shall not be unreasonably withheld. The
Lessee and each Indemnitee are and shall be bound to cooperate with each other
in good faith in connection with the defense of any such action, suit or
proceeding in providing any information and bear witness or give testimony which
may be requested by counsel for any of such parties.
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(c) Unless an Event of Default shall have occurred and be
continuing, no Indemnitee shall enter into any settlement or other compromise
with respect to any Claim which is entitled to be indemnified under Section 7.1
or 7.2 without the prior written consent of the Lessee, which consent shall not
be unreasonably withheld (it being agreed that it will not be unreasonable for
the Lessee to withhold consent if such compromise or settlement adversely
affects a material right or property interest of the Lessee, including, without
limitation, Lessee's use, title or possession of the Leased Property), unless
such Indemnitee waives its right to be indemnified under Section 7.1 or 7.2 with
respect to such Claim, provided that no Indemnitee shall enter into any
settlement which would adversely affect Lessee's use, title to or possession of
the Leased Property without Lessee's prior written consent.
(d) Upon payment in full of any Claim by the Lessee pursuant
to Section 7.1 or 7.2 to or on behalf of an Indemnitee, the Lessee, without any
further action, shall be subrogated to any and all claims that such Indemnitee
may have relating thereto (other than claims in respect of insurance policies
maintained by such Indemnitee at its own expense) including claims (subject to
the provisions of this Section 7 and Section 18.12 of the Lease) against another
Indemnitee and such Indemnitee shall execute such instruments of assignment and
conveyance, evidence of claims and payment and such other documents, instruments
and agreements as may be necessary to preserve any such Claims and otherwise
cooperate with the Lessee and give such further assurances as are necessary or
advisable to enable the Lessee vigorously to pursue such Claims.
(e) Any amount payable to an Indemnitee pursuant to Section
7.1 or 7.2 shall be paid to such Indemnitee promptly upon receipt of a written
demand therefor from such Indemnitee, accompanied by a written statement
describing in reasonable detail the basis for such indemnity and the computation
of the amount so payable, and if requested by the Lessee, such determination
shall be verified by a nationally recognized independent accounting firm
mutually acceptable to the Lessee and the Indemnitee at the expense of the
Lessee.
(f) If Lessee fails to assume the defense of an Indemnified
Claim within a reasonable time (and in any event not more than 30 days) after
receipt of notice thereof from the Indemnitee, the Indemnitee will (upon
delivering notice to such effect to the Lessee) have the right to undertake, at
the Lessee's cost and expense, the defense, compromise or settlement of such
Claim on behalf of and for the account and risk of the Lessee, subject to the
right of the Lessee (provided no Event of Default shall have occurred and
remained outstanding) to assume the defense of such Claim at any time prior to
the settlement, compromise or final determination thereof, and provided however,
that the Indemnitee shall not enter into any such compromise or settlement
without the written consent of the Lessee, which shall not be unreasonably
withheld, as aforesaid, and provided further that no Indemnitee shall enter into
any such settlement which would adversely affect Lessee's use, title to or
possession of the Leased Property without Lessee's prior written consent. In the
event the Indemnitee assumes the defense of any such Claim, the Indemnitee will
cooperate with the Lessee in keeping the Lessee reasonably informed of the
progress of any such defense, compromise or settlement.
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(g) Nothing contained in this Section 7.3 shall be deemed to
expand the obligation of the Lessee to defend or be responsible for
indemnification of the Indemnitees with respect to any Claim beyond the specific
indemnification obligations set forth in Sections 7.1, 7.2, 7.4, or elsewhere in
the Operative Documents.
SECTION 7.4 General Tax Indemnity.
(a) Except as otherwise provided in this Section, the Lessee
shall pay on an After-Tax Basis, and on written demand shall indemnify and hold
each Tax Indemnitee harmless from and against, any and all fees (including,
without limitation, documentation, recording, license and registration fees),
taxes (including, without limitation, income, gross receipts, sales, rental,
use, turnover, value-added, property, excise and stamp taxes), levies, imposts,
duties, charges, assessments or withholdings of any nature whatsoever, together
with any penalties, fines or interest thereon or additions thereto (any of the
foregoing being referred to herein as "Taxes" and individually as a "Tax" (for
the purposes of this Section, the definition of "Taxes" excludes amounts imposed
on, incurred by, or asserted against each Tax Indemnitee as the result of any
prohibited transaction, within the meaning of Section 406 or 407 of ERISA or
Section 4975(c) of the Code, arising out of the transactions contemplated hereby
or by any other Operative Document)) imposed on or with respect to any Tax
Indemnitee, the Lessee, the Leased Property or any portion thereof or the Land,
or any sublessee or user thereof, by the United States or by any state or local
government or other taxing authority in the United States in connection with or
in any way relating to (i) the acquisition, financing, mortgaging, construction,
preparation, installation, inspection, delivery, non-delivery, acceptance,
rejection, purchase, ownership, possession, rental, lease, sublease,
maintenance, repair, storage, transfer of title, redelivery, use, operation,
condition, sale, return or other application or disposition of all or any part
of the Leased Property or the imposition of any Lien, other than a Lessor Lien
(or incurrence of any liability to refund or pay over any amount as a result of
any Lien, other than a Lessor Lien) thereon, (ii) Basic Rent or Supplemental
Rent or the receipts or earnings arising from or received with respect to the
Leased Property or any part thereof, or any interest therein or any applications
or dispositions thereof, (iii) the Leased Property, the Land or any part thereof
or any interest therein, (iv) all or any of the Operative Documents, any other
documents contemplated thereby and any amendments and supplements thereto and
(v) otherwise with respect to or in connection with the transactions
contemplated by the Operative Documents.
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(b) Sections 7.1 and 7.4(a) shall not apply to:
(i) Taxes on, based on, or measured by or with
respect to, net income of the Lessor and the Lender (including, without
limitation, minimum Taxes, capital gains Taxes, Taxes on or measured by
items of tax preference or alternative minimum Taxes) other than (A)
any such Taxes that are, or are in the nature of, sales, use, license,
rental or property Taxes, (B) withholding Taxes imposed by the United
States or any state (1) on payments with respect to the Note, to the
extent imposed by reason of a change in Applicable Law occurring after
the Closing Date or (2) on Rent, to the extent the net payment of Rent
after deduction of such withholding Taxes would be less than amounts
currently payable with respect to the Note and (C) any increase in any
franchise taxes based on or otherwise measured by net income, estate,
inheritance, transfer, income tax or gross income or gross receipts tax
in lieu of net income over the term of the Lease, net of any decrease
in such taxes realized by such Tax Indemnitee, to the extent that such
tax increase or decrease would not have occurred if on the Closing Date
the Lessor had advanced funds to the Lessee in the form of a loan
secured by the Leased Property in an amount equal to the Loan, with
debt service for such loan equal to the portion of the Basic Rent
attributable to the Loan payable on each Rent Payment Date and a
principal balance at the maturity of such loan in an amount equal to
the Loan at the end of the Lease Term;
(ii) Taxes on, based on, or in the nature of or
measured by, Taxes on doing business, business privilege, capital,
capital stock, net worth, or mercantile license or similar taxes other
than (A) any increase in such Taxes imposed on such Tax Indemnitee by
any state, net of any decrease in such taxes realized by such Tax
Indemnitee, to the extent that such tax increase or decrease would not
have occurred if on the Closing Date the Lessor had advanced funds to
the Lessee in the form of a loan secured by the Leased Property in an
amount equal to the Loan, with debt service for such loan equal to the
portion of the Basic Rent attributable to the Loan payable on each Rent
Payment Date and a principal balance at the maturity of such loan in an
amount equal to the Loan at the end of the Lease Term or (B) any Taxes
that are or are in the nature of sales, use, rental, license or
property Taxes;
(iii) Taxes that result from any act, event or
omission, or are attributable to any period of time, that occurs after
the earliest of (A) the expiration of the Lease Term with respect to
the Leased Property and, if the Leased Property is required to be
returned to the Lessor in accordance with the Lease, such return and
(B) the discharge in full of the Lessee's obligations to pay the Lease
Balance, or any amount determined by reference thereto, with respect to
the Leased Property and all other amounts due under the Lease, unless
such Taxes relate to acts, events or matters occurring prior to the
earliest of such times or are imposed on or with respect to any
payments due under the Operative Documents after such expiration or
discharge;
(iv) Taxes imposed on a Tax Indemnitee that result
from any voluntary sale, assignment, transfer or other disposition by
such Tax Indemnitee or any related Tax
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Indemnitee of any interest in the Leased Property or any part thereof,
or any interest therein or any interest or obligation arising under the
Operative Documents (including a sale of an interest in the Note) or
from any sale, assignment, transfer or other disposition of any
interest in such Tax Indemnitee or any related Tax Indemnitee, it being
understood that each of the following shall not be considered a
voluntary sale: (A) any substitution, replacement or removal of any of
the property by the Lessee shall not be treated as a voluntary action
of any Tax Indemnitee, (B) any sale or transfer resulting from the
exercise by the Lessee of any termination option, any purchase option
or sale option, (C) any sale or transfer while an Event of Default
shall have occurred and be continuing under the Lease and (D) any sale
or transfer resulting from the Lessor's exercise of remedies under the
Lease;
(v) any Tax which is being contested in accordance
with the provisions of Section 7.4(c), during the pendency of such
contest;
(vi) any Tax that is imposed on a Tax Indemnitee as a
result of such Tax Indemnitee's gross negligence or willful misconduct
(other than gross negligence on the part of the Lessor and the
incorporators, stockholders, directors, officers, employees and agents
of the Lessor or gross negligence or willful misconduct imputed to the
Lessor or the Lender solely by reason of their respective interests in
the Leased Property);
(vii) any Tax that results from a Tax Indemnitee
engaging, with respect to the Leased Property, in transactions other
than those permitted by the Operative Documents; or
(viii) to the extent any interest, penalties or
additions to tax result in whole or in part from the failure of a Tax
Indemnitee to file a return that it is required to file in a proper and
timely manner, unless such failure (A) results from the transactions
contemplated by the Operative Documents in circumstances where the
Lessee did not give timely notice to Lessor (and the Lessor otherwise
had no actual knowledge) of such filing requirement that would have
permitted a proper and timely filing of such return or (B) results from
the failure of the Lessee to supply information necessary for the
proper and timely filing of such return that was not in the possession
of the Lessor.
(c) If any claim shall be made against any Tax Indemnitee
or if any proceeding shall be commenced against any Tax Indemnitee (including a
written notice of such proceeding) for any Taxes as to which the Lessee may have
an indemnity obligation pursuant to this Section, or if any Tax Indemnitee shall
determine that any Taxes as to which the Lessee may have an indemnity obligation
pursuant to this Section may be payable, such Tax Indemnitee shall promptly
notify the Lessee. The Lessee shall be entitled, at its expense, to participate
in and to the extent that the Lessee desires to, assume and control the defense
thereof; provided, however, that the Lessee shall not be entitled to assume and
control the defense of any such action, suit or proceeding (but the Tax
Indemnitee shall then contest, at the sole cost and expense of the Lessee, on
behalf of the Lessee) if and to the extent that (A) an Event of Default has
occurred and is continuing, (B) such action, suit or
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proceeding involves matters which are unrelated to the transactions contemplated
by the Operative Documents and if determined adversely could be materially
detrimental to the interests of such Tax Indemnitee notwithstanding
indemnification by the Lessee or (C) such action, suit or proceeding involves
the federal or any state income tax liability of the Tax Indemnitee. With
respect to any contests controlled by a Tax Indemnitee, (i) if such contest
relates to the federal or any state income tax liability of such Tax Indemnitee,
such Tax Indemnitee shall be required to conduct such contest only if the Lessee
shall have provided to such Tax Indemnitee an opinion of independent tax counsel
selected by the Lessee and reasonably satisfactory to the Tax Indemnitee stating
that a reasonable basis exists to contest such claim or (ii) in the case of an
appeal of an adverse determination of any contest relating to any Taxes, an
opinion of such counsel to the effect that such appeal is more likely than not
to be successful; provided, however, such Tax Indemnitee shall in no event be
required to appeal an adverse determination to the United States Supreme Court.
The Tax Indemnitee may participate in a reasonable manner at its own expense and
with its own counsel in any proceeding conducted by the Lessee in accordance
with the foregoing. Each Tax Indemnitee shall at the Lessee's expense supply the
Lessee with such information and documents reasonably requested by the Lessee as
are necessary or advisable for the Lessee to participate in any action, suit or
proceeding to the extent permitted by this Section. Unless an Event of Default
shall have occurred and be continuing, no Tax Indemnitee shall enter into any
settlement or other compromise with respect to any Claim which is entitled to be
indemnified under this Section without the prior written consent of the Lessee,
which consent shall not be unreasonably withheld (it being agreed that it will
not be unreasonable for Lessee to withhold consent if such compromise or
settlement would adversely affect material rights or property interests of the
Lessee, including, without limitation, Lessee's use, title or possession of the
Leased Property), unless such Tax Indemnitee waives its right to be indemnified
under this Section with respect to such Claim, provided the settlement would not
adversely affect materials rights or property interests of the Lessee,
including, without limitation, Lessee's use, title or possession of the Leased
Property. Notwithstanding anything contained herein to the contrary, (i) a Tax
Indemnitee will not be required to contest (and the Lessee shall not be
permitted to contest) a Claim with respect to the imposition of any Tax if such
Tax Indemnitee shall waive its right to indemnification under this Section with
respect to such Claim (and any related Claim with respect to other taxable years
the contest of which is precluded as a result of such waiver) and (ii) no Tax
Indemnitee shall be required to contest any Claim if the subject matter thereof
shall be of a continuing nature and shall have previously been decided
adversely, unless there has been a change in law which in the opinion of the
Lessee's counsel creates substantial authority for the success of such contest.
Each Tax Indemnitee and the Lessee shall consult in good faith with each other
regarding the conduct of such contest controlled by either.
(d) If (i) a Tax Indemnitee shall obtain a credit or refund of
any Taxes paid by the Lessee pursuant to this Section or (ii) by reason of the
incurrence or imposition of any Tax for which a Tax Indemnitee is indemnified
hereunder or any payment made to or for the account of such Tax Indemnitee by
the Lessee pursuant to this Section, such Tax Indemnitee at any time realizes a
reduction in any Taxes for which the Lessee is not required to indemnify such
Tax Indemnitee pursuant to this Section, which reduction in Taxes was not taken
into account in
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computing such payment by the Lessee to or for the account of such Tax
Indemnitee, then such Tax Indemnitee shall promptly pay to the Lessee the amount
of such credit or refund, together with the amount of any interest received by
such Tax Indemnitee on account of such credit or refund or an amount equal to
such reduction in Taxes, as the case may be; provided, however, that no such
payment shall be made so long as an Event of Default shall have occurred and be
continuing; and provided, further, that the amount payable to the Lessee by any
Tax Indemnitee pursuant to this subsection shall not at any time exceed the
aggregate amount of all indemnity payments made by the Lessee under this Section
to such Tax Indemnitee and all related Tax Indemnitees with respect to the Taxes
which gave rise to a credit or refund or with respect to the Tax which gave rise
to a reduction in Taxes less the amount of all prior payments made to the Lessee
by such Tax Indemnitee and related Tax Indemnitees under this Section. Each Tax
Indemnitee agrees to act in good faith to claim such refunds and other available
Tax benefits, and take such other actions as may be reasonable to minimize any
payment due from the Lessee pursuant to this Section and to maximize the amount
of any Tax savings available to it. The disallowance or reduction of any credit,
refund or other tax savings with respect to which a Tax Indemnitee has made a
payment to the Lessee under this subsection shall be treated as a Tax for which
the Lessee is obligated to indemnify such Tax Indemnitee hereunder.
(e) Any Tax indemnifiable under this Section shall be paid
directly when due to the applicable taxing authority if direct payment is
practicable and permitted. If direct payment to the applicable taxing authority
is not permitted or is otherwise not made, any amount payable to a Tax
Indemnitee pursuant to this Section shall be paid within thirty (30) days after
receipt of a written demand therefor from such Tax Indemnitee accompanied by a
written statement describing in reasonable detail the amount so payable, but not
before the date that the relevant Taxes are due. Any payments made pursuant to
this Section shall be made directly to the Tax Indemnitee entitled thereto or
the Lessee, as the case may be, in immediately available funds at such bank or
to such account as specified by the payee in written directions to the payor,
or, if no such direction shall have been given, by check of the payor payable to
the order of the payee by certified mail, postage prepaid at its Address as set
forth in this Participation Agreement. Upon the request of any Tax Indemnitee
with respect to a Tax that the Lessee is required to pay, the Lessee shall
furnish to such Tax Indemnitee the original or a certified copy of a receipt for
Lessee's payment of such Tax or such other evidence of payment as is reasonably
acceptable to such Tax Indemnitee.
(f) If the Lessee knows of any report, return or statement
required to be filed with respect to any Taxes that are subject to
indemnification under this Section, the Lessee shall, if the Lessee is permitted
by Applicable Law, timely file such report, return or statement (and, to the
extent permitted by law, show ownership of the Leased Property in the Lessee
except to the extent contrary to financial reporting requirements); Provided,
however, that if the Lessee is not permitted by Applicable Law or does not have
access to the information required to file any such report, return or statement,
the Lessee will promptly so notify the appropriate Tax Indemnitee, in which case
Tax Indemnitee will file such report. In any case in which the Tax Indemnitee
will file any such report, return or statement, Lessee shall, upon written
request of such Tax Indemnitee, provide such Tax Indemnitee with such
information as is reasonably available to the Lessee.
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(g) At the Lessee's request, the amount of any indemnity
payment by the Lessee or any payment by a Tax Indemnitee to the Lessee pursuant
to this Section shall be verified and certified by an independent public
accounting firm selected by the Lessee and reasonably acceptable to the Tax
Indemnitee. Unless such verification shall disclose an error in Lessee's favor
of 5% or more, the costs of such verification shall be borne by the Lessee. In
no event shall the Lessee have the right to review the Tax Indemnitee's tax
returns or receive any other confidential information from the Tax Indemnitee in
connection with such verification. The Tax Indemnitee agrees to cooperate with
the independent public accounting firm performing the verification and to supply
such firm with all information reasonably necessary to permit it to accomplish
such verification; provided, however, that the information provided to such firm
by such Tax Indemnitee shall be for its confidential use. The parties agree that
the sole responsibility of the independent public accounting firm shall be to
verify the amount of a payment pursuant to this Participation Agreement and that
matters of interpretation of this Participation Agreement are not within the
scope of the independent accounting firm's responsibilities.
SECTION 7.5 Increased Costs, etc.
(a) Changes; Legal Restrictions. Subject to the provisions of
Section 8.12, in the event that after the date hereof (i) the adoption of or any
change in any law, treaty, rule, regulation, guideline or determination of a
court or Governmental Authority or any change in the interpretation or
application thereof by a court or Governmental Authority or (ii) compliance by
the Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority:
(A) does or will subject the Lender to any tax, duty or other
charge of any kind which the Lender determines to be applicable to the
Operative Documents or the Loan or change the basis of taxation of
payments to the Lender of principal, interest, invested amount, yield,
fees or any other amount payable hereunder, except for taxes imposed on
or measured by the overall net income of the Lender; or
(B) does or will impose, modify, or hold applicable, in the
determination of the Lender, any reserve, special deposit, liquidity
ratio, compulsory loan, FDIC insurance or similar requirement against
assets held by, or deposits or other liabilities in or for the account
of, advances or loans by, commitments made, or other credit extended
by, or any other acquisition of funds by, the Lender;
and the result of any of the foregoing is to increase the cost to the Lender of
making, renewing or maintaining the Loan or to reduce any amount receivable
thereunder and the Lender gives the Lessee notice of any of the foregoing and
the approximate amount of such cost increase within 120 days after the calendar
year in which such increased costs were incurred by the Lender, then, in any
such case, the Lessee shall promptly pay to the Lender on an After-Tax Basis,
within thirty (30) days after demand made in writing by the Lender to the
Lessee, such amount or amounts (based
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upon an allocation thereof by the Lender to the financing transactions
contemplated by the Operative Documents and affected by this Section) as may be
reasonably necessary to compensate the Lender for any such additional cost
incurred or reduced amount received. The Lender shall deliver to the Lessee a
written statement of the costs or reductions claimed and the basis therefor, and
the allocation made by the Lender of such costs and reductions shall be
conclusive, absent demonstrable error.
(b) Capital Adequacy. Subject to the provisions of Section
8.12, if the Lender shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by the Lender
with any request or directive regarding capital adequacy (whether or not having
the force of law) of any such Governmental Authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on the
Lender's capital as a consequence of its obligations hereunder (including,
without limitation, the Loan) to a level below that which the Lender could have
achieved but for such adoption, change or compliance (taking into consideration
the Lender's policies with respect to capital adequacy), then from time to time,
within thirty (30) days after demand made in writing by the Lender to the
Lessee, the Lessee shall pay to the Lender such additional amount or amounts as
will compensate the Lender for such reduction. The Lender, upon determining in
good faith that any additional amounts will be payable pursuant to this
subsection, will give prompt written notice thereof to the Lessee which notice
shall show in reasonable detail the basis for calculation of such additional
amounts. Such notice shall be conclusive absent demonstrable error.
SECTION 7.6 End of Term Indemnity. In the event that at the end of the
Lease Term (i) the Lessor elects the option set forth in Section 15.6 of the
Lease and (ii) after the Lessor receives the sales proceeds from the Leased
Property under Section 15.6 or 15.7 of the Lease together with the Lessee's
payment of the Recourse Deficiency Amount, the Lessor shall not have received
the entire Lease Balance, then the Lessor or the Lender may obtain, at the
Lessee's sole cost and expense, an appraisal report of each Property from the
appraiser who prepared the most recent appraisal of the Property prepared in
accordance with Section 3 hereof (or if such appraiser is not available, another
appraiser reasonably satisfactory to the Lessor or the Lender, as the case may
be) in form and substance satisfactory to the Lessor and the Lender to establish
the reason for any decline in value of the Leased Property from that anticipated
for such date in the appraisals delivered in accordance with Section 3 hereof.
The Lessee shall promptly reimburse the Lessor for the amount equal to such
decline in value to the extent any appraisal report delivered pursuant to the
preceding sentence concludes that any such decline was due to (i) extraordinary
use, failure to maintain, to repair, to restore, to rebuild or to replace the
Property in a manner consistent with reasonable preservation of its value,
failure to comply with all Applicable Laws, failure to use, workmanship, method
of installation or removal or maintenance, repair, rebuilding or replacement, or
any other cause or condition within the reasonable power of the Lessee to
control or effect resulting in Improvements failing to constitute a warehouse
and distribution facility (excepting in each case ordinary wear and tear), (ii)
any Alteration made to, or any rebuilding of, the Leased
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Property or any part thereof by the Lessee, (iii) any restoration or rebuilding
carried out by the Lessee or any condemnation of any portion of the Leased
Property pursuant to Article XI of the Lease (after taking into account any
Award in respect thereof) or (iv) any use of the Leased Property or any part
thereof by the Lessee other than as permitted pursuant to Article VIII of the
Lease. The parties hereto acknowledge and agree that the obligation imposed upon
the Lessee under this Section arises from a higher standard of maintenance of
the Leased Property than that required under Article VII of the Lease and is
applicable whether or not the Lessee has failed to comply with any such other
obligations under the Operative Documents.
SECTION 7.7 Exculpation. The Lender has and shall have no liability or
obligation whatsoever or howsoever in connection with the construction,
completion or management of the Improvements, and has no obligation except to
make Loan Advances as provided in this Participation Agreement and the Loan
Agreement, and the Lender is not obligated to inspect the Improvements; nor is
the Lender liable and under no circumstances whatsoever shall the Lender be or
become liable for the performance or default of any contractor or subcontractor,
or for any failure to construct, complete, protect or insure the Improvements,
or any part thereof, or for the payment of any cost or expense incurred in
connection therewith, or for the performance or non-performance of any
obligation of the Lessor or the Lessee to the Lender or to any other person,
firm or entity without limitation; and nothing, including without limitation,
any disbursement of Loan Advances or acceptance of any document or instrument,
shall be construed as a representation or warranty, express or implied, on the
Lender's part. Further, the Lessee shall be solely responsible for all aspects
of the Lessee's business and conduct in connection with the construction,
completion and management of the Improvements including, but not limited to:
(a) The quality and suitability of the Plans and Specifications;
(b) Supervision of the work of Construction;
(c) The qualifications, financial condition and performance of all
architects, engineers, contractors, subcontractors and
material suppliers and consultants;
(d) Conformance of the work of Construction and the Improvements
to the requirements of all Applicable Laws and public and
private restrictions and requirements and to the requirements
of this Participation Agreement;
(e) The quality and suitability of all materials and workmanship;
and
(f) The accuracy of all requests for the disbursement proceeds of
the Loans and the proper application of disbursed proceeds of
the Loan.
The Lender shall have no obligation to supervise, inspect or inform the
Lessee, the Lessor or any third party of any aspect of the work or construction
of the Improvements or any other matter referred to above. Any inspection or
review made by or on behalf of the Lender shall be made for
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the purpose of determining whether or not the obligations of the Lessee under
this Participation Agreement are being properly discharged, and neither the
Lessee, the Lessor nor any third party shall be entitled to rely upon any such
inspection or review.
The Lender owes no duty of care to the Lessee or the Lessor or any
third person to protect against or inform the Lessee, the Lessor or any third
person of the existence of negligent, faulty, inadequate or defective design or
construction of the Improvements.
SECTION 7.8 Role of Lender. Any term or condition hereof or of any of
the other Operative Documents to the contrary notwithstanding, the Lender shall
not have, and by its execution and acceptance of this Participation Agreement
hereby expressly disclaims, any obligation or responsibility for the management,
conduct or operation of the Improvements or business and affairs of the Lessee
and any term or condition hereof, or of any of the other Operative Documents,
permitting the Lender to disburse funds, whether from the proceeds of the Loan
or otherwise, or to take or refrain from taking any action with respect to the
Lessee or the Improvements shall be deemed to be solely for the benefit of the
Lender and may not be relied upon by any other person. Further, the Lender shall
not have, has not assumed and by its execution and acceptance of this
Participation Agreement hereby expressly disclaims, any liability or
responsibility for the payment or performance of any indebtedness or obligation
of the Lessee or the Lessor and no term or condition hereof, or of any of the
other Operative Documents, shall be construed otherwise.
SECTION 7.9 Lender's Benefits. All conditions precedent to the
obligation of Lender to make any Loan Advance are imposed hereby solely for the
benefit of Lender. No party other than the Lessor may require satisfaction of
any such condition precedent. No other party (including the Lessor) shall be
entitled to assume that Lender will refuse to make any Loan Advance in the
absence of strict compliance with such conditions precedent. Any requirement of
this Participation Agreement and any requirement of the Loan Agreement may be
waived by Lender, in whole or in part, at any time. Any requirement herein or in
any other Operative Document of submission of evidence to Lender of the
existence or non-existence of a fact shall be deemed, also, to be a requirement
that the fact shall exist or not exist, as the case may be, and without waiving
any condition or obligation of the Lessee or the Lessor, Lender may at all times
independently establish to its satisfaction such existence or non-existence.
SECTION 7.10 Lessor's Benefits. All conditions precedent to the
obligation of Lessor to make any Contribution Advance are imposed hereby solely
for the benefit of Lessor. No party other than the Lender may require
satisfaction of any such condition precedent. No other party (including the
Lender) shall be entitled to assume that Lessor will refuse to make any
Contribution Advance in the absence of strict compliance with such conditions
precedent. Any requirement of this Participation Agreement and any requirement
of the Loan Agreement may be waived by Lessor, in whole or in part, at any time.
Any requirement herein or in any other Operative Document of submission of
evidence to Lessor of the existence or non-existence of a fact shall be deemed,
also, to be a requirement that the fact shall exist or not exist, as the case
may be, and
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without waiving any condition or obligation of the Lessee or the Lessor, Lender
may at all times independently establish to its satisfaction such existence or
non-existence.
SECTION 8
MISCELLANEOUS
SECTION 8.1 Survival of Agreements. The indemnities of the parties
provided for in Section 7 of this Participation Agreement, shall survive the
termination or expiration of this Participation Agreement and any of the other
Operative Documents (including, without limitation, the termination of the Lease
pursuant to Section 15.7 thereof in connection with the Lessee's payment of the
Recourse Deficiency Amount), any disposition of any interest of the Lessor, or
the Lender in the Leased Property and shall be and continue in effect in
accordance with their terms notwithstanding any investigation made by any party
hereto or to any of the other Operative Documents and the fact that any such
party may waive compliance with any of the other terms, provisions or conditions
of any of the Operative Documents. The representations, warranties, covenants
and agreements of the parties provided for in the Operative Documents shall not
be merged into the any Deed.
SECTION 8.2 Notices. Unless otherwise specified herein or in an
applicable Operative Document, it shall, for purposes of this Participation
Agreement and the other Operative Documents, be sufficient service or giving of
any notice, request, complaint, demand, instruction or other instrument or
document to any Person, if it is in writing to the Address set forth below. Any
notice given by telecopy or facsimile transmission shall be deemed given when
sent provided confirmed by regular U.S. mail. Any notice given by mail shall be
deemed to be given when sent by registered or certified mail, return receipt
requested. Any notice sent by any party hereto under the Operative Documents
shall also be sent to the other parties to this Participation Agreement. The
parties hereto may designate, by notice given to each of the other parties, any
further or different addresses than those set forth below to which subsequent
notices shall be sent. For purposes of the Operative Documents (but subject to
the preceding sentence), the Address of the Lessee, the Lender and the Lessor is
as follows:
(i) Lessee Eagle USA Airfreight, Inc.
15330 Vickery Drive
Houston, Texas 77032
Attention: Douglas A. Seckel
Facsimile No.: (281) 618-3423
Telephone No.: (281) 618-3420
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(ii) Lender Bank One, Texas, N.A.
Bank One Center
7th Floor
910 Travis
Houston, Texas 77002
Attention: John Elam
Facsimile No.: (713) 751-6199
Telephone No.: (713) 751-3806
(iii) Lessor Asset XVI Holdings Company, L.L.C.
c/o JH Management Corporation
Room 520
One International Place
Boston, Massachusetts 02110
Attention: Anne Brennan
Facsimile No.: (617) 951-7050
Telephone No.: (617) 951-7690
SECTION 8.3 Counterparts. This Participation Agreement may be executed
in any number of counterparts as may be convenient or necessary, and it shall
not be necessary that the signatures of all parties hereto or thereto be
contained on any one counterpart hereof or thereof. Additionally, the parties
hereto agree that for purposes of facilitating the execution of this agreement,
(a) the signature pages taken from the separate individually executed
counterparts of this agreement may be combined to form multiple fully executed
counterparts and (b) a facsimile transmission shall be deemed to be an original
signature for all purposes. All executed counterparts of this Participation
Agreement shall be deemed to be originals, but all such counterparts taken
together or collectively, as the case may be, shall constitute one and the same
agreement.
SECTION 8.4 Amendments. No Operative Document nor any of the terms
thereof may be terminated, amended, supplemented, waived or modified with
respect to any party thereto except with the prior written consent of such party
thereto and, in all cases, the Lender and the Lessee. If and to the extent that
this Participation Agreement, the Loan Agreement, the Note, the Lease, the
Assignment of Lease and Rents or the Mortgages constitutes an amendment,
supplement, termination, waiver or other modification to any Operative Document,
each of the parties hereto, by its execution of this Participation Agreement,
shall be deemed to have given its written consent to such amendment supplement,
termination, waiver or other modification.
SECTION 8.5 Headings, Etc. The Table of Contents and headings of the
various Sections of this Participation Agreement are for convenience of
reference only and shall not modify, define, expand or limit any of the terms or
provisions hereof.
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SECTION 8.6 Parties in Interest. Except as expressly provided herein,
none of the provisions of this Participation Agreement is intended for the
benefit of any Person except the parties hereto, their successors and their
permitted assigns.
SECTION 8.7 Governing Law. THIS PARTICIPATION AGREEMENT HAS BEEN
DELIVERED IN, AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE.
SECTION 8.8 No Recourse. No recourse shall be had for any claims under
this Participation Agreement, other than for wilful misrepresentation or
intentional misconduct, against any incorporator, shareholder, officer, manager,
member or director, past, present or future, of Lessor or of any successor or of
Lessor's constituent members or other affiliates or of JH Management
Corporation, or against JH Management Corporation, either directly or through
Lessor or any successor, whether by virtue of any constitution, statute or rule
of law or by the enforcement of any assessment or penalty or otherwise, all such
liability being, by acceptance hereof and as part of the consideration for the
acceptance hereof, expressly waived and released.
SECTION 8.9 Expenses.
(a) Expenses of Lessor and Lender. The reasonable fees,
expenses and disbursements (including reasonable counsel fees) of the Lessor and
the Lender in connection with the Operative Documents incurred from and after
the Closing Date shall be paid by the Lessee as Supplemental Rent upon demand
therefor by the Lessor, provided that no such fees shall be payable by Lessee
unless specifically authorized by the Operative Documents.
(b) Amendments Supplements and Appraisal. The Lessee agrees to
pay all reasonable and documented out-of-pocket costs and expenses of the Lessor
and the Lender in connection with the successful amendment or supplementing of
the Operative Documents and the documents and instruments referred to therein
(including, without limitation, the fees and disbursements of counsel for the
Lessor and the Lender).
SECTION 8.10 Severability. Any provision of this Participation
Agreement that is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 8.11 Submission to Jurisdiction; Waivers. Each party hereto
hereby irrevocably and unconditionally (i) submits for itself and its property
in any legal action or proceeding relating to this Participation Agreement or
any other Operative Document, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the
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<PAGE> 52
courts of the State of Texas, the courts of the United States of America for the
District of Texas and appellate courts from any thereof, (ii) consents that any
such action or proceedings may be brought to such courts, and waives any
objection that it may now or hereafter have to the venue of any such action or
proceeding in any court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same, (iii) agrees that
service of process in any such action or proceeding may be effected by mailing a
copy thereof by registered or certified mail (or any substantially similar form
of mail), postage prepaid, to such party at its address set forth in Section 8.2
or at such other address of which the other parties hereto shall have been
notified pursuant to Section 8.2 and (iv) agrees that nothing herein shall
affect the right to effect service of process in any other manner permitted by
law.
SECTION 8.12 Limitation on Interest. Any provision to the contrary
contained in this Participation Agreement or in any of the other Operative
Documents notwithstanding, it is expressly provided that in no case or event
shall the aggregate of (i) all interest payable by the Lessee or the Lessor and
(ii) the aggregate of any other amounts accrued or paid pursuant to this
Participation Agreement or any of the other Operative Documents, which under
applicable laws are or may be deemed to constitute interest, ever exceed the
maximum rate of interest which could lawfully be contracted for, charged or
received. In this connection, it is expressly stipulated and agreed that it is
the intent of the Lessee, the Lessor and the Lender to contract in strict
compliance with the applicable usury laws of the State of Texas and of the
United States (whichever permit the higher rate of interest) from time to time
in effect. In furtherance thereof, none of the terms of this Participation
Agreement or any of the other Operative Documents shall ever be construed to
create a contract to pay, as consideration for the use, forbearance or detention
of money, interest at a rate in excess of the maximum contract interest rate
permitted to be contracted for, charged or received by the applicable laws of
the United States or the State of Texas (whichever permit the higher rate of
interest). The Lessee, the Lessor and the other parties now or hereafter
becoming liable for payment of any indebtedness under this Participation
Agreement or any other Operative Documents shall never be liable for interest in
excess of the maximum rate that may be lawfully contracted for or charged under
the laws of the State of Texas and of the United States (whichever permit the
higher rate of interest). If under any circumstances the aggregate amounts paid
include amounts which by law are deemed interest which would exceed the maximum
amount of interest which could lawfully have been contracted for, charged or
received, the parties stipulate that such amounts will be deemed to have been
paid as a result of an error on the part of the parties, and the party receiving
such excess payment shall promptly, upon discovery of such error or upon notice
thereof from the party making such payment, refund the amount of such excess or
at the Lender's option, credit such excess against any unpaid principal balance
owing. To the maximum extent permitted by applicable law, all amounts contracted
for, charged or received for the use, forbearance, or detention of money shall,
to the extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of the Loan. The provisions of this Section 8.12
shall control all of the Operative Documents.
Section 8.13 Waiver of Consumer Rights. Each of the parties hereto does
hereby represent and warrant with and to each of the other parties hereto that
(a) it is not in a significantly disparate
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<PAGE> 53
bargaining position, (b) it is represented by legal counsel in seeking or
acquiring goods or services and such legal counsel was not directly nor
indirectly identified, suggested or selected by another party hereto, (c) it has
knowledge and experience in financial and business matters that enable it to
evaluate the merits and risks of a transaction, including the transaction
evidenced by the Operative Documents, and (d) the Operative Documents are not a
result of any disparity in bargaining position among the Lessee, the Lessor and
the Lender and were negotiated on an arms-length basis and represent the
bargained-for agreement of parties. EACH PARTY WAIVES ITS RIGHTS UNDER THE
DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT, SECTION 17.41 ET SEQ.,
BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND
PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF ITS OWN SELECTION, IT
VOLUNTARILY CONSENTS TO THIS WAIVER.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 54
IN WITNESS WHEREOF, the parties hereto have caused this Participation
Agreement to be executed by their respective duly authorized officers as of the
day and year first above written.
EAGLE USA AIRFREIGHT, INC., as Lessee
By:
----------------------------------
Name: Douglas A. Seckel
Title: Chief Financial Officer
ASSET XVI HOLDINGS COMPANY, L.L.C.,
as Lessor
By Asset Holdings Corporation I, a
Delaware corporation, its managing
member
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
BANK ONE, TEXAS, N.A., as Lender
By:
----------------------------------
Name: John E. Elam, Jr.
Title: Vice President
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<PAGE> 55
APPENDIX I
TO
MASTER PARTICIPATION AGREEMENT
MASTER LEASE AND DEVELOPMENT AGREEMENT AND LOAN AGREEMENT
DEFINITIONS AND INTERPRETATION
[See separate text]
I-1
<PAGE> 56
APPENDIX II
FORM OF FUNDING REQUISITION
[Date]
Bank One, Texas, N.A.
Bank One Center
7th Floor
910 Travis
Houston, Texas 77002
Attention: John Elam
Asset XVI Holdings Company, L.L.C.
c/o JH Management Corporation
Room 520
One International Place
Boston, Massachusetts 02110
Attn: Anne Brennan
Re: Request for Loan Advances and a Contribution Advance under
that certain Master Participation Agreement, dated as of April
3, 1998 (the "Participation Agreement"), by and among Asset
XVI Holdings Company, L.L.C., as Lessor (the "Lessor"), Eagle
USA Airfreight, Inc., as Lessee (the "Lessee"), and Bank One,
Texas, N.A. as Lender (the "Lender")
I, [Name], [Officer] of the Lessee, [or its agent], acting for the
Lessee and as agent for the Lessor pursuant to the Participation Agreement,
submit this irrevocable Funding Requisition and certify, on behalf of the
Lessee, the following (all terms not defined herein shall have the meanings
given in the Participation Agreement):
1. The total amount of the Property Costs for which a Funding
is hereby requested is ___________ Dollars ($________). The Lender and the
Lessor are each hereby requested to make on the Funding Date of __________ [at
least 3 Business Days after the submission date] a Loan Advance or Contribution
Advance, as applicable (subject to the satisfaction or waiver of all conditions
precedent thereto), which in the aggregate total the amount of the Funding set
forth in the first sentence of this paragraph and allocated in accordance with
the Participation Agreement, in the manner herein described.
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<PAGE> 57
2. The Funding relates to the following Parcels of the Land in
the following amounts.
<TABLE>
<CAPTION>
Parcel Loan Contribution
------ ---- -------------
<S> <C> <C>
Parcel I $______________________ $______________________
Parcel II $______________________ $______________________
Parcel III $______________________ $______________________
Parcel IV $______________________ $______________________
[ADD FURTHER ROWS, IF MORE THAN FOUR PARCELS COMPRISE THE LEASED PROPERTY]
</TABLE>
3. The Lessee certifies that all conditions precedent to the
requested Funding contained in the Operative Documents have been satisfied.
4. The Lessee acknowledges that the [Base Rate][Applicable
LIBOR Rate] shall apply to the requested Funding. [For LIBOR Fundings] The
duration of the Interest Period applicable to the Loan Advance and the
Contribution Advance requested hereby shall be one month. [For Base Rate
Fundings] The Lessee acknowledges that the Base Rate shall apply until the next
Loan Payment Date which is more than 3 Business Days after the submission of
this Funding Requisition, and unless the Lessee shall otherwise request, the
Applicable LIBOR Rate shall apply thereto, and the Funding Date for the
Contribution Advance requested herein shall be the next Loan Payment Date which
is more than 3 Business Days after the submission of this Funding Requisition.
5. The proceeds of the Funding requested herein shall be used
solely to pay Property Costs.
6. No part of the Property Costs paid with the funds advanced
under any previous Funding Requisition is a basis for this Funding Requisition,
and none of the Property Costs which are the subject of this Funding Requisition
was included in any prior Funding Requisition or is in respect of interest on
the Note.
7. Attached to this Funding Requisition is a copy of each
invoice, purchase order, receipt or other such document (the "Invoices") for
Property Costs, which, individually, is in an amount in excess of $500,000,
which Invoices will be, or have been, paid with the proceeds of this Funding,
or, as applicable, the previous Fundings.
8. Construction of all Improvements to date has been performed
in a good and workmanlike manner, substantially in accordance with the Plans and
Specifications therefor, and in compliance with Applicable Law.
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<PAGE> 58
9. There has been no material change in the estimated time of
completion of construction of the Improvements and the Lessee has no reason to
believe that (i) the Completion Date cannot be achieved by the Completion
Deadline or (ii) the Total Property Costs of the Construction of the
Improvements will exceed the Total Commitments.
10. No applicable Law prohibits, and no litigation,
governmental investigation or other proceeding is pending or, to the knowledge
of the Lessee, threatened in which there is a reasonable possibility of an
unfavorable judgment, decree, order or other determination which could prevent
or make unlawful, or impose any material adverse condition upon, the Land, the
Improvement or the construction or operation thereof or any transaction
contemplated hereby or by any other Operative Document or the ability of the
Lessee to perform its obligations hereunder or thereunder or, to the Lessee's
knowledge, the Lessor's interest in the Improvements and the Land.
11. All amounts previously advanced pursuant to previous
Funding Requisitions were or will be paid to the parties entitled thereto as
specified in such Funding Requisitions.
12. All proceeds of the Loan and the Contribution have been
applied solely to Property Costs as required under the Operative Documents.
13. [Except as set forth in this item 13,] all conditions
precedent to the Funding requested herein set forth in the Participation
Agreement (as defined below) have been satisfied: [identify unfulfilled
conditions, the actions being taken by the Lessee to satisfy such conditions and
the date(s) by which the Lessee plans to satisfy such conditions].
14. All of the representations and warranties of the Lessee
set forth in the Operative Documents are true and correct on and as of the date
hereof or, as applicable, on and as of the date specified in such representation
and warranty. The Lessee is in compliance with all of its obligations under the
Operative Documents and there exists no Event of Default under the Operative
Documents.
15. The name, address and wire instructions for the
disbursement of the requested Advance is set forth in the attachment hereto, and
the Lender is hereby requested to make such disbursement of the Advance on the
date set forth above in accordance with said attachment.
Very truly yours,
EAGLE USA AIRFREIGHT, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
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<PAGE> 59
EXHIBIT K
ARCHITECT'S CERTIFICATE
Pursuant to Section 3.2(a)(xvii) of the Participation Agreement,
________________ ______________, a _______________ ______________ (the
"Company") DOES HEREBY CERTIFY to ASSET XVI HOLDINGS COMPANY, L.L.C. and BANK
ONE, TEXAS, N.A., as follows:
1. The Company has served as architect in connection with the preparation
of, and has prepared (or will prepare) architectural plans and
specifications (collectively, the "Plans and Specifications") for a
project consisting of the construction of a warehouse and distribution
facility of approximately _________ gross square feet (the "Intended
Use") located on approximately ______ acres of currently unimproved
land (the "Property") more particularly described on Exhibit A attached
hereto and incorporated herein by reference (the "Project"). The
Company has performed or will perform all related architectural design
work in connection with the development of the Project pursuant to that
certain contract dated _______________ by and between the Company and
Eagle USA Airfreight, Inc., a copy of which is attached hereto as
Exhibit B (the "Contract"). Pursuant to the Contract, the Company will
act as the supervising architect during the development of the Project.
2. The Plans and Specifications provide (or will provide) for the
construction referred to above which, when completed in conformity with
the Plans and Specifications, will comply in all material respects with
the requirements of all applicable laws of governmental authorities
having jurisdiction thereof including, without limitation, The
Americans with Disabilities Act of 1990 (and applicable regulations
thereunder), environmental laws, erosion control laws, zoning and
subdivision ordinances, land use and development laws, as well as
applicable codes and regulations of municipal and city authorities. As
of the date hereof, all permits required by any applicable governmental
authority, will be issued or available for issuance in order to permit
the development and construction of the Project in a timely manner.
There are no facts or issues outstanding with respect to the
construction of the Project in accordance with the Plans and
Specifications which would cause any material delay or otherwise impair
the issuance of all applicable permits for the construction of the
Project in a timely manner or which would materially impair or delay
construction of the Project in a timely manner.
3. The Plans and Specifications have been (or will be) prepared in
accordance with the standards of sound architectural practice and same
will specify that only new materials will be utilized. Upon completion
in accordance with the Plans and Specifications, the Project will be of
sound structure, free of defects, adequately constructed for its
Intended Use and with its mechanical plan in working order.
K-1
<PAGE> 60
4. It is our opinion that, upon completion of the Project in conformity
with the Plans and Specifications, all applicable permits, licenses and
certificates of occupancy to permit the use and operation of the
Project for its Intended Use will be obtainable.
5. The construction of the Project in accordance with the Plans and
Specifications will not affect any "wetlands" located on the Property,
as such term is defined in Section 328.3 of Title 33 of the Code of
Federal Regulations.
6. The Plans and Specifications require the following utilities:
(a) electricity
(b) telephone
(c) water
(d) sewer
(e) natural gas
7. We have confirmed that all such utilities are available to the
boundaries of the Project in proper location and in sufficient capacity
to adequately serve the Project upon completion of the construction in
accordance with the Plans and Specifications and that satisfactory
commitments for connection to and service of the Project have been
obtained and that such commitments for such utilities will not have
expired at the time the Project is completed.
8. The Plans and Specifications and Project comply with all applicable
requirements for parking and building setback lines. There is ingress
and egress to the Project from ______________________ which has been
dedicated to public use and accepted for maintenance by the
__________________________.
9. The Survey prepared by _________________ dated ____________ and last
revised ____________, has been reviewed and based on said survey and a
review of the site, there are no structures or utility lines on the
site of the Project which will materially interfere with the
construction of improvements at the site of the Project.
10. Upon completion of the Project in accordance with the Plans and
Specifications, the Project will comply with all lot area, height,
floor area and bulk, front, rear and side yard setbacks, and parking
requirements of all zoning ordinances and all other requirements of
applicable governmental authorities which apply to the Project,
standing alone, separate and distinct from any adjacent or contiguous
parcel. Such compliance is in no way dependent upon the common
ownership of the Project with any other property, and the land upon
which the project will be developed has been lawfully subdivided as a
separate parcel.
11. Upon completion of the Project in accordance with the Plans and
Specifications, satisfactory methods of vehicular and pedestrian access
to, and egress from, the Project and adjoining or nearby public ways
will be available, sufficient to meet the reasonable needs of the
Project's
K-2
<PAGE> 61
Intended Use and all applicable requirements of public authorities.
Design conditions are such that no drainage of surface or other water
across the property of others, or over the site of the Project from
land of others, is called for or indicated by the Plans and
Specifications or required for the Project.
12. To the undersigned's best knowledge, neither the Project nor the site
of the Project contain or incorporate any asbestos, PCB's,
ureaformaldehyde, radioactive material, or other toxic or hazardous
wastes, materials or product, as defined in federal, state or local
laws and regulations.
------------------------------------
K-3
<PAGE> 1
EXHIBIT 10(iii)D
APPENDIX I
TO
MASTER PARTICIPATION AGREEMENT, MASTER LEASE AND
DEVELOPMENT AGREEMENT AND LOAN AGREEMENT
DEFINITIONS AND INTERPRETATION
A. Interpretation. In each Operative Document, unless a clear contrary
intention appears, (i) the singular number includes the plural number and vice
versa, (ii) reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are permitted by
the Operative Documents, and reference to a Person in a particular capacity
excludes such Person in any other capacity or individually, (iii) reference to
any gender includes each other gender, (iv) reference to any agreement
(including any Operative Document), document or instrument means such agreement,
document or instrument as amended or modified and in effect from time to time in
accordance with the terms thereof and, if applicable, the terms of the other
Operative Documents and reference to any promissory note includes any promissory
note which is an extension or renewal thereof or a substitute or replacement
therefor, (v) reference to any Applicable Law means such Applicable Law as
amended, modified, codified, replaced or reenacted, in whole or in part, and in
effect from time to time, including rules and regulations promulgated thereunder
and reference to any section or other provision of any Applicable Law means that
provision of such Applicable Law from time to time in effect and constituting
the substantive amendment, modification, codification, replacement or
reenactment of such section or other provision, (vi) reference in any Operative
Document to any Article, Section, Appendix, Schedule or Exhibit means such
Article or Section thereof or Appendix, Schedule or Exhibit thereto, (vii)
"hereunder", "hereof", "hereto" and words of similar import shall be deemed
references to an Operative Document as a whole and not to any particular
Article, Section or other provision hereof, (viii) "including" (and with
correlative meaning "include") means including without limiting the generality
of any description preceding such term, (ix) "or" is not exclusive and (x)
relative to the determination of any period of time, "from" means "from and
including", "to" means "to but not including" and "through" means "to and
including".
B. Accounting Terms. In each Operative Document, unless expressly
otherwise provided, accounting terms shall be construed and interpreted, and
accounting determinations and computations shall be made, in accordance with
GAAP.
C. Conflict in Operative Documents. If there is any conflict between
any Operative Documents, such Operative Document shall be interpreted and
construed, if possible, so as to avoid or minimize such conflict but, to the
extent (and only to the extent) of such conflict, the Participation Agreement
shall prevail and control.
D. Defined Terms. Unless a clear contrary intention appears, terms
defined herein have the respective indicated meanings when used in each
Operative Document.
"Acceleration" means the automatic acceleration of Lessee's obligation
to purchase Lessor's interest in the Leased Property pursuant to the provisions
of Section 15.3 of the Lease.
<PAGE> 2
"Address" means, with respect to any Person, such Person's address set
forth in Section 8.2 of the Participation Agreement or such other address as
such Person shall have identified to the parties to the Participation Agreement
in writing.
"Adjusted LIBOR Rate" means the rate per annum equal to the quotient
obtained by dividing the LIBOR Rate by the percentage obtained by subtracting
from 100% the applicable LIBOR Reserve Percentage on the date of calculation.
"Advance" means either a Loan Advance or a Contribution Advance, as
the case may be.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such Person. For purposes of this definition, the term "control" (including
the correlative meanings of the terms "controlling," "controlled by" and "under
common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of such Person, whether through the
ownership of voting securities or by contract or otherwise; provided, however,
(but without limiting the foregoing) that no pledge of voting securities of any
Person without the current right to exercise voting rights with respect thereto
shall by itself be deemed to constitute control over such Person.
"After-Tax Basis" means (i) with respect to any payment to be received
by an Indemnitee (which, for purposes of this definition, shall include any Tax
Indemnitee), the amount of such payment supplemented by a further payment or
payments so that, after deducting from such payments the amount of all Taxes
(net of any current credits, deductions or other Tax benefits arising from the
payment by the Indemnitee of any amount, including Taxes, for which the payment
to be received is made) actually imposed currently on the Indemnitee by any
Governmental Authority or taxing authority with respect to such payments, the
balance of such payments shall be equal to the original payment to be received
and (ii) with respect to any payment to be made by any Indemnitee, the amount
of such payment supplemented by a further payment or payments so that, after
increasing such payment by the amount of any current credits or other Tax
benefits realized by the Indemnitee under the laws of any Governmental
Authority or taxing authority resulting from the making of such payments, the
sum of such payments (net of such credits or benefits) shall be equal to the
original payment to be made; provided, however, for the purposes of this
definition, and for purposes of any payment to be made to either the Lessee or
a Tax Indemnitee on an after-tax basis, it shall be assumed that federal, state
and local taxes are payable at the highest combined marginal federal and state
statutory income tax rate (taking into account the deductibility of state
income taxes for federal income tax purposes) applicable to corporations from
time to time and that such Indemnitee or the Lessee has sufficient income to
utilize any deductions, credits (other than foreign tax credits, the use of
which shall be determined on an actual basis) and other Tax benefits arising
from any payments described in clause (ii) of this definition.
"Alterations" means the construction or installation of non-trade
fixtures, alterations, improvements, modifications and additions to the Leased
Property including without limitation, any repair or restoration pursuant to
Article XI of the Lease or otherwise.
"Applicable Law" means all existing and future applicable laws, rules,
regulations (including Environmental Laws) statutes, treaties, codes,
ordinances, permits, certificates, orders and licenses of and interpretations
by any Governmental Authorities, and applicable judgments,
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<PAGE> 3
decrees, injunctions, writs, orders or like action of any court, arbitrator or
other administrative, judicial or quasi-judicial tribunal or agency of
competent jurisdiction (including those pertaining to health, safety or the
environment (including, without limitation, wetlands) and those pertaining to
the construction, use or occupancy of the Leased Property) and any restrictive
covenant or deed restriction or easement of record affecting the Leased
Property.
"Applicable LIBOR Rate" is defined in Section 2.4(b) of the Loan
Agreement.
"Approved Budget" means the written budget setting forth the estimate
Property Costs for the Construction of Improvements to any Property, prepared
in cost breakdown form, the accuracy of which shall be certified by Lessee, the
Architect and the General Contractor in the certificate to be delivered
pursuant to Section 3.2(a)(xxii) of the Participation Agreement, all in form
and substance satisfactory to Lender.
"Architect" means any Person licensed to perform architectural
services approved by the Lender.
"Assignment of Lease and Rents" means the Assignment of Lease and
Rents dated as of April 3, 1998 from the Lessor to the Lender, together with
each Notice of Assignment of Lease and Rents recorded with respect to a Parcel,
dated as of the Parcel Closing Date therefor, together with any other
amendments or supplements thereto.
"Awards" means any award or payment received by or payable to the
Lender, the Lessor or the Lessee on account of any Condemnation or Event of
Taking (less the actual costs, fees and expenses incurred in the collection
thereof, for which the Person incurring the same shall be reimbursed from such
award or payment).
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended.
"Base Rate" means the rate of interest published or announced from
time to time by the Lender as its base rate, which rate may not necessarily
represent the lowest or best rate actually charged to any customer. Any rate
of interest hereunder which is calculated using the Base Rate shall change
automatically and immediately as and when the Base Rate shall change without
notice to the Lessor or the Lessee, and any notice of such change in the Base
Rate to which the Lessor or the Lessee may otherwise be entitled is hereby
waived, and any such change shall not alter any of the terms and conditions of
the Participation Agreement, the Loan Agreement or the Operative Documents.
"Base Rate Loan" means any portion of the principal amount of the Note
as to which the applicable interest rate is the Base Rate.
"Basic Rent" means the sum of the Facility Rent, the Index Rent and
the Scheduled Rent payable on each Rent Payment Date, as provided in Section
4.1 of the Lease.
"Breakage Costs" shall mean any amounts required to compensate the
Lender for any actual additional losses, costs or expenses which it may
reasonably incur as a result of (i) any payment of principal on the Note on a
date other than the last day of the Interest Period relating thereto, or (ii) a
failure to effect a Loan Advance on a Funding Date, including, without
limitation, any loss, cost or
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<PAGE> 4
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by the Lender from third parties.
"Business Day" means any day other than a Saturday, Sunday or other
day on which banks are required or authorized to be closed for business in
Houston, Texas; provided, however, that the term "Business Day" shall also
exclude any day on which commercial banks are not open for international
business (including dealings in U.S. dollar deposits) in the London interbank
market.
"Capitalized Lease Obligation" shall mean any rental obligation which,
under GAAP, is or will be required to be capitalized on the books of the Lessee
or any of its Subsidiaries, taken at the amount thereof accounted for as
indebtedness (net of interest expenses) in accordance with GAAP.
"Casualty" means an event of damage or casualty relating to all or
part of the Leased Property which does not constitute an Event of Loss.
"Claims" means liabilities, obligations, damages, losses, demands,
penalties, fines, claims, actions, suits, judgments, settlements, utility
charges, costs, expenses and disbursements (including, without limitation,
reasonable legal fees and expenses) of any kind and nature whatsoever.
"Closing Date" means April 8, 1998.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment Deadline" means the later of (i) April 1, 1999 or (ii) the
Final Completion Date.
"Completion Deadline" means, for each Property, the date which is
twelve months after the Parcel Closing Date with respect thereto.
"Condemnation" means any condemnation, requisition, confiscation,
seizure or other taking or sale of the use, occupancy or title to the Leased
Property or any part thereof in, by or on account of any actual eminent domain
proceeding or other action by any Governmental Authority or other Person under
the power of eminent domain, or any transfer in lieu of or in anticipation
thereof, which in any case does not constitute an Event of Taking. A
Condemnation shall be deemed to have "occurred" on the earliest of the dates
that use, occupancy or title is taken.
"Consolidated Depreciation and Amortization" means, for any period,
the consolidated depreciation or amortization charged in such period in respect
of the assets of the Lessee and its Subsidiaries (and not including any amounts
attributable to repayment of Debt), all as determined in accordance with GAAP.
"Consolidated Interest Charges" means, for any period, the
consolidated interest expense incurred by the Lessee and its Subsidiaries
(including amortization of debt discount and expense and imputed interest on
Capitalized Lease Obligations), all as determined in accordance with GAAP.
"Consolidated Lease Expense" means, for any period, the consolidated
Lease Expense of the Lessee and its Subsidiaries.
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"Consolidated Net Income" means, for any period, consolidated net
income of the Lessee and its Subsidiaries as determined in accordance with
GAAP.
"Consolidated Net Worth" means consolidated Net Worth of the Lessee
and its Subsidiaries as determined in accordance with GAAP.
"Consolidated Principal Payments" means, for any period, the
consolidated scheduled principal payments with respect to Debt of the Lessee
and its Subsidiaries during such period, all as determined in accordance with
GAAP.
"Consolidated Tangible Net Worth" means consolidated Tangible Net
Worth of the Lessee and its Subsidiaries as determined in accordance with GAAP.
"Construction" means the development and construction of Improvements
pursuant to the Plans and Specifications therefor.
"Construction Contract" means any agreement for the Construction of
Improvements now existing or subsequently entered into between the Lessee and a
General Contractor.
"Construction Force Majeure Event" means, with respect to any Parcel,
(i) an act of God arising after the related Parcel Closing Date, (ii) any
cause, circumstance or event arising after the related Parcel Closing Date and
not reasonably within the control of the Lessee or (iii) any change in any
state or local law, regulation or other legal requirement arising after the
related Parcel Closing Date and relating to the use of the Parcel or the
construction of the Improvements on the Parcel which prevents the Lessee from
completing the Construction prior to the Completion Deadline and which could
not have been avoided or which cannot be remedied by the Lessee through the
exercise of all commercially reasonable efforts or the commercially reasonable
expenditure of funds and, in the case of clauses (i) and (ii) of this
definition, the existence or potentiality of which was not known to and could
not have been discovered prior to the related Parcel Closing Date through the
exercise of due diligence by the Lessee.
"Contractual Obligation" means, as applied to any Person, any
provision of any Securities issued by that Person or any indenture, mortgage,
deed of trust, contract, undertaking, agreement, instrument or other document
to which that Person is a party or by which it or any of its properties is
bound or to which it or any of its properties is subject (including, without
limitation, any restrictive covenant affecting any of the properties of such
Person).
"Contribution" means, at any time, the aggregate amount of
Contribution Advances the Lessor (i) has made pursuant to Section 2.2 (b) of
the Participation Agreement and (ii) is deemed to have made pursuant to Section
2.2 (d) of the Participation Agreement, not to exceed the Equity Commitment.
"Contribution Advance" means each amount on account of the
Contribution made by the Lessor or any of its members to the Lessee for the
payment of Property Costs pursuant to Section 2.2 of the Participation
Agreement, plus each amount which the Lessor shall have been deemed to have
advanced with respect to Contribution Return pursuant to Section 2.2 (d) of the
Participation Agreement.
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"Contribution Return" means, as of any date of calculation, (a) with
respect to the aggregate amount of the Contribution, a pre-tax cumulative
return on the balance of the Contribution outstanding from time to time, and
(b) with respect to each Parcel Contribution Tranche, a pre-tax cumulative
return on the balance of such Parcel Contribution Tranche outstanding from time
to time, in each case computed at a per annum rate equal to (i) during any
period when a LIBOR Rate Loan is outstanding, (A) during each Interest Period
commencing prior to the Final Completion Date, the Interim Rate and (B) during
each Interest Period commencing on or after the Final Completion Date, the sum
of the Adjusted LIBOR Rate for such Interest Period plus 2.45% per annum; (ii)
during any period when either (A) 100% of the principal balance of the Loan is
a Base Rate Loan, or (B) the Base Rate applies as a result of any circumstance
described in Section 2.4 (f) of the Loan Agreement, the Base Rate; or (iii)
during any period when an Event of Default shall have occurred and remain
uncured, the Overdue Rate; provided, however, that in none of the foregoing
cases shall the applicable foregoing rate exceed the highest rate permitted by
Applicable Law. During the period from the first Funding Date on which a
Contribution Advance shall be made with respect to the Parcel Contribution
Tranche for such Property, to the related Parcel Completion Date, Contribution
Return on such Parcel Contribution Tranche shall be compounded on each Loan
Payment Date as a result of a Contribution Advance to be deemed made pursuant
to Section 2.2 (d) of the Participation Agreement. After the related Parcel
Completion Date, Contribution Return shall be payable on each Loan Payment Date
from the proceeds of the Facility Rent payable by the Lessee on each such date
and any amount of Contribution Return not so paid when due will bear interest
at the Overdue Rate until paid in full (whether after or before judgment).
"Debt" means with respect to the Lessee or any Subsidiary thereof and
as of any date of its determination, without duplication (a) indebtedness of
such Person for borrowed money, (b) obligations of such Person evidenced by
notes, bonds, debentures, or other similar instruments, (c) obligations of such
Person as lessee under Capitalized Lease Obligations, (d) obligations of such
Person to pay the deferred purchase price of property or services, (e)
obligations of such Person under or relating to letters of credit, guaranties,
note purchase agreements, investment agreements, and other obligations of such
Person which support the repayment of the types of indebtedness and obligations
of others referred to in parts (a) through (d) of this definition, and (f)
nonrecourse indebtedness or obligations of others of the kinds referred to in
parts (a) through (e) of this definition secured by any Lien on or in respect
of any property of such Person, all as determined in accordance with GAAP. For
the purposes of determining the amount of any Debt, the amount of the Debt
described in part (e) of the definition of Debt shall be valued at the full
amount of the contingent liability thereunder and the amount of any Debt
described in part (f) shall be valued at the lesser of the amount of the Debt
secured or the value of the property securing such Debt.
"Deed" means any instrument of conveyance pursuant to which the Lessor
acquires a leasehold estate in, or fee simple title to, a Parcel, pursuant to
Section 3.2 of the Participation Agreement.
"Default" means any event, condition or failure which, with notice or
lapse of time or both, would become an Event of Default.
"Dividends" means, for any Person and for any period, the amounts of
cash or stock dividends, and any other distributions in respect of profits of
such Person (exclusive of
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intercompany dividends which would be eliminated upon preparation of
consolidated financial statements), all as determined in accordance with GAAP.
"Environmental Laws" means and include the Resource Conservation and
Recovery Act of 1976, (RCRA) 42 U.S.C. Sections 6901-6987, as amended by the
Hazardous and Solid Waste Amendments of 1984, the Comprehensive Environmental
Response, Compensation and Liability Act, as amended by the Superfund
Amendments and Reauthorization Act of 1986, 42 U.S.C. Sections 9601-9657,
(CERCLA), the Hazardous Materials Transportation Act of 1975, 49 U.S.C.
Sections 1801-1812, the Toxic Substances Control Act, 15 U.S.C. Sections
2601-2671, the Clean Air Act, 42 U.S.C. Sections 7401 et seq., the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Sections 136 et seq., and
all similar federal, state and local environmental laws, ordinances, rules,
orders, statutes, decrees, judgments, injunctions, codes and regulations, and
any other federal, state or local laws, ordinances, rules, codes and
regulations relating to the environment, human health or natural resources or
the regulation or control of or imposing liability or standards of conduct
concerning human health, the environment, Hazardous Materials or the clean-up
or other remediation of the Leased Property, or any part thereof, as any of the
foregoing may have been from time to time amended, supplemented or supplanted.
"Environmental Permits" means all permits, licenses, authorizations,
certificates and approvals of Governmental Authorities required by
Environmental Laws.
"Equity Commitment" means $1,000,000, being the maximum amount of the
Contribution which Lessor has committed to make under the Participation
Agreement.
"Equity Ratio" means 5.00%.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time or any successor federal statute.
"Estimated Parcel Property Costs" means the amount of Property Costs
to be incurred by or on behalf of Lessor to pay the purchase price and any
related costs of acquisition of a Parcel (and any Improvements located thereon
at the time of acquisition) and to pay costs of Construction of any new
Improvements thereto, all as estimated by the Lessee in the certificate to be
delivered pursuant to Section 3.2(a)(xxii) of the Participation Agreement and
approved by the Lender.
"Event of Default" means any event or condition designated as an
"Event of Default" in Article XIII of the Lease.
"Event of Loss" is defined in Section 11.1 of the Lease.
"Event of Taking" is defined in Section 11.2 of the Lease.
"Facilitation Agreement" is defined in Section 4.2 of the Lease.
"Facilitation Fee" means the amount specified as the Facilitation Fee
to be paid by the Lessee to the Lessor as set forth in Section 4.2 of the Lease
and in the Facilitation Agreement.
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<PAGE> 8
"Facility Rent" means amounts payable as Facility Rent as specified in
Section 4.1 of the Lease.
"Fair Market Rental Value" means, with respect to any Property, the
fair market rental value thereof as determined by an independent appraiser
chosen by the Lessor (and reasonably acceptable to the Lessee and the Lender)
that would be obtained in an arm's-length lease between an informed and willing
lessee and an informed and willing lessor, in either case under no compulsion
to lease and neither of which is related to the Lessor or the Lessee for the
lease of the Property on the terms set forth, or referred to, in the Lease.
Such fair market rental value shall be calculated as the value for the use of
the Property to be leased in place at the Parcel assuming, in the determination
of such fair market rental value, that the Property is in the condition and
repair required to be maintained by the terms of the Lease (unless such fair
market rental value is being determined for the purposes of Section 14.1 of the
Lease and except as otherwise specifically provided in the Lease, in which case
this assumption shall not be made).
"Fair Market Sales Value" means, with respect to any Property or any
portion thereof, the fair market sales value thereof as determined by an
independent appraiser chosen by the Lessee (and reasonably acceptable to the
Lender) that would be obtained in an arms-length transaction between an
informed and willing buyer (other than a lessee currently in possession) and an
informed and willing seller, under no compulsion, respectively, to buy or sell
and neither of which is related to the Lessor or the Lessee, for the purchase
of the Property. Such fair market sales value shall be calculated as the value
for the use of the Property assuming, in the determination of such fair market
sales value, that the Property is in the condition and repair required to be
maintained by the terms of the Lease (unless such fair market sales value is
being determined for purposes of Section 14.1 of the Lease and except as
otherwise specifically provided in the Lease, or the Participation Agreement,
in which case this assumption shall not be made).
"Final Completion Date" means the earlier of (i) September 1, 2000 or
(ii) the Parcel Completion Date designated as the "Final Completion Date" by
the Lessee giving notice thereof to the Lesser and the Lender; provided that if
such date is not a Loan Payment Date, the Final Completion Date should be the
next occurring Loan Payment Date.
"Final Rent Payment Date" is defined in Section 14.1 (e) of the Lease.
"Financial Advisor" means Banc One Capital Corporation, Columbus,
Ohio, or such other Person as selected by the Lender and reasonably acceptable
to the Lessee.
"Fiscal Year" means the fiscal year of the Lessee, which shall be the
twelve (12) monthly accounting periods ending on the last calendar day of
September or such other period as the Lessee may designate and the Lender may
approve in writing.
"Fixed Charge Coverage Ratio" means, for any period, the ratio between
(i) Consolidated Net Income (excluding any extraordinary or non-recurring gains
or losses and net gains and net losses resulting from the sale of any capital
assets other than in the ordinary course of business) for such period, minus
Dividends, plus all amounts deducted in the calculation of Consolidated Net
Income on account of (A) Consolidated Interest Charges, (B) Taxes imposed or
measured by income or excess profits (but only to the extent such Taxes were
not actually paid during such period), (C) Consolidated Depreciation and
Amortization, and (D) Consolidated Lease Expense, and (ii) the sum of
Consolidated Lease Expense, Consolidated Interest Charges and Consolidated
Principal Payments.
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"Funding Date" has the meaning specified in Section 2.4 of the
Participation Agreement.
"Funding Requisition" has the meaning specified in Section 2.4 of the
Participation Agreement.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time.
"General Contractor" means each general contractor under a
Construction Contract as may be selected by the Lessee.
"Governmental Action" means all permits, authorizations,
registrations, consents, approvals, waivers, exceptions, variances, orders,
judgments, decrees, licenses, exemptions, publications, filings, notices to and
declarations of or with, or required by, any Governmental Authority, or
required by any Applicable Law and shall include, without limitation, all
siting, building, environmental and operating permits and licenses that are
required for the acquisition, construction, use, occupancy, zoning and
operation of the Leased Property.
"Governmental Authority" means the government of the United States of
America, the government of any other nation, any political subdivision of the
United States of America or any other nation (including, without limitation,
any state, territory, federal district, municipality or possession) and any
federal, state, county, municipal or other governmental or regulatory
authority, agency, board, body, commission, instrumentality or court, or any
political subdivision thereof.
"Hazardous Material" means any substance, waste or material which is
toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous, including petroleum, crude oil or any
fraction thereof, petroleum derivatives, by products and other hydrocarbons and
is or becomes regulated by any Governmental Authority, including any agency,
department, commission, board or instrumentality of the United States, the
State of Wisconsin or any political subdivision thereof and also including
asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls ("PCBs")
and radon gas.
"Improvements" means, with respect to each Parcel, the buildings,
structures and improvements generally described on Appendix I of each Parcel
Lease Supplement and as may be described in the Plans and Specifications, if
any, for such Improvements, as the same shall be finally Constructed, installed
and located on such Parcel, along with all fixtures used or useful in
connection with the operation of such Property, including, without limitation,
all furnaces, boilers, compressors, elevators, fittings, pipings, connectives,
conduits, ducts, partitions, equipment and apparatus of every kind and
description now or hereafter affixed or attached or used or useful in
connection with the buildings, and all Alterations (including all restorations,
repairs, replacements and rebuilding of such buildings, improvements and
structures) thereto (but in all the above cases excluding trade fixtures and
any personal property owned by the Lessee).
"Indemnitee" means the Lender, the Lessor and JH Management
Corporation, and their respective successors, permitted assigns, permitted
transferees, employees, officers, directors and
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agents thereof (and, in the case of the Lessor, also including its constituent
members, its managers, and their respective officers, employees, directors,
agents, incorporators and stockholders); provided, however, that in no event
shall the Lessee be an Indemnitee.
"Indemnitee Group" means the respective employees, officers, directors
and agents of the Lender, the Lessor and JH Management Corporation (and, in the
case of the Lessor, also including its constituent members and their respective
officers, employees, directors, agents, incorporators and stockholders), as
applicable; provided, however, that in no event shall the Lessee be a member of
an Indemnitee Group.
"Indemnified Claims" is defined in Section 7.3 of the Participation
Agreement.
"Index Rent" means an amount equal to all interest accrued and unpaid
on the Loan as of each Rent Payment Date on which Basic Rent shall be due and
payable.
"Initial Loan Advance" means the Loan Advance made by the Lender
pursuant to the Loan Agreement on the Closing Date.
"Intangible Assets" means, with respect to any Person and as of any
date of its determination, the goodwill, patents, trade names, trade marks,
copyrights, franchises, experimental expense, organization expense, unamortized
debt discount and expense, deferred assets (other than prepaid insurance and
prepaid taxes), the excess of cost of share acquired over book value of related
assets, and such other assets of such Person as are properly classified as
"intangible assets" in accordance with GAAP.
"Interest Period" means, during any period when either a LIBOR Rate
Loan or a LIBOR Rate Contribution Advance shall remain outstanding, (a) prior
to the Final Completion Date, the one-month period commencing on the Funding
Date (or date of conversion from a Base Rate Loan) of the earliest such LIBOR
Rate Loan or LIBOR Rate Contribution Advance remaining outstanding and ending
on the last day of such period and, thereafter with respect to the continuation
thereof, each succeeding one-month period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of such
period, to and including the Completion Date, and (b) from and after the Final
Completion Date, the one, two, three or six month period selected by Lessee, or
the one-month period automatically selected, pursuant to the provisions of
Section 2.4 of the Loan Agreement and, thereafter with respect to the
continuation thereof, each succeeding period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of the one,
two, three or six month period selected by Lessee, or the one-month period
automatically selected, pursuant to the provisions of Section 2.4 of the Loan
Agreement.
"Interim LIBOR Rate" means, for any Interest Period, the per annum
rate of interest equal to the sum of the Adjusted LIBOR Rate for such Interest
Period plus 1.5% per annum.
"Land" means, collectively, each of the Parcels.
"Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs, treaties or decrees of any Governmental Authority or any
governmental or political subdivision or agency thereof, or of any court or
similar entity established by any thereof.
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<PAGE> 11
"Lease" means the Master Lease and Development Agreement, dated as of
April 3, 1998 between the Lessor and the Lessee, together with each Parcel
Lease Supplement and any amendments or supplements thereto.
"Lease Balance" means, for each Property as of any date of
determination, an amount equal to the sum of (i) the principal of the related
Parcel Tranche then outstanding, any premium or Breakage Costs applicable to
the prepayment of the related Parcel Tranche, all accrued and unpaid interest
on the related Parcel Tranche and, without duplication, all other amounts then
owing by the Lessee to the Lender under the Operative Documents plus (ii) the
outstanding balance of the related Parcel Contribution Tranche, Lessor's
Breakage Costs, if any, applicable to the prepayment thereof, all accrued and
unpaid Contribution Return (prorated to the date of payment) applicable to the
related Parcel Contribution Tranche and, without duplication, all other amounts
then owing by the Lessee to the Lessor under the Operative Documents.
"Lease Expense" means, for any period, the amounts paid by the Lessee
or any Subsidiary thereof as rent for rental payments under any operating lease
of real property and its improvements, as determined in accordance with GAAP,
pursuant to which lease the Lessee or any Subsidiary thereof is treated as the
owner of such property and its improvements for federal income tax purposes.
"Lease Term" means, with respect to each Property, (i) the period
commencing on the related Parcel Closing Date, and ending on the Scheduled
Termination Date or (ii) such shorter period as may result from earlier
termination of the Lease as provided therein.
"Lease Termination Date" means the Scheduled Termination Date or such
earlier date on which the Lease Term shall end as provided in the Lease.
"Leased Property" means, collectively, each of the Properties from
time to time subject to the Lease.
"Lender" means Bank One, Texas, N.A. and its permitted successors and
assigns.
"Lender Ratio" means 95.00%.
"Lessee" means Eagle USA Airfreight, Inc., a Texas corporation, and
its permitted successors and assigns.
"Lessor" means Asset XVI Holdings Company, L.L.C., a Massachusetts
limited liability company.
"Lessor Indemnitee" means the Lessor, its successors and permitted
assigns, permitted transferees, incorporators, members, employees, officers,
manager and agents.
"Lessor Liens" means Liens on or against the Leased Property or any
portion thereof, the Lease or any payment of Rent (i) which result from any act
of, or any Claim against, the Lessor unrelated to the exercise of Lessor's
rights under the Operative Documents or (ii) which result from any Tax owed by
the Lessor, except any Tax for which the Lessee is obligated to indemnify the
Lessor.
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"Lessor Property Financing Statements" means those UCC financing
statements given by the Lessor to the Lender with reference to the security
interest created by each Mortgage covering the collateral described therein.
"Lessor Rents Financing Statements" means those UCC financing
statements given by the Lessor to the Lender with reference to the security
interest created by the Assignment of Lease and Rents covering the collateral
described therein.
"Lessor's Breakage Costs" means any amounts (other than Breakage Costs
as defined herein) required to be paid by the Lessor or any of its members to
compensate any creditor thereof for any actual additional losses, costs or
expenses which such creditor may reasonably incur (including, without
limitation, any loss, cost or expense incurred by such creditor by reason of
the liquidation or reemployment of deposits or other funds acquired such
creditor from third parties) which follow the Lessee's untimely payment of
Facility Rent or its failure to accept a Contribution Advance, resulting in any
payment of principal on a note held by such creditor on a date other than when
due.
"LIBOR Rate" means, for any Interest Period an interest rate per annum
equal to the London Interbank Offered Rate for a term comparable to the term of
the Interest Period, as published in the most recent Federal Reserve
Statistical Bulletin before the applicable Funding Date; provided, however,
that in the event such a rate for a particular Interest Period term is not
published therein, "LIBOR Rate", with respect to such Interest Period term,
shall mean an interest rate per annum at which the Lender is offered deposits
in U.S. dollars in the London Interbank Market in accordance with its customary
business practice at approximately 10:00 a.m., Houston, Texas time, two (2)
business days prior to the commencement of such Interest Period in principal
amounts approximately equal to the outstanding principal amount of the Loan or
Loan Advance, whichever may be applicable, and with maturity comparable to such
Interest Period.
"LIBOR Rate Contribution Advance" means any Contribution Advance or
other portion of the Contribution as to which the Contribution Return related
thereto shall be determined by reference to the LIBOR Rate.
"LIBOR Rate Loan" means any portion of the principal amount of the
Note the rate of interest applicable thereto is determined by reference to the
LIBOR Rate.
"LIBOR Reserve Percentage" means the reserve requirement including any
supplemental and emergency reserves (expressed as a percentage) applicable to
member banks of the Federal Reserve System in respect of eurocurrency
liabilities under Regulation D of the Board of Governors of the Federal Reserve
System, or any substituted or amended reserve requirements applicable to member
banks of the Federal Reserve System which is in effect as of the date hereof
and taking into account any transitional requirements thereto becoming
effective during the term of the Loan.
"Lien" means any lien, mortgage, deed of trust, encumbrance, pledge,
charge, lease, easement, servitude, right of others (legal or equitable) or
security interest of any kind, including any thereof arising under any
conditional sale or other title retention agreement.
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"Loan" means that loan of up to $19,000,000 by the Lender to the
Lessor made pursuant to the Loan Agreement.
"Loan Advance" means any advance from time to time by the Lender to
the Lessor, or to the Lessee pursuant to Section 2.2 of the Participation
Agreement of amounts available to be borrowed under the Loan.
"Loan Agreement" means the Loan Agreement dated as of April 3, 1998,
between the Lender and the Lessor, together with all amendments and supplements
thereto.
"Loan Commitment" means the aggregate total amount of Loan Advances
which Lender has committed to make under the Loan Agreement, up to the maximum
principal sum of $19,000,000.
"Loan Documents" means the Loan Agreement, the Note, the Mortgages,
the Assignment of Lease and Rents, the Security Agreements and Assignments and
all documents and instruments executed and delivered in connection with each of
the foregoing.
"Loan Event of Default" means any of the events specified in Section
5.1 of the Loan Agreement, provided that any requirement for the giving of
notice, the lapse of time, or both or any other condition, event or act has
been satisfied.
"Loan Payment Date" means (i) while any LIBOR Loan shall be
outstanding, (a) to and including the Final Completion Date, the last day of
each Interest Period, and (b) after the Final Completion Date, (1) with respect
to any one-month Interest Period, the last day of such Interest Period, and (2)
with respect to any Interest Period having a duration longer than one month,
(A) for each calendar month (or part thereof) other than the last calendar
month (or part thereof) of such Interest Period, the day of each such
subsequent calendar month (or part thereof) which is the same day of the month
on which such Interest Period began, and (B) for the last calendar month (or
part thereof) of such Interest Period, the last day of such Interest Period;
and (ii) otherwise, the first Business Day of each month; provided, however,
that if any date determined in accordance with the foregoing shall be a date
other than a Business Day, the related Loan Payment Date shall instead be the
Business Day immediately preceding such date.
"Loan Default" means any event, condition or failure which, with
notice or lapse of time or both, would become a Loan Event of Default.
"Loss Proceeds" shall have the meaning specified in Section 11.6 of
the Lease.
"Material Adverse Effect" means a material adverse effect upon (i) the
consolidated financial condition, operations, performance or properties of the
Lessee and its Subsidiaries, or (ii) the ability of the Lessee to perform in
any material respect under the Operative Documents.
"Memorandum of Lease" means each Memorandum of Lease dated as of a
Parcel Closing Date between Lessee and Lessor which describes the Lease and
certain of its provisions and is intended to be recorded in the real property
records of the local jurisdiction in which such Parcel is located.
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"Mortgage" means each Mortgage and Security Agreement, Deed of Trust
and Security Agreement or similar instrument, dated as of the Parcel Closing
Dates executed by Lessor for the benefit of the Lender with respect to any
Property.
"Net Worth" means, with respect to any Person and as of any date of
its determination, the excess of the assets of such Person over the sum of the
liabilities of such Person and the minority interests of such Person, all as
determined in accordance with GAAP.
"Non-Disturbance and Attornment Agreement" means each Subordination,
Non-Disturbance and Attornment Agreement, dated as of a Parcel Closing Date, by
and among the Lender, the Lessor and the Lessee, with respect to any Property
together with any amendments or supplements thereto.
"Note" means the promissory note issued by Lessor to the Lender under
the Loan Agreement to evidence the Loan, together with any amendments or
supplements thereto or replacements thereof.
"Officer's Certificate" of a Person means a certificate signed by the
Chairman of the Board or the President or any Executive Vice President or any
Senior Vice President or any other Vice President of such Person signing with
the Treasurer or any Assistant Treasurer or the Controller or any Assistant
Controller or the Secretary or any Assistant Secretary of the such Person, or
by any Vice President who is also Controller or Treasurer signing alone.
"Operating Agreement" means that certain Limited Liability Company
Agreement, dated as of April 3, 1998, between Asset Holdings Corporation, a
Delaware corporation and Asset Holdings Corporation I, a Delaware corporation,
relating to the formation and governance of the Lessor.
"Operative Documents" means the Participation Agreement, the Lease,
the Security Agreement and Assignment, the Note, the Loan Agreement, the
Assignment of Lease and Rents, the Mortgages and the Non-Disturbance and
Attornment Agreements.
"Overdue Rate" means the lesser of (i) the highest interest rate
permitted by Applicable Law and (ii) an interest rate per annum (calculated on
the basis of a 365-day (or 366-day, if appropriate year) equal to the Base Rate
in effect from time to time plus 3.00%.
"Parcel" means each parcel of land described in Appendix I to each
Parcel Lease Supplement.
"Parcel Completion Date" means (i) with respect to a Parcel on which
the Construction of Improvements is to be financed from the proceeds of
Fundings pursuant to the Operative Documents, the first Loan Payment Date on
which the conditions specified in Section 3.3 of the Participation Agreement
shall have been satisfied or (ii) with respect to a Parcel on which no
Improvements are to be so Constructed, the related Parcel Closing Date.
"Parcel Conditions" is defined in Section 3.2 of the Participation
Agreement.
"Parcel Contribution Tranche" means, at any time of calculation, that
portion of the principal amount of the Contribution which equals (i) the total
of all Contribution Advances made in
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<PAGE> 15
respect of a particular Property less (ii) all amounts paid on account of the
Lease Balance of such Property in repayment of the Contribution, whether
pursuant to Articles XIV or XV of the Lease or otherwise; all allocations of
Contribution Advances and payments of Lease Balance to be determined by Lessor
in its discretion, which shall be binding on Lessee in the absence of manifest
error.
"Parcel Lease Supplement" means a supplement to the Lease executed by
the Lessee and the Lessor pursuant to which a Parcel of the Land shall be
leased and demised by the Lessor to the Lessee under the Lease, substantially
in the form set forth in Appendix II to the Lease, pursuant and subject to the
provisions of Section 2.1 of the Lease and Section 3.2 of the Participation
Agreement.
"Parcel Tranche" means that portion of the principal amount of the
Loan which (i) equals all Loan Advances made in respect of a particular
Property, less (ii) all amounts of Scheduled Rent, Lease Balance or other
prepayments of the Loan allocated by the Lender in its discretion in reduction
of such Parcel Tranche, the decision of the Lender as to any such allocation to
be binding on the Lessee and the Lessor in the absence of manifest error.
"Parcel Tranche Payment Schedule" means, with respect to each Parcel
Tranche, the schedule of monthly principal installments payable by Lessor on
each Loan Payment Date, to be delivered by the Lender on each Parcel Closing
Date, and otherwise, pursuant to the Loan Agreement.
"Participation Agreement" means the Master Participation Agreement
dated as of April 3, 1998 among the Lender, the Lessor and the Lessee, together
with all amendments and supplements thereto.
"Permitted Investments" means: (i) interest-bearing deposit accounts
(which may be represented by short-term certificates of deposit, time deposit
open account agreements or other short-term deposit instruments) in national or
state banks having (A) a combined capital and surplus of not less than
$100,000,000; (B) whose deposits are insured by the Federal Deposit Insurance
Corporation; and (C) whose senior unsecured debt is rated "A2" or better (or
the then equivalent thereof) by Moody's or "A" or better (or the then
equivalent thereof) by S&P; (ii) direct obligations of, or obligations the
principal of and interest on which are unconditionally guaranteed by, the
United States of America; or (iii) commercial paper rated "A-1" (or the then
equivalent thereof) by S&P and "P-1" (or the then equivalent thereof) by
Moody's and maturing not more than 180 days after the date of deposit.
"Permitted Liens" means (i) the respective rights and interests of the
Lessee, the Lessor and the Lender as provided in the Operative Documents, (ii)
Lessor Liens, (iii) Liens for Taxes either not yet due or being contested in
good faith and by appropriate proceedings, so long as enforcement thereof is
stayed pending such proceedings, (iv) materialmen's, mechanics', workers',
repairmen's, employees' or other like Liens arising after the related Parcel
Closing Date in the ordinary course of business for amounts either not yet due
or being contested in good faith and by appropriate proceedings, so long as
enforcement thereof is stayed pending such proceedings, (v) Liens arising after
the related Parcel Closing Date out of judgments or awards with respect to
which at the time an appeal or proceeding for review is being prosecuted in
good faith, so long as the enforcement thereof has been stayed pending such
appeal or review, (vi) easements, rights of way, reservations, servitudes and
rights of others against the Land which are listed on Schedule B to the related
Title
-15-
<PAGE> 16
Policy or permitted by Article VI of the Lease, (vii) assignments, leases and
subleases expressly permitted by the Operative Documents, and (viii) liens
which are not otherwise permitted by clauses (i) through (vii) of this
definition, do not violate the restrictions on the Lessee set forth in Section
5.4 of the Participation Agreement and secure obligations not exceeding
$100,000 at any one time.
"Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
nonincorporated organization or government or any agency or political
subdivision thereof.
"Plans and Specifications" means (i) the final plans and
specifications for any Improvements to be constructed after the related Parcel
Closing Date, as such Plans and Specifications may be hereafter amended,
supplemented or otherwise modified from time to time, and (ii) the final, "as
built" plans and specifications for Improvements in existence on a Parcel as of
the related Parcel Closing Date, all as approved and satisfactory to the
Lender.
"Property" means a Parcel and the Improvements at any time
Constructed, installed or located thereon.
"Property Costs" is defined in Section 2.6 of the Participation
Agreement.
"Purchase Option" is defined in Section 15.1 of the Lease.
"Purchase Option Price" means, for any Property, an amount equal to
the Lease Balance for such Property as of the closing date of the purchase of
such Property pursuant to the exercise by the Lessee of the Purchase Option set
forth in, and in accordance with, Section 15.1 of the Lease.
"Qualified Payment" shall mean any monies paid or payable to the
Lessor or the Lender and identified in the Lease or any other Operative
Document as a "Qualified Payment", it being agreed that all Qualified Payments
shall be paid to the Lender as a pre-payment of the Loan to be applied against
principal payments or installments of the Loan in the inverse order of
maturity, but without (unless agreed in writing by the Lender and the Lessee)
affecting or giving rise to any change or adjustment of the Basic Rent except
the installment due on the Lease Termination Date.
"Recourse Deficiency Amount" means (i) with respect to each Property,
the amount set as the Recourse Deficiency Amount in the related Parcel Lease
Supplement and (ii) with respect to all of the Leased Property, the aggregate
total of the Recourse Deficiency Amounts for each of the Properties which are
subject to the Lease at the time of determination; provided, however, if (i)
any amount of principal of the Note shall be prepaid, or repaid other than as
provided in Appendix III of the Loan Agreement, following the occurrence of an
Event of Loss or Event of Taking, (ii) a prepayment of the Note shall occur
following an appraisal of any Property in accordance with Section 3.5 of the
Participation Agreement, or (iii) as of the Final Completion Date, the total
Property Costs shall be less that the Total Commitments, then the Lessee may
request the Financial Advisor to recalculate the amount of the Recourse
Deficiency Amount for any Property utilizing the same formula, methodology and
assumptions used to calculate the original Recourse Deficiency Amount. The
Financial Advisor shall notify the Lessee, the Lessor and the Lender of the
recalculated Recourse Deficiency Amount, which recalculation, in the absence of
manifest error, shall be conclusive and binding upon the Lender, the Lessor and
the Lessee.
-16-
<PAGE> 17
"Regulations" means the income tax regulations promulgated from time
to time under and pursuant to the Code.
"Reinvestment Account" means the account maintained by the Lender
pursuant to Section 3.7 of the Loan Agreement.
"Release" means the release, deposit, disposal or leak of any
Hazardous Material into or upon or under any land or water or air, or otherwise
into the environment, including, without limitation, by means of burial,
disposal, discharge, emission, injection, spillage, leakage, seepage, leaching,
dumping, pumping, pouring, escaping, emptying, placement and the like.
"Release Date" means the date that the Loan has been paid in full.
"Remaining Commitments" is defined in Section 2.2 (b) of the
Participation Agreement.
"Remarketing Option" is defined in Section 15.6 of the Lease.
"Rent" means Basic Rent and Supplemental Rent, collectively.
"Rent Payment Date" means, with respect to each Property, each Loan
Payment Date during the Lease Term commencing on the first Loan Payment Date
which next follows the related Parcel Completion Date.
"Rent Period" means initially the period commencing on the first
Parcel Completion Date and ending on the first Rent Payment Date, and
thereafter each period from one Rent Payment Date to the next following Rent
Payment Date.
"Requirements of Law" means, as to any Person, the charter and by-laws
or other organizational or governing documents of such Person, and any law,
rule or regulation, permit, approval, authorization, license or variance, order
or determination of an arbitrator or a court or other Governmental Authority,
in each case applicable to or binding upon such Person or any of its property
or to which such Person or any of its property is subject, including, without
limitation, the Securities Act, the Securities Exchange Act, Regulations G, T,
U and X, and any building, environmental or land use requirement or permit or
occupational safety or health law, rule or regulation.
"Responsible Officer" means the President, any Senior Vice President
or Executive Vice President, any Vice President, the Secretary, any Assistant
Secretary, the Treasurer, or any Assistant Treasurer.
"Scheduled Rent" means, for the Lease Term, the rent payable pursuant
to Section 4.1 (c) of the Lease on each Rent Payment Date in the amount set
forth in Appendix III to the Lease, as such Appendix may be adjusted in the
circumstances described in Section 4.1 of the Lease.
"Scheduled Termination Date" means April 1, 2005.
"SEC" means the United States Securities and Exchange Commission.
-17-
<PAGE> 18
"Securities" means any stock, shares, voting trust certificates,
bonds, debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities", or any certificates of interest,
shares, or participations in temporary or interim certificates for the purchase
or acquisition of, or any right to subscribe to, purchase or acquire any of the
foregoing.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Security Agreement and Assignment" means, with respect to a Parcel on
which Improvements are to be constructed in accordance with the Operative
Documents, each Security Agreement and Assignment (Construction Contract,
Permits, Licenses and Governmental Approvals, and Plans, Specifications and
Drawings), dated as of a Parcel Closing Date from the Lessee to the Lender,
together with any amendments or supplements thereto.
"Subsidiary" means for any Person any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions are at the time directly or indirectly owned by such Person.
"Supplemental Rent" means any and all amounts, liabilities and
obligations other than Basic Rent which the Lessee assumes or agrees or is
otherwise obligated to pay under the Lease or any other Operative Document
(whether or not designated as Supplemental Rent) to the Lessor, the Lender or
any other party, including, without limitation, amounts under Article XVII of
the Lease, Fair Market Sales Value payments and indemnities and damages for
breach of any covenants, representations, warranties or agreements.
"Tangible Net Worth" means, for any Person and as of any date of its
determination, the Net Worth of such Person less the Intangible Assets of such
Person.
"Tax" or "Taxes" is defined in Section 7.4 (a) of the Participation
Agreement.
"Tax Indemnitee" means the Lessor, the Lender and their respective
Affiliates, successors, permitted assigns, permitted transferees, employees,
officers, directors and agents thereof (and, in the case of the Lessor, also
including its incorporators, manager, members, and in particular, the manager
in its capacity as the tax matters partner) provided, however, that in no event
shall the Lessee be a Tax Indemnitee.
"Title Insurance Company" means Commonwealth Land Title Insurance
Company and its successors and assigns and any other title insurance company
approved by Lender.
"Title Policy" is defined in Section 3.1 of the Participation
Agreement.
"Total Commitments" means the sum of the Loan Commitment and the
Equity Commitment.
-18-
<PAGE> 19
"Total Lease Balance" means, as of any date of determination, the
aggregate total of the Lease Balances applicable to each of the Properties then
subject to the Lease.
"UCC" means the Uniform Commercial Code of the State, as in effect
from time to time.
"Unfunded Benefit Liabilities" means, with respect to any Employee
Benefit Plan at any time, the amount of unfunded benefit liabilities of such
Employee Benefit Plan at such time as determined under ERISA Section
4001(a)(18) which shall not be less than the accumulated benefit obligation, as
disclosed in accordance with FAS 87, over the fair market value of Employee
Benefit Plan assets.
-19-
<PAGE> 1
EXHIBIT 11(i)
EAGLE USA AIRFREIGHT, INC.
COMPUTATION OF PER SHARE EARNINGS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AND FOOTNOTE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30,
1998 1997
------- -------
<S> <C> <C>
Net income $15,524 $11,566
Shares used in basic calculation:
Weighted average shares outstanding 18,617 17,716
------- -------
Total basic shares 18,617 17,716
Additional shares for diluted computation:
Effect of stock options (1) 705 898
------- -------
Total diluted shares 19,322 18,614
======= =======
Basic earnings per share $ 0.83 $ 0.65
======= =======
Diluted earnings per share $ 0.80 $ 0.62
======= =======
</TABLE>
- -------------
(1) For the nine months ended June 30, 1998, calculated assuming exercise
of options for 3,019,153 shares of common stock at prices ranging from
$1.25 to $35.13 per share and assumed repurchase of shares at the
average market price of $30.28. For the nine months ended June 30,
1997, calculated assuming exercise of options for 2,319,270 shares of
common stock at prices ranging from $1.25 to $30.63 per share and
assumed repurchase of shares at the average market price per share of
$26.14.
<PAGE> 1
EXHIBIT 11(ii)
EAGLE USA AIRFREIGHT, INC.
COMPUTATION OF PER SHARE EARNINGS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AND FOOTNOTE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
1998 1997
------- -------
<S> <C> <C>
Net income $ 5,645 $ 4,104
Shares used in basic calculation:
Weighted average shares outstanding 19,008 17,906
------- -------
Total basic shares 19,008 17,906
Additional shares for diluted computation:
Effect of stock options (1) 666 767
------- -------
Total diluted shares 19,674 18,673
======= =======
Basic earnings per share $ 0.30 $ 0.23
======= =======
Diluted earnings per share $ 0.29 $ 0.22
======= =======
</TABLE>
- -------------
(1) For the three months ended June 30, 1998, calculated assuming exercise
of options for 3,019,153 shares of common stock at prices ranging from
$1.25 to $35.13 per share and assumed repurchase of shares at the
average market price of $31.74. For the three months ended June 30,
1997, calculated assuming exercise of options for 2,319,270 shares of
common stock at prices ranging from $1.25 to $30.63 per share and
assumed repurchase of shares at the average market price per share of
$23.49.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF EAGLE USA AIRFREIGHT, INC. FOR
THE NINE MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-Q REPORT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 33,880
<SECURITIES> 14,076
<RECEIVABLES> 57,700
<ALLOWANCES> 461
<INVENTORY> 0
<CURRENT-ASSETS> 110,032
<PP&E> 27,153
<DEPRECIATION> 6,986
<TOTAL-ASSETS> 140,303
<CURRENT-LIABILITIES> 27,185
<BONDS> 0
0
0
<COMMON> 19
<OTHER-SE> 113,099
<TOTAL-LIABILITY-AND-EQUITY> 140,303
<SALES> 295,239
<TOTAL-REVENUES> 295,239
<CGS> 164,525
<TOTAL-COSTS> 164,525
<OTHER-EXPENSES> 106,829
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 25,144
<INCOME-TAX> 9,620
<INCOME-CONTINUING> 15,524
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,524
<EPS-PRIMARY> 0.83
<EPS-DILUTED> 0.80
</TABLE>
