<PAGE> 1
REGISTRATION NO. 001-12211
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10/A-1
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR 12(G) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------------
ECHELON INTERNATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
FLORIDA 59-2554218
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
ONE PROGRESS PLAZA 33701
SUITE 2400 (ZIP CODE)
ST. PETERSBURG, FLORIDA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(813) 824-6767
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
- --------------------------------------- -------------------------------
<S> <C>
Common Stock, par value $.01 per share New York Stock Exchange
Series A Junior Participating Preferred New York Stock Exchange
Stock, par value $.01 per share
</TABLE>
------------------------
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
ITEM 1. BUSINESS.
The information required by this item is contained under the sections
"Business," "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and in the Echelon Financial
Statements of the Information Statement dated November , 1996 included herewith
as Exhibit 2.1 (the "Information Statement") and such sections and financial
statements are incorporated herein by reference.
ITEM 2. FINANCIAL INFORMATION.
The information required by this item is contained under the sections
"Selected Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" of the Information Statement and such
sections are incorporated herein by reference.
ITEM 3. PROPERTIES.
The information required by this item is contained under the sections
"Business -- The Real Estate Business -- Commercial Real Estate Ownership and
Management" and "Business -- The Real Estate Business -- Other Owned Real
Estate; Multi-Family Residential and Commercial Real Estate Development" of the
Information Statement and such sections are incorporated herein by reference.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item is contained under the sections
"Management and Executive Compensation -- Management Ownership of Securities"
and "Management and Executive Compensation -- Security Ownership of Certain
Beneficial Owners" of the Information Statement and such sections are
incorporated herein by reference.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS.
The information required by this item is contained under the sections
"Management and Executive Compensation -- Board of Directors" and "Management
and Executive Compensation -- Executive Officers" of the Information Statement
and such sections are incorporated herein by reference.
ITEM 6. EXECUTIVE COMPENSATION.
The information required by this item is contained under the section
"Management and Executive Compensation" of the Information Statement and such
section is incorporated herein by reference.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is contained under the sections
"Relationship Between Florida Progress and Echelon After the Distribution" and
"Management and Executive Compensation -- Certain Relationships and Related
Transactions" of the Information Statement and such sections are incorporated
herein by reference.
ITEM 8. LEGAL PROCEEDINGS.
The information required by this item is contained under the section
"Business -- Legal Proceedings" of the Information Statement and such section is
incorporated herein by reference.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The information required by this item is contained under the sections "The
Distribution -- Manner of Effecting the Distribution," "The
Distribution -- Listing and Trading of Echelon Common Stock," "Dividend
<PAGE> 3
Policy" and "Description of Capital Stock" of the Information Statement and such
sections are incorporated herein by reference.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
None.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
The information required by this item is contained under the section
"Description of Capital Stock" of the Information Statement and such section is
incorporated herein by reference.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The information required by this item is contained under the section
"Description of Capital Stock -- Provisions of Echelon Articles of Incorporation
and By-laws Affecting Changes in Control -- Indemnification and Limitation of
Liability for Directors and Officers" of the Information Statement and such
section is incorporated herein by reference.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is identified in the "Index to
Financial Statements" and is contained in (i) the Echelon Financial Statements
in the Information Statement and such index and financial statements are
incorporated herein by reference, and (ii) Schedule II -- "Valuation and
Qualifying Accounts", Schedule III -- "Real Estate and Accumulated
Depreciation", and Schedule IV -- "Mortgage Loans and Real Estate" to this
Registration Statement.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL MATTERS.
None.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
The information required by this items in contained in (i) the "Index to
Financial Statements" on page F-1 of the Information Statement to this
Registration Statement and such index is incorporated herein by reference, and
(ii) Schedule II -- "Valuation and Qualifying Accounts", Schedule III -- "Real
Estate and Accumulated Depreciation", and Schedule IV -- "Mortgage Loans and
Real Estate" to this Registration Statement.
<PAGE> 4
(b) Exhibits
The following documents are filed as exhibits hereto:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- ------------------------------------------------------------------------------------
<C> <S>
2.1 Information Statement dated as of November , 1996
3.1 Form of Amended and Restated Articles of Incorporation of Echelon International
Corporation*
3.2 Form of Amended and Restated By-laws of Echelon International Corporation*
4.1 Specimen Common Share certificate*
4.2 Form of Rights Agreement between Echelon International Corporation and The First
National Bank of Boston, as Rights Agent*
4.3 Form of Articles of Amendment of Articles of Incorporation Providing for Series A
Junior Participating Preferred Stock of Echelon International Corporation (attached
as Exhibit A to the Rights Agreement filed as Exhibit 4.2 hereto)*
4.4 Form of Right Certificate (attached as Exhibit B to the Rights Agreement filed as
Exhibit 4.2 hereto)*
4.5 Loan Agreement dated as of November 5, 1996 by and among Echelon International
Corporation as Borrower, Salomon Brothers Realty Corp. as Lender and LaSalle
National Bank as Collateral Agent
4.6 Promissory Note in the amount of $105,000,000 dated November 5, 1996 by Echelon
International Corporation as Maker to Salomon Brothers Realty Corp. As Holder
4.7 Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing
dated November 5, 1996 by Echelon International Corporation as Mortgagor to Salomon
Brothers Realty Corp. as Mortgagee
4.8 Pledge and Security Agreement by Echelon International Corporation as Obligor in
favor of Salomon Brothers Realty Corp. as Secured Party
4.9 Assignment of Contracts, Licenses, Permits, Agreements, Warranties and Approvals
dated as of November 5, 1996 by Echelon International Corporation as Borrower to
Salomon Brothers Realty Corp. as Lender
4.10 Assignment of Rents and Leases executed as of November 5, 1996 by Echelon
International Corporation as Borrower to Salomon Brothers Realty Corp. as Lender
4.11 Assignment of Participation Interest dated as of November 5, 1996 by Echelon
International Corporation as Borrower to Salomon Brothers Realty Corp. as Lender
4.12 Collateral Assignment of Mortgage and Other Documents effective November 5, 1996 by
Echelon International Corporation as Assignor to Salomon Brothers Realty Corp. as
Lender (Assignee)
10.1 Form of Distribution Agreement between Florida Progress Corporation and Echelon
International Corporation*
10.2 Form of Tax Sharing Agreement between Florida Progress Corporation and Echelon
International Corporation*
10.3 Form of Employee Benefits Allocation Agreement between Florida Progress Corporation
and Echelon International Corporation*
10.4 Form of Transition Services Agreement between Florida Progress Corporation and
Echelon International Corporation*
10.5 Form of Note issued by Echelon International Corporation to Progress Capital
Holdings, Inc.*
10.6 Consulting Agreement by and between Talguin Development Company and Mission
Development Company dated as of July 30, 1996
10.7 Echelon International Corporation 1996 Employee Stock Purchase Plan
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- ------------------------------------------------------------------------------------
<C> <S>
10.8 Echelon International Corporation Long Term Incentive Plan
10.9 Echelon International Corporation Non-Employee Directors' Stock Plan
10.10 Echelon International Corporation 1996 Stock Option Plan
10.11 Form of Employment Agreement to be entered into by and between Echelon International
Corporation and Darryl A. LeClair
10.12 Form of Employment Agreement to be entered into by and between Echelon International
Corporation and Larry J. Newsome
10.13 Form of Employment Agreement to be entered into by and between Echelon International
Corporation and Thomas D. Wilson
10.14 Form of Employment Agreement to be entered into by and between Echelon International
Corporation and Raymond F. Higgins
10.15 Form of Employment Agreement to be entered into by and between Echelon International
Corporation and James R. Hobbs
10.16 Form of Indemnification Agreement to be entered into by and between Echelon
International Corporation and each of its directors
27 Financial Data Schedule of Echelon International Corporation
99.1 Chairman's letter to Stockholders of Florida Progress Corporation
</TABLE>
- ---------------
* Previously filed
<PAGE> 6
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
ECHELON INTERNATIONAL CORPORATION
By: /s/ DARRYL A. LECLAIR
--------------------------------------
NAME: DARRYL A. LECLAIR
TITLE: PRESIDENT
Date: November 7, 1996
<PAGE> 7
INDEPENDENT AUDITORS' REPORT
The Stockholder of
Echelon International Corporation:
Under date of September 18, 1996, we reported on the consolidated balance sheets
of Echelon International Corporation and subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of operations and deficit and
cash flows for each of the years in the three-year period ended December 31,
1995, which are included in the Form 10 included in the Information Statement.
In connection with our audits of the aforementioned consolidated financial
statements, we also audited the related consolidated financial statement
schedules in the Form 10. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
St. Petersburg, Florida
September 18, 1996
S-1
<PAGE> 8
ECHELON INTERNATIONAL CORPORATION
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO DEDUCTIONS BALANCE AT
BEGINNING COSTS AND FROM END OF
OF PERIOD EXPENSES RESERVES OTHER(A) PERIOD
---------- ---------- ---------- -------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995:
Allowance for losses on loans and
leases................................. $ 33.7 $5.0 $ (6.7) $0.0 $ 32.0
Allowance for losses on real estate....... 16.8 1.2(b) (18.0)(c) 0.0 0.0
Allowance for doubtful accounts........... 0.9 0.1 0.0 0.0 1.0
YEAR ENDED DECEMBER 31, 1994:
Allowance for losses on loans and
leases................................. $ 24.5 $9.9 $ (0.7) $0.0 $ 33.7
Allowance for losses on real estate....... 16.1 0.7 0.0 0.0 16.8
Allowance for doubtful accounts........... 0.6 0.3 0.0 0.0 0.9
YEAR ENDED DECEMBER 31, 1993:
Allowance for losses on loans and
leases................................. $ 22.9 $5.9 $ (4.3) $0.0 $ 24.5
Allowance for losses on real estate....... 14.8 0.6 0.0 0.7 16.1
Allowance for doubtful accounts........... 0.6 0.0 0.0 0.0 0.6
</TABLE>
- ---------------
(a) Represents a balance sheet transfer from investment in unconsolidated
affiliates.
(b) Reconciliation of 1995 provision for losses charged to operations:
<TABLE>
<S> <C>
Amount credited to allowance account.............. $1.2
Amount charged directly to asset account.......... 0.8
----
Total provision charged to operations... $2.0
====
</TABLE>
(c) Reserve was eliminated through the writedown of assets due to impairment.
S-2
<PAGE> 9
ECHELON INTERNATIONAL CORPORATION
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
GROSS CARRYING VALUE
INITIAL COST COSTS AT DECEMBER 31, 1995
-------------------- CAPITALIZED IMPAIRMENT --------------------
BUILDINGS & SUBSEQUENT TO WRITEDOWN BUILDINGS &
REAL ESTATE PROPERTY LAND IMPROVEMENTS ACQUISITION (A) LAND IMPROVEMENTS
- ------------------------------------------------------- ----- ------------ ------------- ---------- ----- ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
FOR SALE AND UNDER DEVELOPMENT
St. Petersburg, Florida:
9th Street Property.................................. $ 5.4 $0.0 $ 0.0 $ 0.0 $ 5.4 $ 0.0
4th Street Property.................................. 2.5 0.0 1.0 (1.9) 1.6 0.0
Carillon............................................. 23.7 0.0 17.4 0.0 41.1 0.0
Lakeland, Florida:
Riverside Ranch...................................... 1.2 0.6 0.1 0.0 1.2 0.7
Gainesville, Florida:
Progress Center Land................................. 0.6 0.0 2.9 (2.5) 1.0 0.0
Miscellaneous.......................................... 1.0 0.0 0.8 (0.9) 0.9 0.0
----- ---- ------ ------ ----- ------
Sub-total.............................................. 34.4 0.6 22.2 (5.3) 51.2 0.7
----- ---- ------ ------ ----- ------
INCOME PRODUCING
OFFICE AND INDUSTRIAL BUILDINGS
St. Petersburg, Florida:
Barnett Tower........................................ 3.6 0.0 53.5 0.0 3.6 53.5
McNulty Station...................................... 1.5 0.5 9.9 (0.3) 2.0 9.6
Bayboro Properties................................... 2.8 0.9 0.8 (0.3) 2.6 1.6
3rd & 3rd............................................ 0.3 0.0 2.3 0.0 0.8 1.8
100 Carillon......................................... 1.5 0.0 6.3 0.0 1.5 6.3
Tampa, Florida:
7th Avenue........................................... 1.4 0.0 4.1 (0.9) 1.4 3.2
5th Avenue........................................... 0.1 0.0 0.1 0.0 0.1 0.1
Progress Packaging................................... 0.4 1.2 0.0 0.0 0.4 1.2
Tallahassee, Florida:
Highpoint Center..................................... 0.8 0.0 13.3 0.0 0.8 13.3
Gainesville, Florida:
Progress Center...................................... 0.3 0.0 11.2 (1.2) 0.3 10.0
Miscellaneous.......................................... 0.0 0.3 1.5 (0.9) 0.0 0.9
----- ---- ------ ------ ----- ------
Sub-total.............................................. 12.7 2.9 103.0 (3.6) 13.5 101.5
----- ---- ------ ------ ----- ------
DOCKAGE AND MARINE SERVICES
St. Petersburg, Florida:
Harborage of Bayboro................................. 1.7 4.4 9.7 (9.1) 1.7 5.0
----- ---- ------ ------ ----- ------
GRAND TOTAL............................................ $48.8 $7.9 $ 134.9 $(18.0) $66.4 $107.2
===== ==== ====== ====== ===== ======
<CAPTION>
GROSS
CARRYING
VALUE
AT
DECEMBER
31, 1995
-------- ACCUMULATED CONSTRUCTION YEAR
REAL ESTATE PROPERTY TOTAL DEPRECIATION YEAR ACQUIRED
- ------------------------------------------------------- ------ ----------- ------------- ------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
FOR SALE AND UNDER DEVELOPMENT
St. Petersburg, Florida:
9th Street Property.................................. $ 5.4 $ 0.0 n/a 1991
4th Street Property.................................. 1.6 0.0 n/a 1993
Carillon............................................. 41.1 0.0 n/a 1990
Lakeland, Florida:
Riverside Ranch...................................... 1.9 (0.7) 1984 1984
Gainesville, Florida:
Progress Center Land................................. 1.0 0.0 n/a 1984
Miscellaneous.......................................... 0.9 0.0 n/a n/a
------ ------
Sub-total.............................................. 51.9 (0.7)
------ ------
INCOME PRODUCING
OFFICE AND INDUSTRIAL BUILDINGS
St. Petersburg, Florida:
Barnett Tower........................................ 57.1 (7.1) 1990 1986
McNulty Station...................................... 11.6 (3.0) 1984 - 1988 1983 - 1985
Bayboro Properties................................... 4.2 (1.7) n/a 1984 - 1985
3rd & 3rd............................................ 2.6 (0.6) 1984 1993
100 Carillon......................................... 7.8 (1.2) 1987 1994
Tampa, Florida:
7th Avenue........................................... 4.6 (1.0) 1986 1986
5th Avenue........................................... 0.2 0.0 1979 1985
Progress Packaging................................... 1.6 (0.3) 1993 1993
Tallahassee, Florida:
Highpoint Center..................................... 14.1 (3.1) 1990 1995
Gainesville, Florida:
Progress Center...................................... 10.3 (3.0) 1984 - 1988 1984
Miscellaneous.......................................... 0.9 (0.5) n/a n/a
------ ------
Sub-total.............................................. 115.0 (21.5)
------ ------
DOCKAGE AND MARINE SERVICES
St. Petersburg, Florida:
Harborage of Bayboro................................. 6.7 (4.0) 1984 - 1988 1984
------ ------
GRAND TOTAL............................................ $173.6 $ (26.2)
====== ======
</TABLE>
- ---------------
(A) See "Notes to Schedule III -- Real Estate and Accumulated Depreciation."
S-3
<PAGE> 10
ECHELON INTERNATIONAL CORPORATION
NOTES TO SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
(A) Impairment writedown is based on management's estimate of fair market
value of assets determined to be impaired at December 31, 1995.
(B) The aggregate cost for Federal income tax purposes is $144.1 million.
(C) Reconciliation:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
REAL ESTATE
Balance at beginning of period........................... $158.3 $156.3 $171.8
Acquisitions and improvements.......................... 17.0 7.8 3.7
Cost of real estate sold............................... (1.7) (5.8) (19.2)
------ ------ ------
Balance at end of period................................. $173.6 $158.3 $156.3
====== ====== ======
ACCUMULATED DEPRECIATION
Balance at beginning of period........................... $ 19.4 $ 15.2 $ 12.6
------ ------ ------
Additions:
Depreciation........................................ 4.8 3.6 4.1
Other............................................... 3.1 1.7 1.7
------ ------ ------
7.9 5.3 5.8
Deductions:
Accumulated depreciation of real estate sold........ (1.1) (1.1) (3.2)
------ ------ ------
Balance at end of period................................. $ 26.2 $ 19.4 $ 15.2
====== ====== ======
</TABLE>
S-4
<PAGE> 11
ECHELON INTERNATIONAL CORPORATION
SCHEDULE IV -- MORTGAGE LOANS ON REAL ESTATE
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
FINAL FACE CARRYING
MATURITY PRIOR AMOUNT OF AMOUNT OF
DESCRIPTION INTEREST RATE DATE PERIODIC PAYMENT TERMS LIENS MORTGAGES MORTGAGES
- --------------------------- ------------- ---------- ----------------------------------- ----- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
First Mortgage Loans --
Office Buildings:
Madison Building......... Prime + .75% Nov. 1998 Varying amounts with $3.1 balloon $0.0 $ 3.6 $ 3.4
Continuum Building....... Prime + 1.5% Dec. 1998 Varying amounts with $8.2 balloon 0.0 11.0 9.2
Plaza Del Rio............ Prime + 1.5% Feb. 1997 Level amount with $5.3 balloon 0.0 5.5 5.3
Vine Street -- Olympia... Prime + .75% July 2001 $5.3 balloon 0.0 5.3 5.3
Vine Street -- Capital
View I................. Prime + .75% Oct. 1998 $5.8 balloon 0.0 5.8 5.8
Vine Street -- Capital
View II................ Prime + .75% Dec. 1999 $5.0 balloon 0.0 5.0 5.0
Vine Street -- Town
Square VI.............. Prime + .75% May 2001 $4.5 balloon 0.0 4.5 4.5
Vine Street -- Tacoma.... Prime + .75% Aug. 1996 $12.3 balloon(D) 0.0 12.3 12.3
---- ------ ------
0.0 53.0 50.8
---- ------ ------
First Mortgage Loans -- Industrial
Marquardt................ Prime + 2% Dec. 1998 $23.5 balloon 0.0 35.0 23.5
MacDill.................. Prime + 2% April 1997 Level amount with $0.4 balloon 0.0 0.5 0.4
First Mortgage Loans -- Life Care
South Port............... 11% April 2000 Varying amounts with $16.7 balloon 0.0 25.0 23.5
South Port
Supplemental........... 11% April 2000 Varying amounts with $2.1 balloon 0.0 2.5 2.4
Lake Port................ 11% April 2000 Varying amounts with $9.2 balloon 0.0 11.0 10.3
---- ------ ------
0.0 38.5 36.2
---- ------ ------
$0.0 $ 127.0 $ 110.8
====== ====== ======
</TABLE>
(A) At December 31, 1995 there were no loans subject to delinquent principal or
interest.
(B) Reconciliation of the carrying amount of mortgage loans to total carrying
amount of mortgages:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Beginning balance............................................ $122.5 $152.3 $143.6
New mortgage loans........................................... 0.0 0.0 38.2
Collections of principal..................................... (11.6) (29.8) (29.5)
------ ------ ------
Ending balance............................................... $110.9 $122.5 $152.3
====== ====== ======
</TABLE>
Total amount of mortgages extended as of December 31, 1995 is $28.8
million.
(C) The aggregate cost for federal income tax purposes is $110.5 million.
(D) Paid off in August 1996.
S-5
<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- ------------------------------------------------------------------------------------
<C> <S>
2.1 Information Statement dated as of November , 1996
3.1 Form of Amended and Restated Articles of Incorporation of Echelon International
Corporation*
3.2 Form of Amended and Restated By-laws of Echelon International Corporation*
4.1 Specimen Common Share certificate*
4.2 Form of Rights Agreement between Echelon International Corporation and The First
National Bank of Boston, as Rights Agent*
4.3 Form of Articles of Amendment of Articles of Incorporation Providing for Series A
Junior Participating Preferred Stock of Echelon International Corporation (attached
as Exhibit A to the Rights Agreement filed as Exhibit 4.2 hereto)*
4.4 Form of Right Certificate (attached as Exhibit B to the Rights Agreement filed as
Exhibit 4.2 hereto)*
4.5 Loan Agreement dated as of November 5, 1996 by and among Echelon International
Corporation as Borrower, Salomon Brothers Realty Corp. as Lender and LaSalle
National Bank as Collateral Agent
4.6 Promissory Note in the amount of $105,000,000 dated November 5, 1996 by Echelon
International Corporation as Maker to Salomon Brothers Realty Corp. As Holder
4.7 Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing
dated November 5, 1996 by Echelon International Corporation as Mortgagor to Salomon
Brothers Realty Corp. as Mortgagee
4.8 Pledge and Security Agreement by Echelon International Corporation as Obligor in
favor of Salomon Brothers Realty Corp. as Secured Party
4.9 Assignment of Contracts, Licenses, Permits, Agreements, Warranties and Approvals
dated as of November 5, 1996 by Echelon International Corporation as Borrower to
Salomon Brothers Realty Corp. as Lender
4.10 Assignment of Rents and Leases executed as of November 5, 1996 by Echelon
International Corporation as Borrower to Salomon Brothers Realty Corp. as Lender
4.11 Assignment of Participation Interest dated as of November 5, 1996 by Echelon
International Corporation as Borrower to Salomon Brothers Realty Corp. as Lender
4.12 Collateral Assignment of Mortgage and Other Documents effective November 5, 1996 by
Echelon International Corporation as Assignor to Salomon Brothers Realty Corp. as
Lender (Assignee)
10.1 Form of Distribution Agreement between Florida Progress Corporation and Echelon
International Corporation*
10.2 Form of Tax Sharing Agreement between Florida Progress Corporation and Echelon
International Corporation*
10.3 Form of Employee Benefits Allocation Agreement between Florida Progress Corporation
and Echelon International Corporation*
10.4 Form of Transition Services Agreement between Florida Progress Corporation and
Echelon International Corporation*
10.5 Form of Note issued by Echelon International Corporation to Progress Capital
Holdings, Inc.*
10.6 Consulting Agreement by and between Talguin Development Company and Mission
Development Company dated as of July 30, 1996
10.7 Echelon International Corporation 1996 Employee Stock Purchase Plan
</TABLE>
<PAGE> 13
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- ------------------------------------------------------------------------------------
<C> <S>
10.8 Echelon International Corporation Long Term Incentive Plan
10.9 Echelon International Corporation Non-Employee Directors' Stock Plan
10.10 Echelon International Corporation 1996 Stock Option Plan
10.11 Form of Employment Agreement to be entered into by and between Echelon International
Corporation and Darryl A. LeClair
10.12 Form of Employment Agreement to be entered into by and between Echelon International
Corporation and Larry J. Newsome
10.13 Form of Employment Agreement to be entered into by and between Echelon International
Corporation and Thomas D. Wilson
10.14 Form of Employment Agreement to be entered into by and between Echelon International
Corporation and Raymond F. Higgins
10.15 Form of Employment Agreement to be entered into by and between Echelon International
Corporation and James R. Hobbs
10.16 Form of Indemnification Agreement to be entered into by and between Echelon
International Corporation and each of its directors
27 Financial Data Schedule of Echelon International Corporation
99.1 Chairman's letter to Stockholders of Florida Progress Corporation
</TABLE>
- ---------------
* Previously filed
<PAGE> 1
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT ON FORM 10 RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THIS PRELIMINARY
INFORMATION STATEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.
SUBJECT TO COMPLETION OR AMENDMENT, DATED NOVEMBER 7, 1996
INFORMATION STATEMENT
---------------------
ECHELON INTERNATIONAL CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
---------------------
This Information Statement is being furnished in connection with the
distribution (the "Distribution") to holders of common stock, without par value
(the "Florida Progress Common Stock"), of Florida Progress Corporation ("Florida
Progress") of all outstanding shares of common stock, par value $.01 per share
(the "Echelon Common Stock"), of Echelon International Corporation ("Echelon").
Shares of Echelon Common Stock will be distributed to holders of Florida
Progress Common Stock of record as of the close of business on ,
1996 (the "Record Date"). Each such holder will receive one share of Echelon
Common Stock for every 15 shares of Florida Progress Common Stock held on the
Record Date. Share certificates representing shares of Echelon will be mailed on
, 1996 or as promptly as practicable thereafter. No consideration
will be paid by Florida Progress's stockholders for shares of Echelon Common
Stock. There is no current trading market for Echelon Common Stock, although a
"when-issued" market is expected to develop prior to the Distribution. The
Echelon Common Stock has been accepted for listing on the New York Stock
Exchange ("NYSE"), subject to notice of issuance, under the symbol "EIN." See
"The Distribution -- Listing and Trading of Echelon Common Stock."
---------------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
RECIPIENTS OF ECHELON COMMON STOCK, SEE "RISK
FACTORS" BEGINNING ON PAGE 9.
NO STOCKHOLDER APPROVAL OF THE DISTRIBUTION IS REQUIRED OR SOUGHT.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO
SEND US A PROXY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS INFORMATION STATEMENT.
THIS INFORMATION STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.
---------------------
Stockholders of Florida Progress with inquiries related to the Distribution
should contact The First National Bank of Boston, telephone (617) 575-3100, the
Distribution Agent for the Distribution.
The date of this Information Statement is November , 1996.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INFORMATION STATEMENT SUMMARY......................................................... 1
SUMMARY FINANCIAL DATA................................................................ 7
SUMMARY PRO FORMA DATA................................................................ 8
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS............................. 9
RISK FACTORS.......................................................................... 9
THE DISTRIBUTION...................................................................... 19
RELATIONSHIP BETWEEN FLORIDA PROGRESS AND ECHELON AFTER THE DISTRIBUTION.............. 23
DIVIDEND POLICY....................................................................... 26
CAPITALIZATION........................................................................ 27
SELECTED FINANCIAL DATA............................................................... 28
PRO FORMA FINANCIAL DATA.............................................................. 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.......................................................................... 32
BUSINESS.............................................................................. 37
MANAGEMENT AND EXECUTIVE COMPENSATION................................................. 53
DESCRIPTION OF CAPITAL STOCK.......................................................... 61
AVAILABLE INFORMATION................................................................. 67
REPORTS OF ECHELON.................................................................... 67
INDEX TO FINANCIAL STATEMENTS......................................................... F-1
</TABLE>
i
<PAGE> 3
INFORMATION STATEMENT SUMMARY
The following is a summary of certain information contained in this
Information Statement. This summary is included for convenience only and should
not be considered complete. This summary is qualified in its entirety by the
more detailed information and financial statements contained elsewhere in this
Information Statement. Certain capitalized terms used but not expressly defined
in this summary are defined elsewhere in this Information Statement. This
Information Statement contains forward-looking statements which involve risks
and uncertainties. The actual results of Echelon and the degree to which Echelon
is able to implement its business plan, maximize the value of its assets, grow
its business and achieve profitability may differ significantly from the
proposed implementation and contemplated actions discussed in the forward-
looking statements. In particular, Echelon may not be able to collect loan and
lease receivables, to maintain occupancy levels at existing properties or
collect rent payments on existing assets, to identify and develop new properties
or to sell existing properties, loans or other assets in the manner or at the
times contemplated by the business plan and business described herein. Factors
that might cause such differences include, but are not limited to, those
discussed in "Risk Factors."
THE DISTRIBUTION
Distributing Company....... Florida Progress Corporation, a Florida
corporation.
Distributed Company........ Echelon International Corporation, a Florida
corporation. Echelon, formerly known as PLC Leasing
Corporation, is the successor to Progress Credit
Corporation ("PCC") and two of PCC's subsidiaries,
Talquin Development Company and Progress Leasing
Corporation.
Business of Distributed
Company.................. Echelon is a real estate and financial services
company with operations in two business segments:
(i) development, ownership and management of
commercial and multi-family residential real estate
(the "Real Estate Business") and (ii)
collateralized financing of commercial real estate
and aircraft and leasing of aircraft and other
assets (the "Lending and Leasing Business"). The
Real Estate Business and the Lending and Leasing
Business are referred to collectively as the
"Echelon Business". Echelon's strategy subsequent
to the Distribution will be to focus on expanding
the Real Estate Business as follows:
- Residential Real Estate Development. Echelon
initially plans to develop, own and operate
apartment complexes on company-owned land in the
St. Petersburg area, and eventually on land to be
acquired elsewhere in Florida and the
southeastern United States. Echelon owns 137
acres of multi-family residential zoned
developable land within the Gateway area between
Tampa, St. Petersburg and Clearwater, including
land in Carillon Park, a 432-acre commercial,
office and multi-family residential park. The
Carillon Park land, together with Echelon's 4th
and 9th Street properties, account for a
substantial portion of all the land currently
zoned for apartment development in that area.
Echelon believes the favorable market
demographics, as well as limited housing supply
and growing local employment base, suggest that
apartment development in the Gateway area is
warranted and could support 500 to 600 units
annually for the next five years. See
"Business -- Other Owned Real Estate;
Multi-Family Residential and Commercial Real
Estate Development."
- Commercial Real Estate Development. Echelon
intends to take advantage of the commercial real
estate market in the Gateway area,
<PAGE> 4
where occupancy levels are averaging over 95%, by
developing a portion of the 134 acres it holds
within Carillon Park for commercial use. In
particular, Echelon's plans include office
building development within Carillon Park and
elsewhere, subject to market conditions and other
relevant factors. Almost all infrastructure at
Carillon Park is already in place, including
roads, sewers, utilities and related
improvements. Financing for further development
is expected from a variety of sources, including
internally generated funds from the collection of
loans and assets sales, operating cash flow and
from existing cash, which, as of the
Distribution, is expected to approximate $60
million (see "Pre-Distribution Recapitalization
and Related Transactions" below), and, most
importantly, from project-based financings. See
"Business -- Other Owned Real Estate;
Multi-Family Residential and Commercial Real
Estate Development."
- Low Income Housing Development. As part of
Echelon's real estate development plan, Echelon
intends to invest in, develop and operate,
affordable housing projects, including projects
entitled to the benefits of federal low-income
housing tax credits. Structured properly and as
presently available under federal law, these
housing tax credit projects generate
dollar-for-dollar tax credits over a 10-year
period and can be applied to Echelon's expected
future United States federal income tax
liability. See "Business -- Other Owned Real
Estate; Multi-Family Residential and Commercial
Real Estate Development."
- Real Estate Property Management. Echelon
currently manages its owned office buildings.
After the Distribution, Echelon intends to expand
its real estate management services business by
offering to manage office buildings for third
parties, managing Echelon's new apartment
developments (see above) and managing low-income
housing tax credit projects for its own account
and for third parties. See
"Business -- Commercial Real Estate Ownership and
Management."
With regard to the Lending and Leasing Business,
Echelon's strategies subsequent to the Distribution
are as follows:
- Real Estate and Aircraft Loans. Echelon does not
anticipate originating any new financings of
commercial real estate or aircraft unless such
financings facilitate a sale of an existing
asset. Echelon's strategy is to collect
outstanding loan balances as soon as practicable,
to take the steps necessary to maximize the value
of each asset, and, ultimately, to withdraw from
the business of commercial real estate lending
and aircraft lending as existing loans mature and
are repaid or otherwise liquidated. See
"Business -- Collateralized Commercial Real
Estate Loan Portfolio" and "-- Collateralized
Financing and Leasing of Aircraft/Equipment."
- Aircraft and Other Leases. Echelon plans to hold
its leveraged lease assets to maturity or until
the termination value of the leveraged lease
assets equals their market values and to hold its
other lease assets through expiration in
accordance with their respective terms. Echelon
will then either sell or hold and re-lease
pursuant to operating leases the underlying
aircraft or other assets, depending upon which
option is determined to provide the highest
risk-adjusted return. See
"Business -- Collateralized Financing and Leasing
of Aircraft/Equipment."
2
<PAGE> 5
For a more complete discussion of Echelon's assets
and strategy, see "Business."
Shares to be Distributed... The Distribution will be made to holders of record
on the Record Date of issued and outstanding shares
of Florida Progress Common Stock. Based on the
97,005,268 shares of Florida Progress Common Stock
outstanding as of November , 1996, the
Distribution would consist of 6,467,018 shares of
Echelon Common Stock. Each holder of Florida
Progress Common Stock will receive as a dividend
one share of Echelon Common Stock for every 15
shares of Florida Progress Common Stock held on the
Record Date.
The Board of Directors of Echelon has adopted a
stockholder rights agreement (the "Echelon Rights
Agreement"). Certificates evidencing shares of
Echelon Common Stock issued in the Distribution
will therefore represent the same number of Echelon
Rights (as defined below) issued under the Echelon
Rights Agreement. See "Description of Echelon
Capital Stock -- Echelon Rights Agreement." Unless
the context otherwise requires, references herein
to the Echelon Common Stock include the related
Echelon Rights.
Florida Progress stockholders will not have to make
any payment or surrender or exchange shares of
Florida Progress Common Stock in order to receive
their pro rata share of the Distribution. No vote
of holders of Florida Progress Common Stock is
required or sought in connection with the
Distribution.
For a more complete discussion of the Distribution,
see "The Distribution."
Fractional Share
Interests................ Fractional shares of Echelon Common Stock will not
be distributed. Fractional shares of Echelon Common
Stock will be aggregated and sold in the public
market by the Distribution Agent, and the aggregate
net cash proceeds will be distributed ratably to
those stockholders otherwise entitled to such
fractional interests. See "The
Distribution -- Manner of Effecting the
Distribution."
Record Date................ The Record Date is , 1996. In order to
be entitled to receive shares of Echelon Common
Stock in the Distribution, holders of shares of
Florida Progress Common Stock must be such as of
the close of business on the Record Date.
Distribution Date.......... The "Distribution Date" is presently expected to be
on or about , 1996.
Distribution Agent......... The First National Bank of Boston will be the
Distribution Agent (the "Distribution Agent") for
the Distribution.
United States Federal
Income Tax Consequences of
the Distribution......... Florida Progress has received a ruling from the
Internal Revenue Service ("IRS") to the effect that
the Distribution will be tax-free for United States
federal income tax purposes, except to the extent
that cash is received for fractional shares of
Echelon Common Stock. Florida Progress stockholders
will apportion their tax bases in Florida Progress
3
<PAGE> 6
Common Stock held immediately before the
Distribution between such Florida Progress Common
Stock and the Echelon Common Stock received in the
Distribution, based on the relative fair market
values of the Florida Progress Common Stock and the
Echelon Common Stock as of the Distribution Date.
Florida Progress will provide appropriate
information to each holder of record of Florida
Progress Common Stock as of the Record Date
concerning the basis allocation. See "The
Distribution -- United States Federal Income Tax
Consequences of the Distribution."
Stock Exchange Listing..... There is not currently a public market for the
Echelon Common Stock. The Echelon Common Stock has
been accepted for listing on the NYSE, subject to
notice of issuance, under the symbol "EIN", and
trading is expected to commence on a "when-issued"
basis prior to the Distribution. On the first NYSE
trading day following the Distribution Date,
"when-issued" trading in respect of the Echelon
Common Stock will end and "regular-way" trading
will begin. See "The Distribution -- Listing and
Trading of Echelon Common Stock."
Limited Relationships
Between Florida Progress
and Echelon After the
Distribution............. After the Distribution, neither Florida Progress
nor Echelon will have any ownership interest in the
other. Each of Florida Progress and Echelon will be
an independent public company. Prior to the
Distribution, Florida Progress and Echelon will
enter into certain agreements governing their
relationships subsequent to the Distribution and
providing for the allocation of tax, employee
benefits and certain other liabilities and
obligations arising from periods prior to the
Distribution. Prior to the Distribution, in
connection with the repayment of certain
indebtedness owed by Echelon to Progress Capital
Holdings, Inc. ("PCH"), the former direct parent
corporation of Echelon and a direct, wholly owned
subsidiary of Florida Progress, Echelon will issue
a note to PCH (the "PCH Note"). In the ordinary
course of their respective businesses, Echelon and
Florida Progress and its affiliates are parties to
lease agreements pursuant to which Echelon leases
certain of its premises to Florida Progress and its
affiliates. These lease agreements will continue
after the Distribution. See "Relationship Between
Florida Progress and Echelon After the
Distribution" and "Management and Executive
Compensation -- Certain Relationships and Related
Transactions."
Dividend Policies.......... The payment and level of cash dividends by Echelon
after the Distribution will be subject to the
discretion of the Echelon Board of Directors.
Echelon currently intends to retain all future
earnings for the development of its business and
does not anticipate paying any cash dividends for
the foreseeable future. See "Dividend Policy."
Pre-Distribution
Recapitalization and
Related Financing
Transactions............. Effective as of September 30, 1996, Florida
Progress contributed $140 million to the equity of
Echelon, which was used by Echelon to repay
advances from Florida Progress. After giving effect
to such recapitalization, as of September 30, 1996,
Echelon remained obligated to repay $101.1 million
of advances from Florida Progress. In addition to
the contribution by Florida Progress of $140
million to the equity of Echelon,
4
<PAGE> 7
Florida Progress will contribute an additional
amount of approximately $18 million to the equity
of Echelon prior to the Distribution to provide
cash for the payment of expenses incurred in
evaluating and implementing the Distribution and to
provide additional liquidity. Echelon expects that
immediately prior to the Distribution, Echelon's
obligation to Florida Progress will have been
reduced to approximately $36 million, reflecting
(i) the receipt of $105 million in secured
financing from Salomon Brothers Realty Corp. on
November 5, 1996 (the "Loan") and the repayment of
$43 million of such advances using a portion of the
such Loan, and (ii) the repayment of approximately
$22 million of such advances with proceeds
generated from operations, from maturities and
collections on loans, from planned sales of assets
and from the additional capital contribution from
Florida Progress. The remaining indebtedness of
approximately $36 million will be evidenced by the
PCH Note. See "Management's Discussion and Analysis
of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
Antitakeover Provisions.... The Amended and Restated Articles of Incorporation
(the "Articles of Incorporation") and Amended and
Restated By-laws (the "By-laws") of Echelon contain
provisions that may have the effect of discouraging
an acquisition of control of Echelon not approved
by its Board of Directors. Such provisions may also
have the effect of discouraging third parties from
making proposals involving an acquisition or change
of control of Echelon, although such proposals, if
made, might be considered desirable by a majority
of the stockholders of Echelon. Such provisions
could further have the effect of making it more
difficult for third parties to cause the
replacement of the Board of Directors of Echelon.
These provisions have been designed to enable
Echelon to develop its businesses and foster its
long-term growth without disruptions caused by the
threat of a takeover not deemed by its Board of
Directors to be in the best interests of Echelon
and its stockholders. Certain provisions of the
distribution agreement to be entered into between
Florida Progress and Echelon (the "Distribution
Agreement") may also have the effect of
discouraging third parties from making proposals
involving an acquisition or change of control of
Florida Progress or Echelon. See "Description of
Echelon Capital Stock" and "Relationship Between
Florida Progress and Echelon After the
Distribution -- Distribution Agreement."
The Board of Directors of Echelon has adopted a
stockholder rights agreement. A stockholder rights
agreement is designed to protect stockholders in
the event of an unsolicited offer and other
takeover tactics which, in the opinion of the Board
of Directors, could impair its ability to represent
stockholder interests. The provisions of a
stockholder rights agreement may render an
unsolicited takeover of Echelon more difficult or
less likely to occur or might prevent such a
takeover, even though such a takeover may offer
Echelon's stockholders the opportunity to sell
their stock at a price above the prevailing market
price and may be favored by a majority of the
stockholders of Echelon. However, the Echelon
Rights would not prevent a merger or business
combination approved by the Board of Directors,
since prior to a person becoming an "Acquiring
Person" (as defined below) such Echelon Rights may
be redeemed. See "Description of Capital
Stock -- Echelon Rights Agreement."
5
<PAGE> 8
Echelon is subject to provisions of Florida
corporate law which may restrict certain business
combination transactions. See "Description of
Echelon Capital Stock -- Florida Business
Corporation Act."
See also "Description of Echelon Capital
Stock -- Provisions of Echelon Articles of
Incorporation and By-laws Affecting Change in
Control."
Echelon is also subject to contractual restrictions
limiting to 25% the portion of its voting
securities that may be owned by persons who are not
citizens of the United States or resident aliens of
the United States. See "Relationship Between
Florida Progress and Echelon After the
Distribution -- Distribution Agreement."
Risk Factors............... Stockholders should carefully consider the matters
discussed under the section entitled "Risk Factors"
in this Information Statement.
* * *
This Information Statement is being furnished by Florida Progress solely to
provide information to stockholders of Florida Progress who will receive Echelon
Common Stock in the Distribution. It is not, and is not to be construed as, an
inducement or encouragement to buy or sell any securities of Florida Progress or
Echelon. The information contained in this Information Statement is believed by
Florida Progress and Echelon to be accurate with respect to Florida Progress and
Echelon, respectively, as of the date set forth on its cover. Changes may occur
after that date, and neither Florida Progress nor Echelon will update the
information except in the normal course of their respective public disclosure
practices.
6
<PAGE> 9
SUMMARY FINANCIAL DATA
The following table summarizes certain selected consolidated financial data
of Echelon which have been derived from the Consolidated Financial Statements of
Echelon for the five years ended December 31, 1995, and the nine months ended
September 30, 1996 and 1995. Results for the interim periods may not be
indicative of results for the full year. Historical consolidated financial
information is not expected to be indicative of Echelon's future performance as
an independent company. The information set forth below should be read in
conjunction with the information set forth under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Echelon's
Consolidated Financial Statements and the Notes thereto included elsewhere in
this Information Statement. The following information is qualified in its
entirety by the information and financial statements appearing elsewhere in this
Information Statement.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ----------- ------ ------ ------ ----------- -----------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Revenue.............................. $ 48.6 $ 33.7 $ 47.6 $ 48.8 $ 66.5 $ 42.4 $ 94.4
Loss before income taxes............. (43.2)(1) (7.8) (9.9) (9.2) (5.7) (22.5) (1.3)
Net loss(2).......................... $ (28.2)(1) $ (3.9) $ (5.0) $ (5.0) $ (5.0) $ (13.1) $ (0.7)
======= ======= ======= ======= ======= ======= =======
Net loss per common share(3)......... $ (4.34) $ (0.60) $(0.77) $(0.77) $(0.77) $ (2.02) $ (0.11)
======= ======= ======= ======= ======= ======= =======
BALANCE SHEET DATA:
Assets:
Lending and leasing................ $ 347.0 $ 424.6 $400.3 $478.8 $552.6 $ 598.1 $ 670.3
Real estate........................ 136.9 142.5 154.2 144.6 148.9 187.1 166.8
------- ------- ------- ------- ------- ------- -------
Total assets................ $ 483.9 $ 567.1 $554.5 $623.4 $701.5 $ 785.2 $ 837.1
======= ======= ======= ======= ======= ======= =======
Deferred income taxes................ $ 162.9 $ 192.4 $182.3 $224.3 $244.9 $ 268.3 $ 291.3
======= ======= ======= ======= ======= ======= =======
Capitalization:
Advances from Florida Progress..... $ 101.1 $ 265.4 $250.0 $283.8 $321.2 $ 341.4 $ 404.8
Debt............................... 20.4 24.7 33.2 32.7 32.5 29.4 34.7
Common equity...................... 172.6 62.9 60.8 69.0 77.2 84.7 129.3
------- ------- ------- ------- ------- ------- -------
Total capitalization........ $ 294.1 $ 353.0 $344.0 $385.5 $430.9 $ 455.5 $ 568.8
======= ======= ======= ======= ======= ======= =======
</TABLE>
- ---------------
(1) Reflects $30.1 million pre-tax write-down of assets which management has
determined will be disposed of and $8 million of pre-tax costs associated
with the Distribution.
(2) The similarity of net loss for the years ended December 31, 1995, 1994 and
1993 reflects the orderly withdrawal strategy pursuant to which Echelon was
being operated during such years. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Overview."
(3) Net loss per common share is based upon 6,467,018 outstanding common shares.
7
<PAGE> 10
SUMMARY PRO FORMA DATA
The following summary pro forma financial data have been derived from and
should be read in conjunction with the unaudited Pro Forma Consolidated Results
of Operations for the nine months ended September 30, 1996 and the year ended
December 31, 1995 and Pro Forma Consolidated Balance Sheet at September 30,
1996, which present the consolidated results of operations and consolidated
financial position of Echelon assuming that the transactions contemplated by the
Distribution and the related refinancing transactions described in the Notes to
the Pro Forma Financial Data had been completed as of January 1, 1995 for
purposes of the Pro Forma Consolidated Results of Operations, and at September
30, 1996 for purposes of the Pro Forma Consolidated Balance Sheet. These pro
forma consolidated financial data should be read in conjunction with the audited
consolidated financial statements and footnotes for the three year period ended
December 31, 1995. The pro forma consolidated financial data are presented for
informational purposes only and may not necessarily reflect the future results
of operations or financial position of Echelon or what the results of operations
or financial position would have been had Echelon's business been operated as a
separate, independent company during the periods shown. See "Pro Forma Financial
Data."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED
1996 DECEMBER 31, 1995
----------------- -----------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
SUMMARY OF OPERATIONS:(1)
Revenue........................................................... $ 48.6 $ 47.6
Loss before income taxes.......................................... (32.7) (5.2)
Net loss.......................................................... $ (20.2) $ (2.1)
======= ======
Net loss per common share(2)...................................... $ (3.11) $ (0.32)
======= ======
BALANCE SHEET DATA:(3)
Assets:
Lending and leasing............................................. $ 347.0
Real estate..................................................... 192.9
-------
Total assets............................................. $ 539.9
=======
Deferred income taxes............................................. $ 162.9
=======
Capitalization:
Note payable to PCH............................................. $ 36.0
Long-term debt.................................................. 125.4
-------
Total debt............................................... 161.4
Common equity................................................... 190.6
-------
Total capitalization..................................... $ 352.0
=======
</TABLE>
- ---------------
(1) The summary of operations data reflect additional general and administrative
expenses which would have been incurred by Echelon as a separate,
independent company and refinancing of advances from Florida Progress and
elimination of expenses not associated with Echelon's ongoing operations.
See "Pro Forma Consolidated Results of Operations" and the Notes thereto.
(2) Pro forma net loss per share is computed based on 6,467,018 shares of
Echelon being distributed in the Distribution.
(3) The balance sheet data reflect the refinancing of advances from Florida
Progress and an $18 million equity contribution by Florida Progress. See
"Pro Forma Consolidated Balance Sheet" and the Notes thereto.
8
<PAGE> 11
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained herein regarding matters that are not
historical facts are forward-looking statements (as such term is defined in the
Securities Act of 1933, as amended), including (i) certain statements contained
in "Management's Discussion and Analysis of Financial Condition and Results of
Operations," such as those statements concerning Echelon's strategies,
generally, Echelon's expected sources of funds, and Echelon's expected uses of
funds, including its expected capital expenditures, and (ii) certain statements
contained in "Business," such as those statements concerning Echelon's strategy
(a) with respect to its office properties, to hold its existing portfolio of
properties with a focus on generating favorable growth in operating income
through leasing to high quality tenants and controlling operating expenses, (b)
with respect to its industrial and other properties, to increase cash flow as
market conditions improve and to determine and implement the optimum operation,
sale or development option for each property, (c) with respect to its real
estate management business, to expand such business, (d) with respect to its
other owned real estate and commercial and residential real estate development
activities, to develop commercial and residential real estate projects on its
currently owned properties and, eventually, on properties to be acquired and, in
addition, to sell certain properties to third parties, (e) with respect to its
collateralized commercial real estate loan portfolio, to collect outstanding
loan balances upon repayment at maturity or upon foreclosure and sale of the
collateral, (f) with respect to its leasing business, to hold the leveraged
leases to maturity or until the termination values of the assets equal their
respective market values and to re-lease or sell the assets underlying the
various leases to maximize returns, (g) with respect to its aircraft lending
business, to negotiate a sale or refinancing of its loans or to foreclose and
sell the collateral, and (h) to deploy the proceeds generated by the ultimate
disposition of certain assets to the Real Estate Business and to repayment of
the PCH Note. Because such statements involve risks and uncertainties, actual
strategies and the timing and expected results thereof may differ materially
from those expressed or implied by such forward-looking statements. Factors that
could cause such differences include, but are not limited to, those discussed
herein under "Risk Factors."
RISK FACTORS
ABSENCE OF PRIOR TRADING MARKET FOR THE ECHELON COMMON STOCK; CHANGES IN TRADING
PRICES
Prior to the date hereof, there has not been any established trading market
for Echelon Common Stock. There can be no assurance as to the prices at which
Echelon Common Stock will trade before, on or after the Distribution Date.
Unless and until Echelon Common Stock is fully distributed and an orderly market
develops in Echelon Common Stock, the price at which such stock trades may
fluctuate significantly and may be lower or higher than the price that would be
expected for a fully distributed issue. Prices for Echelon Common Stock will be
determined in the marketplace and may be influenced by many factors, including
(i) the depth and liquidity of the market for Echelon Common Stock, (ii)
developments affecting the businesses of Echelon generally, (iii) investor
perception of Echelon, and (iv) general economic and market conditions. See "The
Distribution--Listing and Trading of Echelon Common Stock."
NEED FOR AND ACCESS TO CAPITAL
Echelon's anticipated increase in its level of real estate development
activities will require a significant amount of capital. Accordingly, the extent
of Echelon's real estate development will depend upon the amount of funds
generated through operating activities, maturity and collection of loans,
planned asset sales and project-based financings. There can be no assurance that
operating activities, maturity and collection of loans, planned asset sales and
project-based financings will generate net proceeds for Echelon in amounts and
at times necessary to enable Echelon to repay its debt obligations or as
otherwise contemplated by Echelon's business plan.
Echelon has historically relied on Florida Progress for various financial
and administrative services, and funding for the Echelon Business has
historically come, in part, from PCH, a direct, wholly owned subsidiary of
Florida Progress that finances the activities of Florida Progress's diversified
operations. PCH has historically funded Echelon through the issuance of
commercial paper and medium-term notes. Except as contemplated
9
<PAGE> 12
by certain of the agreements described below, after the Distribution, Florida
Progress will not provide such financial and administrative support services.
Although Echelon has recently received proceeds totalling $105 million pursuant
to the Loan, which is secured by Echelon's owned real estate and collateralized
real estate loans, to the extent that Echelon may need additional funding to
finance its operations and capital expenditures, no assurance can be given that
Echelon will be able to access the capital markets or otherwise obtain necessary
financing in the future, or that any such financing can be obtained in a timely
and commercially acceptable manner. For these reasons, Echelon may have to defer
or otherwise limit certain development projects, which could adversely affect
Echelon's efforts to implement its strategy and its business generally.
The terms of the Loan provide, among other things, that if the
loan-to-value of collateral ratio exceeds 75%, then Echelon will be required to
deposit the cash flow from the assets pledged as collateral into a collection
account to be disbursed monthly to pay scheduled Loan payments, property
expenses, and other items and to fund certain reserves. Cash balances remaining
in such account would then be released to Echelon. Under the terms of the Loan,
the lender has the right to give notice if it determines the loan-to-value of
collateral ratio exceeds 75% and Echelon has certain rights to contest that
determination. If the loan-to-value of collateral ratio exceeds 80%, then
remaining cash balances in such account which would otherwise have been released
to Echelon will be applied monthly to reduce the principal amount of the Loan
until the ratio is less than 80%. The imposition of such a requirement could
have a material adverse impact on Echelon's ability to successfully implement
its business plan because the items comprising the collateral represent
Echelon's key sources of operating cash flow. The lender has not yet received
final appraisals of all the collateral. However, at the time the Loan was
funded, the parties believed the loan-to-value of collateral ratio was less than
75%. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources".
Echelon is and will be subject to the risks normally associated with debt
financing, including the risk that Echelon's cash flow will be insufficient to
meet required payments of principal and interest, the risk that existing
indebtedness on its properties (which in most cases will not have been fully
amortized at maturity) will not be able to be refinanced or that the terms of
such refinancing will not be as favorable as the terms of the existing
indebtedness. There can be no assurance that Echelon will be able to refinance
any indebtedness Echelon may incur or otherwise be able to obtain funds by
selling assets or raising equity to make required payments on maturing
indebtedness. If Echelon is unable to refinance its indebtedness on acceptable
terms, Echelon may be forced to dispose of assets upon disadvantageous terms,
which could result in losses to Echelon and acceleration of tax liabilities. If
Echelon disposes of an asset that is part of the collateral for the Loan, then
principal payments in addition to the mandatory monthly principal payments under
such Loan may be due. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources".
Moreover, a substantial portion of Echelon's assets are illiquid, and in the
event Echelon were required to sell certain of its assets in the near term or on
an accelerated basis, there can be no assurance that Echelon would be able to
consummate such sales, and any such sales could be consummated at values
substantially below those at which the assets are carried on Echelon's books.
If prevailing interest rates or other factors result in higher interest
rates at a time when Echelon must refinance its indebtedness, Echelon's interest
expense would increase, which would adversely affect Echelon's results of
operations and cash flow. Further, if a property or properties are mortgaged to
secure payment of indebtedness and Echelon is unable to meet mortgage payments,
the property or properties could be foreclosed upon by or otherwise transferred
to the mortgagee with a consequent loss of income and asset value to Echelon. In
addition, even with respect to non-recourse indebtedness, a lender may have the
right to recover deficiencies from Echelon in certain circumstances, including
fraud and environmental liabilities.
NEW OPERATING STRATEGY; RELIANCE ON KEY OFFICERS
Florida Progress had for a number of years operated the Echelon Business
pursuant to a strategy of orderly withdrawal pursuant to which Florida
Progress's goal was for Echelon to withdraw from its several businesses by
disposing of assets in an orderly manner without incurring the significant
losses which could result from a more accelerated liquidation of the portfolio.
Echelon's current strategies are intended to achieve
10
<PAGE> 13
growth and profitability, and therefore represent a significant departure from
the strategy which had guided the operation of the Echelon Business prior to the
Distribution. Echelon has had limited experience executing its new strategies
and in operating certain of its proposed businesses, including low-income
housing developments and investing in low-income housing tax credits. There can
be no assurance that management will be able to implement such strategies or, if
implemented, that such strategies will enable Echelon to maximize the value of
its assets, grow its business and achieve profitability.
The successful implementation of these strategies by Echelon will depend in
a large part on certain key officers, including, Mr. Darryl LeClair, President
and Chief Executive Officer, and Mr. Larry Newsome, Senior Vice President and
Chief Financial Officer, Secretary and Treasurer, who have managed Echelon's
businesses and participated in the development of Echelon's business plan. Due
to the unique experience of these key officers and their knowledge of Echelon's
assets, such individuals could not be easily replaced, and the loss of such key
officers as a team or the loss of certain individual members of such team could
have a material adverse effect on Echelon. Echelon has not obtained any key-man
life insurance policies. See "Management and Executive Compensation--Executive
Officers."
CERTAIN ANTITAKEOVER PROVISIONS
The Articles of Incorporation and By-laws of Echelon contain provisions
that may have the effect of discouraging an acquisition of control of Echelon
not approved by its Board of Directors. Such provisions may also have the effect
of discouraging third parties from making proposals involving an acquisition or
change of control of Echelon, although such proposals, if made, might be
considered desirable by a majority of the stockholders of Echelon. Such
provisions could further have the effect of making it more difficult for third
parties to cause the replacement of the Board of Directors of Echelon. These
provisions have been designed to enable Echelon to develop its businesses and
foster its long-term growth without disruptions caused by the threat of a
takeover not deemed by its Board of Directors to be in the best interests of
Echelon and its stockholders. Certain provisions of the Distribution Agreement
may also have the effect of discouraging third parties from making proposals
involving an acquisition or change of control of Florida Progress or Echelon.
See "Description of Capital Stock" and "Relationship Between Florida Progress
and Echelon After the Distribution -- Distribution Agreement."
The Board of Directors of Echelon has adopted a stockholder rights
agreement. A stockholder rights agreement is designed to protect stockholders in
the event of an unsolicited offer and other takeover tactics which, in the
opinion of the Board of Directors, could impair its ability to represent
stockholder interests. The provisions of a stockholder rights agreement may
render an unsolicited takeover of Echelon more difficult or less likely to occur
or might prevent such a takeover, even though such a takeover may offer
Echelon's stockholders the opportunity to sell their stock at a price above the
prevailing market price and may be favored by a majority of the stockholders of
Echelon. See "Description of Capital Stock -- Echelon Rights Agreement."
Echelon is subject to provisions of Florida corporate law which may
restrict certain business combination transactions. See "Description of Capital
Stock -- Florida Business Corporation Act."
Echelon is also subject to contractual restrictions limiting to 25% the
portion of its voting securities that may be owned by persons who are not
citizens of the United States or resident aliens of the United States. See
"Relationship Between Florida Progress and Echelon After the
Distribution -- Distribution Agreement."
POTENTIAL TAXATION
Florida Progress has received a ruling from the Internal Revenue Service
(the "IRS") to the effect that, among other things, the Distribution will
qualify as a tax-free spinoff under Section 355 of the Internal Revenue Code of
1986, as amended (the "Internal Revenue Code").
11
<PAGE> 14
The IRS ruling is based on certain factual representations and assumptions
made by Florida Progress which include representations and assumptions relating
to Echelon's business plan, the active conduct of a trade or business, certain
asset transfers occurring prior to the Distribution, and the lack of a plan or
intent to liquidate, merge or sell assets other than in the ordinary course of
business. If such factual representations and assumptions were incorrect in a
material respect, such ruling could become invalid. Florida Progress is not
aware of any facts or circumstances which would cause such representations and
assumptions to be incorrect. Each of Florida Progress and Echelon has agreed to
certain restrictions on its future actions to provide further assurances that
Section 355 of the Internal Revenue Code will apply to the Distribution. See
"Relationship Between Florida Progress and Echelon After the Distribution."
If the Distribution were not to qualify under Section 355 of the Internal
Revenue Code, then, in general, a corporate tax (which would be very
substantial) would be payable by the consolidated group, of which Florida
Progress is the common parent. In addition, under the consolidated return rules,
each member of the consolidated group (including Echelon) is jointly and
severally liable for such tax liability. Pursuant to the tax sharing agreement
to be entered into between Florida Progress and Echelon (the "Tax Sharing
Agreement") and the Distribution Agreement, Florida Progress and Echelon will
agree that if the Distribution were not to qualify under Section 355 of the
Internal Revenue Code due to the failure by one party to comply with the terms
of the IRS ruling letter, then such party would bear the entire cost of any
resulting tax liability to the consolidated Florida Progress group. If the
Distribution were not to qualify under Section 355 of the Internal Revenue Code
for a reason other than the failure of a party to comply with the terms of such
ruling letter, then any resulting tax liability would be borne by Florida
Progress. If the Distribution occurred and it were not to qualify under Section
355 of the Internal Revenue Code, the resulting tax liability would have a
material adverse effect on the financial position, results of operations and
cash flows of Echelon, and could have a material adverse effect on the financial
position, results of operations and cash flows of Florida Progress. See "The
Distribution--United States Federal Income Tax Consequences of the
Distribution."
RISKS ASSOCIATED WITH THE REAL ESTATE BUSINESS AND COLLATERALIZED REAL ESTATE
LENDING
General Real Estate Investment Risks. As a real estate development and
management company, Echelon is and will be subject to certain risks incident
generally to the ownership, development and management of real property. These
risks include the cyclical nature of real estate markets, governmental
regulations, shortages of materials, strikes, increases in the costs of labor
and materials, and competition from other real estate owners. In particular, a
commercial property's revenues and value may be adversely affected by a number
of factors, including construction costs, the national, state and local economic
climate and real estate conditions (such as oversupply of or reduced demand for
space and changes in market rental rates); the perceptions of prospective
tenants of the safety, convenience and attractiveness of the properties; the
ability of the owner to provide adequate management, maintenance and insurance;
the ability to collect on a timely basis all rent from tenants; the expense of
periodically renovating, repairing and reletting spaces; and increasing
operating costs including real estate taxes and utilities which may not be
passed through to tenants. Certain significant expenditures associated with
investments in real estate (such as mortgage payments, real estate taxes,
insurance and maintenance costs) are generally not reduced when circumstances
cause a reduction in rental revenues from the property. If a property were
mortgaged to secure the payment of indebtedness and if Echelon were unable to
meet its mortgage payments, a loss could be sustained as a result of foreclosure
on the property or the exercise of other remedies by the mortgagee. In addition,
real estate values and income from properties are also affected by such factors
as compliance with laws, including tax and environmental laws, zoning
regulations, interest rate levels and the availability of financing. While
Echelon believes that its existing real estate portfolio of land and buildings,
together with its business strategy, will allow it to manage such risks
effectively, no assurance can be given as to the effect such matters might have
on its business, financial condition or results of operations.
General Risks of Collateralized Commercial Real Estate Lending
Business. The factors listed under "General Real Estate Investment Risks" may
also adversely affect a borrower's ability to meet its obligations to Echelon
with respect to loans extended pursuant to Echelon's commercial real estate
lending business. Where Echelon's commercial real estate loans are not
personally guaranteed by the borrowers, Echelon relies
12
<PAGE> 15
solely on the value of the underlying property for its security. In such cases,
the borrower's ability to make payments due under a loan and the amount Echelon
may realize upon default, including upon a bankruptcy of such borrower, are
dependent in part upon the economic performance of the property underlying the
loan.
Dependence on Florida Real Estate Market Conditions. Currently, all of
Echelon's owned real estate properties are located in the State of Florida,
primarily in the Tampa Bay area, including St. Petersburg and Tampa, and
approximately 80% of Echelon's commercial rental space (measured by square
footage) is located in this area. Due to this lack of geographical
diversification, Echelon is dependent upon the continued demand for office,
industrial and other commercial space in the Tampa Bay area. Echelon may be
adversely affected in the event the demand for office space in St. Petersburg or
Tampa declines or the St. Petersburg or Tampa economy experiences a downturn.
Like other real estate markets, the Florida commercial real estate market has
experienced periodic economic fluctuations.
Regulatory Approvals for Development Projects. Before Echelon can develop
a property, it must obtain a variety of approvals from local and state
governments with respect to such matters as zoning, subdivision, architectural
design and environmental issues. Because of the discretionary nature of these
approvals and concerns which may be raised by various government officials and
public interest groups during both the approval and the development process,
Echelon's ability to develop properties and realize income from its projects
could be delayed, reduced or prevented.
General Risks of Acquisition, Development and Construction
Activities. Echelon intends to develop its existing properties and, eventually,
to acquire and develop additional properties, in each case to the extent that
they can be acquired and/or developed on acceptable terms and meet Echelon's
investment and development criteria. General investment risks associated with
any real estate investment include the risk that the investment will fail to
perform as expected or that estimates of the cost of development or of
improvements to bring an acquired property up to standards established for the
intended market position may prove inaccurate. Specific risks associated with
Echelon's development and construction activities include the risks that Echelon
may abandon development opportunities after expending resources to determine
feasibility; construction costs of a project may exceed original estimates;
occupancy rates and rents at a newly developed property may not be sufficient to
make the property profitable; and construction and lease-up may not be completed
on schedule, resulting in increased debt service expense and construction costs.
In addition, new development activities, regardless of whether or not they are
ultimately successful, typically require a substantial portion of management's
time and attention.
Tenant Defaults. A significant portion of Echelon's revenue is and is
expected in the future to be derived from rental income from real property.
Consequently, Echelon's cash flow and results of operations would be adversely
affected if a significant number of tenants failed to meet their lease
obligations. In the event of a default by a lessee, Echelon may experience
delays in enforcing its rights as lessor and may incur substantial costs in
protecting its investment. Additionally, as a significant number of Echelon's
tenants are in the financial services, legal and accounting businesses,
Echelon's cash flow and results of operations could be adversely affected if
these industries experienced a significant reduction in workforce. At any time,
a tenant of Echelon's properties may also seek protection under the bankruptcy
laws, which could result in rejection and termination of such tenant's lease. If
a tenant rejects its lease in a bankruptcy proceeding, Echelon's claim for
breach of the lease would (absent collateral securing the claim) be treated as a
general unsecured claim. No assurance can be given that Echelon will not
experience significant tenant defaults in the future.
Reliance on Major Tenants. For the 12-month period ended September 30,
1996, Echelon's largest tenants, Raymond James Financial Inc. ("Raymond James");
Andersen Consulting LLP ("Andersen Consulting"); Barnett Bank; Merrill Lynch,
Pierce, Fenner & Smith, Inc. ("Merrill Lynch"); KPMG Peat Marwick and Florida
Progress, accounted for approximately 54% of Echelon's total rental revenue.
Echelon could be adversely affected in the event of bankruptcy or insolvency of,
or a downturn in the business of, any of such tenants.
Borrower Defaults. In the event of a default by a borrower with respect to
Echelon's collateralized commercial real estate lending business, Echelon may
experience delays in enforcing its rights as mortgagee
13
<PAGE> 16
and may incur substantial costs associated with protecting its investment.
Echelon may be required to acquire title to a property and thereafter to make
substantial improvements or repairs (and obtain financing for such matters) in
order to maximize the property's investment potential. In addition, in the event
of a bankruptcy or similar proceeding against a borrower, Echelon may not be
able to realize on its investment for an extended period of time. In such a
proceeding, a court might conclude that certain equity enhancements such as
contingent interest should not be treated as a debt of such borrower and Echelon
ultimately may not be able to recover its investment.
Low-Income Housing Tax Credit Risks. As part of Echelon's real estate
development plan, Echelon has invested in, and intends to invest further in,
develop and operate apartments entitled to the benefits of federal low-income
housing tax credits ("Housing Tax Credits"). A significant component of the
anticipated return on Housing Tax Credit projects is generally attributable to
the dollar-for-dollar tax credits which are available over a ten year period.
However, such credits are subject to recapture if the rules for qualification
for the credit are not sustained during the required minimum compliance period,
which is generally equal to the first 15 years of operations, but could be
longer. Although Echelon believes that Housing Tax Credit development projects
could significantly reduce Echelon's taxable income while creating favorable
earnings and returns, Echelon had not previously invested in Housing Tax Credits
or developed Housing Tax Credit projects, and there can be no assurance that
Echelon will be able to obtain Housing Tax Credits or to successfully identify,
acquire or develop projects entitled to the benefits of any Housing Tax Credits
which are obtained. Furthermore, the applicable regulations are highly complex,
and there can be no assurance that Echelon will be able to operate such projects
in compliance with such regulations or that credits taken in early years will
not be subject to subsequent recapture. The recapture of Housing Tax Credits
relating to any Housing Tax Credit project would adversely affect both the
returns on such project in particular and Echelon's results of operations and
cash flows generally. In addition, a bill which would have substantially limited
the future grants of federal low-income housing tax credits was recently passed
by Congress but vetoed by President Clinton. There can be no assurance that
similar legislation will not be re-introduced and passed in the future. See
"Business -- Other Owned Real Estate; Multi-Family Residential and Commercial
Real Estate Development -- Affordable Housing."
Real Estate Industry Competition. The real estate ownership, development
and management markets are generally regional, and the identity of Echelon's
competitors and the levels of competition vary in each area of activity and in
each market. While Echelon encounters significant competition in each area of
activity and in each market, Echelon believes that no one competitor is
dominant. In particular, within the Tampa Bay area in which Echelon's operations
are concentrated, there are numerous commercial properties that compete with
Echelon's properties in attracting tenants, numerous companies that compete with
Echelon in selecting land for development and properties for acquisition
(including within the affordable housing market generally and for Housing Tax
Credits in particular) and numerous companies that compete for real estate
management business. Certain of these competitors have significantly greater
financial resources than Echelon and may have greater experience than Echelon in
acquiring, developing and managing real estate. See "Business -- Competition."
Uninsured Loss. Echelon carries comprehensive liability, fire, extended
coverage insurance with respect to all of its properties and carries rental loss
insurance with respect to substantially all of its properties, in each case,
with policy specifications, insured limits and deductibles customarily carried
for similar properties. Echelon also requires borrowers in its lending business
to obtain such insurance for properties securing Echelon's mortgage loans. There
are, however, certain types of losses (such as losses arising from acts of war
or relating to pollution) that are not generally insured because they are either
uninsurable or not economically insurable. Should an uninsured loss or a loss in
excess of insured limits occur for a property owned by Echelon, Echelon could
lose its capital invested in a property, as well as the anticipated future
revenue from such property and would continue to be obligated on any mortgage
indebtedness or other obligations related to the property. Any such loss would
adversely affect the business of Echelon and its financial condition and results
of operations. In addition, an uninsured loss for a borrower in Echelon's
collateralized commercial real estate lending business could increase the risk
of default on the borrower's mortgage loan with Echelon.
14
<PAGE> 17
Possible Environmental Liabilities. Under various federal, state and local
environmental laws, ordinances and regulations, a current or previous owner or
operator of real estate may be required to investigate and clean up hazardous or
toxic substances or petroleum product releases at such property and may be held
liable to a governmental entity or to third parties for damages to property or
natural resources and for investigation and remediation costs incurred by such
parties in connection with the contamination. Such laws typically impose
remediation responsibility and liability without regard to whether the owner
knew of or caused the presence of the contaminations, and the liability under
such laws has been interpreted to be joint and several. The cost of
investigation, remediation or removal of such substances may be substantial and
the owner's liability therefor under such laws is generally not limited and may
exceed the value of the property or the aggregate assets of the owner. In
addition, the presence of such substances, or the failure properly to remediate
the contamination on such property, may adversely affect the owner's ability to
sell or rent such property or to borrow using such property as collateral.
Persons who arrange for the disposal or treatment of hazardous or toxic
substances or petroleum products at a disposal or treatment facility also may be
liable for the costs of removal or remediation of a release of hazardous or
toxic substances or petroleum products at such disposal or treatment facility,
whether or not such facility is owned or operated by such person. In addition,
some environmental laws create a lien on the contaminated site in favor of the
government for damages and costs it incurs in connection with the contamination.
In addition to statutory liability, the owner of a site may be subject to common
law claims by third parties based on damages and costs resulting from
environmental contamination emanating from a site. In connection with its
ownership and operation of its properties, Echelon may be liable for costs and
damages of the types described above. Statutes of limitations applicable to
liabilities arising from releases of hazardous or toxic substances or petroleum
products generally are not based on the time of disposal.
Certain federal, state, and local laws and regulations impose requirements
on the construction and operation of commercial buildings, including
requirements for pre-construction review of environmental impacts, permit
requirements for the discharge of wastewater and the operation of fossil fuel
burning equipment above a certain size, restrictions on the construction and
operation of certain commercial parking facilities, and approval requirements
for the construction and use of structures in certain tidelands and wetlands.
Failure to comply with such requirements could have a material adverse effect on
Echelon's operations of its properties or result in penalties that could have a
material adverse effect on Echelon's business, financial condition or results of
operations.
Certain federal, state and local laws, regulations and ordinances govern
the removal, encapsulation, disturbance, or release to the environment of
asbestos-containing materials ("ACMs") in the event of construction, remodeling,
renovation or demolition, of a building. Such laws generally allow for
imposition of fines for failure to comply with such requirements, may impose
liability for the release of ACMs and may provide for third parties to seek
recovery from owners or operators of real properties for personal injury
associated with ACMs. The potential for release of, or exposure to, asbestos
from ACMs is greater if ACMs are damaged and "friable." "Friable" ACMs are
generally any ACMs that can be crumbled, pulverized, or reduced to powder by
hand pressure. In connection with the ownership and operation of its properties,
Echelon may be subject to such requirements or potentially liable for such
costs.
Certain federal and state regulations also apply to the generation,
storage, transportation, and disposal of hazardous wastes. Other federal, state,
and local regulations and ordinances set forth requirements applicable to the
construction, operation, licensing, and removal of certain storage tanks and the
storage of flammable liquids. As a result of the ownership and operation of its
properties, Echelon may be subject to such requirements. Failure to comply with
such requirements could have a material adverse effect on Echelon's operations
of its properties or result in penalties that would have a material adverse
effect on Echelon's business, financial condition or results of operations.
Many of Echelon's properties are located in urban areas where current or
historic industrial uses of the areas may have caused site contamination at the
properties. Nonetheless, at this time, Echelon does not anticipate that
regulatory authorities will require remediation of such properties in any manner
that would result in a material adverse effect on Echelon's business, results of
operations or financial condition, and Echelon estimates that its proportionate
share of liability for cleaning up all sites ranges from $0.1 million to
15
<PAGE> 18
$1.0 million. See "Business -- Governmental and Environmental Regulation -- Real
Estate Industry," and see Note 11 to the Consolidated Financial Statements
included in this Information Statement.
RISKS ASSOCIATED WITH AIRCRAFT LEASING AND LENDING
General. Aircraft leasing involves numerous risks, including risks
stemming from the obsolescence or physical deterioration of aircraft and the
possibility of defaults by lessees. In addition, fluctuations in general
business and economic conditions, the adoption of restrictive regulations and
legislation, changes in consumer demand for air travel, fluctuations in fuel
prices and other factors over which lessors of aircraft have no control could be
expected to affect adversely the supply and demand for aircraft or aircraft
leases and may cause cost increases relating to the leasing of aircraft that
cannot be offset by increased leasing revenues. The market for aircraft is
currently characterized by a relatively large supply of most types of aircraft
and relatively weak demand, which adversely affects the marketability and
near-term value of Echelon's portfolio of aircraft lease assets. Certain of the
risks and other factors affecting the aircraft leasing business, as they apply
to Echelon, are described in more detail below.
Risks of Lessee Defaults or Bankruptcy of Lessees. Due to many factors,
including the fluctuating state of the economy, uncertain traffic levels,
intense route and fare competition and the ease of entry of new airlines under
the Airline Deregulation Act of 1978, several commercial airlines in recent
years have been forced to suspend or cease operations due to financial
difficulties. These airlines have filed petitions for reorganization under the
Federal Bankruptcy Code, have merged with other airlines or have been
liquidated. Echelon believes this recent economic uncertainty in the commercial
airline industry is indicative of the periodic fluctuations in the industry's
economic performance. No assurance can be given that weakening financial
condition or bankruptcies of lessees of aircraft from Echelon would not have a
material adverse effect on Echelon's business, results of operations or
financial condition. Moreover, if aircraft are returned by bankrupt carriers,
there can be no assurance that Echelon will be able to sell or re-lease such
aircraft on favorable terms or in a timely manner.
Certain provisions of Echelon's leases may not be enforceable upon a
default by a lessee or in the event of a lessee's bankruptcy. The enforceability
of leases will be subject to certain limitations imposed by federal and
applicable state law and equitable principles. See "Business--Collateral
Financing and Leasing of Aircraft/Equipment--Bankruptcy of Lessees." In
evaluating a potential lessee of an aircraft, Echelon has considered such
factors as creditworthiness of the lessee, the aircraft's potential value and
the anticipated usage and rental value of the aircraft. However, there can be no
assurance as to the extent to which lessees will be able to perform their
financial and other obligations under their leases. Default by a lessee may
result in loss of revenue and litigation costs to Echelon which might not be
recovered from the lessee, and the aircraft may be returned without notice,
thereby interrupting receipt of lease revenues by Echelon. To the extent a
default or bankruptcy by a lessee required Echelon to sell the underlying asset,
certain tax liabilities of Echelon could be accelerated. See "Aircraft
Remarketing and Sale," below. In addition, upon default, particularly if the
lessee is in bankruptcy, Echelon may be delayed in or prevented from enforcing
certain of its rights under the lease and in re-leasing or selling the aircraft.
See "Business -- Collateralized Financing and Leasing of
Aircraft/Equipment -- Bankruptcy of Lessees."
Echelon leases three aircraft to USAir Inc. ("USAir"), a subsidiary of
USAir Group, Inc. ("USAir Group"), which reported significant operating losses
in each of the four years ended December 31, 1994 and which also reported
negative stockholders' equity at December 31, 1995, 1994 and 1993. Although for
the year ended December 31, 1995, USAir Group reported positive operating and
net income, USAir Group also reported that USAir's high cost structure makes its
financial condition, results of operations and prospects more susceptible to an
economic downturn and competitive conditions than many of its major competitors
amid the growing low-cost, low fare environment of the domestic airline
industry. While USAir Group recently reported improved interim results, if USAir
were unable to remain a viable competitor in the industry, USAir may be unable
to meet its obligations to Echelon. Any failure to pay rent by USAir could have
a material adverse effect on Echelon. In particular, should USAir default on its
leases with Echelon, or file for bankruptcy and reject its aircraft leases with
Echelon and other lessors, there could be a material decrease in the market
value of the types of aircraft leased to USAir due to the sudden increase in the
availability of these
16
<PAGE> 19
aircraft for lease or sale. In such a case, Echelon could suffer significant
losses on the ultimate disposal of the related aircraft or upon the ultimate
repossession of the aircraft by the lenders, as well as significant acceleration
of tax liabilities with the consequent adverse impact on cash flow.
Echelon has an interest in two aircraft and two engines leased to operators
based outside the United States and one aircraft loan to an operator based
outside the United States. These aircraft are not registered in the United
States and it is not possible to file liens thereon with the Federal Aviation
Administration (the "FAA"). Further, in the event of a lessee default or
bankruptcy, repossession and claims will be subjected to laws other than those
of the United States.
Citizenship. Under the Federal Aviation Act, as amended (the "FAA Act"),
the operation of an aircraft not registered with the FAA in the United States is
generally unlawful. Subject to certain limited exceptions, an aircraft may not
be registered under the FAA Act unless it is owned by a "citizen of the United
States" or a "resident alien" of the United States. If Echelon were to cease
being a "citizen of the United States" or a "resident alien" of the United
States, Echelon could be subject to claims based upon the breach of covenants
and representations concerning its status as a citizen of the United States
included in the contracts underlying its leveraged, direct finance and operating
leases. Because Florida Progress will continue to guarantee certain of these
covenants after the Distribution, the Distribution Agreement will require that
the Echelon Chairman, the Echelon President and two-thirds of the Echelon Board
of Directors be United States citizens or resident aliens within the meaning of
the FAA Act for as long as any of such covenants are guaranteed by Florida
Progress.
Leasing Industry Competition. The aircraft leasing industry is highly
competitive, offering users alternatives to the purchase of nearly every type of
aircraft. Competitive conditions vary considerably depending upon the type of
aircraft to be leased and the nature of the prospective lessee. As Echelon's
aircraft leases mature, Echelon will be subject to such competition to the
extent it attempts to re-lease such aircraft. In attempting to obtain
commitments to re-lease aircraft to specific lessees, Echelon may be expected to
compete, directly or indirectly, with aircraft manufacturers, airlines and other
operators, equipment managers, leasing companies, financial institutions and
numerous other parties engaged in leasing, managing, marketing or remarketing
aircraft. Many of these competitors have significantly greater financial
resources than Echelon and may have greater experience than Echelon in managing,
leasing, operating and selling aircraft. Such competitors may offer to lease
aircraft at rates lower than those which Echelon can reasonably offer and may
provide certain benefits, such as maintenance, crews, support services and
trade-in privileges, which Echelon generally cannot provide. In addition, to the
extent troubled airlines seek to re-negotiate the terms of the leases relating
to their aircraft, certain of Echelon's competitors with greater resources may
be able to bring more leverage to bear in avoiding re-negotiation or may be able
to enter into such negotiations and achieve relatively more favorable terms than
Echelon would be able to do.
Airline Industry Conditions and Competition. Conditions and competition in
the airline industry may weaken the creditworthiness of lessees on Echelon's
aircraft leases and result in losses to Echelon due to, among other things,
lease payment defaults or a reduction of the residual value of the leased
aircraft due to inadequate cash flow to meet lessee's maintenance and other
operating obligations under the Echelon leases. The airline industry is highly
competitive and susceptible to price discounting. Airline profit levels are
highly sensitive to, and have been severely impacted by, adverse changes in fuel
costs, average yield (fare levels) and passenger demand. The emergence in recent
years of several new carriers, typically with low cost structures, has further
increased the competitive pressures on the major airlines in the United States.
In some cases, the new entrants have initiated or triggered price discounting.
Although the domestic airline industry has generally abandoned deeply discounted
pricing structures, and fare levels have generally increased from 1993 levels,
significant industry-wide discounts could be reimplemented at any time, and, in
some markets, have been reimplemented, and the introduction of broadly
available, deeply discounted fares by a major airline in the United States would
result in lower yields for the entire industry and could have a material adverse
effect on operating results for lessees of aircraft from Echelon and,
consequently, on Echelon.
Insurance. The lessees of Echelon's aircraft are responsible for the
maintenance of public liability, property damage and all-risk aircraft hull
insurance on the aircraft to the extent described in the leases with
17
<PAGE> 20
respect to such aircraft. The failure of any lessee to adequately insure the
aircraft, or the retention of self-insurance amounts, will affect the proceeds
which could be obtained upon an event of loss involving the aircraft and, thus,
may affect the proceeds available to Echelon. The lessees of Echelon's aircraft
maintain casualty insurance in such amounts and covering such risks as Echelon
has deemed advisable. However, there is no assurance that sufficient coverage
will continue to be available, that casualties occurring to Echelon's aircraft
will be insured or that, if insured, the insurance proceeds will be sufficient
to cover the loss.
Section 504 of the FAA Act provides that no lessor of any civil aircraft
under a bona fide lease of 30 days or more will be liable by reason of his
interest as lessor or owner of the aircraft so leased for any injury to or death
of persons, or damage to or loss of property, on the surface of the earth caused
by such aircraft or by the ascent, descent or flight of such aircraft or by the
dropping or falling of an object therefrom, unless such aircraft is in the
actual possession or control of the lessor. Although it is expected that the
provisions of Section 504 will protect Echelon from liability for injury, death,
damage or loss caused by an aircraft or the operation thereof, there are certain
circumstances under which the protections of Section 504 may not apply. For
example, at least one court has held that Section 504 does not preempt state law
which may apply to hold the lessor or owner of an aircraft liable for injuries
suffered inside the aircraft while in flight. Because there is little case law
interpreting Section 504, there can be no assurance that its provisions will
fully protect Echelon from all liabilities in connection with any injury, death,
damage or loss which may be caused by an aircraft. In addition, Section 504 does
not preempt state law with respect to liability for third-party injuries arising
from a lessor's or owner's own negligence.
Regulatory Matters. The maintenance and operation of aircraft are strictly
regulated by the FAA, which oversees such matters as aircraft certification,
inspection and safety, certification of personnel and record keeping. In the
last several years, the FAA has issued a number of administrative directives and
other regulations relating to, among other things, collision avoidance systems,
airborne windshear avoidance systems, noise abatement and increased inspection
requirements, which will require lessees or Echelon to incur additional
expenditures for compliance. See "Business -- Governmental and Environmental
Regulation -- Aircraft Leasing Industry." If a lessee fails to comply with FAA
requirements, the cost of complying with these requirements could have a
substantial adverse effect on Echelon. In addition, future changes in government
laws or regulations, including laws and regulations governing aviation safety,
environmental protection (particularly noise compliance requirements) and fuel
conservation, may increase the costs of operating or maintaining the aircraft
owned by Echelon and may adversely affect the residual values of the aircraft.
See "Business -- Governmental and Environmental Regulation -- Aircraft Leasing
Industry."
Maintenance. The lessees are responsible for the maintenance, service,
repair and overhaul of the leased aircraft, but only to the extent described in
the leases. The failure of any lessee (or any sublessee) to adequately maintain,
service, repair or overhaul an aircraft may adversely affect the value of such
aircraft and thus adversely affect Echelon. Notwithstanding compliance by any
lessee (or any sublessee) with its obligations under any aircraft lease to
adequately maintain, service, repair or overhaul the aircraft subject to such
lease, the value of the aircraft may deteriorate and may adversely affect the
residual value of the aircraft to Echelon.
Repossession. The leases generally do not contain any general geographic
restriction on the lessee's (or any sublessee's) ability to operate the
aircraft. The lessees are also generally permitted, upon compliance with the
leases, to register the aircraft in foreign jurisdictions and to sublease the
aircraft. While Echelon's rights and remedies in the event of a default under
the leases include the right to terminate the leases and repossess the aircraft
leased thereunder, it may be difficult, expensive and time-consuming to obtain
possession of the aircraft, particularly when an aircraft located outside the
United States has been registered in a foreign jurisdiction or is subleased to a
foreign operator. Any such exercise of the right to repossess the aircraft may
be subject to the limitations and requirements of applicable law, including the
need to obtain consents or approvals for deregistration or reexport of the
aircraft, which may be subject to delays and to political risk. When a
defaulting sublessee or other permitted transferee is the subject of a
bankruptcy, insolvency or similar event, such as protective administration,
additional limitations may apply.
18
<PAGE> 21
Furthermore, certain jurisdictions may accord higher priority to certain
other liens or other third-party rights over the aircraft. These factors could
limit the benefits of the security interest in the aircraft.
Aircraft Remarketing and Sale. On termination of a lease and return or
repossession of an aircraft to or by Echelon, Echelon would need to remarket the
aircraft to realize its full investment. The remarketing of aircraft may be
through a lease or sale. The terms and conditions of any such transaction cannot
be determined until such time as the transaction is consummated. Whether an
investment in any aircraft initially subject to a leveraged or direct finance
lease will ultimately prove to have been profitable may depend upon the terms on
which such aircraft will be re-leased or sold. No assurance can be given that as
aircraft come off lease, Echelon will be able to re-lease or sell such aircraft
on commercially acceptable terms or in a timely manner. Furthermore, in the
event of a lessee default or bankruptcy requiring Echelon to sell the aircraft
prior to expected maturity of the lease, Echelon would accelerate the incurrence
of tax liabilities, which could be significant, even if the aircraft is sold for
less than its long-term value.
THE DISTRIBUTION
INTRODUCTION
On July 1, 1996, the Board of Directors of Florida Progress approved in
principle a plan to distribute all the issued and outstanding Echelon Common
Stock to all holders of outstanding Florida Progress Common Stock. On November
, 1996, the Florida Progress Board of Directors formally approved the
Distribution and declared a dividend payable to each holder of record at the
close of business on the Record Date of one share of Echelon Common Stock for
every 15 shares of Florida Progress Common Stock held by such holder on the
Record Date.
On April 11, 1996, Florida Progress received a ruling from the IRS that the
receipt by Florida Progress stockholders of the Echelon Common Stock in the
Distribution will be generally tax-free to such stockholders and Florida
Progress for United States federal income tax purposes. On or before the
Distribution Date, Florida Progress will deliver all of the outstanding shares
of Echelon Common Stock to the Distribution Agent for transfer and distribution
to the holders of record of Florida Progress Common Stock on the Record Date.
The Distribution will be made on or about December , 1996.
Questions relating to the Distribution prior to the Distribution Date or
relating to transfers of Echelon Common Stock after the Distribution Date should
be directed to: The First National Bank of Boston, telephone (617) 575-3100.
REASONS FOR THE DISTRIBUTION
In 1991, after a severe downturn in the airline and real estate industries,
Florida Progress reviewed the results of its lending and leasing and real estate
businesses and assessed the long-term prospects of such businesses and
determined that these businesses were not a strategic fit for Florida Progress.
In part, this was due to the increasing capital needs of the lending and leasing
and real estate businesses and to the competition for capital between such
businesses and the other businesses within the consolidated Florida Progress
group. In light of the competing capital needs, management of Florida Progress
was also concerned that if Florida Progress did not begin to withdraw from such
businesses, the cost of capital could increase for other operations of the
Florida Progress group. Consequently, in September 1991, Florida Progress
announced its plan to withdraw in an orderly manner from the lending and leasing
and real estate businesses. As a result of Florida Progress's orderly withdrawal
strategy, between September 30, 1991 and December 31, 1995, Echelon decreased
its portfolio by approximately $583 million, or 51% of the September 30, 1991
portfolio. Although Florida Progress's orderly withdrawal strategy had resulted
in a substantial reduction in the size of the portfolio, the continued weakness
in the airline industry and commercial real estate market had slowed Florida
Progress's efforts. As a result, Florida Progress continued to examine other
business options that could accelerate the process.
After a careful review of available options, on July 1, 1996 the Florida
Progress Board of Directors approved in principle a plan to spin-off the Echelon
Business as a separate public company to Florida Progress stockholders as the
best alternative available for Florida Progress and its stockholders. The Board
of Directors
19
<PAGE> 22
of Florida Progress believes that the separation of Echelon from Florida
Progress will provide each of Florida Progress and Echelon with greater
managerial, operational and financial flexibility to respond to changing market
conditions in their different business environments.
The discussion of the reasons for the Distribution set forth herein
includes forward-looking statements that are based upon numerous assumptions
with respect to the ability of Echelon's management to maximize the value of its
assets, grow the business and achieve profitability and with respect to other
factors which may be beyond the control of Echelon's management. Many of such
factors are discussed above under the caption "Risk Factors."
Strategic and Management Considerations. The Distribution represents an
acceleration of Florida Progress's existing strategy to withdraw from the
lending and leasing and real estate businesses, and is designed to separate
distinct businesses that operate under different market and competitive
conditions. The Distribution will allow the management of each of Florida
Progress and Echelon to focus more intensively on its own businesses and provide
each company flexibility to grow in a manner best suited for its businesses and
markets. The Distribution should be beneficial to each of Florida Progress and
Echelon, because it will enable the management of each to design and advance
corporate policies and strategies that are based primarily on its own business
characteristics and to concentrate its financial resources wholly on its own
operations. The Distribution will also permit Echelon to design incentive
compensation programs that relate more directly to its own business
characteristics and performance.
Future Growth. The Distribution will also provide Echelon management with
the opportunity to pursue a business plan designed to maximize the value of
Echelon's assets, to grow the businesses comprising the Real Estate Business and
to achieve profitability. To facilitate its corporate objectives of growth and
profitability, Echelon is expected to employ three distinct strategies. First
and foremost, Echelon will pursue real estate development opportunities for its
existing undeveloped real estate assets, including office, commercial and
multi-family residential development of the 134 remaining acres owned by Echelon
within Carillon Park. Second, with regard to its existing portfolio of aircraft
assets, commercial real estate loans and income-producing real property, Echelon
will attempt to maximize long-term values and cash flow through active
management, selected asset sales and opportunistic capital redeployment. Third,
concurrent with the management of its existing portfolio, Echelon will pursue
several additional businesses with attractive growth potential. Echelon expects
that these businesses, which include real estate management services and Housing
Tax Credit and other affordable housing development projects, will provide an
additional basis for Echelon's future growth and profitability. See "Business."
Given the different priorities and strategies of Florida Progress, pursuing such
opportunities was not practicable for Echelon prior to the Distribution.
Investor Understanding and Flexibility. Debt and equity investors should
be able to evaluate better the financial performance of each of Florida Progress
and Echelon and their respective strategies, thereby enhancing the likelihood
that each will achieve appropriate market recognition and valuation. The
Distribution will also provide investors with additional flexibility by allowing
them to make separate investment decisions regarding Florida Progress and
Echelon.
MANNER OF EFFECTING THE DISTRIBUTION
The Distribution will be made on the Distribution Date to stockholders of
record of Florida Progress at the close of business on the Record Date. Prior to
the Distribution Date, Florida Progress will deliver all of the issued and
outstanding shares of Echelon Common Stock to the Distribution Agent for
distribution. The Distribution Agent will mail, on or about the Distribution
Date, certificates representing the shares of Echelon Common Stock to Florida
Progress stockholders of record on the Record Date. Florida Progress
stockholders will not be required to pay for shares of Echelon Common Stock
received in the Distribution, or to surrender or exchange shares of Florida
Progress Common Stock in order to receive shares of Echelon Common Stock. No
vote of Florida Progress stockholders is required or sought in connection with
the Distribution.
No certificates or scrip representing fractional shares of Echelon Common
Stock will be issued to Florida Progress stockholders as part of the
Distribution. In lieu of receiving fractional shares of Echelon Common Stock,
each holder of Florida Progress Common Stock who would otherwise be entitled to
receive a fractional
20
<PAGE> 23
share will receive cash for such fractional interests. The Distribution Agent
will, as soon as practicable after the Distribution Date, aggregate and sell all
such fractional interests on the NYSE at then prevailing market prices and
distribute the aggregate proceeds (net of brokerage fees) ratably to Florida
Progress stockholders otherwise entitled to such fractional interests. See
"United States Federal Income Tax Consequences of the Distribution" below for a
discussion of the United States federal income tax treatment of fractional share
interests.
IN ORDER TO BE ENTITLED TO RECEIVE SHARES OF ECHELON COMMON STOCK IN THE
DISTRIBUTION, FLORIDA PROGRESS STOCKHOLDERS MUST BE STOCKHOLDERS AT THE CLOSE OF
BUSINESS ON THE RECORD DATE, , 1996.
The Board of Directors of Echelon has adopted a stockholder rights
agreement. Certificates evidencing shares of Echelon Common Stock issued in the
Distribution will therefore represent the same number of Echelon Rights issued
under the Echelon Rights Agreement. See "Description of Capital Stock -- Echelon
Rights Agreement." Unless the context otherwise requires, references herein to
the Echelon Common Stock include the related Echelon Rights.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION
Florida Progress has received a ruling letter from the IRS to the effect
that, among other things, the Distribution will qualify as a tax-free spinoff
under Section 355 of the Internal Revenue Code. Under Section 355 of the
Internal Revenue Code, in general:
1. Holders of Florida Progress Common Stock will not recognize any income,
gain or loss as a result of the Distribution except that holders of Florida
Progress Common Stock that receive cash in lieu of fractional shares of Echelon
Common Stock will recognize gain or loss equal to the difference between such
cash and the tax basis allocated to such fractional shares. Any such gain or
loss will constitute capital gain or loss if such fractional shares would have
been held as a capital asset on the Distribution Date.
2. Holders of Florida Progress Common Stock will apportion the tax basis of
their Florida Progress Common Stock between such Florida Progress Common Stock
and any Echelon Common Stock (including fractional shares of Echelon Common
Stock) received by such holder in the Distribution in proportion to the relative
fair market values of such stock on the Distribution Date. Florida Progress will
provide appropriate information to each holder of record of Florida Progress
Common Stock as of the Record Date concerning the basis allocation.
3. The holding period for the Echelon Common Stock received in the
Distribution by holders of Florida Progress Common Stock will include the period
during which such holder held the Florida Progress Common Stock with respect to
which the Distribution was made, provided that such Florida Progress Common
Stock is held as a capital asset by such holder on the Distribution Date.
4. The Distribution will not be treated as a taxable disposition of Echelon
by Florida Progress.
Current Treasury regulations require each holder of Florida Progress Common
Stock who receives Echelon Common Stock pursuant to the Distribution to attach
to his or her United States federal income tax return for the year in which the
Distribution occurs a detailed statement setting forth such data as may be
appropriate in order to show the applicability of Section 355 of the Internal
Revenue Code to the Distribution. Florida Progress will convey the appropriate
information to each holder of record of Florida Progress Common Stock as of the
Record Date.
The IRS ruling is based on certain factual representations and assumptions
made by Florida Progress. If such factual representations and assumptions were
incorrect in a material respect, such ruling could become invalid. Florida
Progress is not aware of any facts or circumstances which would cause such
representations and assumptions to be incorrect. Each of Florida Progress and
Echelon has agreed to certain restrictions on its future actions to provide
further assurances that Section 355 of the Internal Revenue Code will apply to
the Distribution. See "Relationship Between Florida Progress and Echelon After
the Distribution."
21
<PAGE> 24
If the Distribution were not to qualify under Section 355 of the Internal
Revenue Code, then, in general, a corporate tax (which, as noted above, would be
very substantial) would be payable by the consolidated group, of which Florida
Progress is the common parent, based upon the difference between (x) the fair
market value of the Echelon Common Stock and (y) the adjusted basis of Florida
Progress in such Echelon Common Stock. In addition, under the consolidated
return rules, each member of the consolidated group (including Echelon) is
jointly and severally liable for such tax liability. Pursuant to the Tax Sharing
and Distribution Agreements, Florida Progress and Echelon will agree that if the
Distribution were not to qualify under Section 355 of the Internal Revenue Code
due to the failure by one party to comply with the terms of the IRS ruling
letter, then such party would bear the entire cost of any resulting tax
liability to the consolidated Florida Progress group. If the Distribution were
not to qualify under Section 355 of the Internal Revenue Code for a reason other
than the failure of a party to comply with the terms of such ruling letter, then
any resulting tax liability would be borne by Florida Progress. If the
Distribution occurred and it were not to qualify under Section 355 of the
Internal Revenue Code, the amount of the resulting tax liability would depend
upon the market value and tax basis of Echelon as of the Distribution Date. Any
such tax liability would have a material adverse effect on the financial
position, results of operations and cash flows of Echelon, and could have a
material adverse effect on the financial position, results of operations and
cash flows of Florida Progress.
Furthermore, if the Distribution were not to qualify as a tax-free spinoff,
each Florida Progress stockholder receiving shares of Echelon Common Stock in
the Distribution would be treated as if such stockholder had received a taxable
distribution in an amount equal to the fair market value of Echelon Common Stock
received, which would result in (y) a dividend to the extent of such
stockholder's pro rata share of Florida Progress's current and accumulated
earnings and profits and (z) a reduction in such stockholder's basis in Florida
Progress Common Stock to the extent the amount received exceeds such
stockholder's share of earnings and profits and a capital gain to the extent the
amount received exceeds the stockholder's basis provided that such Florida
Progress Common Stock is held as a capital asset by such holder on the
Distribution Date.
Florida Progress has also sought and received favorable rulings from the
IRS as to the United States federal income tax consequences of certain
restructurings which were or are to be effected by Florida Progress prior to the
Distribution.
The foregoing summary of the anticipated material United States federal
income tax consequences of the Distribution is for general information only and
does not purport to cover all United States federal income tax consequences that
might apply to every stockholder. FLORIDA PROGRESS STOCKHOLDERS SHOULD CONSULT
THEIR OWN ADVISERS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE DISTRIBUTION,
INCLUDING THE APPLICATION AND EFFECT OF APPLICABLE FOREIGN, STATE AND LOCAL TAX
LAWS.
LISTING AND TRADING OF ECHELON COMMON STOCK
Prior to the date hereof, there has not been any established trading market
for Echelon Common Stock. The Echelon Common Stock has been accepted for listing
on the NYSE, subject to notice of issuance, under the symbol "EIN", and trading
is expected to commence on a "when-issued" basis at least two days prior to the
Record Date. On the first NYSE trading day following the Distribution Date,
"when-issued" trading in respect of the Echelon Common Stock will end and
"regular-way" trading will begin.
There can be no assurance as to the prices at which the Echelon Common
Stock will trade before, on or after the Distribution Date. Unless and until the
Echelon Common Stock is fully distributed and an orderly market develops in the
Echelon Common Stock, the price at which such stock trades may fluctuate
significantly and may be lower or higher than the price that would be expected
for a fully distributed issue. Prices for the Echelon Common Stock will be
determined in the marketplace and may be influenced by many factors, including
(i) the depth and liquidity of the market for Echelon Common Stock, (ii)
developments affecting the businesses of Echelon generally, (iii) investor
perception of Echelon, and (iv) general economic and market conditions.
Shares of Echelon Common Stock distributed to Florida Progress stockholders
will be freely transferable, except for shares of Echelon Common Stock received
by persons who may be deemed to be "affiliates" of
22
<PAGE> 25
Echelon under the Securities Act of 1933, as amended (the "Securities Act").
Persons who may be deemed to be affiliates of Echelon after the Distribution
generally include individuals or entities that control, are controlled by, or
are under common control with Echelon and may include certain officers and
directors of Echelon, as well as principal stockholders of Echelon. Persons who
are affiliates of Echelon will be permitted to sell their shares of Echelon
Common Stock only pursuant to an effective registration statement under the
Securities Act or an exemption from the registration requirements of the
Securities Act, such as the exemption afforded by Section 4(1) of the Securities
Act or Rule 144 thereunder.
RELATIONSHIP BETWEEN FLORIDA PROGRESS AND
ECHELON AFTER THE DISTRIBUTION
Echelon is a wholly owned subsidiary of Florida Progress, and the results
of operations of Echelon have been included in Florida Progress's consolidated
financial results. After the Distribution, Florida Progress will not have any
ownership interest in Echelon, and Echelon will be an independent public
company. Furthermore, all contractual relationships existing prior to the
Distribution between Florida Progress and Echelon will be terminated except for
the contractual agreements described below and certain commercial relationships
entered into in the ordinary course of business.
Prior to the Distribution, Florida Progress and Echelon will enter into
certain agreements, described below, governing their relationship subsequent to
the Distribution and providing for the allocation of tax, employee benefits and
certain other liabilities and obligations arising from periods prior to the
Distribution. Copies of the forms of such agreements have been filed as exhibits
to the Registration Statement of Echelon in respect of the registration of the
Echelon Common Stock under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). In addition, promptly after the declaration of the dividend of
Echelon Common Stock by the Board of Directors of Florida Progress, Florida
Progress will file a Current Report on Form 8-K in connection with the
Distribution, and the Distribution and Tax Sharing Agreements will be filed as
exhibits to such Report.
The following description summarizes certain terms of such agreements, but
is qualified by reference to the texts of such agreements, which are
incorporated herein by reference.
DISTRIBUTION AGREEMENT
Florida Progress and Echelon will enter into the Distribution Agreement
providing for, among other things, certain corporate transactions required to
effect the Distribution and other arrangements between Florida Progress and
Echelon subsequent to the Distribution. In particular, the Distribution
Agreement defines the assets and liabilities which are being allocated to and
assumed by Echelon. The Distribution Agreement also defines what constitutes the
"Echelon Business."
Pursuant to the Distribution Agreement, Florida Progress is obligated to
transfer or cause to be transferred all right, title and interest in the assets
comprising the Echelon Business to Echelon, and Echelon is obligated to transfer
or cause to be transferred all its right, title and interest in the assets
comprising the Florida Progress business to Florida Progress. All assets are
being transferred without any representation or warranty, "as is-where is," and
the relevant transferee bears the risk that any necessary consent to transfer is
not obtained. Each party also agrees to exercise its respective commercially
reasonable efforts promptly to obtain any necessary consents and approvals and
to take such actions as may be reasonably necessary or desirable to carry out
the purposes of the Distribution Agreement and the other agreements summarized
below.
The Distribution Agreement provides for, among other things, assumptions of
liabilities and cross indemnities designed to allocate generally, effective as
of the Distribution Date, financial responsibility for the liabilities arising
out of or in connection with (i) the businesses currently conducted by the
Echelon Group, including any environmental liabilities arising out of or
relating to any of Echelon's properties, to Echelon and (ii) all other
liabilities to Florida Progress. For a discussion of such businesses, see
"Business." The
23
<PAGE> 26
Distribution Agreement provides for the settlement or payment of inter-company
receivables, payables and loans in accordance with specified procedures. No
party will have any liability to any other party for inaccurate forecasts or
arising out of any pre-Distribution arrangement, course of dealing or
understanding (other than the Distribution Agreement or the other agreements as
described below) unless such arrangement, course of dealing or understanding is
specifically set forth on a schedule to the Distribution Agreement.
The Distribution Agreement also provides for certain transactions between
Florida Progress and Echelon with respect to prior indebtedness of the companies
comprising the Echelon Group to members of the Florida Progress group. In
particular, prior to the Distribution Date, Echelon will be required to repay
certain indebtedness owed to Florida Progress and to deliver a note (as
described in greater detail below, under "PCH Note") to PCH in repayment of
intercompany indebtedness.
Under the Distribution Agreement, Echelon agrees that for so long as
Florida Progress or any of its subsidiaries is a guarantor of or obligor for any
Echelon liability, Echelon will not take certain actions, or fail to take
certain actions, which would result in a breach by Echelon of any of the
obligations so guaranteed. Specifically, Echelon agrees to be and remain a
"citizen of the United States" for purposes of the FAA Act and the Shipping Act
of 1916, as amended, for as long as Florida Progress is a guarantor of any of
the covenants Echelon made in its leasing contracts concerning its status as a
citizen of the United States for purposes of such Acts. Echelon also agrees not
to permit the imposition of liens on any asset if the imposition thereof would
constitute a breach under any obligation guaranteed. In addition, Echelon agrees
to take all commercially reasonable efforts to cause such guarantees to be
cancelled, discharged or otherwise terminated as promptly as practicable after
the Distribution.
The Distribution Agreement provides that neither Florida Progress nor
Echelon will take any action that would jeopardize the intended tax consequences
of the Distribution. Each of Florida Progress and Echelon agrees, among other
matters, to maintain its status as a company engaged in the active conduct of a
trade or business, as defined in Section 355(b) of the Internal Revenue Code,
until the second anniversary of the Distribution Date. Neither Florida Progress
nor Echelon expects this limitation to inhibit its financing or other activities
or its ability to respond to unanticipated developments. As part of the request
for a ruling that the Distribution will be tax free for United States federal
income tax purposes, each of Florida Progress and Echelon has represented to the
Internal Revenue Service that, subject to certain exceptions, it has no plan or
intent to liquidate, merge or sell all or substantially all of its assets.
Therefore, the acquisition of control of Florida Progress or Echelon shortly
after the Distribution may cause the ruling to be called into question. As a
result, any such acquisition of control of Florida Progress or Echelon may be
more difficult or less likely to occur because of the potential substantial
damages that could result upon a breach of such provisions of the Distribution
Agreement.
Under the Distribution Agreement, each of Florida Progress and Echelon
agrees to provide to the other party, subject to certain conditions, access to
certain corporate records and information and to provide certain services on
such terms as are set forth in a Transition Services Agreement between such
parties.
The Distribution Agreement also provides that, except as otherwise set
forth therein or in any other agreement, all costs and expenses incurred on or
prior to the Distribution Date in connection with the Distribution will be
charged to and paid by Florida Progress. Except as set forth in the Distribution
Agreement or any related agreement, each party shall bear its own costs and
expenses incurred after the Distribution Date.
24
<PAGE> 27
TAX SHARING AGREEMENT
Florida Progress and Echelon will enter into a Tax Sharing Agreement to the
effect that Florida Progress and Echelon will each pay its respective share of
the consolidated tax liability for the tax years that Echelon and its
subsidiaries are included in Florida Progress's consolidated United States
federal income tax return, as well as most state and local taxes attributable to
periods prior to the Distribution Date. In general, Florida Progress and Echelon
will pay all taxes attributable to their respective groups after the
Distribution. However, pursuant to the Tax Sharing Agreement and Distribution
Agreement, Florida Progress and Echelon will agree that if the Distribution were
not to qualify under Section 355 of the Internal Revenue Code due to the failure
by one party to comply with the terms of the IRS ruling letter, then such party
would bear the entire cost of any resulting tax liability to the consolidated
Florida Progress group. If the Distribution were not to qualify under Section
355 of the Internal Revenue Code for a reason other than the failure of a party
to comply with the terms of such ruling letter, then any resulting tax liability
would be borne by Florida Progress.
The Tax Sharing Agreement will not be binding on the IRS or any other
taxing authority. Moreover, notwithstanding the provisions of the Tax Sharing
Agreement, Echelon will remain, as a legal matter, jointly and severally liable
for the entire consolidated United States federal tax liability for the years
that Echelon and its subsidiaries are included in Florida Progress's
consolidated United States federal income tax return as well as the entire
consolidated Florida tax liability for the years that Echelon and its
subsidiaries are included in Florida Progress's consolidated Florida income tax
return. See "Risk Factors -- Potential Taxation" and "The Distribution -- United
States Federal Income Tax Consequences of the Distribution."
EMPLOYEE BENEFITS ALLOCATION AGREEMENT
Florida Progress and Echelon will enter into an Employee Benefits
Allocation Agreement (the "Employee Benefits Agreement"), which allocates and
assigns responsibility for certain employee benefits matters in respect of
Florida Progress and Echelon on and after the effective time of the Distribution
Date.
With respect to defined benefit plans, the Employee Benefits Agreement
provides that no assets or liabilities with respect to Echelon employees and
their beneficiaries shall be transferred from the Florida Progress Retirement
Plan to any plan or arrangement established or maintained by Echelon for the
benefit of its employees.
With respect to defined contribution plans, the Employee Benefits Agreement
provides that active participation of Echelon employees in the Florida Progress
Savings Plan shall cease immediately after the Distribution Date, although such
employees will have the ability to maintain their existing investments and/or
transfer between funds maintained by Florida Progress.
With respect to welfare plans, the Employee Benefits Agreement provides
that, from and after the Distribution Date Echelon shall sponsor its welfare
plans solely for the benefit of its employees and its employees shall not
continue to participate in the Florida Progress welfare plans.
The Employee Benefits Agreement also provides that Florida Progress will
generally retain all employee benefit litigation liabilities that are asserted
prior to the Distribution Date (but not such liabilities that relate to the
participation of Echelon employees in their retirement plans or savings plans),
and that Florida Progress and Echelon will retain the workers' compensation
liabilities of their respective pre-Distribution employees.
TRANSITION SERVICES AGREEMENT
Florida Progress and Echelon will enter into a Transition Services
Agreement pursuant to which the respective parties have agreed to certain basic
terms governing the provision by one party to another of specified transitional,
administrative or other support services.
PCH NOTE
Immediately prior to the Distribution, in connection with the
recapitalization of Echelon by Florida Progress, Echelon will issue a note to
PCH (the "PCH Note"). The principal amount of the PCH Note will equal the amount
of the advances from Florida Progress which will not have been repaid by
Echelon, which amount is expected to be approximately $36 million. Such
principal amount will mature four years after issuance, with required principal
payments due upon disposition by Echelon of certain non-strategic operating
25
<PAGE> 28
and direct finance leasing interests and other assets. Interest on the PCH Note
will reflect a market rate, and the PCH Note will be secured by the
non-strategic-assets described above. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources -- Cash Flow from Financing Activities."
OTHER
Florida Progress and its affiliates will continue to occupy or utilize
certain premises leased from Echelon. Such leases are on terms which reflect
market rates and conditions and have been entered into by the parties in the
ordinary course of their respective businesses. See "Business -- The Real Estate
Business -- Commercial Real Estate Ownership and Management" and "Management and
Executive Compensation -- Certain Relationships and Related Transactions."
DIVIDEND POLICY
The payment and level of cash dividends by Echelon after the Distribution
will be subject to the discretion of the Board of Directors of Echelon. Echelon
currently intends to retain all future earnings for the development of its
business and does not anticipate paying any cash dividends for the foreseeable
future.
26
<PAGE> 29
CAPITALIZATION
The following table sets forth, as of September 30, 1996, the
capitalization of Echelon and the capitalization of Echelon as adjusted to
reflect the issuance of the PCH Note, the recent receipt of $105 million in
third-party secured financing, the repayment of outstanding advances from
Florida Progress and an equity contribution by Florida Progress. The information
set forth below does not necessarily reflect the capitalization of Echelon in
the future or as it would have been had the Distribution occurred on September
30, 1996.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
------------------------
HISTORICAL PRO FORMA
---------- ---------
(IN MILLIONS)
<S> <C> <C>
Advances from Florida Progress (excluding PCH Note)............. $101.1(a) $ 0.0
Long-term debt, including current portion --
PCH Note...................................................... 0.0(b) 36.0
Third-party financing......................................... 0.0(c) 105.0
Other indebtedness............................................ 20.4 20.4
------ ------
Total debt............................................. 121.5 161.4
Preferred stock................................................. 0.0(d) 0.0
Common stockholder's equity..................................... 172.6(e) 190.6
------ ------
Total capitalization................................... $294.1 $ 352.0
====== ======
</TABLE>
- ---------------
(a) Reflects repayment of $22.1 million of such advances with proceeds generated
from operations, from maturity and collection of loans and from planned
sales of assets, repayment of $43 million of such advances using a portion
of the $105 million Loan which Echelon recently obtained and the issuance of
the PCH Note.
(b) Reflects the PCH Note to be issued in settlement of certain advances from
Florida Progress. See "Relationship Between Florida Progress and Echelon
After the Distribution -- PCH Note," and Note 1 to the Consolidated
Financial Statements included elsewhere in this Information Statement.
(c) Reflects the Loan. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
(d) Echelon is authorized to issue of 10,000,000 shares of preferred stock. At
September 30, 1996 there were no shares outstanding.
(e) Reflects equity contribution in the expected amount of $18 million by
Florida Progress to Echelon prior to the Distribution to provide cash for
payment of expenses incurred in evaluating and implementing the Distribution
and to provide additional liquidity.
27
<PAGE> 30
SELECTED FINANCIAL DATA
The following consolidated financial data are qualified in its entirety by
the financial statements of Echelon and other information contained elsewhere in
this Information Statement. The financial data as of December 31, 1995 and 1994,
and for the years ended December 31, 1995, 1994 and 1993, have been derived from
the audited financial statements of Echelon contained elsewhere in this
Information Statement. The financial data as of September 30, 1996 and 1995, and
December 31, 1992 and 1991, and for the nine months ended September 30, 1996 and
1995, and for the years ended December 31, 1992 and 1991, are unaudited. Results
for the interim periods are not necessarily indicative of results for the full
year. Historical consolidated financial information is not expected to be
indicative of Echelon's future performance as an independent company. The
following financial data should be read in conjunction with the information set
forth under "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Echelon's Consolidated Financial Statements and Notes
thereto appearing elsewhere in this Information Statement.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ----------- ------ ------ ------ ----------- -----------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Revenue.............................. $ 48.6 $ 33.7 $ 47.6 $ 48.8 $ 66.5 $ 42.4 $ 94.4
Loss before income taxes............. (43.2)(1) (7.8) (9.9) (9.2) (5.7) (22.5) (1.3)
Net loss(2).......................... $ (28.2)(1) $ (3.9) $ (5.0) $ (5.0) $ (5.0) $ (13.1) $ (0.7)
======= ======= ======= ======= ======= ======= =======
Net loss per common share(3)......... $ (4.34) $ (0.60) $(0.77) $(0.77) $(0.77) $ (2.02) $ (0.11)
======= ======= ======= ======= ======= ======= =======
BALANCE SHEET DATA:
Assets:
Lending and leasing................ $ 347.0 $ 424.6 $400.3 $478.8 $552.6 $ 598.1 $ 670.3
Real estate........................ 136.9 142.5 154.2 144.6 148.9 187.1 166.8
------- ------- ------- ------- ------- ------- -------
Total assets................ $ 483.9 $ 567.1 $554.5 $623.4 $701.5 $ 785.2 $ 837.1
======= ======= ======= ======= ======= ======= =======
Deferred income taxes................ $ 162.9 $ 192.4 $182.3 $224.3 $244.9 $ 268.3 $ 291.3
======= ======= ======= ======= ======= ======= =======
Capitalization:
Advances from Florida Progress..... $ 101.1 $ 265.4 $250.0 $283.8 $321.2 $ 341.4 $ 404.8
Debt............................... 20.4 24.7 33.2 32.7 32.5 29.4 34.7
Common equity...................... 172.6 62.9 60.8 69.0 77.2 84.7 129.3
------- ------- ------- ------- ------- ------- -------
Total capitalization........ $ 294.1 $ 353.0 $344.0 $385.5 $430.9 $ 455.5 $ 568.8
======= ======= ======= ======= ======= ======= =======
</TABLE>
- ---------------
(1) Reflects $30.1 million pre-tax write-down of assets which management has
determined will be disposed of and $8 million of pre-tax costs associated
with the Distribution.
(2) The similarity of net loss for the years ended December 31, 1995, 1994 and
1993 reflects the orderly withdrawal strategy pursuant to which Echelon was
being operated during such years. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Overview."
(3) Net loss per common share is based upon 6,467,018 outstanding common shares.
28
<PAGE> 31
PRO FORMA FINANCIAL DATA
The unaudited Pro Forma Consolidated Results of Operations for the nine
months ended September 30, 1996 and the year ended December 31, 1995 and the Pro
Forma Consolidated Balance Sheet at September 30, 1996 present the consolidated
results of operations and consolidated financial position of Echelon assuming
that the transactions contemplated by the Distribution and the related
refinancing transactions described in the Notes hereto had been completed as of
January 1, 1995 for purposes of the Pro Forma Consolidated Results of
Operations, and at September 30, 1996 for purposes of the Pro Forma Consolidated
Balance Sheet. The following unaudited pro forma financial data and notes
thereto do not include certain information and footnotes required by generally
accepted accounting principles for complete financial statements. However, in
the opinion of management, all adjustments considered necessary for a fair
presentation have been included.
The following pro forma consolidated financial data should be read in
conjunction with the audited Consolidated Financial Statements and Notes thereto
for the three year period ended December 31, 1995, included elsewhere in this
Information Statement. The accounting principles used in preparing the pro forma
financial data are the same as those described in such audited statements. The
pro forma consolidated financial data are presented for informational purposes
only and may not necessarily reflect the future results of operations or
financial position of Echelon or what the results of operations or financial
position would have been if Echelon's business had been operated as a separate,
independent company during the periods shown. Historical per share data and
dividends have not been reflected as Echelon was not a publicly-held company
during the periods presented below.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1996 YEAR ENDED DECEMBER 31, 1995
----------------------------------- -----------------------------------
PRO PRO
HISTORICAL ADJUSTMENTS FORMA HISTORICAL ADJUSTMENTS FORMA
---------- ----------- ------ ---------- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
SALES AND REVENUES:
Real estate operations --
Rental income................. $ 8.9 $ 0.0 $ 8.9 $ 10.1 $ 0.0 $ 10.1
Sale of development
properties................. 18.2 0.0 18.2 0.9 0.0 0.9
Marina and other revenues..... 5.5 0.0 5.5 7.2 0.0 7.2
Lending and leasing
operations --
Interest income............... 11.8 0.0 11.8 21.7 0.0 21.7
Earned income on finance
leases..................... 2.1 0.0 2.1 4.8 0.0 4.8
Other......................... 2.1 0.0 2.1 2.9 0.0 2.9
------ ------ ----- ------- ----- -----
48.6 0.0 48.6 47.6 0.0 47.6
------ ------ ----- ------- ----- -----
OPERATING EXPENSES:
Cost of operations.............. 8.6 0.8(a) 9.4 10.5 1.0(a) 11.5
Cost of development property
sold.......................... 18.5 0.0 18.5 0.8 0.0 0.8
Depreciation.................... 4.3 0.0 4.3 6.4 0.0 6.4
Provision for lease, loan and
real estate losses............ 33.9 0.0 33.9 7.0 0.0 7.0
Interest expense................ 15.6 (4.4)(b) 11.2 22.0 (7.2)(b) 14.8
Marketing and administrative.... 4.2 1.1(a) 5.3 5.2 1.5(a) 6.7
Other expenses, net............. 6.7 (8.0)(c) (1.3) 5.6 0.0 5.6
------ ------ ----- ------- ----- -----
91.8 (10.5) 81.3 57.5 (4.7) 52.8
------ ------ ----- ------- ----- -----
LOSS BEFORE INCOME
TAXES......................... (43.2) 10.5 (32.7) (9.9) 4.7 (5.2)
Income tax benefit.............. (15.0) 2.5(d) (12.5) (4.9) 1.8(d) (3.1)
------ ------ ----- ------- ----- -----
NET LOSS........................ $(28.2) $ 8.0 $(20.2) $ (5.0) $ 2.9 $ (2.1)
====== ====== ===== ======= ===== =====
NET LOSS PER COMMON SHARE....... $(4.34) $(3.11)(e) $(0.77) $(0.32)(e)
====== ===== ======= =====
</TABLE>
See the Notes hereto set forth on page 31.
29
<PAGE> 32
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
---------------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
ASSETS
LEASES, LOANS, PROPERTY AND OTHER INVESTMENTS:
Leases and loans receivable, net.......................... $235.1 $ 0.0 $ 235.1
Property, net of depreciation............................. 132.9 0.0 132.9
Investments in unconsolidated affiliates.................. 32.9 0.0 32.9
------ ------ ------
400.9 0.0 400.9
------ ------ ------
ASSETS HELD FOR SALE........................................ 32.8 0.0 32.8
------ ------ ------
CURRENT ASSETS:
Cash and equivalents...................................... 0.2 56.0(a)(b) 56.2
Accounts receivable, net.................................. 1.4 0.0 1.4
Current portion of leases and loans receivable............ 42.5 0.0 42.5
Inventories............................................... 3.2 0.0 3.2
Miscellaneous............................................. 0.4 0.0 0.4
------ ------ ------
47.7 56.0 103.7
------ ------ ------
OTHER NON-CURRENT ASSETS.................................... 2.5 0.0 2.5
------ ------ ------
Total assets......................................... $483.9 $ 56.0 $ 539.9
====== ====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable and other liabilities.................... $ 22.4 $ 0.0 $ 22.4
Income taxes payable...................................... 2.3 0.0 2.3
Current portion of long-term debt......................... 2.5 0.0 2.5
------ ------ ------
Total current liabilities............................ 27.2 0.0 27.2
DUE TO FLORIDA PROGRESS AND AFFILIATES...................... 103.0 (103.0)(a) 0.0
NOTE PAYABLE TO PCH......................................... 0.0 36.0(a) 36.0
LONG-TERM DEBT.............................................. 17.9 105.0(a) 122.9
DEFERRED INCOME TAXES....................................... 162.9 0.0 162.9
OTHER LIABILITIES........................................... 0.3 0.0 0.3
------ ------ ------
Total liabilities.................................... 311.3 38.0 349.3
------ ------ ------
STOCKHOLDER'S EQUITY:
Preferred stock........................................... 0.0 0.0 0.0
Common Stock.............................................. 0.1 0.0 0.1
Additional paid in capital................................ 251.2 18.0(b) 269.2
Retained deficit.......................................... (78.7) 0.0 (78.7)
------ ------ ------
172.6 18.0 190.6
------ ------ ------
$483.9 $ 56.0 $ 539.9
====== ====== ======
</TABLE>
See the Notes hereto set forth on page 31.
30
<PAGE> 33
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(1) The pro forma adjustments to the accompanying unaudited consolidated
statement of operations for the nine months ended September 30, 1996 and the
audited consolidated statement of operations for the twelve months ended
December 31, 1995 are described below:
(a) To record additional general and administrative expenses which
would have been incurred by Echelon as a separate publicly-held company,
based on estimates by the management of Echelon.
(b) To record additional interest expense related to the incurrence of
the $105 million Loan and the issuance of the PCH Note in the amount of
approximately $36 million (both at an assumed interest rate of 9.0%), after
eliminating interest expense related to intercompany advances included in
historical financial statements. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
(c) To eliminate the costs of evaluating and implementing the
Distribution.
(d) To record the estimated income tax benefit associated with pro
forma adjustments (a-c) at an assumed combined federal and state income tax
rate of 38.575%.
(e) Pro forma net loss per common share is computed based on 6,467,018
shares of Echelon being distributed in the Distribution.
(2) The pro forma adjustments to the accompanying unaudited consolidated
balance sheet at September 30, 1996 are described below:
(a) To record the incurrence of the $105 million Loan, a portion of
which was used to repay advances from Florida Progress and to provide cash
for operations of Echelon after the Distribution.
(b) To record an $18 million equity contribution from Florida Progress
to provide cash for payment of expenses incurred in evaluating and
implementing the Distribution and to provide additional liquidity.
31
<PAGE> 34
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis of financial condition and results of
operations is prepared as if Echelon were a separate entity for all periods
discussed. This discussion should be read in conjunction with Echelon's
Consolidated Financial Statements and the Notes thereto included elsewhere in
this Information Statement.
OVERVIEW
In September 1991, Florida Progress announced its plan to withdraw from the
lending and leasing and real estate businesses. As a result of Florida
Progress's orderly withdrawal strategy, between September 30, 1991 and December
31, 1995, Echelon decreased its portfolio by approximately $583 million, or 51%
of the September 30, 1991 portfolio. Although Florida Progress's orderly
withdrawal strategy had resulted in a substantial reduction in the size of the
portfolio, the continued weakness in the airline industry and commercial real
estate market had slowed Florida Progress's efforts. After a careful review of
available options, the Florida Progress Board of Directors concluded that the
Distribution was the best alternative available for Florida Progress and its
stockholders. In contrast to the orderly withdrawal strategy pursued by Echelon
while under the control of Florida Progress, upon the Distribution, Echelon will
be able to pursue a business plan designed to: (1) grow the Real Estate Business
and accelerate the disposal of certain non-strategic assets, (2) maximize the
value of the remaining assets, and (3) achieve profitability.
The similarity of Echelon's results for each of the three years ended
December 31, 1995, 1994 and 1993 reflects the orderly withdrawal strategy
pursuant to which Echelon was being operated. In particular, during such period,
one of the goals of Florida Progress was to dispose of certain Echelon assets
without incurring significant losses. Accordingly, Echelon conducted its
operations, selected assets for sale, determined the timing of such asset sales,
and recognized and recorded provisions for losses in a manner which, subject to
applicable accounting rules, was as consistent as possible with such orderly
withdrawal strategy and the desire to avoid significant losses in any given
period.
Effective as of September 30, 1996, Florida Progress contributed $140
million to the equity of Echelon, which was used by Echelon to repay advances
from Florida Progress. After giving effect to such recapitalization, as of
September 30, 1996, Echelon remained obligated to repay $101.1 million of
advances from Florida Progress. In addition to the contribution by Florida
Progress of $140 million to the equity of Echelon, Florida Progress will
contribute an additional amount of approximately $18 million to the equity of
Echelon prior to the Distribution to provide cash for the payment of expenses
incurred in evaluating and implementing the Distribution and to provide
additional liquidity. Echelon expects that immediately prior to the
Distribution, Echelon's obligation to Florida Progress will have been reduced to
approximately $36 million, reflecting the repayment of $43 million of such
advances using a portion of the $105 million Loan which Echelon recently
obtained and the repayment of approximately $22 million of such advances with
proceeds generated from operations, from maturities and collections on loans,
from planned sales of assets and from the additional capital contribution.
Due to the foregoing items and Echelon's intention to abandon the orderly
withdrawal strategy which had previously guided the conduct of its business in
favor of a more growth-oriented business plan, the results of operations
discussed below are not expected to be indicative of future results.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1996 Compared to Nine Months Ended September
30, 1995
For the nine months ended September 30, 1996, Echelon reported a loss
before income taxes of $43.2 million, a $35.4 million decline from the $7.8
million loss before income taxes reported for the same period in the prior year.
Revenues. Sales and revenues for the nine months ended September 30, 1996
increased $14.9 million over the same period in 1995, primarily due to two sales
totaling 55 acres of land in Carillon Park for $18.2 million. Rental income for
the nine months ended September 30, 1996 increased by $1.3 million over the same
32
<PAGE> 35
nine month period in 1995 due primarily to the acquisition of a 67% interest in
an office building in which Echelon had previously held a 33% interest. Interest
income for the nine months ended September 30, 1996 declined by $3.6 million
compared to the same nine month period in 1995 due to loan payoffs and sales.
Expenses. Operating expenses for the nine months ended September 30, 1996
increased by $50.3 million over the same period in 1995, primarily due to the
$30.1 million provision Echelon recorded in 1996 in anticipation of the
Distribution to cover losses expected to be incurred on the accelerated sale of
certain non-strategic assets. Operating expenses for the first nine months of
1996 also reflected an $8.0 million charge to other expenses, net as a result of
an allocation from Echelon's parent related to costs associated with the
Distribution. The $17.7 million increase in cost of development properties sold
reflected the cost of the 55 acres sold as described above. Operating expenses
also reflected an increase of $1.2 million in costs of operations attributable
to the previously mentioned acquisition of a 67% interest in an office building
in which Echelon had previously held a 33% interest.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
For the year ended December 31, 1995, Echelon reported a $9.9 million loss
before income taxes, a $0.7 million increase in losses over the $9.2 million
loss reported for the prior year.
Revenues. Rental income for the year ended December 31, 1995 increased
$1.8 million over the year ended December 31, 1994, primarily as a result of the
acquisition by Echelon of the remaining 50% interest in an office building in
1995 and the subsequent inclusion in its results of 100% of the rental revenues
generated thereby. Marina and other revenues increased $1.7 million due
primarily to a more favorable market for boat sales. Revenues from sales of
development properties decreased $4.1 million in 1995, as fewer properties were
sold compared to 1994. Earned income on finance leases in 1995 was essentially
unchanged over 1994 despite the sale in 1995 of two aircraft leveraged leases
and the termination of a third aircraft leveraged lease upon receipt of
insurance proceeds in 1995.
Expenses. The $1.2 million increase in depreciation for the year ended
December 31, 1995 over the year ended December 31, 1994 and the $1.5 million
increase in cost of operations were due primarily to the effects of Echelon's
acquisition of the remaining 50% interest in an office building in 1995, as
discussed above. The cost of development properties sold decreased by $4.0
million due to the decrease in sales of properties in 1995 as discussed above.
Marketing and other administrative expenses increased $1.1 million due to an
increase in professional fees in connection with the liquidation of a number of
leveraged lease assets. The $4.2 million increase in other expenses, net
primarily reflected costs associated with the sale and termination of leveraged
leases in 1995 as discussed above. The $1.1 million decrease in interest expense
primarily reflected the reduction of debt to Florida Progress that resulted from
the use of cash proceeds generated through the sale of assets. In 1995, Echelon
recorded an additional provision for losses of $7.0 million compared to $10.6
million in 1994 based on estimated future losses from the continued orderly
liquidation of assets.
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993
For the year ended December 31, 1994, Echelon reported a $9.2 million loss
before income taxes, a $3.5 million increase in losses over the $5.7 million
loss reported for the prior year.
Revenues. Rental income for the year ended December 31, 1994 declined $1.6
million compared to the year ended December 31, 1993, reflecting the loss of
rental revenues from an apartment project which was sold in 1993. Revenues from
sales of development properties declined to $5.0 million for the year ended
December 31, 1994 from $17.5 million for the year ended December 31, 1993 due to
the reduction in inventory of saleable projects as the liquidation of real
estate assets continued. In 1994, Echelon sold three industrial buildings and
approximately 706 acres of undeveloped land for an aggregate of $5.0 million,
whereas in 1993, an apartment project and approximately 1,290 acres of
undeveloped land were sold for an aggregate of $17.5 million.
33
<PAGE> 36
Earned income on finance leases declined to $4.4 million for the year ended
December 31, 1994 from $7.7 million for the year ended December 31, 1993 as a
result of four equipment leveraged leases having been sold in 1993.
Expenses. Cost of operations decreased by $1.0 million for the year ended
December 31, 1994 compared to the prior year, reflecting the absence of costs
associated with an apartment project which was sold in 1993. The $13.7 million
decline in the cost of development properties sold in 1994 compared to 1993 is
due primarily to the larger volume of property sales in 1993, as discussed
above. Other expenses, net in 1994 decreased $1.9 million due to equipment
leveraged lease sales mentioned above. In 1994, Echelon recorded an additional
provision for losses of $10.6 million compared to $6.6 million in 1993 based on
estimated future losses from the continued orderly liquidation of assets. The
$2.3 million decrease in interest expense in 1994 compared to 1993 primarily
reflects the reduction of debt to Florida Progress that resulted from the use of
the cash proceeds generated through the sale of assets.
LIQUIDITY AND CAPITAL RESOURCES
Sources of Liquidity
Historically, Echelon's sources of liquidity have been derived from the
proceeds of asset sales and the maturity and collection of Echelon's loan
portfolio, operating cash flow and advances from Florida Progress.
Prospectively, the sources of funds are expected to come from the continued
maturity and collection of Echelon's loan portfolio and proceeds from the sale
of certain non-strategic assets, operating cash flow and, with respect to
Echelon's future real estate development, from project-based financings.
On November 5, 1996, Echelon obtained a three-year secured loan from
Salomon Brothers Realty Corp. in the principal amount of $105 million. The
proceeds of the Loan were used to repay $43 million of advances from Florida
Progress and to create a cash balance for working capital and other investments.
The Loan is non-recourse to Echelon (except for certain cases of actual fraud
and other wrongful acts and except in certain events with respect to a $6
million tax lien on a real estate loan portfolio property), and is secured by
five of Echelon's commercial real estate properties (Barnett Tower, McNulty
Station, 100 Carillon, Highpoint Center and Progress Center), substantially all
of Echelon's real estate loan portfolio and certain additional collateral,
including the Harborage of Bayboro and the 7th Avenue property. See
"Business -- Commercial Real Estate Ownership and Management."
If the loan-to-value of collateral ratio exceeds 75%, then Echelon will be
required to deposit the cash flow from the assets pledged as collateral into a
collection account to be disbursed monthly to pay scheduled Loan payments,
property expenses and other items and to fund certain reserves. Cash balances
remaining in such account would then be released to Echelon. Under the terms of
the Loan, the lender has the right to give notice if it determines the
loan-to-value of collateral ratio exceeds 75%, and Echelon has certain rights to
contest that determination. If the loan-to-value of collateral ratio exceeds
80%, then the remaining cash balances in such account which would otherwise have
been released to Echelon will be applied monthly to reduce the principal amount
of the Loan until the ratio is less than 80%. The imposition of such a
requirement could have a material adverse impact on Echelon's ability to
successfully implement its business plan because the items comprising the
collateral represent Echelon's key sources of operating cash flow. The lender
has not yet received final appraisals of all the collateral. However, at the
time the Loan was funded the parties believed the loan-to-value of collateral
ratio was less than 75%.
The Loan requires mandatory monthly principal payments based on an
amortization schedule of 25 years (or, in the case of the real estate loan
portfolio, the scheduled principal payments actually received, if greater),
provided, however, that the scheduled amortization is accelerated to 18 years if
the loan-to-value of collateral ratio is greater than 75%. Additional principal
payments may be due upon the sale or other transfer of individual items of
collateral or upon the prepayment at a discount of any real estate loan
comprising collateral. Under the Loan, monthly payments of interest at the rate
of LIBOR plus 2.95% per annum are due on the unpaid principal balance.
34
<PAGE> 37
In addition, the loan agreement governing the Loan contains covenants that
require Echelon to maintain a ratio of debt to total capitalization of not
greater than 60% and to maintain certain levels of liquidity during each year of
the Loan. If Echelon fails to pay any amount due on the Loan after it becomes
due, fails to repay outstanding principal at the stated maturity of the Loan,
becomes bankrupt or insolvent, fails to comply with any covenants in the loan
agreement or a change of control of Echelon occurs (each an "Event of Default"),
then the lender may accelerate the maturity of the Loan and during the
continuance of an Event of Default, overdue amounts will bear interest at 5.0%
above the rate otherwise applicable.
Cash Flow Used in and Provided from Operating Activities
Cash flow used in operating activities was $12.3 million for the nine
months ended September 30, 1996 compared to $16.2 million of cash flow provided
from operating activities for the nine months ended September 30, 1995. In each
case, the primary factor contributing to the level of cash used was the timing
of tax payments relating to asset sales.
Cash flow used in operating activities was $22.9 million, $19.7 million,
and $22.1 million for 1995, 1994, and 1993, respectively. The primary use of
cash in each of these years was largely related to previously deferred tax
liabilities becoming due and payable as a result of leveraged lease sales.
Prospectively, Echelon currently plans to hold its leveraged lease assets to
maturity or until their termination values equal their market values, which
would spread the remaining deferred tax payments over a longer term. Net cash
flow from operations in the future is generally expected to be reinvested in the
Real Estate Business.
Cash Flow From Investing Activities
For the nine months ended September 30, 1996 and 1995, Echelon had net cash
flow from investing activities of $32.5 million and $46.2 million, respectively.
Proceeds from the sale or collection of leases and loans contributed $23.6
million and $47.5 million of the net cash flow for the first nine months of 1996
and 1995, respectively. Proceeds from the sale of real estate properties
contributed $17.6 million and $0.7 million of the net cash flow for the nine
months of 1996 and 1995, respectively.
Echelon's net cash flow from investing activities for 1995, 1994, and 1993
was $69.7 million, $69.0 million, and $71.0 million, respectively. In each case,
the foregoing cash flows reflected the $74.0 million, $65.5 million, and $79.2
million, respectively, in proceeds received from the sale or collection of
leases and loans. Upon the maturity and collection of Echelon's loan portfolio,
Echelon expects investing activities to become a net use of funds as Echelon
attempts to build the Real Estate Business.
Capital expenditures for 1995, 1994, and 1993, which are reported as real
estate property additions, were $4.1 million, $1.3 million, and $1.2 million,
respectively, and were primarily for office tenant construction improvements and
land development infrastructure improvements such as roads, water, and sewer
construction. In 1997, capital expenditures and investments are expected to be
approximately $29.3 million, comprised of approximately $6.2 million for tenant
improvements and land development, approximately $13.9 million for new apartment
development, and approximately $9.2 million for passive investments in Housing
Tax Credits. These expenditures are expected to be funded through project-based
financings and from existing cash, which, as of the Distribution, is expected to
approximate $60 million.
Cash Flow from Financing Activities
In connection with the Distribution, Echelon has obtained third-party
secured financing of $105 million, and the material terms of such Loan are
described above. Proceeds of the Loan were used to repay $43 million of advances
from Florida Progress and to create a cash balance for working capital and other
investments.
At the Distribution, Echelon will be obligated under the PCH Note. The PCH
Note will be secured by certain non-strategic assets that will be sold as soon
as practicable. The entire principal amount of the PCH Note is due four years
from the Distribution Date, provided that prepayments are required from the
proceeds from the sales of such assets. Echelon expects that proceeds from the
sale of the assets securing the PCH Note will be sufficient to repay the PCH
Note.
35
<PAGE> 38
Echelon expects to use land Echelon currently owns which is not encumbered
by debt to help procure financing for new apartment developments on such land.
By using the land as equity, Echelon expects to be able to obtain non-recourse
construction financing upon favorable terms.
Dividend payments to Florida Progress were $3.2 million, $3.2 million, and
$2.5 million in 1995, 1994, and 1993, respectively. Echelon does not currently
intend to pay dividends for the foreseeable future.
Cash and Cash Equivalents
At the Distribution, Echelon expects to have approximately $60 million in
cash and cash equivalents that will be available for operations.
Off-Balance Sheet Risk
Through a previous partnership, Echelon remains contingently liable for
first mortgage bonds issued to residents of the life care communities owned by
such partnership. The contingent liability reduces over time as those who were
residents at the time of the sale of Echelon's partnership interest discontinue
their residency. If the current owners fail to perform their obligations and if
the partnership assets, consisting primarily of land and buildings, were
worthless, Echelon could be liable for an additional $32.2 million as of
December 31, 1995. Echelon considers the incurrence of this liability to be
remote based on asset values and the indemnification agreement from the current
owners to Echelon.
IMPACT OF INFLATION
Echelon believes that inflation will not have a materially adverse effect
on its business or financial condition.
36
<PAGE> 39
BUSINESS
GENERAL
Echelon is a real estate and financial services company with operations in
two business segments: (i) the Real Estate Business and (ii) the Lending and
Leasing Business. Echelon's principal executive offices are located at One
Progress Plaza, Suite 2400, St. Petersburg, Florida, 33701, telephone (813)
824-6767.
THE REAL ESTATE BUSINESS
COMMERCIAL REAL ESTATE OWNERSHIP AND MANAGEMENT
General
Echelon owns and manages a portfolio of income producing commercial real
estate properties located in Florida. The majority of these properties are
located in the Tampa Bay area including Tampa, St. Petersburg and the Gateway
area in between Tampa, St. Petersburg and Clearwater. With over two million
residents, Tampa Bay ranks among the top 25 metropolitan areas in the United
States in terms of population. The employment base of the Tampa Bay area ranks
second to Miami in Florida's employment markets. According to the Commerce
Department's Bureau of Economic Analysis, Tampa is expected to add at least
300,000 new jobs over the course of the next decade. Echelon believes these
demographics will support Echelon's business plan to maximize the value of its
assets, grow its Real Estate Business and achieve profitability.
Echelon's owned assets include 11 major commercial real estate properties,
consisting of five office buildings and six industrial sites and other
properties. The following table summarizes Echelon's owned commercial real
estate:
Summary of Owned Commercial Real Estate Portfolio
<TABLE>
<CAPTION>
% OF
RENTABLE
PERCENTAGE SQ. FT.
RENTABLE LEASED LEASED
PROJECT SQUARE AS OF MAJOR BY MAJOR
NAME DESCRIPTION LOCATION FEET(2) SEPTEMBER 30, 1996 TENANTS TENANTS
- ----------- -------------------------------- ------------------- ------------- ------------------ ------------------ --------
<S> <C> <C> <C> <C> <C> <C>
OFFICE
Barnett
Tower..... 26-story Class A office tower St. Petersburg, FL 294,096 92% Florida Progress 21%
Barnett Bank 14.2%
KPMG Peat Marwick 10.5%
Merrill Lynch 7.3%
Raymond James 5.8%
Carlton Fields Law 5.4%
Firm
McNulty
Station... 5 multi-tenant, Class A office St. Petersburg, FL 90,978 95% Andersen 77.4%
buildings, historic renovation Consulting 7.6%
AmSouth Bank 3.8%
First Union
3rd &
3rd....... 3-story Class C office building St. Petersburg, FL 32,607 100% Florida Power(1) 100%
100
Carillon... 3-story, multi-tenant Class A St. Petersburg, FL 79,013 100% Raymond James 83.2%
suburban office building located
in Carillon Park
Highpoint
Center.... 15-story, multi-tenant Class A Tallahassee, FL 79,670 95% Katz Kutter Law 46.2%
office building near the state Firm 21.5%
capitol building Huey Guilday Law
Firm
INDUSTRIAL
AND OTHER
Progress
Center.... 2 multi-tenant, Class A Gainesville, FL 87,630 43% University of 14.7%
office/research buildings Florida 12.8%
located in research park Pharmos
Corporation
Bayboro
Property... Property adjacent to Harborage St. Petersburg, FL 104,152 100% Florida Power 100%
of Bayboro, including land
leased to Florida Power
7th
Avenue.... Class A, Industrial warehouse Tampa, FL 187,500 54% All Points 54.0%
5th
Avenue.... Industrial warehouse Tampa, FL 16,482 100% Finer Scrap Metal 100%
Progress
Packaging... Industrial warehouse Tampa, FL 121,860 46% Sports & 29.5%
Recreation
Harborage
of
Bayboro... Full service marina includes wet St. Petersburg, FL 235 wet slips 100% n/a n/a
slips and high & dry boat 425 dry slips
storage, boat sales, marine
repair & service, parts sales,
and marine supply store
</TABLE>
- ---------------
(1) Lease scheduled to expire March 31, 1997; thereafter lease will be on
month-to-month basis.
(2) Unless otherwise indicated.
37
<PAGE> 40
Office Buildings
A significant component of Echelon's total investment in real estate is
represented by its portfolio of commercial office buildings. Three of Echelon's
five office buildings, Barnett Tower, McNulty Station and 3rd & 3rd, are located
in downtown St. Petersburg. Downtown St. Petersburg is home to more than 1,400
businesses which together employ approximately 25,000 workers. St. Petersburg is
also home to the Tampa Bay Devil Rays, major league baseball's newest expansion
team, which will begin playing baseball in downtown St. Petersburg in 1998.
Barnett Tower is a 26-story, 294,096 square foot Class A office building in
the center of St. Petersburg and accounts for 28% of Echelon's more than
1,000,000 square feet of owned commercial real estate. Completed in 1990, it is
the newest office building in downtown St. Petersburg and is home to several of
the area's most prominent firms, including Florida Progress. Seventy-two percent
of the building is currently occupied by six tenants (including their
affiliates): Barnett Bank; Merrill Lynch; KPMG Peat Marwick; Raymond James &
Associates, Inc.; Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A. and
Florida Progress. These principal tenants have leases with remaining terms of at
least seven years. As of September 30, 1996 the property was approximately 92%
occupied.
McNulty Station is a complex of five office buildings ranging in size from
two to five stories, totaling 90,978 square feet, and is located across the
street from the Barnett Tower. McNulty Station was originally a train station
and was part of an historic renovation completed in 1985. The buildings are all
Class A buildings leased to such tenants as Andersen Consulting, AmSouth
Bancorporation and First Union Bank Corporation. Echelon recently acquired the
fifth building located on the site in conjunction with the expansion of Andersen
Consulting, which leases 77% of the McNulty Station properties under a lease
scheduled to expire in August 2001. As of June 30, 1996, McNulty Station was 95%
leased.
The 3rd & 3rd building is a three-story, 32,607 square foot office building
located two blocks south of Barnett Tower. Florida Power Corporation currently
occupies the entire building, but will be vacating the building in March 1997.
Echelon is currently seeking new tenants for the property.
Echelon's other office property in the St. Petersburg area is 100 Carillon.
100 Carillon, located in the Gateway area of Tampa Bay, is a three-story, 79,013
square foot office building housed within the 432-acre Carillon multi-use
development site (the "Carillon Park"). Raymond James, a regional securities
brokerage firm with headquarters in a neighboring building, with its affiliates
occupies 83% of the building with leases scheduled to expire in the second half
of 1997. Echelon has been notified by Raymond James of its current intent to
extend its lease for a five-year term. The property is a Class A multi-tenant
building which, as of September 30, 1996, was 100% leased. Raymond James is also
planning to construct an additional building within Carillon Park, with
anticipated completion by mid-1998.
As of April 1996, the office market in downtown St. Petersburg had a
vacancy rate of 22% (according to the Maddux Report of April 1996). Based on
historical absorption rates, the current supply of vacant office space will
hinder increases in market rental rates. This pressure on rental rates also
affects suburban office markets, such as the Gateway area where 100 Carillon is
located. Even though the Gateway area and the directly competing Westshore
(South Tampa) area have occupancy rates exceeding 95% (according to the Maddux
Report of June 1996), Echelon's business plan does not expect significant
increases in rental rates until demand for office space in the downtown St.
Petersburg and Tampa areas increases and existing vacancies in such areas are
absorbed.
Other Florida office properties owned by Echelon include the Highpoint
Center, a 15-story, 79,670 square foot Class A office building located in
downtown Tallahassee that was approximately 95% leased as of September 30, 1996.
The property is situated two blocks from the state capitol building and houses
several law firms with significant state business activities. The law firms
constituting the building's two main tenants occupy 68% of the building with
lease expirations of December 2002 and November 1999, respectively. Except for
the state capitol building, Highpoint Center, which was built in 1990, is the
tallest building in downtown Tallahassee.
38
<PAGE> 41
Echelon intends to hold its existing portfolio of office properties with a
focus on generating growth in operating cash and net income through leasing to
high quality tenants and controlling operating expenses.
Industrial and Other Properties
Although its industrial properties do not represent a significant part of
Echelon's investment in commercial real estate, these properties are generally
located in locations with some potential for growth. Echelon's industrial
properties include Progress Center, the Bayboro Property, the 7th Avenue
property, the 5th Avenue Property and Progress Packaging.
Progress Center, located near Gainesville, Florida, is a 87,630 square foot
office research facility. The facility includes two buildings, each of which is
comprised of approximately 25% office space and 75% laboratory space. The
property is part of a 200-acre research park ("Progress Park") owned by Echelon
and affiliated with nearby University of Florida. The property is approximately
43% leased, including 31,196 square feet which is occupied by university
affiliated tenants. The two major tenants occupy 37% of the facility. The
property is designed to provide a vital link between University of Florida
researchers and private industry to transfer new technologies from the
laboratory to the market place.
Echelon's Bayboro Property is a 104,152 square foot tract of land in St.
Petersburg, a portion of which is leased to Florida Power. Florida Power leases
the land to house some of its "peaking" operations, a system of gas powered
backup generators used to produce power during periods of peak electrical
demand. The system includes several turbine engines to power the generators. The
lease to Florida Power can be cancelled upon written notice from Florida Power.
The property includes a former power plant facility which Echelon is renovating
for commercial office use. Most of the land comprising the Bayboro Property was
acquired for its development potential. The Bayboro area is close to downtown
St. Petersburg and is located within a redevelopment zone.
Echelon has several properties located in various areas of Tampa. The 7th
Avenue property, constructed in 1987, is a 187,500 square foot
warehouse/distribution facility located on the east side of Tampa. The property
is approximately 54% leased. The facility is one of the largest warehouse
properties in a predominantly industrial neighborhood. The 5th Avenue property,
located near the 7th Avenue property, is a 16,482 square foot industrial
building and is 100% leased to a single tenant who has a purchase option which
is expected to be exercised upon completion of environmental clean-up work by
Echelon. Progress Packaging is a 120,549 square foot industrial warehouse
located in West Tampa that is approximately 46% leased.
Echelon's strategy for its industrial properties is to increase cash flow
as market conditions improve and to determine and implement the optimum
operation, sale or development option for each property, as developing cash flow
allows.
Echelon also owns and operates a marina, the Harborage of Bayboro,
employing approximately 40 people and located in the Bayboro Harbor area near
downtown St. Petersburg. This full service marina offers 235 wet slips and 425
high and dry slips, each of which, as of September 30, 1996, were 100% leased.
In addition to the leasing of the slips, the marina provides such services as
new and used boat sales, marine repair and service, parts sales, and a marine
supply store. The wet slips consist of a floating concrete dock system
specifically designed for this harbor location. The system is popular for its
stability, durability and aesthetic qualities and is designed to withstand a
12-foot tidal surge. The dock system is the largest floating dock system on
Florida's west coast. The high and dry slips are an out-of-water rack storage
system for small to medium sized boats. The submerged land under the wet slips
is leased from the City of St. Petersburg. Although the lease will expire in
2013, Echelon expects to bid for the right to enter into a new lease at that
time.
Real Estate Management
Echelon currently manages its owned office buildings. After the
Distribution, Echelon intends to expand its real estate management services
business by offering to manage office buildings for third-parties, managing
Echelon's new apartment developments and managing Housing Tax Credit projects
built for its own account and for third parties. Echelon expects that these
activities will facilitate its management team's participation in
39
<PAGE> 42
the marketplace, thereby serving to obtain additional knowledge and
opportunities. Echelon currently utilizes the services of TRS Commercial Real
Estate Services, Inc. ("TRS"), a realty service company, to assist in the
management of its office buildings and the sale of certain of its real estate
assets. After the Distribution, Echelon intends that the current employees of
TRS will become employees of Echelon and join Echelon's current real estate
services employees in managing all the real estate assets of Echelon.
OTHER OWNED REAL ESTATE; MULTI-FAMILY RESIDENTIAL AND COMMERCIAL REAL ESTATE
DEVELOPMENT
Overview
Another significant portion of Echelon's real estate holdings is
represented by several large parcels of undeveloped land in the St. Petersburg
area. Substantial infrastructure investment has already gone into certain of
these properties, including Carillon Park. Echelon's strategy is to accelerate
the development of both residential and commercial projects on these sites. The
following table summarizes Echelon's investment in undeveloped land:
Summary of Undeveloped Owned Commercial Real Estate
<TABLE>
<CAPTION>
DEVELOPMENT POTENTIAL
-------------------------
APPROXIMATE
ACRES FOR NUMBER OF
SALE OR APARTMENT
PROJECT NAME DESCRIPTION LOCATION ZONING DEVELOPMENT UNITS
- ----------------- ---------------------------- -------------------- ------------------------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Carillon Park.... Class A, suburban office and St. Petersburg, FL Phase I 38 N/A
residential park in Gateway Zoned business park, DRI in
area place
Phase II 96 1,170
Zoned multi-family residential
and business park; area wide
DRI in place
4th Street....... 15 undeveloped acres St. Petersburg, FL Zoned residential office park 15 225
(Multi-family)
9th Street....... 72 undeveloped acres St. Petersburg, FL Zoned multi-family residential 72 965
(Multi-family)
Progress Park.... Research park consisting of Gainesville, FL Zoned office 150 N/A
150 acres with industrial/commercial
infrastructure in place
Royal Oaks....... 35 undeveloped acres Tallahassee, FL Zoned multi-family residential 35 N/A
adjacent to 131 single
family lots previously
developed and sold
Riverside
Ranch.......... 2,000-acre operating ranch Lakeland, FL Zoned agricultural 2,000 N/A
----- -----
TOTAL.......... 2,406 2,360
</TABLE>
Carillon Park is a 432-acre office park located in the Gateway area of
Tampa Bay and is among the largest tracts of property in the metropolitan Tampa
Bay area with all necessary zoning and other development approvals in place.
Going forward, Echelon believes that the 134 acres within Carillon Park which
are owned by Echelon and held for sale or development will play a central role
in Echelon's business plan. Carillon Park is bordered by a triangle of major
roads serving both Pinellas and Hillsborough counties. Carillon Park's central
location (equidistant from downtown St. Petersburg, downtown Tampa and downtown
Clearwater) provides quick access to residential neighborhoods and Tampa
International Airport. Echelon estimates that Carillon Park has a potential
development capacity of over 6,000,000 square feet of office space, 750 hotel
rooms, over 1,000 multi-family residential units, and a variety of supporting
retail services. The Carillon Park master plan contemplates a child care center,
fitness stations, jogging and walking paths and other amenities which are
intended to help commercial tenants attract and retain the highest quality
employees and to maximize on-the-job productivity.
Although new office construction generally has many hurdles to overcome,
including the building of infrastructure, development rights in Carillon Park
have become vested pursuant to Development of Regional Impact orders. Carillon
Park's development plan includes stormwater retention areas, underground
utilities
40
<PAGE> 43
including fiber optic capability and zoning approvals which allow for a broad
spectrum of uses. For purposes of implementing such plan, development of the
land is divided into two phases.
Phase I has the infrastructure in place and is already the location of
offices of companies such as Raymond James, AllState, Xerox and Public Service
Credit Union Service Centers. Phase I will have 38 acres remaining to be sold
after the completion of the pending sale of 15 additional acres to Raymond
James. Construction of infrastructure for Phase II is currently underway with
completion scheduled for November, 1996.
Ninety-six of the original 155 acres of Phase II remain to be sold. Of the
original 155 acres for sale in Phase II, 90 acres were zoned for office
buildings and retail and 65 acres were zoned for residential apartments. Of the
90 acres for office buildings, almost 16 acres have been sold and of the
remaining 74 acres, Franklin Templeton Inc. has recently purchased 28 acres.
This leaves a balance of approximately 46 acres for office building development
to be sold in Phase II. Of the 65 acres for apartments, 15 acres have been sold
leaving approximately 50 acres with the potential for development of
approximately 1,170 apartment units. Echelon intends to develop some of the
Carillon Park properties for its own account and, as and when market conditions
warrant, to market land to third parties.
Financing for further development of Carillon Park is expected from a
variety of sources, including internally generated funds from the collection of
loans and asset sales and from operating cash flow, from existing cash, which,
as of the Distribution, is expected to approximate $60 million, and, most
importantly, from project-based financings. See "Liquidity and Capital
Resources", below.
Echelon's 9th Street site, which is also located in the Gateway area of
Tampa Bay, has a total of 72 acres with apartment development potential of
approximately 965 units. The 9th Street site is currently in the initial stage
of its development, with the basic infrastructure to be completed in December
1996 so that the site will be ready for apartment development thereafter.
Echelon's 15-acre 4th Street site has potential for the development of
approximately 225 apartment units. Echelon currently intends to use the 4th
Street site for the development of affordable housing apartments qualifying for
Housing Tax Credits. Echelon has submitted an application to the Florida Housing
Finance Agency to be awarded Housing Tax Credits, and has received preliminary
notice of being awarded the credits necessary to proceed with development of
approximately 108 Housing Tax Credit apartment units on the 4th Street site. See
"Affordable Housing," below.
Progress Park has approximately 150 developable acres near Gainesville,
Florida. The rural setting and lack of substantial economic base complicate the
development and marketing of this property. However, given the park's highway
access and proximity to nearby Interstate 75, as well as its proximity to the
University of Florida, Echelon believes that opportunities for developing the
park may come from two areas: (i) research-related office and laboratory
buildings similar to existing facilities and (ii) back office operational
centers and distribution facilities. Echelon currently intends to subdivide the
property and to add additional curb cuts along the highway frontage to increase
the property's marketability.
Other Echelon properties include undeveloped land in the Royal Oaks
subdivision of Tallahassee and a fully operational 2,000-acre ranch property
located near Lakeland, Florida. Although no agreements currently exist relating
to the sale of such properties, Echelon intends to sell these properties as
promptly as practicable, and to apply the entire net proceeds received to prepay
a portion of the PCH Note (which, at the Distribution, is expected to equal $36
million).
Apartments
Echelon believes that its most attractive opportunities for growth and
profitability are the development, ownership and operation of rental apartment
units in the Tampa Bay area and, ultimately, in other selected locations in the
southeastern United States. Echelon plans to begin developing apartments on its
owned land in St. Petersburg, including the Carillon Park, 4th Street and 9th
Street properties, and eventually on land to be acquired elsewhere in Florida
and in the southeastern United States. Echelon has previously, by itself or
through a joint venture, developed, owned and operated approximately 2,200
apartment units. Echelon marketed and sold projects representing approximately
1,700 of these units for a price in excess of $84 million, which corresponded to
an average capitalization rate (which is a rate of return calculated by dividing
net
41
<PAGE> 44
income by the sales price of a property) of approximately 7.25%. The 334-unit
Promenade at Carillon, Echelon's first apartment project in Carillon Park, cost
$17.5 million to build and was sold prior to completion in October 1994 for a
sale price of $20.65 million. In 1990, Echelon sold its interest in a 192-unit
apartment complex for a pre-tax gain of approximately $500,000. In addition to
these owned apartments, Echelon constructed a 71 unit affordable apartment
complex known as 701 Mirror Lake in downtown St. Petersburg.
Although real estate development has inherent business risks, general
market demographics as well as independent marketing studies sponsored by
Echelon suggest that apartment development in the Gateway area is warranted and
could support 500 to 600 units annually for the next five years. In particular,
there are currently over 3,000 employees based within Carillon Park, and
thousands of additional employees are based in offices in the immediate
vicinity, including the approximately 1,000 persons employed at the nearby
offices of MCI Communications Corp. and the approximately 2,000 persons employed
at The Home Shopping Network, Inc. directly across from Carillon Park. In
addition, based on announced relocations or expansions, Echelon believes that
within two years, an additional 2,500 employees are expected to be working in or
around Carillon Park. Echelon also believes that the current population of over
two million people in the Tampa Bay metropolitan region and projected population
and employment growth rates in such region, the relatively limited supply of
land in the greater Tampa Bay metropolitan area that is currently zoned for
residential apartment development and the current high occupancy rates of
existing developments in the area collectively support Echelon's strategy to
build on its past successful apartment development efforts.
Affordable Housing
As part of Echelon's strategy to focus on real estate development, Echelon
intends to invest in, develop and operate, affordable housing projects,
including projects entitled to the benefits of Housing Tax Credits. Housing Tax
Credit projects are affordable housing projects which meet certain requirements
with respect to maximum limits on tenant income, gross rent restrictions, and
certain other requirements of state tax credit authorities and the Internal
Revenue Service. Structured properly, these projects allow investors in Housing
Tax Credit properties to record dollar-for-dollar tax credits over a 10-year
period against their United States federal income tax liability. Echelon
believes that Housing Tax Credit investments are appropriate investments not
only because of the significant demand for affordable and low-income housing and
attractive risk and return outlook, but also because Echelon expects that its
lease portfolio will create a large base of taxable income for United States
federal income tax purposes over the next 10 to 15 years which is expected to
create a significant cash outflow from Echelon over that period. Echelon
believes that investments in Housing Tax Credits could significantly reduce such
cash outflow while creating favorable earnings and returns for Echelon.
Because Echelon had not previously invested in Housing Tax Credit projects,
Echelon intends to further its knowledge of these projects by its passive
investments in Housing Tax Credit projects through limited partnerships
controlled by third parties. Echelon's eventual strategy is to develop, own and
operate Housing Tax Credit apartment projects utilizing its owned land, within
the limits of Echelon's tax base. Echelon also plans eventually to develop and
operate Housing Tax Credit properties for other investors as part of its real
estate management services business.
Commercial Real Estate Development
In addition to residential development, Echelon plans to take advantage of
the commercial real estate market in the Gateway area, where occupancy levels
are averaging over 95% (according to the Maddux Report of June 1996) by
developing its holdings within Carillon Park. Although regional office vacancies
exist, Echelon believes the current high occupancy levels and the lack of
available commercial space in the Gateway area will support future construction.
In particular, Echelon's plans include constructing office buildings in Carillon
Park, subject to market and other conditions, and Echelon believes that
utilization of a five acre tract of land from the land inventory in Carillon
Park for such construction will enhance the value of the remaining acreage.
Echelon also believes that an office project will provide a source of
prospective tenants for the apartments expected to be developed within Carillon
Park.
To the extent market and other conditions warrant, Echelon's long-term
plans include potential further office building development within Carillon Park
and elsewhere.
42
<PAGE> 45
THE LENDING AND LEASING BUSINESS
COLLATERALIZED COMMERCIAL REAL ESTATE LOAN PORTFOLIO
Echelon manages a portfolio of commercial real estate loans secured by
properties located throughout the United States summarized in the chart below.
The aggregate loan balance, as of September 30, 1996, was $97.2 million. Of this
total, four borrowers, representing six loan transactions, accounted for
approximately 82% of the loan balance, or $79.6 million. The largest single
geographic concentration of loans is in the State of Florida. Echelon's real
estate loan portfolio consists of loans secured by a diverse group of
properties, including single tenant and multi-tenant office buildings, life care
facilities, and industrial properties, as summarized in the following table:
Summary of Real Estate Loan Portfolio
<TABLE>
<CAPTION>
MATURITY DATE INTEREST BALANCE AT
COLLATERAL MATURITY AFTER RATE 9/30/96
BORROWER/PROJECT LOCATION COLLATERAL DESCRIPTION DATE EXTENSIONS(4) BASIS (MILLIONS) AMORTIZATION
- ---------------------- ----------------- ---------------------- --------- ------------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Madison Building(1) Tampa, FL Multi-tenant, Class C Nov-98 N/A Floating $ 3.3 30-year
office building
Continuum Building(2) Austin, TX Single tenant (The Dec-98 N/A Floating 9.0 20-year
Continuum Company,
Inc.), Class A office
building attached
parking garage
Marquardt Van Nuys, CA Industrial office Dec-96 N/A Floating 23.5 None
complex on 54 acres
Plaza Del Rio Bradenton, FL Multi-tenant, Class B Feb-97 N/A Floating 5.3 30-year
office building
Vine Street -- Olympia Olympia, WA Single tenant (State Jan-97 July-01 Floating 5.3 None
(Black Lake Place) of Washington), Class
A office building
Vine Street -- Capitol Olympia, WA Single tenant (State Oct-98 N/A Floating 5.8 None
View I of Washington), Class
A office building
Vine Street -- Capitol Olympia, WA Single tenant (State Dec-99 N/A Floating 5.0 None
View II of Washington), Class
A office building
Vine Street -- Town Olympia, WA Single tenant (State Nov-96 May-01 Floating 4.5 None
Square VI of Washington), Class
A office building
Life Care Port Charlotte & 440-unit Independent Apr-00 N/A Fixed 35.5 Yes,
Leesburg, FL Living Facility Varied(3)
("ILF") with 120 bed
nursing home and
140-unit Assisted
Living Facility
("ALF") located in
Port Charlotte,
Florida and a 400-unit
ILF with 40 bed
nursing home and a
20-unit ALF located in
Leesburg, Florida
-----
Total $ 97.2
========
</TABLE>
- ---------------
(1) Echelon's balance represents an 80% interest in this loan.
(2) Echelon's balance represents a 50% interest in this loan.
(3) Depending on excess cash flow relative to net operating income (as defined
in the loan documents) the borrowers may be required to pay additional
principal payments.
(4) The maturity date of certain loans may be extended upon satisfaction by the
borrowers of certain conditions.
43
<PAGE> 46
Certain loans have extension options which allow the borrower, at its
option and subject to prior notification and payment of a fee to Echelon, to
extend the maturity of the loans pursuant to the loan agreement. Echelon has
attempted to encourage its borrowers to refinance or repay loans without
extension. The final maturities of the loans comprising Echelon's real estate
loan portfolio, including all applicable extension options, range from 1996 to
2001.
As is indicated in the preceding table, most of the loans bear interest at
a floating rate. The floating interest rates are at premiums to the prime rate
ranging from 0.75% to 2.0%.
Echelon's largest borrower is the Johnson Ezell Company ("Johnson Ezell")
with three loans totaling $35.5 million as of September 30, 1996. These three
loans are cross-collateralized with cross-default features under one mortgage.
The terms of the loans also include a participation feature, whereby Echelon
receives a variable percentage of the projects' excess cash flow (defined as net
cash flow after scheduled principal payments) that would be applied against the
outstanding loan balance. Johnson Ezell operates life care campuses for the
elderly. Life care campuses, also known as continuing care facilities, consist
of independent living facilities ("ILF"), assisted care living facilities
("ACLF"), and skilled nursing facilities ("SNF"). Johnson Ezell's campuses in
Port Charlotte, Florida, consisting of 440 ILF units, 140 ACLF units and a
120-bed SNF, and Leesburg, Florida, consisting of 400 ILF units, 20 ACLF units,
a 40-bed SNF, and miscellaneous commercial property provide the collateral for
Echelon's loans to Johnson Ezell. In addition, Echelon's loans to Johnson Ezell
are secured by certain personal guarantees.
As is indicated in the preceding table, Echelon has four loans aggregating
$20.6 million as of September 30, 1996 to the two Vine Street partnerships. Each
of such partnerships has as its managing general partner Brent McKinley, a local
real estate developer. Each loan is a stand-alone facility, and each loan is
secured by an office building located in the State of Washington. The several
buildings securing such loans range in size from 43,000 to 76,000 square feet.
The loans are split between two Vine Street partnerships: Vine Street Investors
("VSI") and Vine Street Associates ("VSA"). Each partnership guarantees the
other partnership's loans. VSI is the borrower of the Olympia Building and
Capital View I and II loans, while VSA provides the guarantees. VSA is the
borrower of the Town Square VI loan, while VSI provides the guarantee. The
guarantees are secured with second liens and assignment of leases on the other
partnership's security. All four buildings are leased to the State of
Washington. A comparison of lease terms to loan maturities is as follows:
<TABLE>
<CAPTION>
MAXIMUM
CURRENT ORIGINAL CURRENT EXTENDED MAXIMUM
LOAN LEASE LEASE LOAN LEASE
PROJECT LOANS MATURITY TERM MATURITY MATURITY MATURITY
--------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Capital View I............................... 10/30/98 5 years 5/31/99 10/30/98 5/31/04
Capital View II.............................. 12/31/99 5 years 6/30/00 12/31/99 6/20/05
Town View Square VI.......................... 11/30/96 10 years 11/30/96 5/31/01 11/30/01
Olympia Building............................. 1/31/97 5 years 4/30/97 7/31/01 4/30/02
</TABLE>
Extension options under the Vine Street loans are contingent upon the borrower
receiving lease extensions of no less than five years.
As of September 30, 1996, Echelon had a $23.5 million loan to the Marquardt
Company ("Marquardt"). Marquardt is owned by Ferranti PLC ("Ferranti"), which is
operating under receivership in the United Kingdom. The Ferranti receiver,
Arthur Andersen & Co., is in the process of liquidating Ferranti's assets,
including Marquardt. Echelon's loan is secured by a 54-acre industrial complex
located in California adjacent to the Van Nuys airport. Situated on the property
are several industrial buildings which are predominantly vacant, with the
exception of 173,764 square feet building on 16 acres of land leased to Kaiser
Marquardt for the manufacturing and testing of aerospace engines. In addition,
Echelon has been assigned Marquardt's lease with Kaiser Marquardt. Currently,
this lease generates $2.4 million in rental income, which is sufficient to
service the interest payments on Echelon's loan. Echelon estimates that the
potential fair market value of the industrial complex exceeds the outstanding
loan balance. Echelon has extended the maturity on this loan several times
through forbearance and does not expect full payment until the infrastructure
has been completed and the parcel has been subdivided. Ferranti recently
received initial indication of approval from
44
<PAGE> 47
Los Angeles County to subdivide the property to enhance its marketability. It is
anticipated that the implementation of the subdivision plan could take two years
to complete. In addition, the California Department of Environmental Protection
has received the environmental closure plan that the borrower has submitted and
Echelon is awaiting its approval.
As of September 30, 1996, Echelon had a $9.0 million loan to a partnership
made up of several officers of The Continuum Company, Inc., the Continuum
Building's sole tenant. The $9.0 million loan represents Echelon's portion of a
joint credit shared with Bank Midwest of Kansas City, Missouri, with each lender
equally secured. The loan is secured by a first mortgage on a 199,472 gross
square foot office building located in Austin, Texas. The borrower has provided
additional collateral in the form of an assignment of the lease to the lenders.
As of September 30, 1996, Echelon had a $5.3 million loan to Plaza Del Rio
Corp. The loan is secured by a first mortgage on a 76,587 square foot office
building located in Bradenton, Florida. The borrower's interest in the property
is a leasehold interest subject to a subordinated, long-term ground lease with
an expiration date of October 2083. Currently, the property is 100% leased to
eight tenants. The principals of the borrower have personally guaranteed a
portion of the principal balance. The original maturity of the loan has been
extended to October 1996, with four one-month options available to the borrower
to February 1997 upon payment of an extension fee, in order for borrower to
refinance the property.
As of September 30, 1996, Echelon had an 80% participation in a $4.1
million loan to Madison Building, Inc. The loan is secured by a first mortgage
on a 94,680 square foot Class-C office building located in downtown Tampa. The
borrower has provided additional collateral in the form of $250,000 in
marketable securities. The borrower's interest in the property is a leasehold
interest subject to a subordinated, long-term ground lease with an expiration
date of 2062. Currently, the building is less than 61% occupied and does not
generate enough cash flow to cover debt service. Although, in the past, the
borrower has had sufficient resources to cover previous shortfalls, there can be
no assurance that the borrower will be able to continue to make payments.
Echelon has commenced discussions with the borrower and expressed its desire to
be paid off, paid down or adequately secured by additional collateral or
principal payments. If Echelon is forced to foreclose, proceeds from the sale of
the building are expected to be substantially less than the principal amount of
the loan.
Echelon does not anticipate originating any new financings of commercial
real estate unless such financing facilitates a sale of an existing asset.
Echelon's strategy is to collect outstanding loan balances as soon as
practicable, to take the steps necessary to maximize the value of each asset,
and, ultimately, to withdraw from the business of commercial real estate
financing as existing loans mature and are repaid. In the event that certain
borrowers are unable to repay or refinance their loans at final maturity,
Echelon anticipates either negotiating an extension of the maturity of the loan
or taking the necessary legal steps to foreclose on the underlying collateral
and then liquidating the underlying property. Echelon's strategy is to redeploy
capital from its real estate loan portfolio to its Real Estate Business.
45
<PAGE> 48
COLLATERALIZED FINANCING AND LEASING OF AIRCRAFT/EQUIPMENT
General
Echelon owns and manages a portfolio of leveraged, direct finance and
operating leases of aircraft and other equipment and a number of collateralized
loans secured by aircraft.
Echelon's portfolio of leveraged leases represent transactions in which
Echelon acts as the equity investor and owner participant. In a typical aircraft
leveraged lease transaction, an airline, which may be unable either to allocate
capital to the purchase of a large commercial aircraft or to utilize effectively
the tax benefits related to the ownership thereof, and an aircraft manufacturer
enter into a transaction in which a third party (called an "owner participant"
or "equity participant") purchases the aircraft, typically through a special
purpose trust (an "owner trust"), from the manufacturer and then leases that
aircraft to the airline or to an affiliate of the manufacturer which then
subleases the aircraft to the airline. The owner trust is the legal owner of the
aircraft. The purchase of the aircraft is generally financed by both the equity
investment by the owner participant and by non-recourse loans borrowed by the
owner trust from a bank or other lender or lenders. The rent payable to the
owner trust pursuant to the leveraged lease generally represents the amount
necessary to service the debt, plus a return on the owner participant's equity
investment. The owner participant also generally reaps certain tax benefits as
the beneficial owner of the aircraft. These leases are typically long-term (20
years or more), and at their termination the owner participant takes possession
of the plane or other asset, which generally still has a useful life of several
years (usually 10 years in the case of aircraft). Upon expiration, the lessee
generally has the right to purchase the asset for the lower of the asset's fair
market value or for some stated percentage of the asset's cost. The lessee may
also generally terminate the lease early by payment of the lease termination
value (a pre-determined pricing method which reflects, among other things, the
amount of non-recourse debt, the initial investment and certain tax
consequences).
Under the terms of these leases, the ultimate user (i.e., the lessee or
sub-lessee) of the aircraft is generally required to bear the direct operating
costs and the risk of physical loss of the aircraft; maintain the aircraft;
indemnify Echelon as lessor against any liability suffered by Echelon as the
result of any act or omission of the lessee or its agents; maintain casualty
insurance in an amount equal to the specific amount set forth in the lease; and
maintain liability insurance naming Echelon as an additional insured with a
minimum coverage which Echelon deems appropriate. In general, substantially all
obligations connected with the ownership and operation of the leased aircraft
are assumed by the lessee, and minimal obligations are imposed upon Echelon.
Default by a lessee, however, may cause Echelon to incur unanticipated expenses.
See "Governmental and Environmental Regulations" below. Moreover, the risk that
the asset will be worth less than originally anticipated, and the risk that it
will not be re-leased or sold upon expiration of the lease, is borne by Echelon
as the owner participant.
Echelon's other lease assets include operating and direct finance leases.
Under the operating leases, Echelon leases an asset to a third party in
circumstances unrelated to the financing of such asset for a term which is
generally shorter than the typical term of a leveraged lease. Direct finance
leases are generally structurally similar to the leveraged lease transactions,
except for the absence of third party debt financing by the owner trust.
46
<PAGE> 49
Leveraged Leasing
The following table summarizes Echelon's leveraged lease portfolio:
Summary of Leveraged Lease Portfolio
<TABLE>
<CAPTION>
LEASE
AIRCRAFT/ASSET LEASE TERMINATION AGE OF ASSET
TYPE/YEAR COMMENCEMENT ORIGINAL COST DATE AT LEASE
LEASE/SUB-LEASES OF DELIVERY DATE ($ IN THOUSANDS) (MO./YR.) MATURITY
- --------------------------------------- ------------------- ------------ ---------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
A.I. Leasing II A300-B4-203 Mar-85 40,000 Jan-07 21
(Airbus)/Philippine Air 1985
Airbus A300 Leasing, Inc./ A300-B4-605R Apr-89 53,813 May-11 22
American 1989
Air Wisconsin Bae146-300A Sep-89 22,954 Mar-10 20
1989
American Airlines, Inc. DC 9-82 Oct-84 22,900 Jan-05 20
1984
American Airlines, Inc. DC 9-82 Oct-84 22,900 Jan-05 20
1984
America West Airlines, Inc. B757-2G7ER Dec-89 48,223 Jan-18 28
1989
Delta Air Lines, Inc. B737-232 ADV Apr-84 18,165 Mar-05 20
(Stage II) 1984
Delta Air Lines, Inc. B737-232 ADV Apr-84 17,976 Mar-05 20
(Stage II) 1984
Delta Air Lines, Inc. B737-247 ADV Jul-87 18,800 Jul-02 15
(Stage II) 1987
Delta Air Lines, Inc. B737-247 ADV Jul-87 18,800 Jul-02 15
(Stage II) 1987
Delta Air Lines, Inc. B767-332 ADV Nov-87 58,650 Jan-10 22
1987
Delta Air Lines, Inc. B757-232 Feb-88 43,306 Aug-10 22
1988
USAir, Inc. B737-301 Aug-86 24,303 Jan-07 20
1986
USAir, Inc. B737-301 Aug-86 24,401 Jan-07 20
1986
USAir, Inc. B737-301 Aug-86 24,257 Jan-07 20
1986
United Technologies, Inc./ two spare engines Jul-87 9,022 Jan-08 20
Tarom
Consolidated Rail Co. 25 GE Mar-85 32,469 Jan-01 --
C-36-7 locomotives
Union Bank-Real Estate 410,000 square foot Sep-86 50,100 Dec-11 --
Monterey Park, CA building
Reading & Bates(1) oil rig -- -- -- --
</TABLE>
(1) Reading & Bates encountered financial difficulties in 1987 and restructured
the lease. Echelon anticipates that the underlying asset could be subject
to foreclosure, which would trigger a tax liability payable by Echelon of
approximately $7.9 million. The Echelon Consolidated Balance Sheet at
September 30, 1996, which is included elsewhere in this Information
Statement, reflects a reserve for such amount.
Because current disposition of the leveraged lease assets would result in
significant current income tax liabilities, Echelon plans to hold the leveraged
lease assets to maturity or until the termination value of a leveraged lease
asset equals its market value. At that time, Echelon will either sell or hold
and re-lease the underlying aircraft or other asset, depending upon which option
is determined to provide the highest return. Current market values for aircraft
are relatively low due to the excess supply for most types of aircraft relative
to current market demands. After initial lease maturity, the average age of the
leased aircraft in Echelon's portfolio will be only 20 years. Based on a
standard useful aircraft life of 30 years, Echelon will have an average of ten
years to attempt to recoup the value of the leased assets through re-leasing and
to achieve an overall favorable return on its investment in such assets.
47
<PAGE> 50
Direct Finance and Operating Leases
Echelon's portfolio includes two direct finance lease transactions. The
first is through the Progress Potomac Capital Ventures ("PPCV") joint venture
between Echelon and Potomac Capital Corporation ("Potomac") and involves two
1973 DC10-30s that are currently on lease to Continental Airlines
("Continental"). Continental reduced and/or renegotiated the rent paid to
lessors on many of its leased aircraft. As a result, PPCV agreed to revised
terms with Continental pursuant to which the rent payable was deferred for 4
months starting in 1992 and 16 months starting in 1995. Continental issued
deferred rent notes with interest rates of 10.4% and 8.0% for the 1992 and 1995
notes, respectively. The principal amount of these notes as of September 30,
1996 was $7.4 million and will be fully amortized by the maturity of the notes
in 2000. The second direct finance lease covers a 1984 B737-300 leased to
Southwest Airlines through June 1, 2004.
Echelon currently has two operating leases: a 1981 B727-200 Adv. aircraft
on lease to Air Micronesia (a subsidiary of Continental) which has a lease
expiration of December 1998, and two 1986 CFM-56 engines leased through PPCV to
America West.
Although operating leases are generally for relatively higher rental rates
than longer term direct finance or leveraged leases and the lessee enjoys
relatively greater flexibility through the shorter term, the lessor under an
operating lease may be at relatively greater risk because the asset must be
re-leased on maturity. Re-leasing any such asset could take time and could be
delayed due to future market weakness and could be impacted by potentially lower
future rental rates.
Echelon believes that to maximize the long-term values of its existing
aircraft and equipment assets, it may be necessary to hold such assets beyond
the terms of their current leases. Echelon also believes that re-deploying such
assets under operating leases represents an opportunity which could provide
acceptable returns on a risk-adjusted basis.
Aircraft Lending
The following table summarizes Echelon's aircraft loan portfolio:
Summary of Aircraft Loan Portfolio
<TABLE>
<CAPTION>
AIRCRAFT LOAN
YEAR/ BALANCE AT 9/30/96
BORROWER/LESSEE ASSET TYPE ($ MILLIONS) LEASE MATURITY LOAN MATURITY INTEREST RATE BASIS
- -------------------------------- ------------- ------------------ -------------- ------------- -------------------
<S> <C> <C> <C> <C> <C>
Pegasus/TWA..................... 1974 L1011-50 $ 9.9 Dec-99 Jun-96 Floating
Pegasus/ChallengAir............. 1973 DC10-30 26.1 Dec-97 Jun-96 Floating
Pegasus/Continental............. 1986 MD-82 10.7 Jan-03 Jan-03 Fixed
------------------
Total................... $ 46.7
==================
</TABLE>
All of Echelon's aircraft loans are to Pegasus Capital Corporation
("Pegasus"), an aircraft leasing company. Pegasus leases over 50 planes to the
airline industry worldwide through itself and its two affiliates. As indicated
by the table above, as of September 30, 1996, the three loans to Pegasus
consisted of a $9.9 million loan secured by a 1974 L1011-50 aircraft leased by
Pegasus to TWA, a $26.1 million loan secured by a 1973 DC 10-30 aircraft leased
by Pegasus to ChallengAir (a charter air company based in Brussels, Belgium) and
a $10.7 million loan secured by a 1986 MD-82 leased by Pegasus to Continental.
In October 1996, the Pegasus/Continental $10.7 million loan was repaid in full.
Echelon plans to withdraw from the aircraft lending business and is working
with Pegasus to negotiate the sale or refinancing of its loans as promptly as
practicable. If neither action proves feasible, Echelon will foreclose and
attempt to sell the assets. The proceeds from any such sale or refinancing would
be used to repay the PCH Note issued to PCH. In light of the credit quality of
Pegasus's lessees and the current low market value of the aircraft securing
Echelon's loans to Pegasus, Echelon has also created a provision in its
financial statements equal to the losses anticipated upon the sale or
refinancing of such loans or the sale of the collateral upon foreclosure. The
loans are reflected in the Consolidated Balance Sheet as of September 30, 1996
among the "Assets Held for Sale."
48
<PAGE> 51
Bankruptcy of Lessees of Aircraft
Due to many factors, including the fluctuating state of the economy,
uncertain traffic levels, intense route and fare competition and the ease of
entry of new airlines under the Airline Deregulation Act of 1978, several
commercial airlines in recent years have been forced to suspend or cease
operations due to financial difficulties. These airlines have filed petitions
for reorganization under the Federal Bankruptcy Code, have merged with other
airlines or have been liquidated. Echelon believes this recent economic
uncertainty in the commercial airline industry is indicative of the periodic
fluctuations in the industry's economic performance. No assurance can be given
that the weakening financial condition or bankruptcies of lessees of aircraft
from Echelon would not have a material adverse effect on Echelon's business,
results of operations or financial condition. Moreover, if aircraft are returned
by bankrupt carriers, there can be no assurance that Echelon will be able to
sell or re-lease such aircraft on favorable terms or in a timely manner.
In order to encourage equipment financing to the commercial airline
industry, federal bankruptcy laws traditionally have afforded special treatment
to certain lenders or lessors who have provided such financing. Section 1110 of
the Bankruptcy Code implements this policy by creating a category of aircraft
lenders and lessors whose rights to repossession upon the occurrence of a
default are substantially enhanced.
In reorganizations of airlines under chapter 11 of the Bankruptcy Code,
Section 1110 provides that the airline debtor cannot prevent a lessor, such as
Echelon, or, with respect to transactions entered into prior to October 1994, a
secured party who holds a purchase-money security interest, from taking action
in accordance with its security documents or lease to repossess the aircraft in
the event of a default, unless, within 60 days after the date of the order
granting the debtor relief under the Bankruptcy Code, the airline cures all
defaults under the lease or secured loan (other than those arising solely from
the bankruptcy, insolvency or financial condition of the debtor) and agrees to
perform all future obligations under the lease or secured loan.
Section 1110 only protects a financing party's rights in respect of
aircraft leased to an air carrier operating under an air carrier operating
certificate issued by the Secretary of Transportation for aircraft capable of
carrying ten or more individuals or 6,000 pounds of cargo. Airlines based
outside the United States are not covered by such certificates and accordingly
leases of aircraft to such parties are not entitled to Section 1110 protection
in a bankruptcy or other insolvency proceeding involving such airline. Echelon
currently has two leases to airlines based outside the United States. In the
event of a default by such foreign lessees or a foreign insolvency proceeding
involving such lessees, Echelon's legal rights, including the right of
repossession, may be subjected to legal treatment different from what is
provided in the United States. Similarly, because Section 1110 is intended to
protect parties offering financing to airline operators, it is unlikely that
leases to manufacturers would be entitled to the protections of such Section.
However, because subleases of assets by such manufacturers to airline operators
would generally be entitled to such protections, the benefits thereof could be
indirectly available to the original owner/lessor. Echelon currently has two
leases to affiliates of Airbus Industrie G.I.E. and one lease to United
Technologies, Inc., each of which is a manufacturer which has sub-leased the
relevant assets to airline operators.
When Echelon entered into lease transactions with domestic airlines,
Echelon generally received opinions of counsel that it was entitled to the
protections of Section 1110. However, there can be no assurance that, in the
event of a bankruptcy of an airline to which Echelon leased an aircraft, a court
would determine that a lease to such airline was entitled to Section 1110
protection. If an aircraft lease were not subject to Section 1110, payments
thereunder may be interrupted without the ability to repossess the aircraft or
exercise other remedies thereunder. Further, Section 1110 does not prevent a
lessee from rejecting a lease or demanding a renegotiation of the lease as a
condition to continuing to perform under the lease. In the event Echelon were to
repossess an aircraft after default by an airline, it may not be able to
re-lease such aircraft at comparable rates.
Aircraft Remarketing and Sale
On termination of a lease and return or repossession of an aircraft to or
by Echelon, Echelon would need to remarket the aircraft to realize its full
investment. The remarketing of aircraft may be through a lease or sale. The
terms and conditions of any such transaction cannot be determined until such
time as the transaction
49
<PAGE> 52
is consummated. Whether an investment in any aircraft initially subject to a
leveraged or direct finance lease will ultimately prove to have been profitable
may depend upon the terms on which such aircraft will be re-leased or sold. No
assurance can be given that as aircraft come off lease, Echelon will be able to
re-lease or sell such aircraft on commercially acceptable terms or in a timely
manner. Furthermore, in the event of a lessee default or bankruptcy requiring
Echelon to sell the aircraft prior to expected maturity of the lease, Echelon
would accelerate the incurrence of tax liabilities, which could be significant,
even if the aircraft is sold for less than its long-term value.
EMPLOYEES
At September 30, 1996, Echelon had 80 full-time employees. These employees
work in a variety of capacities, comprised of 17 in executive and corporate
functions, 29 in real estate and property management services and 34 in marina
and other operations. None of Echelon's employees are represented by labor
unions. Echelon believes that, generally, labor relations are satisfactory and
have been maintained in a normal and customary manner. From time to time,
Echelon engages third party contractors on development projects for
infrastructure management and building construction, these contractors'
employees include persons represented by various building and trade unions.
COMPETITION
Real Estate Industry
The real estate ownership, development and management markets are generally
regional, and the identity of Echelon's competitors and the levels of
competition vary in each area of activity and in each market. While Echelon
encounters significant competition in each area of activity and in each market,
Echelon believes that no one competitor is dominant. In particular, within the
Tampa Bay area in which Echelon's operations are concentrated, there are
numerous commercial properties that compete with Echelon in attracting tenants,
numerous companies that compete with Echelon in selecting land for development
and properties for acquisition (including within the affordable housing market
generally and for Housing Tax Credits in particular) and numerous companies that
compete for real estate management business. Echelon believes competition is
based largely on location, quality of products and services and financial
resources. Although certain of Echelon's competitors have significantly greater
financial resources than Echelon and may have greater experience than Echelon in
acquiring, developing and managing real estate, placing them at a competitive
advantage in this regard, Echelon believes the location and quality of its
properties places Echelon in a generally favorable competitive position.
Aircraft Leasing Industry
The aircraft leasing industry is highly competitive, offering users
alternatives to the purchase of nearly every type of aircraft. Competitive
conditions vary considerably depending upon the type of aircraft to be leased
and the nature of the prospective lessee. As Echelon's aircraft leases mature,
Echelon will be subject to such competition to the extent it attempts to
re-lease such aircraft. In attempting to obtain commitments to lease aircraft to
specific lessees, Echelon may be expected to compete, directly or indirectly,
with aircraft manufacturers, airlines and other operators, equipment managers,
leasing companies, financial institutions and numerous other parties engaged in
leasing, managing, marketing or remarketing aircraft. Many of these competitors
have significantly greater financial resources than Echelon and may have greater
experience than Echelon in managing, leasing, operating and selling aircraft.
Such competitors may offer to lease aircraft at rates lower than those which
Echelon can reasonably offer and may provide certain benefits, such as
maintenance, crews, support services and trade-in privileges, which Echelon
generally cannot provide. In addition, to the extent troubled airlines seek to
re-negotiate the terms of the leases relating to their aircraft, certain of
Echelon's competitors with greater resources may be in better bargaining
positions to avoid renegotiation or may be able to enter into such negotiations
and achieve relatively more favorable terms than Echelon would be able to do.
50
<PAGE> 53
LEGAL PROCEEDINGS
There are no material legal proceedings pending against Echelon.
GOVERNMENTAL AND ENVIRONMENTAL REGULATION
Real Estate Industry
Echelon believes that it is in compliance in all material respects with all
material environmental laws or regulations and that the cost of continued
compliance with such laws and regulations will not have a material adverse
effect on Echelon. However, many of Echelon's properties are located in urban
areas where fill or current or historic industrial uses of the areas may have
caused site contamination at the properties. Nonetheless, at this time, Echelon
does not anticipate that regulatory authorities will require remediation of the
properties in any manner that would result in a material adverse effect on
Echelon's business, results of operations or financial condition, and Echelon
estimates that its proportionate share of liability for cleaning up all sites
ranges from $0.1 million to $1.0 million. See Note 11 to the Consolidated
Financial Statements included in this Information Statement.
Aircraft Leasing Industry
General. The ownership and operation of aircraft in the United States are
strictly regulated by the FAA, which imposes certain minimum restrictions and
economic burdens upon the use, maintenance and ownership of aircraft. The FAA
Act and FAA regulations contain strict provisions governing various aspects of
aircraft ownership and operation, including aircraft inspection and
certification, maintenance, equipment requirements, general operating and flight
rules, noise levels, certification of personnel, and record keeping in
connection with aircraft maintenance. In the last several years, the FAA has
issued a number of administrative directives and other regulations relating to,
among other things, collision avoidance systems, airborne windshear avoidance
systems, noise abatement and increased inspection requirements, which will
require lessees or Echelon to incur additional expenditures for compliance. FAA
policy has given high priority to aviation safety, and a primary objective of
FAA regulations is that an aircraft be maintained properly during its service
life. FAA regulations establish standards for repairs, periodic overhauls and
alterations and require that the owner or operator of an aircraft establish an
airworthiness inspection program to be carried out by certified mechanics
qualified to perform aircraft repairs. Each aircraft in operation is required to
have a Standard Airworthiness Certificate issued by the FAA.
Maintenance and Aircraft Aging. Echelon, as the beneficial owner of
aircraft, bears the ultimate responsibility for compliance with certain federal
regulations. However, under all of its aircraft leases, the lessee has the
primary obligation to ensure that at all times, the use, operation, maintenance
and repair of the aircraft are in compliance with all applicable governmental
rules and regulations and that Echelon is indemnified from loss by the lessee
for breach of any of these lessee responsibilities. Changes in government
regulations may increase the cost to, and other burdens on, Echelon of complying
with such regulations.
Maintenance is further regulated by the FAA which also monitors compliance.
At lease termination, the lessees are required to return the aircraft in good
operating condition. Echelon may incur unanticipated maintenance expenses if a
lessee were to default under a lease and Echelon were to take possession of the
leased aircraft without such maintenance having been performed. If the lessee
defaulting is in bankruptcy, Echelon will file a proof of claim for the required
maintenance expenses in the lessee's bankruptcy proceedings and attempt to
negotiate payment and reimbursement of a portion of these expenses. The
bankruptcy of a lessee could adversely impact Echelon's ability to recover
maintenance expense.
As a result of investigations into the causes of several incidents,
including rapid in-flight aircraft decompression and fatigue cracks in critical
parts, the aircraft manufacturers issued service bulletins and the FAA has also
issued airworthiness directives ("ADs"). These bulletins and directives provide
instructions to aircraft operators in the maintenance of aircraft and are
intended to prevent the occurrence of similar incidents. Compliance with ADs is
mandatory.
51
<PAGE> 54
On March 6, 1989, the FAA ordered extensive repairs of all older commercial
aircraft which it implemented through several 1990 ADs. These ADs were issued to
ensure that the oldest portion of the nation's transport aircraft fleet remains
airworthy. The FAA is requiring that these aircraft undergo extensive structural
modifications. These modifications are required upon accumulation of 20 years'
time in service, prior to the accumulation of a designated number of
flight-cycles or prior to 1994 deadlines established by the various ADs,
whichever occurs later. Echelon has interests in three aircraft that have over
20 years' time in service. A formal program to control corrosion in all aircraft
has also been added to the FAA mandatory requirements for maintenance for each
type of aircraft. These FAA rules and proposed rules evidence the current
approach to aircraft maintenance developed by the manufacturers and supported by
the FAA in conjunction with an aircraft industry group. Echelon may be required
to pay for these FAA requirements if a lessee defaults or if necessary to
release or sell the aircraft.
There are more than 12,000 jet aircraft in the western fleets of the
principal airlines of the world. On average these aircraft are less than 13
years old. Several hundred have been in service for 20 years or more and that
number is growing. See "Summary of Leveraged Lease Asset Portfolio" above for a
table showing the lease date, manufacture and the date of lease termination of
Echelon aircraft.
Aircraft Noise. The FAA, through regulations, has categorized certain
aircraft types as Stage I, Stage II and Stage III according to the noise level
as measured at three designated points. Stage I aircraft create the highest
measured noise levels. Aircraft which exceed Stage I noise maximums are no
longer allowed to operate from civil airports in the United States.
The Aviation Safety and Capacity Act of 1990 bans the operation of Stage II
aircraft after December 31, 1999. All of Echelon's leased aircraft have Stage
III noise certification, except four B737-200s leased to Delta. A lease
extension with Delta Airlines requires the airline to install hushkits on two of
such aircraft, while Echelon plans to install hushkits on the other two aircraft
in order to qualify for Stage III noise certification. The cost of the hushkits
is currently approximately $2.5 million per aircraft.
Registration of Aircraft; United States Person. Under the FAA Act, the
operation of an aircraft not registered with the FAA in the United States is
generally unlawful. Subject to certain limited exceptions, an aircraft may not
be registered under the FAA Act unless it is owned by a "citizen of the United
States" or a "resident alien" of the United States. If Echelon were to cease
being a "citizen of the United States" or a "resident alien" of the United
States, it may be subject to claims based upon its breach of covenants and
representations concerning its status as a citizen of the United States included
in the contracts underlying its leveraged, direct finance and operating leases.
Because Florida Progress will continue to guarantee certain of these covenants
after the Distribution, the Distribution Agreement will require that the Echelon
Chairman, the Echelon President and two-thirds of the Echelon Board of Directors
be United States citizens or resident aliens within the meaning of the FAA Act
for as long as any of such covenants are guaranteed by Florida Progress.
52
<PAGE> 55
MANAGEMENT AND EXECUTIVE COMPENSATION
BOARD OF DIRECTORS
Echelon has set the size of its Board of Directors at five. Echelon's
current Board has four directors and one vacancy. One of the directors is an
executive officer of Florida Progress. Echelon anticipates that a fifth director
will be named to fill the vacancy shortly after the Distribution. The Echelon
Board of Directors is divided into three classes. Directors for each class will
be elected at the annual meeting of stockholders held in the year in which the
term for such class expires and will serve thereafter for three years.
The following sets forth the names, in alphabetical order, and certain
information about the persons who are the current directors of Echelon.
W. Michael Doramus, age 46, is a director and the Chairman of the Board of
Echelon, with a term to expire at the annual meeting of stockholders to be held
in 1999. Mr. Doramus brings more than two decades of executive experience in all
phases of multi-family residential real estate operations, including project
planning, acquisition, development, financing, management and disposition. Mr.
Doramus founded Mission Development Company, Dallas, Texas, a real estate
consulting services, real estate development, systems development, technology
and market research company in January of 1996 and serves as its President. He
served as Executive Vice President and National Partner of JPI Development
Partners, Inc., Dallas, Texas from 1992 to 1995. Mr. Doramus served as President
of Rosewood Management and Acquisition Group, Inc., from 1990 to 1992. Prior to
1992, he served as President of various companies including Doramus Ventures,
Inc., from 1988 to 1989 and two Trammel Crow companies, Brentwood Properties and
Trammell Crow Advisory Services, Inc. from 1977 to 1987.
Darryl A. LeClair, age 37, is a director and the President and Chief
Executive Officer of Echelon. His term as director will expire at the annual
meeting of stockholders to be held in 1999. Prior to the Distribution, Mr.
LeClair had been employed by Florida Progress or its affiliates for more than 14
years, serving in a variety of executive positions, particularly those regarding
real estate development, management and finance and aircraft leasing and
finance. Prior to the Distribution, Mr. LeClair served in a variety of
capacities, including as Vice President of Mergers, Acquisitions and
Divestitures of Florida Progress from 1991 through 1996, and as the President of
PCC, Talquin Development Company ("Talquin") and Progress Leasing Corporation
("Progress Leasing") from 1992 to the time such companies were combined with and
into Echelon. From 1988 to 1992 he was Vice President of Talquin, heading up
operations, including the real estate group.
Thomas W. Mahr, age 38, is a director of Echelon, with a term to expire at
the annual meeting of stockholders in 1998. Mr. Mahr has more than 12 years of
experience in the aircraft leasing and finance and airline industries, including
service in the treasury and financial planning functions for regional and
national airlines and more recently in executive positions with firms focusing
solely on aircraft financing. Mr. Mahr is currently a Managing Director of the
Seabury Group, a firm specializing in aviation investment banking located in
Greenwich, Connecticut. Mr. Mahr was a Principal with Fieldstone Private Capital
Group, New York, New York from 1991 to 1996. From 1989 to 1991, he served as
Vice President of Marketing for Chrysler Capital Corporation, Greenwich,
Connecticut, responsible for all aviation investments. He served as Vice
President and Chief Financial Officer of Rocky Mountain Airways, Denver,
Colorado, from 1988 to 1989 and as Director of Finance of Texas Air Corporation,
Houston, Texas, from 1986 to 1988. From 1983 to 1985, Mr. Mahr served as Manager
of Finance for New York Air, Flushing, New York.
Joseph H. Richardson, age 47, is a director of Echelon, with a term to
expire at the annual meeting of stockholders in 1997. Mr. Richardson has been
employed by Florida Progress or its affiliates for more than 20 years. He joined
Florida Power Corporation in 1976 as Assistant Counsel, was promoted to
Corporate Counsel in 1977 and became Assistant General Counsel of Florida
Progress in 1983. In 1986 he joined Talquin as Vice President and was promoted
to President and Chief Executive Officer in 1990. While at Talquin, he also
served as Group Vice President and Senior Vice President of the Development
Group of Florida Progress. In 1993 Mr. Richardson became Senior Vice President,
Legal and Administrative Services at Florida Power and in 1995 became Senior
Vice President of Energy Distribution. In April 1996, he became
53
<PAGE> 56
a member of the Board of Directors and was promoted to President and Chief
Operating Officer of Florida Power and continues to serve as a Group Vice
President of the Utility Group of Florida Progress.
DIRECTORS' COMPENSATION
Directors who are not employees of Echelon ("Non-Employee Directors") will
receive an annual retainer fee of $15,000 to be paid quarterly, in arrears, in
the form of Echelon Common Stock and an automatic grant of options to purchase
1,000 shares of Echelon Common Stock each year in accordance with the Echelon
International Corporation Non-Employee Directors' Stock Plan (the "Directors'
Plan") approved by Echelon's stockholder prior to the Distribution. In addition,
Non-Employee Directors will receive $1,000 for each meeting of the Board of
Directors attended and $500 for each meeting of a Committee of the Board of
Directors attended. Non-Employee Directors who serve as Chairman of a Committee
of the Board of Directors will receive an additional $750 for each meeting
chaired.
In addition to the annual retainer fee and meeting fees described above, W.
Michael Doramus will receive an additional $100,000 per year as Chairman of the
Board.
COMMITTEES OF THE BOARD OF DIRECTORS
Echelon's Board of Directors has established the following standing
committees to act between regular meetings of the Board of Directors:
Audit Committee. The Audit Committee will be comprised of at least two
Non-Employee Directors. Its function includes the recommendation of the
independent auditors to be engaged by Echelon and the review of Echelon's
general policies and procedures with respect to audits and accounting and
financial controls.
Compensation Committee. The Compensation Committee is comprised of two
Non-Employee Directors, Thomas W. Mahr and Joseph H. Richardson. Its function
includes the establishment of compensation policies for the executive officers
of Echelon and administration of any stock-based compensation plans except the
Directors' Plan.
Nominating Committee. The Nominating Committee is comprised of two
Non-Employee Directors, W. Michael Doramus and Joseph H. Richardson. Its
function includes the consideration of recommendations for nominees for election
to the Board of Directors submitted by stockholders.
EXECUTIVE OFFICERS
Listed below is certain information about the persons who will be Echelon's
executive officers after the Distribution.
Darryl A. LeClair, age 37, is the President and Chief Executive Officer of
Echelon. See biographical information above under "Board of Directors."
Larry J. Newsome, age 48, is the Senior Vice President, Chief Financial
Officer, Secretary and Treasurer of Echelon. Mr. Newsome has been employed by
Florida Progress or its affiliates for more than 25 years, serving in a variety
of tax, financial and managerial positions. He served as Vice President of Tax
Administration at Florida Progress (1992-1996) and held the same position at
Florida Power Corporation, its subsidiary (1994-1996). He was the Director of
Tax Administration at Florida Progress from 1983 to 1992. Until 1993, Mr.
Newsome also served Progress Leasing as a Director from 1983 and as Assistant
Treasurer from 1984 and served PLC Leasing as a Director and Assistant Treasurer
from 1985. He joined Florida Power Corporation in 1971 and served in various
capacities including Manager and Supervisor of Tax Accounting, Senior Accountant
and Accountant.
Thomas D. Wilson, age 49, is a Vice President of Echelon. Mr. Wilson has
been employed by Florida Progress or its affiliates for more than seven years,
having served as Vice President of PCC (1989-1996), as Director and Vice
President of Progress Leasing and PLC Leasing (1991-1996) and as Vice President
of Talquin (1993-1996). He joined Florida Progress in 1989 as the Director of
Real Estate, Lending and Leasing.
54
<PAGE> 57
Raymond F. Higgins, age 45, is the Vice President of Financial Analysis,
Chief Information Officer and Assistant Secretary of Echelon. Mr. Higgins has
been employed by Florida Progress or its affiliates for more than 14 years,
having served as the Director of Financial Reporting & Planning for Florida
Power Corporation (1992-1996) and was Director of Financial Reporting & Planning
for Florida Progress from 1986 to 1992. He joined Florida Power Corporation in
1982 and held various financial positions including, Manager of Financial
Reporting, Senior Accountant and Accountant.
James R. Hobbs, Jr., C.P.A., age 44, is the Vice President and Controller
of Echelon. Mr. Hobbs has been employed by Florida Progress or its affiliates
for more than 14 years, having served as Controller and Assistant Treasurer of
PCC (1995-1996), Controller and Assistant Treasurer of Talquin (1993-1996) and
Controller and Assistant Treasurer of Progress Leasing and PLC Leasing
(1995-1996). He was Manager of Accounting for Talquin from 1987 to 1993, and
Supervisor of Accounting for Talquin Corporation from 1985 to 1987. He joined
Florida Power Corporation in 1982 and held the positions of Operational Auditor
and Senior Operational Auditor until 1985.
Michael S. Talmadge, age 37, is the Vice President of Leasing and Real
Estate Services of Echelon. Mr. Talmadge has more than 11 years of experience in
managing commercial real estate projects, the last five years in the Tampa Bay
area. He has served as the President of TRS Commercial Real Estate Services,
Inc., a leasing and property management company in Tampa, Florida since 1993. He
joined TRS Commercial Real Estate Services, Inc. as Director of Marketing in
1991. Mr. Talmadge served as a Principal for Trammell Crow Company in Denver and
Colorado Springs, Colorado from 1989 to 1991. He served as General Manager of
Phase One Development for San Diego Gas & Electric from 1988 to 1989, after
joining the company as marketing executive in 1987.
The executive officers of Echelon will resign from all positions with
Florida Progress and its subsidiaries prior to the Distribution.
55
<PAGE> 58
COMPENSATION OF ECHELON'S EXECUTIVE OFFICERS
The information set forth in the following table reflects compensation
earned based on services rendered to Florida Progress and its affiliates in 1995
by Echelon's Chief Executive Officer and the other two executive officers of
Echelon whose total annual salary and bonus exceeded $100,000 (collectively the
"Named Executive Officers"). The services rendered to Florida Progress, in some
respects, were in capacities not equivalent to those to be provided to Echelon,
and the prior compensation may not be indicative of the compensation to be paid
to the Named Executive Officers of Echelon in the future.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(1) PAYOUTS
------------------------- ------------
(A) (H) (I)
NAME AND PRINCIPAL (B) (C) (D) LTIP ALL OTHER
POSITION(S) WITH ECHELON YEAR SALARY BONUS PAYOUTS COMPENSATION(2)
- --------------------------------------------- ---- -------- ------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Darryl A. LeClair............................ 1995 $211,947 $87,500 N/A $ 6,645
President and Chief Executive Officer
Larry J. Newsome............................. 1995 $133,450 $44,000 N/A $ 2,004
Senior Vice President, Chief
Financial Officer, Secretary and Treasurer
Thomas D. Wilson............................. 1995 $ 98,055 $19,500 N/A $ 2,221
Vice President
</TABLE>
- ---------------
(1) All other annual compensation paid to the Named Executive Officers during
1995, other than salary and annual incentive compensation, does not exceed
the minimum amounts required to be reported pursuant to Securities and
Exchange Commission rules.
(2) Florida Progress matching contributions to its Savings Plan and/or its
Executive Optional Deferred Compensation Plan on behalf of the Named
Executive Officers.
The following table provides information with respect to performance shares
awarded in 1995 to the Named Executive Officers of Echelon for the 1995-1997
performance cycle of the Florida Progress Long-Term Incentive Plan ("LTIP"):
LONG-TERM INCENTIVE PLAN(1)
AWARDS IN 1995
<TABLE>
<CAPTION>
ESTIMATED PAYOUT AT
NUMBER OF PERFORMANCE END OF PERIOD(3)
PERFORMANCE PERIOD ---------------------------
NAME SHARES(2) COVERED THRESHOLD TARGET MAXIMUM
- ---------------------------------- ----------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Darryl A. LeClair................. 1,483 1995-1997 742 shares 1,483 shares 2,225 shares
Larry J. Newsome.................. 625 1995-1997 313 shares 625 shares 938 shares
</TABLE>
- ---------------
(1) The LTIP is an incentive plan to reward participants for long-term growth
and performance of Florida Progress.
(2) Performance shares awarded under the LTIP which, upon achievement of
performance criteria, would result in the payout of shares of common stock
of Florida Progress, two-thirds of which would be restricted for certain
periods of time. Payouts of shares of common stock are made for achieving
returns on equity equal to or exceeding the thresholds determined by the
Compensation Committee of the Florida Progress Board of Directors.
(3) Awards are earned upon achievement of Florida Progress and/or subsidiary
return on equity goals for the three-year performance cycle.
56
<PAGE> 59
PENSION PLAN TABLE
The table below illustrates the estimated annual benefits (computed as a
straight life annuity beginning at retirement at age 65) payable under Florida
Progress Corporation's Retirement Plan and Nondiscrimination Plan for specified
final average compensation and years of service levels. Echelon does not have a
retirement plan.
ESTIMATED ANNUAL RETIREMENT BENEFITS PAYABLE UNDER
THE RETIREMENT PLAN AND NONDISCRIMINATION PLAN
<TABLE>
<CAPTION>
AVERAGE SERVICE YEARS
ANNUAL --------------------------------------------------------------------------------------
COMPENSATION 5 10 15 20 25 30 35 OR MORE
- ------------ ------- ------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$100,000 $ 9,000 $18,000 $ 27,000 $ 36,000 $ 45,000 $ 54,000 $ 63,000
200,000 18,000 36,000 54,000 72,000 90,000 108,000 126,000
300,000 27,000 54,000 81,000 108,000 135,000 162,000 189,000
400,000 36,000 72,000 108,000 144,000 180,000 216,000 252,000
500,000 45,000 90,000 135,000 180,000 225,000 270,000 315,000
</TABLE>
Under the Retirement Plan and the Nondiscrimination Plan, the compensation
taken into account in calculating benefits is salary only. The years of credited
service that would be used in calculating benefits under the Retirement Plan and
the Nondiscrimination Plan for the Named Executive Officers in the summary
compensation table are as follows: Darryl A. LeClair, 14 years of service; Larry
J. Newsome, 25 years of service; Thomas D. Wilson, 7 years of service. The
benefits under the Retirement Plan and the Nondiscrimination Plan are subject to
offset by an amount equal to 1/7% of a participant's primary Social Security
benefit for each year of service (with a maximum offset of 40%).
EQUITY BASED COMPENSATION PLANS
Echelon has adopted the Echelon International Corporation 1996 Stock Option
Plan (the "Stock Option Plan"), the Echelon International Corporation 1996
Employee Stock Purchase Plan (the "Stock Purchase Plan"), the Echelon
International Corporation Long-Term Incentive Plan (the "Echelon LTIP") and the
Directors' Plan. The Compensation Committee will administer the Stock Option
Plan, Stock Purchase Plan and Echelon LTIP and make the determination as to the
grant of awards, options and/or rights under the respective plans. No member of
the committee may receive grants or awards under the plans. The Board of
Directors of Echelon will administer the Directors' Plan.
Stock Option Plan. A maximum of 150,000 shares of Echelon Common Stock are
reserved for issuance under the plan. Under the Stock Option Plan, incentive
stock options, nonqualified stock options or any combination thereof may be
granted to any employee of Echelon. In general, the exercise price of the
options will be determined by the committee, but such price will not be less
than the market price of Echelon Common Stock on the date the option is granted.
Options will normally vest 20% each year after issuance over a period of five
years and will expire after 10 years.
Stock Purchase Plan. An aggregate of 75,000 shares of Echelon Common Stock
are reserved for issuance under the plan. Under the Stock Purchase Plan, all
employees will be given the opportunity to purchase shares of Echelon Common
Stock two times a year at a price equal to 85% of the market price of the stock
immediately prior to the beginning of each offering period. The Stock Purchase
Plan provides for two offering periods, the months of March and September, in
each of the years 1997-2006.
Echelon LTIP. An aggregate of 950,000 shares of Echelon Common Stock are
reserved for issuance under the plan. Under the Echelon LTIP, restricted stock,
incentive stock options, nonqualified stock options and stock appreciation
rights or any combination thereof may be granted to Echelon employees. The
exercise price of the options granted under the plan will be determined in the
discretion of the committee administering the plan, which price may not be less
than the market price of Echelon Common Stock on the date the option is granted.
Options will normally vest 20% each year after issuance over a period of five
years and will expire
57
<PAGE> 60
after 10 years. The committee may condition awards of restricted stock and stock
appreciations rights upon satisfaction of performance criteria or other
conditions.
Directors' Plan. An aggregate of 25,000 shares of Echelon Common Stock are
reserved for issuance under the plan. Non-Employee Directors will receive an
annual retainer fee of $15,000 paid quarterly in the form of Echelon Common
Stock. In addition to the annual retainer, each year Non-Employee Directors who
are elected or are continuing as Non-Employee Directors as of the conclusion of
Echelon's annual meeting of stockholders will receive options to purchase 1,000
shares of Echelon Common Stock. The exercise price of the options will be equal
to the market price of Echelon Common Stock on the date the option is granted.
Options will vest fully at the end of one year and will expire after five years.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of its
executive officers, including the Named Executive Officers. The initial term of
the agreement for Mr. LeClair is through December 31, 1999, and for each of
Messrs. Newsome and Wilson is through December 31, 1998. Pursuant to their
employment agreements, the annual base salaries of Messrs. LeClair, Newsome and
Wilson will be at least $280,000, $170,000 and $106,860, respectively. Under
their employment agreements, Messrs. LeClair, Newsome and Wilson are eligible
for annual incentive cash bonuses under Echelon's management incentive
compensation plan (the "MICP Bonus") based upon the annual results of Echelon's
operations and Messrs. LeClair and Newsome are eligible under the Echelon LTIP
to earn shares of Echelon Common Stock based upon the cumulative results of
Echelon's operations for the three years ending December 31, 1999 (the "LTIP
Bonus"). Pursuant to their employment agreements, Messrs. LeClair, Newsome and
Wilson have been granted 194,011, 32,335 and 12,934 shares, respectively, of
Echelon Common Stock under the Echelon LTIP. These shares are subject to a risk
of forfeiture which lapses with respect to one-quarter of the shares each
January 31st, commencing January 31, 1998. In addition, Messrs. LeClair, Newsome
and Wilson have been granted options to purchase 129,340, 2,500 and 1,000
shares, respectively, of Echelon Common Stock under the Echelon LTIP at an
exercise price equal to the closing price for Echelon's Common Stock on the NYSE
eight months after the completion of the Distribution. These options generally
have a term of ten years. One third of the options issued to Mr. LeClair and
one-fifth of the options issued to Messrs. Newsome and Wilson become exercisable
each January 31st, commencing January 31, 1998.
The employment agreements provide that Messrs. LeClair, Newsome and Wilson
are entitled to certain severance benefits in the event that their employment is
terminated by Echelon "without cause" or by such executive within one year
following a "change of control" (both as defined in the employment agreements).
In the event of termination "without cause," the executive will receive his base
salary for the remainder of the then effective employment term or 24 months (36
months for Mr. LeClair), whichever occurs first, and the MICP Bonus for the year
of termination multiplied by the number of years (and fractions thereof) in the
unexpired term of the agreement. In the event of such termination within one
year after a "change of control," Mr. LeClair will receive cash payments equal
to three times his base salary and three times his MICP Bonus, the cash value of
his LTIP Bonus for the then current three-year cycle, and a cash payment of
between $500,000 and $2,000,000 depending on the year of termination. In the
event of such termination within one year after a "change of control," Messrs.
Newsome and Wilson will each receive cash payments equal to two times their base
salary and two times their MICP Bonus; in addition, Mr. Newsome will receive a
payment equal to the cash value of his LTIP Bonus for the then current
three-year cycle. In addition, upon any such termination "without cause" or
within one year after a "change of control," all vesting, performance or similar
requirements in respect of any award under the Echelon LTIP shall be deemed to
have been fully satisfied and each executive will receive an additional cash
payment in an amount necessary to pay any federal excise taxes. Each employment
agreement is also subject to termination in the event of disability, death or
voluntary retirement by the individual or his termination "for cause." Each
employment agreement includes certain non-competition covenants applicable to
certain activities within Florida which remain in effect for two years following
any termination.
58
<PAGE> 61
MANAGEMENT OWNERSHIP OF SECURITIES
The following table sets forth information with respect to the number of
shares of Echelon Common Stock that are expected to be owned beneficially
immediately after the Distribution by each director and each of the Named
Executive Officers of Echelon and by all directors and executive officers of
Echelon as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME BENEFICIALLY OWNED(1) CLASS(2)
- ----------------------------------------------------------------- --------------------- ----------
<S> <C> <C>
W. Michael Doramus............................................... 0
Darryl A. LeClair................................................ 194,186(3) 2.9%
Thomas W. Mahr................................................... 0
Joseph H. Richardson............................................. 665
Larry J. Newsome................................................. 32,385(4)
Thomas D. Wilson................................................. 12,939(5)
All directors, Named Executive Officers and executive officers as
a group (9 persons), including those named above............... 274,317(6) 4.1%
</TABLE>
- ---------------
(1) As used in this table, "beneficial ownership" means the direct or indirect,
sole or shared power to vote, or to direct the voting of, a security and/or
investment power with respect to a security.
(2) Unless otherwise noted, less than 1%.
(3) The number of shares shown for Darryl A. LeClair includes 194,011 shares of
Echelon Common Stock granted under the Echelon LTIP subject to a risk of
forfeiture which lapses as to one-quarter of the shares each January 31st,
commencing January 31, 1998. Does not include 129,340 shares of Echelon
Common Stock subject to options granted under the Echelon LTIP.
(4) The number of shares shown for Larry J. Newsome includes 32,335 shares of
Echelon Common Stock granted under the Echelon LTIP subject to a risk of
forfeiture which lapses as to one-quarter of the shares each January 31st,
commencing January 31, 1998. Does not include 2,500 shares of Echelon
Common Stock subject to options granted under the Echelon LTIP.
(5) The number of shares shown for Thomas D. Wilson includes 12,934 shares of
Echelon Common Stock granted under the Echelon LTIP subject to a risk of
forfeiture which lapses as to one-quarter of the shares each January 31,
commencing January 31, 1998. Does not include 1,000 shares of Echelon
Common Stock subject to options granted under the Echelon LTIP.
(6) The number of shares shown includes 273,232 shares of Echelon Common Stock
granted to executive officers under the Echelon LTIP, subject to a risk of
forfeiture which lapses as to one-quarter of the shares each January 31st,
commencing January 31, 1998.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information concerning each person known to
Florida Progress who would be the beneficial owner of more than 5% of the
Echelon Common Stock upon completion of the Distribution if such person
continued to own beneficially on the Record Date the same number of shares of
Florida Progress Common Stock believed by Florida Progress to be owned
beneficially by such person on September 30, 1996 (and assuming no change in the
number of outstanding shares of Florida Progress Common Stock from such date to
the Record Date.) Such information has been obtained from Florida Progress's
records and a review of statements filed with the SEC pursuant to Sections 13(d)
and 13(g) of the Securities Exchange Act with respect to Florida Progress Common
Stock and received by Florida Progress prior to September 30, 1996.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY OWNED(1) OF CLASS
- ------------------------------------------------------------------- --------------------- --------
<S> <C> <C>
Franklin Resources, Inc. .......................................... 361,978 5.6%
777 Mariners Island Blvd.
San Mateo, California 94404
</TABLE>
59
<PAGE> 62
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In July 1996, Talquin Development Company, a former affiliate of Echelon
which has since been merged into Echelon ("Talquin"), entered into a Consulting
Agreement with Mission Development Company, a company which is wholly owned by
Mr. Doramus. Mr. Doramus will be Chairman of the Board of Echelon. Talquin
agreed to pay Mission Development Company a total of $400,000 for real estate
consulting services to be provided through March 31, 1997. The Consulting
Agreement was initially entered into when the parties were unaffiliated and, in
the view of Echelon's management, the terms of such agreement are comparable to
those which could have been obtained from other unaffiliated sources. Management
is currently negotiating an amendment to the Consulting Agreement with Mission
Development Company pursuant to which the term would be extended through the end
of 1997, the services to be provided would be expanded, and the compensation to
be paid would be increased by a total of $400,000. Management believes that the
terms of the amendment are also comparable to the terms which could be obtained
from a third party. The services rendered pursuant to the Consulting Agreement
and the compensation therefore are independent of Mr. Doramus's services as
Chairman and the compensation paid to him as a director and Chairman.
Mr. Richardson, who will continue to serve as a director of Echelon
following the Distribution, is an executive officer of both Florida Progress and
Florida Power. During 1996, Florida Progress has entered into various agreements
with Echelon including the Distribution Agreement, Tax Sharing Agreement,
Employee Benefits Allocation Agreement and Transition Services Agreement. See
"Relationship Between Florida Progress and Echelon After the Distribution."
In addition, Florida Progress and Florida Power have ongoing lease
agreements with Echelon. Such leases are on terms which reflect market rates and
conditions and have been entered into by the parties in the ordinary course of
their respective businesses. The leases are summarized in the following table:
SUMMARY OF LEASE ARRANGEMENTS
<TABLE>
<CAPTION>
APPROXIMATE
REMAINING
LOCATION RENTABLE SQUARE FEET LEASED TERM
- --------------------------------------------------- --------------------------- -----------------
<S> <C> <C>
Florida Progress
Barnett Tower...................................... 62,149 10 years
Florida Power
3rd and 3rd........................................ 32,607 4 months
Highpoint Center................................... 1,831 10 years
Bayboro (land lease only).......................... 104,152 Cancellable upon
written notice
from Florida
Power
</TABLE>
See "Business -- Commercial Real Estate Ownership and Management."
60
<PAGE> 63
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The total number of shares of all classes of stock that Echelon has
authority to issue under its Articles of Incorporation is 35,000,000 shares, of
which 25,000,000 shares represent shares of Echelon Common Stock and 10,000,000
shares represent shares of Preferred Stock (the "Echelon Preferred Stock").
Based on 97,005,268 shares of Florida Progress Common Stock outstanding as of
November , 1996, and a distribution ratio of one share of Echelon Common Stock
for every 15 shares of Florida Progress Common Stock, it is anticipated that
approximately 6,467,018 shares of Echelon Common Stock will be distributed to
holders of Florida Progress Common Stock on the Distribution Date.
ECHELON COMMON STOCK
Each outstanding share of Echelon Common Stock is entitled to one vote on
all matters submitted to a vote of stockholders.
Subject to any preferential rights of any Echelon Preferred Stock created
by the Board of Directors of Echelon, each outstanding share of Echelon Common
Stock is entitled to such dividends, if any, as may be declared from time to
time by the Board of Directors of Echelon. See "Dividend Policy".
In the event of liquidation, dissolution or winding up of Echelon, holders
of Echelon Common Stock are entitled to receive on a pro rata basis any assets
remaining after provision for payment of creditors and after payment of any
liquidation preferences to holders of Echelon Preferred Stock.
ECHELON PREFERRED STOCK
The authorized Echelon Preferred Stock is available for issuance from time
to time in one or more series at the discretion of the Echelon Board of
Directors without stockholder approval. The Echelon Board of Directors has the
authority to prescribe for each series of Echelon Preferred Stock it establishes
the number of shares, the voting rights (if any) to which such shares are
entitled, the consideration for such shares, the designations, powers,
preferences and relative, participating, optional or other special rights,
dividend, redemption and sinking fund provisions (if any), and any
qualifications, limitations or restrictions of the shares in that series.
Depending upon the rights of such Preferred Stock, the issuance of Echelon
Preferred Stock could have an adverse effect on holders of Echelon Common Stock
by delaying or preventing a change in control of Echelon, making removal of the
present management of Echelon more difficult or resulting in restrictions upon
the payment of dividends and other distributions to the holders of Echelon
Common Stock.
AUTHORIZED BUT UNISSUED CAPITAL STOCK
Florida law does not require stockholder approval for any issuance of
authorized shares. However, the listing requirements of the NYSE, which would
apply so long as the Echelon Common Stock remained listed on the NYSE, require
stockholder approval of certain issuances equal to or exceeding 20% of the then
outstanding voting power or then outstanding number of shares of Echelon Common
Stock. Authorized but currently unissued shares, if issued, may be used for a
variety of corporate purposes, including future public offerings to raise
additional capital or to facilitate corporate acquisitions. Echelon currently
has no plans to issue additional shares of Echelon Common Stock or Echelon
Preferred Stock other than in connection with employee compensation plans. See
"Management and Executive Compensation."
One of the effects of the existence of unissued and unreserved Echelon
Common Stock and Echelon Preferred Stock may be to enable the Board of Directors
of Echelon to issue shares to persons friendly to current management, which
issuance could render more difficult or discourage an attempt to obtain control
of Echelon by means of a merger, tender offer, proxy contest or otherwise, and
thereby protect the continuity of Echelon's management and possibly deprive the
stockholders of opportunities to sell their shares of Echelon Common Stock at
prices higher than prevailing market prices. Such additional shares also could
be used to
61
<PAGE> 64
dilute the stock ownership of persons seeking to obtain control of Echelon
pursuant to the operation of the Stockholder Rights Agreement, which is
discussed below.
ECHELON RIGHTS AGREEMENT
Pursuant to a Stockholder Rights Agreement dated as of November 4, 1996 (as
the same may be amended from time to time, the "Echelon Rights Agreement")
between Echelon and The First National Bank of Boston (the "Echelon Rights
Agent"), on November 4, 1996 the Board of Directors of Echelon declared a
dividend of one preferred share purchase right (a "Right") for each outstanding
share of Echelon Common Stock. The dividend was payable on November 15, 1996
(the "Record Date") to Florida Progress, which was the sole stockholder of
record on the record date therefore. Each Right entitles the registered holder
to purchase from Echelon one-hundredth of a share of Series A Junior
Participating Echelon Preferred Stock, par value $.01 per share (the "Echelon
Preferred Stock"), of Echelon at a price of $55 per one-hundredth of a share of
Echelon Preferred Stock (as the same may be adjusted, the "Purchase Price"),
subject to adjustment.
Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired beneficial ownership of 15% or more of the outstanding
shares of Echelon Common Stock or (ii) 10 business days (or such later date as
may be determined by action of the Board of Directors prior to such time as any
person or group of affiliated persons becomes an Acquiring Person) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of the outstanding shares of
Echelon Common Stock (the earlier of such dates, the "Rights Distribution
Date"), the Rights will be evidenced by such Echelon Common Stock certificate.
The Echelon Rights Agreement provides that, until the Rights Distribution
Date (or earlier redemption or expiration of the Rights), the Rights will be
transferred with and only with the Echelon Common Stock. Until the Rights
Distribution Date (or earlier redemption or expiration of the Rights), Echelon
Common Stock will be issued with Rights, and certificates will contain a
notation incorporating the Echelon Rights Agreement by reference. Until the
Rights Distribution Date (or earlier redemption or expiration of the Rights),
the surrender for transfer of any certificates for shares of Echelon Common
Stock will also constitute the transfer of the Rights associated with the shares
of Echelon Common Stock represented by such certificates. As soon as practicable
following the Rights Distribution Date, separate certificates evidencing the
Rights ("Right Certificates") will be mailed to holders of record of the Echelon
Common Stock as of the close of business on the Rights Distribution Date and
such separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Rights Distribution Date. The
Rights will expire on November 15, 2006 (the "Final Expiration Date"), unless
the Final Expiration Date is advanced or extended or unless the Rights are
earlier redeemed or exchanged by Echelon, in each case as described below.
The Purchase Price payable, and the number of shares of Echelon Preferred
Stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Echelon Preferred Stock, (ii) upon the grant to holders of the Echelon Preferred
Stock of certain rights or warrants to subscribe for or purchase Echelon
Preferred Stock at a price, or securities convertible into Echelon Preferred
Stock with a conversion price, less than the then-current market price of the
Echelon Preferred Stock or (iii) upon the distribution to holders of the Echelon
Preferred Stock of evidences of indebtedness or assets (excluding regular
periodic cash dividends or dividends payable in Echelon Preferred Stock) or of
subscription rights or warrants (other than those referred to above).
The number of Rights are also subject to adjustment in the event of a stock
dividend on the Echelon Common Stock payable in shares of Echelon Common Stock
or subdivisions, consolidations or combinations of the Echelon Common Stock
occurring, in any such case, prior to the Distribution Date.
62
<PAGE> 65
Shares of Echelon Preferred Stock purchasable upon exercise of the Rights
will not be redeemable. Each share of Echelon Preferred Stock will be entitled,
when, as and if declared, to a minimum preferential quarterly dividend payment
of $1 per share but will be entitled to an aggregate dividend of 100 times the
dividend declared per share of Echelon Common Stock. In the event of
liquidation, dissolution or winding up of Echelon, the holders of the Echelon
Preferred Stock will be entitled to a minimum preferential liquidation payment
of $10 per share (plus any accrued but unpaid dividends) but will be entitled to
an aggregate payment of 100 times the payment made per share of Echelon Common
Stock. Each share of Echelon Preferred Stock will have 100 votes, voting
together with the Echelon Common Stock. Finally, in the event of any merger,
consolidation or other transaction in which shares of Echelon Common Stock are
converted or exchanged, each share of Echelon Preferred Stock will be entitled
to receive 100 times the amount received per share of Echelon Common Stock.
These rights are protected by customary antidilution provisions in the Echelon
Rights Agreement.
Because of the nature of the Echelon Preferred Stock's dividend,
liquidation and voting rights, the value of the one-hundredth interest in a
share of Echelon Preferred Stock purchasable upon exercise of each Right should
approximate the value of one share of Echelon Common Stock.
If any person or group of affiliated or associated persons becomes an
Acquiring Person, each holder of a Right, other than Rights beneficially owned
by the Acquiring Person (which will thereupon become void), will thereafter have
the right to receive upon exercise of a Right and payment of the Purchase Price,
that number of shares of Echelon Common Stock having a market value equal to two
times the Purchase Price. The sale of the Echelon Preferred Stock upon exercise
of Rights will be made pursuant to a registration statement under the Securities
Act of 1933, as amended.
If, after a person or group has become an Acquiring Person, Echelon is
acquired in a merger or other business combination transaction or 50% or more of
its consolidated assets or earning power are sold, proper provision will be made
so that each holder of a Right (other than Rights beneficially owned by an
Acquiring Person which will have become void) will thereafter have the right to
receive, upon the exercise thereof and payment of the Purchase Price, that
number of shares of common stock of the person with whom Echelon has engaged in
the foregoing transaction (or its parent), which number of shares at the time of
such transaction will have a market value equal to two times the Purchase Price.
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of 50% or more of the outstanding
shares of Echelon Common Stock or the occurrence of an event described in the
prior paragraph, the Board of Directors of Echelon may exchange the Rights
(other than Rights owned by such person or group which will have become void),
in whole or in part, at an exchange ratio of one share of Echelon Common Stock,
or a fractional share of Echelon Preferred Stock (or of a share of a class or
series of Echelon's preferred stock having similar rights, preferences and
privileges), of equivalent value per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of Echelon Preferred Stock will be
issued (other than fractions which are integral multiples of one-one-hundredth
of a share of Echelon Preferred Stock, which may, at the election of Echelon, be
evidenced by depositary receipts) and in lieu thereof, an adjustment in cash
will be made based on the market price of the Echelon Preferred Stock on the
last trading day prior to the date of exercise.
At any time prior to the time an Acquiring Person becomes such, the Board
of Directors of Echelon may redeem the Rights in whole, but not in part, at a
price of $.01 per Right (hereinafter referred to in this description of the
Rights as the "Redemption Price"). The redemption of the Rights may be made
effective at such time, on such basis and with such conditions as the Board of
Directors in its sole discretion may establish. Immediately upon any redemption
of the Rights, the right to exercise the Rights will terminate and the only
right of the holders of Rights will be to receive the Redemption Price.
For so long as the Rights are then redeemable, the Echelon Board of
Directors may, except with respect to the redemption price, amend the Rights in
any manner. After the Rights are no longer redeemable, the
63
<PAGE> 66
Echelon Board of Directors may, except with respect to the redemption price,
amend the Rights in any manner that does not adversely affect the interests of
holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of Echelon, including, without limitation, the right to
vote or to receive dividends.
A copy of the Echelon Rights Agreement has been filed as an Exhibit to the
Registration Statement on Form 10 of Echelon in respect of the registration of
the Echelon Common Stock and Rights under the Exchange Act. A copy of the
Echelon Rights Agreement is available free of charge from Echelon. The summary
description of the Rights set forth above does not purport to be complete and is
qualified in its entirety by reference to the Echelon Rights Agreement, as the
same may be amended from time to time, which is hereby incorporated herein by
reference.
CERTAIN EFFECTS OF THE ECHELON RIGHTS AGREEMENT
The Echelon Rights Agreement is designed to protect stockholders of Echelon
in the event of unsolicited offers to acquire Echelon and other coercive
takeover tactics which, in the opinion of the Board of Directors of Echelon,
could impair its ability to represent stockholder interests. The provisions of
the Echelon Rights Agreement may render an unsolicited takeover of Echelon more
difficult or less likely to occur or might prevent such a takeover, even though
such takeover may offer Echelon's stockholders the opportunity to sell their
stock at a price above the prevailing market price and may be favored by a
majority of the stockholders of Echelon.
NO PREEMPTIVE RIGHTS
No holder of any class of stock of Echelon authorized at the time of the
Distribution will have any preemptive right to subscribe for any securities of
Echelon of any kind or class.
TRANSFER AGENT AND REGISTRAR
The First National Bank of Boston has been appointed as transfer agent and
registrar for the Echelon Common Stock.
FLORIDA BUSINESS CORPORATION ACT
Echelon is subject to several anti-takeover provisions under Florida law
that apply to a public corporation organized under Florida law unless the
corporation has elected to opt out of such provisions in its Articles of
Incorporation or (depending on the provision in question) its By-laws. Echelon
has not elected to opt out of these provisions. The Florida Business Corporation
Act (the "Florida Act") contains a provision that prohibits the voting of shares
in a publicly held Florida corporation which are acquired in a "control share
acquisition" unless the holders of a majority of the corporation's voting shares
(exclusive of shares held by officers of the corporation, inside directors or
the acquiring party) approve the granting of voting rights as to the shares
acquired in the control share acquisition. A control share acquisition is
defined as an acquisition that immediately thereafter entitles the acquiring
party to vote in the election of directors within each of the following ranges
of voting power: (i) one-fifth or more but less than one third of such voting
power, (ii) one third or more but less than a majority of such voting power and
(iii) more than a majority of such voting power.
The Act also contains an "affiliated transaction" provision that prohibits
a publicly-held Florida corporation from engaging in a broad range of business
combinations or other extraordinary corporate transactions with an "interested
stockholder" unless (i) the transaction is approved by a majority of
disinterested directors before the person becomes an interested stockholder,
(ii) the interested stockholder has owned at least 80% of the corporation's
outstanding voting shares for at least five years, or (iii) the interested
stockholder is the beneficial owner of at least 90% of the corporation's
outstanding voting shares, exclusive of those shares acquired by the interested
stockholder directly from the corporation in a transaction approved by
64
<PAGE> 67
a majority of the disinterested directors. An interested stockholder is defined
as a person who together with affiliates and associates beneficially owns more
than 10% of the corporation's outstanding voting shares.
PROVISIONS OF ECHELON ARTICLES OF INCORPORATION AND BY-LAWS AFFECTING CHANGES IN
CONTROL
Certain provisions of the Echelon Articles of Incorporation and By-laws may
delay or make more difficult unsolicited acquisitions or changes of control of
Echelon. Such provisions may enable Echelon to develop its business in a manner
that will foster its long-term growth without disruption caused by the threat of
a takeover not deemed by its Board of Directors to be in the best interests of
Echelon and its stockholders. Such provisions could have the effect of
discouraging third parties from making proposals involving an unsolicited
acquisition or change of control of Echelon, although such proposals, if made,
might be considered desirable by a majority of Echelon's stockholders. Such
provisions may also have the effect of making it more difficult for third
parties to cause the replacement of the current Board of Directors of Echelon.
These provisions include (i) the availability of capital stock for issuance from
time to time at the discretion of the Board of Directors (see "Authorized but
Unissued Capital Stock," above), (ii) a classified Board of Directors, (iii)
prohibition against stockholders acting by written consent in lieu of a meeting,
(iv) limitations on calling meetings of stockholders, (v) requirements for
advance notice for raising business or making nominations at stockholders'
meetings, and (vi) the ability of the Board of Directors to increase the size of
the Board of Directors and to appoint directors to newly created directorships.
These provisions are present in the Articles of Incorporation or By-laws of
Echelon.
Classified Board of Directors
The Echelon Articles of Incorporation provide for Echelon's Board of
Directors to be divided into three classes of directors serving staggered
three-year terms. As a result, approximately one third of Echelon's Board of
Directors will be elected each year. See "Management and Executive
Compensation--Board of Directors."
Echelon believes that a classified Board of Directors will help to assure
the continuity and stability of its Board of Directors, and its business
strategies and policies as determined by its Board of Directors, because a
majority of the directors at any given time will have prior experiences as
directors of Echelon. This provision should also help to ensure that Echelon's
Board of Directors, if confronted with an unsolicited proposal from a third
party that has acquired a block of Echelon's voting stock, will have sufficient
time to review the proposal and appropriate alternatives and to seek the best
available result for all stockholders.
This provision could prevent a party who acquires control of a majority of
the outstanding voting stock from obtaining control of Echelon's Board of
Directors until the second annual meeting of stockholders following the date the
acquiror obtained the controlling stock interest, could have the effect of
discouraging a potential acquiror from making a tender offer or otherwise
attempting to obtain control of Echelon's and thus could increase the likelihood
that incumbent directors will retain their positions.
No Stockholder Action by Written Consent; Special Meetings
The Echelon Articles of Incorporation and By-laws provide that stockholder
action can be taken only at an annual or special meeting and cannot be taken by
written consent in lieu of a meeting. The Echelon Articles of Incorporation and
By-laws also provide that special meetings of the stockholders may be called
only by (i) the Chief Executive Officer or President of Echelon, (ii) a vote of
the majority of the Board of Directors or (iii) upon the written demand of the
holders of not less than 33 1/3% of Echelon's outstanding voting power.
Advance Notice for Raising Business or Making Nominations at Meetings
The By-laws of Echelon establish an advance notice procedure for
stockholder proposals to be brought before an annual meeting of stockholders and
for nominations by stockholders of candidates for election as directors at an
annual or special meeting at which directors are to be elected. Only such
business may be conducted at an annual meeting of stockholders as has been
brought before the meeting by, or at the direction of, the Chairman of the Board
of Directors, or by a stockholder of Echelon who is entitled to vote at the
65
<PAGE> 68
meeting who has given to the Secretary of Echelon timely written notice, in
proper form, of the stockholder's intention to bring that business before the
meeting. The chairman of such meeting has the authority to make such
determinations. Only persons who are nominated by, or at the direction of, the
Chairman of the Board of Directors, or who are nominated by a stockholder who
has given timely written notice, in proper form, to the Secretary prior to a
meeting at which directors are to be elected will be eligible for election as
directors of Echelon.
To be timely, a stockholder's notice of business to be brought before an
annual meeting and nominations of candidates for election as directors at any
annual meeting shall be delivered to the Secretary of Echelon at the principal
executive offices of Echelon not less than 70 days nor more than 90 days prior
to the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is advanced by
more than 20 days, or delayed by more than 70 days, from such anniversary date,
notice by the stockholder to be timely must be so delivered not earlier than the
ninetieth day prior to such annual meeting and not later than the close of
business on the later of the seventieth day prior to such annual meeting or the
tenth day following the day on which public announcement of the date of such
meeting is first made.
To be timely, a stockholder's notice of nominations of persons for election
to the Board of Directors may be made at such a special meeting of stockholders
if the stockholder's notice shall be delivered to the Secretary of Echelon at
the principal executive offices of Echelon not earlier than the ninetieth day
prior to such special meeting and not later than the close of business on the
later of the seventieth day prior to such special meeting or the tenth day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting.
The notice of any nomination for election as a director must set forth the
name and address of, and the class and number of shares of Echelon held by the
stockholder who intends to make the nomination and the beneficial owner, if any,
on whose behalf the nomination is being made; the name and address of the person
or persons to be nominated; a representation that the stockholder is a holder of
record of stock of Echelon entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; a description of all arrangements or understandings
between the stockholder and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination or nominations are to
be made by the stockholder; such other information regarding each nominee
proposed by such stockholder as would have been required to be included in a
proxy statement filed pursuant to the proxy rules of the SEC had each nominee
been nominated, or intended to be nominated, by the Board of Directors; and the
consent of each nominee to serve as a director if so elected.
Number of Directors; Filling of Vacancies; Removal
The Echelon Articles of Incorporation and By-laws provide that newly
created directorships resulting from any increase in the authorized number of
directors (or any vacancy) may be filled by a vote of a majority of directors
then in office. Accordingly, the Board of Directors of Echelon may be able to
prevent any stockholder from obtaining majority representation on the Board of
Directors by increasing the size of the Board of Directors and filling the newly
created directorships with its own nominees. Directors may be removed only for
cause.
Amendments to the Articles of Incorporation
The Echelon Articles of Incorporation require the affirmative vote of the
holders of at least 66 2/3% in voting power of all the shares of Echelon
entitled to vote generally in the election of directors, voting together as a
single class, to alter, amend or repeal provisions of the Articles of
Incorporation relating to (i) the amendment of the Articles of Incorporation
and/or the By-laws, (ii) all provisions concerning directors, including those
dealing with the number of directors, the classified Board of Directors,
procedure for nominations for director, removal of directors and the filling of
director vacancies and (iii) calling and taking actions at meetings of
stockholders.
66
<PAGE> 69
Indemnification and Limitation of Liability for Directors and Officers
The Echelon By-laws provide that Echelon shall have the power but not the
obligation to indemnify directors and officers to the fullest extent permitted
by the laws of the State of Florida. Echelon has entered into indemnification
agreements with all of its executive officers and directors creating certain
indemnification obligations on Echelon's part in favor of the directors and
executive officers and, as permitted by applicable law. These indemnification
agreements clarify and expand the circumstances under which a director or
executive officer will be indemnified.
The indemnification rights conferred by the By-laws and indemnification
agreements are not exclusive of any other right, under the Florida Act or
otherwise, to which a person seeking indemnification may otherwise be entitled.
Echelon will also provide liability insurance for the directors and officers for
certain losses arising from claims or charges made against them while acting in
their capacities as directors or officers.
The effect of such indemnification arrangements may be to exempt or limit
the liability of such executive officers and directors to Echelon or its
stockholders for monetary damages for breach of fiduciary duty to Echelon,
except to the extent such exemption or limitation is not permitted under the
Florida Act as the same exists or may hereafter be amended.
AVAILABLE INFORMATION
Echelon has filed with the SEC a Registration Statement on Form 10 with
respect to the shares of Echelon Common Stock to be received by the stockholders
of Florida Progress in the Distribution. This Information Statement does not
contain all of the information set forth in the Form 10 Registration Statement
and the exhibits thereto, to which reference is hereby made. Statements made in
this Information Statement as to the contents of any contract, agreement or
other document referred to herein are not necessarily complete. With respect to
each such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to such exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. The Registration Statement and the
exhibits thereto may be inspected and copied at the public reference facilities
maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549 and at the Regional Offices of the SEC at Seven World Trade Center, Suite
1300, New York, New York 10048 and in the Citicorp Center, Suite 1400, 500 West
Madison Street, Chicago, Illinois 60661 and may be obtained through the SEC
Internet address at http://www.sec.gov.
REPORTS OF ECHELON
After the Distribution, Echelon will be required to comply with the
reporting requirements of the Exchange Act and, in accordance therewith, to file
reports, proxy statements and other information with the SEC.
After the Distribution, such reports, proxy statements and other
information may be inspected and copied at the public reference facilities of
the SEC listed above and obtained by mail from the SEC as described above. The
Echelon Common Stock has been accepted for listing on the NYSE, subject to
notice of issuance, and when such shares of Echelon Common Stock commence
trading on the NYSE, such reports, proxy statements and other information will
be available for inspection at the offices of the NYSE, 20 Broad Street, New
York, New York 10005.
Additionally, Echelon intends to provide annual reports, containing audited
financial statements, to its stockholders in connection with its annual meetings
of stockholders.
No person is authorized to give any information or to make any
representations other than those contained in this Information Statement, and,
if given or made, such information or representations must not be relied upon as
having been authorized.
67
<PAGE> 70
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
ECHELON INTERNATIONAL INCORPORATED
Independent Auditors' Report.......................................................... F-2
Financial Statements:
Consolidated Statements of Operations and Deficit for the Nine Months Ended
September 30, 1996 and 1995 (unaudited) and each of the years in the three year
period ended December 31, 1995................................................... F-3
Consolidated Balance Sheets as of September 30, 1996 (unaudited) and December 31,
1995
and 1994......................................................................... F-4
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1996
and 1995 (unaudited) and each of the years in the three year period ended
December 31, 1995................................................................ F-5
Notes to Consolidated Financial Statements.......................................... F-6
PROGRESS POTOMAC CAPITAL VENTURES
Independent Auditors' Report.......................................................... F-20
Financial Statements:
Statements of Income for each of the years in the three year period ended December
31, 1995......................................................................... F-21
Balance Sheets as of December 31, 1995 and 1994..................................... F-22
Statements of Changes in Joint Venturers' Capital for each of the years in the three
year period ended December 31, 1995.............................................. F-23
Statements of Cash Flows for each of the years in the three year period ended
December 31, 1995................................................................ F-24
Notes to Financial Statements....................................................... F-25
</TABLE>
F-1
<PAGE> 71
INDEPENDENT AUDITORS' REPORT
To the Stockholder of
Echelon International Corporation:
We have audited the accompanying consolidated balance sheets of Echelon
International Corporation and subsidiaries as of December 31, 1995 and 1994, and
the related consolidated statements of operations and deficit and cash flows for
each of the years in the three year period ended December 31, 1995, as listed in
the Index to Financial Statements herein. These consolidated financial
statements are the responsibility of Echelon International Corporation's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Echelon
International Corporation and subsidiaries as of December 31, 1995 and 1994, and
the results of their operations and their cash flows for each of the years in
the three year period ended December 31, 1995, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
St. Petersburg, Florida
October 24, 1996, except as
to the last three paragraphs
of Note 5, which are as
of November 5, 1996
F-2
<PAGE> 72
ECHELON INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
<TABLE>
<CAPTION>
UNAUDITED
NINE MONTHS
ENDED SEPTEMBER
30, YEAR ENDED DECEMBER 31,
--------------- ------------------------
1996 1995 1995 1994 1993
------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
SALES AND REVENUES:
Real estate operations --
Rental income:
Outside........................................ $ 7.1 $ 5.9 $ 7.9 $ 5.8 $ 7.8
Affiliates..................................... 1.8 1.7 2.2 2.5 2.1
Sale of development properties................... 18.2 0.9 0.9 5.0 17.5
Marina and other revenues........................ 5.5 4.8 7.2 5.5 4.5
Lending and leasing operations --
Interest income.................................. 11.8 15.4 21.7 22.4 22.6
Earned income on finance leases.................. 2.1 2.8 4.8 4.4 7.7
Other............................................ 2.1 2.2 2.9 3.2 4.3
------ ----- ----- ----- -----
48.6 33.7 47.6 48.8 66.5
------ ----- ----- ----- -----
OPERATING EXPENSES:
Cost of operations.................................. 8.6 7.0 10.5 9.0 10.0
Cost of development properties sold................. 18.5 0.8 0.8 4.8 18.5
Depreciation........................................ 4.3 4.6 6.4 5.2 5.4
Provision for lease, loan and real estate losses.... 33.9 4.6 7.0 10.6 6.6
Interest expense:
Affiliates....................................... 13.9 15.1 19.9 20.5 21.3
Outside.......................................... 1.7 1.6 2.1 2.6 4.1
Allocated administrative expenses of affiliates..... 1.3 1.3 1.6 1.4 1.8
Marketing and other administrative.................. 2.9 2.3 3.6 2.5 1.2
Other expenses, net................................. 6.7 4.2 5.6 1.4 3.3
------ ----- ----- ----- -----
91.8 41.5 57.5 58.0 72.2
------ ----- ----- ----- -----
LOSS BEFORE INCOME TAXES.............................. (43.2) (7.8) (9.9) (9.2) (5.7)
INCOME TAX BENEFIT.................................... (15.0) (3.9) (4.9) (4.2) (0.7)
------ ----- ----- ----- -----
NET LOSS.............................................. (28.2) (3.9) (5.0) (5.0) (5.0)
Retained deficit at beginning of period............. (50.5) (42.3) (42.3) (34.1) (26.6)
Dividends paid to Florida Progress.................. 0.0 (2.4) (3.2) (3.2) (2.5)
------ ----- ----- ----- -----
Retained deficit at end of period................... $(78.7) $(48.6) $(50.5) $(42.3) $(34.1)
====== ===== ===== ===== =====
Shares of common stock outstanding.................... 6.5 6.5 6.5 6.5 6.5
Net loss per common share............................. $(4.34) $(0.60) $(0.77) $(0.77) $(0.77)
====== ===== ===== ===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 73
ECHELON INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED DECEMBER 31,
SEPTEMBER 30, ---------------
1996 1995 1994
------------- ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
ASSETS
LEASES, LOANS, PROPERTY & OTHER INVESTMENTS:
Leases and loans receivable, net (Note 2)...................... $ 235.1 $309.3 $408.9
Property, net of accumulated depreciation of $35.3 million in
1996, $32.6 million in 1995 and $24.7 million in 1994 (Note
3).......................................................... 132.9 153.6 146.7
Investments in and advances to unconsolidated affiliates....... 32.9 39.9 43.9
------ ------ ------
400.9 502.8 599.5
------ ------ ------
ASSETS HELD FOR SALE (Note 4).................................... 32.8 0.0 0.0
------ ------ ------
CURRENT ASSETS:
Cash and equivalents........................................... 0.2 0.4 0.6
Accounts receivable, net....................................... 1.4 2.0 2.4
Current portion of leases and loans receivable................. 42.5 42.4 14.8
Income taxes receivable........................................ 0.0 0.0 0.9
Inventories.................................................... 3.2 2.2 1.5
Miscellaneous.................................................. 0.4 0.6 0.3
------ ------ ------
47.7 47.6 20.5
------ ------ ------
OTHER NON-CURRENT ASSETS......................................... 2.5 4.1 3.4
------ ------ ------
Total assets................................................ $ 483.9 $554.5 $623.4
====== ====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable and other liabilities......................... $ 22.4 $ 10.0 $ 5.1
Income taxes payable........................................... 2.3 9.6 0.0
Current portion of long-term debt.............................. 2.5 10.2 8.3
------ ------ ------
Total current liabilities................................... 27.2 29.8 13.4
DUE TO FLORIDA PROGRESS AND AFFILIATES (Note 6).................. 103.0 256.2 290.3
LONG-TERM DEBT (Note 5).......................................... 17.9 23.0 24.4
DEFERRED INCOME TAXES (Note 9)................................... 162.9 182.3 224.3
OTHER LIABILITIES................................................ 0.3 2.4 2.0
------ ------ ------
Total Liabilities........................................... 311.3 493.7 554.4
------ ------ ------
STOCKHOLDER'S EQUITY (Note 13):
Preferred stock, $.01 par value, 10,000,000 shares authorized
and none outstanding........................................ 0.0 0.0 0.0
Common Stock, $.01 par value, 25,000,000 shares authorized,
6,467,018 issued and outstanding............................ 0.1 0.1 0.1
Additional paid-in capital..................................... 251.2 111.2 111.2
Retained deficit............................................... (78.7) (50.5) (42.3)
------ ------ ------
Total stockholder's equity.................................. 172.6 60.8 69.0
------ ------ ------
Total liabilities and stockholder's equity.................. $ 483.9 $554.5 $623.4
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 74
ECHELON INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
UNAUDITED
NINE MONTHS
ENDED SEPTEMBER
30, YEAR ENDED DECEMBER 31,
--------------- ------------------------
1996 1995 1995 1994 1993
------ ------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss.............................................. $(28.2) $ (3.9) $ (5.0) $ (5.0) $ (5.0)
Adjustment for noncash items:
Depreciation........................................ 4.3 4.6 6.4 5.2 5.4
Deferred income taxes............................... (19.4) (31.9) (42.0) (20.5) (24.3)
Amortization of investment tax credits.............. (0.5) (3.7) (0.3) (1.5) (1.4)
Provision for lease, loan and real estate losses.... 33.9 4.6 7.0 10.6 6.6
(Gain) loss on sale of assets....................... 0.5 4.9 4.0 (0.2) (1.0)
Equity in losses of unconsolidated affiliates,
net.............................................. 1.9 1.1 1.5 4.1 4.2
Changes in working capital:
Accounts payable and other liabilities........... 8.1 (0.1) 4.9 (0.9) (3.0)
Income taxes receivable/payable.................. (7.3) 8.9 10.5 (12.7) (4.0)
Other working capital changes.................... (0.2) (0.8) (0.6) 0.5 3.0
Other operating activities.......................... (5.4) 0.1 (9.3) 0.7 (2.6)
------ ------ ------ ------ ------
(12.3) (16.2) (22.9) (19.7) (22.1)
------ ------ ------ ------ ------
INVESTING ACTIVITIES:
Purchase of leases and loans.......................... 0.0 0.0 0.0 (5.7) (42.6)
Proceeds from sale or collection of leases and
loans............................................... 23.6 47.5 74.0 65.5 79.2
Real estate property additions........................ (7.5) (2.4) (4.1) (1.3) (1.2)
Proceeds from sale of real estate properties.......... 17.6 0.7 0.7 4.9 16.7
Proceeds from sale of businesses...................... 0.0 0.0 0.0 2.1 10.5
Distributions from unconsolidated affiliates, net of
investments......................................... (1.2) .4 (0.9) 3.5 8.4
------ ------ ------ ------ ------
32.5 46.2 69.7 69.0 71.0
------ ------ ------ ------ ------
FINANCING ACTIVITIES:
Repayment of long-term debt........................... (11.5) (9.7) (9.7) (8.2) (25.9)
Decrease in due to Florida Progress and affiliates.... (148.9) (18.4) (34.1) (37.4) (21.4)
Equity contribution from Parent....................... 140.0 0.0 0.0 0.0 0.0
Dividends paid to Florida Progress.................... 0.0 (2.4) (3.2) (3.2) (2.5)
------ ------ ------ ------ ------
(20.4) (30.5) (47.0) (48.8) (49.8)
------ ------ ------ ------ ------
Net increase(decrease) in cash and equivalents........ (0.2) (0.5) (0.2) 0.5 (0.9)
Beginning cash and equivalents........................ 0.4 0.6 0.6 0.1 1.0
------ ------ ------ ------ ------
Ending cash and equivalents........................... $ 0.2 $ 0.1 $ 0.4 $ 0.6 $ 0.1
====== ====== ====== ====== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest............................................ $ 10.7 $ 11.6 $ 22.4 $ 22.9 $ 27.6
Income taxes (net of refunds)....................... 11.9 4.9 26.7 29.1 27.7
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 75
ECHELON INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REFERENCES TO PERIODS ENDED SEPTEMBER 30 ARE UNAUDITED
(1) SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
SPIN-OFF TRANSACTION
On July 1, 1996 the Board of Directors of Florida Progress Corporation
("Florida Progress") approved in principle a plan to spin-off Echelon
International Corporation (the "Company"). Prior to the Distribution (as defined
below), as part of a pre-Distribution reorganization, (i) Talquin Development
Company, a direct wholly owned subsidiary of Progress Credit Corporation
("PCC"), was merged with and into PCC, (ii) PCC was merged with and into
Progress Leasing Corporation ("Progress Leasing"), a direct wholly owned
subsidiary of PCC, and (iii) Progress Leasing was merged with and into Echelon,
which was a direct, wholly owned subsidiary of Progress Leasing and which, prior
to such merger, was known as PLC Leasing Corporation. Echelon, together with
PCC, Talquin, Progress Leasing and their respective subsidiaries, are
collectively referred to as the "Echelon Group". Upon the merger of Progress
Leasing with and into Echelon, Echelon became the successor to the Echelon
Group. Echelon was a legal entity as of the dates and for the periods presented
in the financial statements. The spin-off will be effected by distributing (the
"Distribution") to the holders of Florida Progress's common stock one share of
the Company's common stock for each 15 shares of Florida Progress common stock.
Following the Distribution, which is expected to occur during the fourth quarter
of 1996, the Company will operate as an independent company whose shares of
common stock will be publicly traded; financial support previously provided by
Florida Progress will be discontinued. In accordance with the plan of
Distribution, as of September 30, 1996, Florida Progress made a capital
contribution of $140 million to the Company by converting intercompany
indebtedness to equity.
The Company has obtained third-party secured financing of $105 million to
provide liquidity to the Company to execute its business plan and to repay in
part advances from Florida Progress. See Note 5. The remaining debt owed to
Florida Progress is expected to be approximately $36 million and will be
evidenced by a secured interest bearing note issued to Progress Capital
Holdings, Inc., a wholly owned subsidiary of Florida Progress. The note will
mature in four years and will require specified principal payments upon the
disposition by the Company of certain non-strategic operating and direct finance
leasing interests and other assets.
The financial information included herein may not necessarily reflect the
financial position and results of operations of the Company in the future or
what the financial position and results of operations of the Company would have
been had it been a separate, stand-alone entity during the periods reported. It
is expected that after the Distribution, the Company will incur additional
administrative expenses, including investor relations, Board of Directors fees
and expenses, insurance costs and audit and legal fees. See the Unaudited Pro
Forma Consolidated Statements of Operations for the year ended December 31, 1995
for a presentation of the effects of such anticipated additional expenses.
DESCRIPTION OF BUSINESS AND PRINCIPLES OF PRESENTATION
The accompanying consolidated financial statements include the financial
results of the Company and its majority owned operations. The common stock of
the Company will be distributed by Florida Progress to its stockholders as of a
date to be established.
The Company is a real estate and financial services company. Prior to July
1, 1996, pursuant to a strategy adopted by Florida Progress, the Company has
been operating under a strategy of orderly liquidation of all of its businesses
and assets. The strategy of the Company after the Distribution will primarily be
the development, ownership and management of commercial and multi-family
residential real estate projects and to maximize the value of its commercial
lending and leasing assets.
All significant intercompany balances and transactions have been
eliminated. Investments in 20% to 50% owned joint ventures and partnerships are
accounted for using the equity method. A 20.9% investment in common stock of a
non-publicly traded entity is accounted for by the cost method. See Note 8.
F-6
<PAGE> 76
ECHELON INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REFERENCES TO PERIODS ENDED SEPTEMBER 30 ARE UNAUDITED
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
The unaudited interim financial statements reflect all normal and recurring
adjustments, which are in the opinion of management, necessary for a fair
statement of the results for the interim periods presented.
EARNED INCOME ON FINANCE LEASES
Finance leases consist of direct financing leases and leveraged leases.
Income on direct financing leases is recognized by a method which produces a
constant periodic rate of return on the outstanding investment in the lease.
Income on leveraged leases is recognized by a method which produces a constant
rate of return on the outstanding investment in the lease net of the related
deferred tax liability in the years in which the net investment is positive. The
net investment in leveraged leases is the aggregate of rentals receivable (net
of principal and interest on the related nonrecourse third party debt) and
estimated residual value of the equipment less the unearned income.
FINANCIAL INSTRUMENTS
Estimated fair value amounts have been determined by the Company using
available market information and discounted cash flow analysis. Judgment is
required in interpreting market data to develop estimates of fair value.
Accordingly, the estimates may be materially different from the amounts that the
Company could realize in a current market transaction.
Estimating fair values for loans associated with the airline industry is
difficult due to the limited number of transactions. Management, therefore, has
estimated a range of values for these loans. See Note 2.
The Company currently has no derivative financial instruments, such as
futures, forwards, swaps or options contracts.
ALLOWANCE FOR LEASE AND LOAN LOSSES
In accordance with SFAS No. 114 a loan is considered impaired when
management determines that it is probable that the Company will not collect all
amounts due according to the contractual terms of the loan. An allowance for
loss on an impaired loan is recognized when the present value of the expected
future cash flows, discounted at the loan's effective rate, is less than the
carrying value of the loan. When an impaired loan is collateral dependent, and
foreclosure is probable, the lower of the carrying amount of the loan, or the
market value of collateral less costs to sell, is used to measure the amount of
allowance for loss to be recognized.
Allowance for losses on leases is provided when management has determined
that it is probable that the net investment in a lease will not be recovered due
to lessee credit problems. The allowance is measured by the difference between
net investment in the lease and the market value of the leased asset less costs
to sell. Establishing the allowance for losses relies substantially upon
management judgment utilizing the best available information at the time of
review.
PROPERTY AND DEPRECIATION
The Company records property at cost adjusted for any impairment and
provides for depreciation primarily on a straight-line basis over the estimated
service lives or lease terms of the related assets. The Company reviews its
property for impairment whenever events or changes in circumstances indicate
that the
F-7
<PAGE> 77
ECHELON INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REFERENCES TO PERIODS ENDED SEPTEMBER 30 ARE UNAUDITED
carrying amount of an asset may not be recoverable. For all properties, other
than property held for sale or development, a loss is recognized, and the
property written down, when the carrying amount exceeds the indicated fair
value. Fair value is determined using quoted market prices, when available, or
discounted cash flows. Impairment losses on property for sale and under
development are recognized when fair value less cost to dispose is less than
carrying value.
REAL ESTATE TRANSACTIONS
Real estate revenues include rent from leasing operations and sales of real
estate. Rental revenues, net of any rent concessions given to lessees, are
recognized ratably over the lease period. Profit from the sale of real estate is
recognized only upon the closing of a sale, the transfer of ownership rights to
the purchaser and receipt of an adequate cash down payment. If the cash down
payment is not adequate, profits are deferred using the installment method of
accounting.
INTEREST EXPENSE
The accompanying consolidated statements of operations and deficit include
an allocation of Florida Progress's interest expense based upon the average
outstanding amounts due to Florida Progress and affiliates. See Note 6 for a
more detailed description of the allocation procedures. Management believes the
allocation method used is reasonable.
INCOME TAXES
Taxable income of the Company has been included in the consolidated income
tax returns of Florida Progress. Florida Progress's "tax allocation policy" is
to allocate current income taxes to each subsidiary in an amount equal to its
stand-alone tax liability. Benefits of losses are allocated to the subsidiary
generating the loss upon utilization in the consolidated tax return. At the time
of the Distribution, the Florida Progress and the Company will execute a tax
sharing agreement which allocates all pre and post distribution tax liabilities
between the Company and Florida Progress.
Deferred taxes are provided on all significant temporary differences
between the financial and tax basis of assets and liabilities using presently
enacted tax rates in accordance with Financial Accounting Standard (SFAS) No.
109, "Accounting for Income Taxes," which was implemented in 1993. The effect of
implementing SFAS No. 109 was immaterial.
EARNINGS PER COMMON SHARE
The net loss per common share reflects, for all periods presented the
outstanding common shares of Echelon after giving effect to the changes in the
capitalization as discussed in Note 12. There were no options, warrants or other
potentially dilutive securities outstanding during the periods presented.
RECENTLY ADOPTED ACCOUNTING STANDARDS
Effective January 1, 1995, the Company adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan," as amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan -- Income Recognition and Disclosure." These
standards require the Company to compute present values for impaired loans when
determining the allowance for credit losses. There was no impact on earnings as
a result of implementing these standards.
The Company adopted SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets To Be Disposed Of," on January 1,
1996. This standard requires that long-lived assets and certain intangible
assets be reviewed for impairment whenever events or changes in circumstances
indicate
F-8
<PAGE> 78
ECHELON INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REFERENCES TO PERIODS ENDED SEPTEMBER 30 ARE UNAUDITED
that the carrying amount of an asset may not be recoverable through future cash
flows from the use and disposition of the asset. An impairment loss recognized
on assets to be held and used is measured as the amount by which the carrying
amount of the asset exceeds the fair value of the asset. Assets held for sale
are reported at the lower of carrying amount or net realizable value. There was
no impact on earnings as a result of implementing this standard.
(2) LEASES AND LOANS RECEIVABLE AND FAIR VALUE OF FINANCIAL INSTRUMENTS
At September 30, 1996, and at December 31, 1995 and 1994, investments in
leases and loans receivable were as follows:
<TABLE>
<CAPTION>
UNAUDITED DECEMBER 31,
SEPTEMBER 30, ---------------
1996 1995 1994
------------- ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Finance leases:
Rentals receivable..................................... $ 165.4 $197.6 $226.3
Unguaranteed residual values........................... 105.6 109.7 153.5
Unearned income........................................ (54.9) (62.5) (78.7)
Deferred investment tax credits........................ (14.2) (14.7) (20.5)
------ ------ ------
Total finance leases........................... 201.9 230.1 280.6
Commercial finance loans receivable...................... 93.8 153.6 176.8
Allowance for losses..................................... (18.1) (32.0) (33.7)
------ ------ ------
277.6 351.7 423.7
Less: current portion.................................... 42.5 42.4 14.8
------ ------ ------
$ 235.1 $309.3 $408.9
====== ====== ======
</TABLE>
Finance leases consist primarily of leveraged investments in aircraft as
described below. The majority of the aircraft leases have remaining terms of 10
to 15 years, with a maximum of 23 years. Rentals receivable from finance leases
represent unpaid rentals less principal and interest on nonrecourse third-party
debt. The Company's share of rentals receivable is subordinate to the debt
holders who have security interests in the leased assets.
At December 31, 1995, net contractual maturities of rentals receivable
under the contracts were $11.9 million, $10.4 million, $9.6 million, $12.9
million and $12.2 million for each of the years in the five year period from
1996 through 2000, respectively, and $140.5 million in total thereafter.
Net income recognized from leveraged leases (after payments to nonrecourse
lenders, but before other borrowing costs) was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ---- -----
(IN MILLIONS)
<S> <C> <C> <C>
Lease income..................................................... $ 2.0 $0.5 $ 2.7
Income tax effect................................................ (1.0) (0.1) (1.3)
Effect of change in tax rate on deferred assets/liabilities...... 0.0 0.0 (2.9)
Gain (loss) on sale of equipment................................. (1.1) 0.2 3.8
Amortization of investment tax credits........................... 0.3 1.5 1.4
----- ---- -----
$ 0.2 $2.1 $ 3.7
===== ==== =====
</TABLE>
The Company's commercial finance loans are secured by first mortgage liens
on the related commercial real estate or by security interests in aircraft,
aircraft engines or spare parts. These loans are further
F-9
<PAGE> 79
ECHELON INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REFERENCES TO PERIODS ENDED SEPTEMBER 30 ARE UNAUDITED
collateralized, where applicable, by an assignment to the Company of the
borrowers' lease agreements, and, in some cases, third party guaranties.
At September 30, 1996, and at December 31, 1995 and 1994, the Company's
portfolio included investments in the airline industry totaling $215.9 million,
$294.6 million and $357.6 million, respectively. Investments in the commercial
real estate industry totaled $109.6 million, $122.2 million and $134.6 million
at the same dates.
At December 31, 1995, $58.6 million of loans receivable were impaired under
the definition of SFAS 114. The Company had assigned approximately $5 million of
the $18.1 million total of allowances for loan losses to these loans. In
connection with management's plan to dispose of certain non-strategic assets,
$35.1 million of the these loans have been reclassified to "Assets Held for
Sale". See Note 4. At September 30, 1996, the Company has determined that the
remaining loan of $23.5 million is considered impaired in accordance with SFAS
114. No valuation allowance is required because, in the opinion of management,
the estimated current market value of the underlying property is in excess of
the $23.5 million loan balance and cash flow from leases on this property, which
have been assigned to the Company, supports the current recorded value of this
loan.
The Company's portfolio included $65.1 million, $90.2 million and $61.0
million in loans and leases performing under restructured agreements at
September 30, 1996, and December 31, 1995 and 1994, respectively. All
restructured assets are performing in accordance with their new terms and the
restructurings are not anticipated to materially reduce the Company's future
annual revenue.
During 1995, 1994 and 1993, the Company recorded $5.0 million, $9.9 million
and $5.9 million, respectively, for possible loan and lease losses and had
write-offs totaling $6.7 million, $.7 million and $4.3 million, respectively.
Leases and loans generally are placed on nonaccrual status when management
believes the collectibility of interest or principal is unlikely. There were no
assets on nonaccrual status at September 30, 1996, or at December 31, 1995 or
1994.
In the opinion of management, the estimated fair value of financial
instruments at September 30, 1996, December 31, 1995 and 1994 was as follows:
<TABLE>
<CAPTION>
CARRYING AMOUNT FAIR VALUE
----------------------- -----------------------------
1996 1995 1994 1996 1995 1994
----- ------ ------ ----- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Real Estate loans................. $93.1 $106.8 $118.4 $93.1 $ 106.6 $ 117.1
Aircraft loans.................... 0.7 49.8 58.4 0.7 14 to 44 14 to 43
Debt (Note 5)..................... 20.4 33.2 32.7 20.4 33.2 32.7
</TABLE>
Management's estimate of aircraft loan fair values takes into account not
only market interest rates but additionally considers published estimates of
aircraft market values.
(3) PROPERTY
The Company's established allowance for losses of $18.0 million was applied
as a write down of property cost as of December 31, 1995 in contemplation of the
adoption of SFAS 121 on January 1, 1996. The Company recognized an additional
$3.8 million impairment during the nine months ended September 30, 1996 which is
reflected in the allowance for losses. The Company recognized an impairment on
an income producing building when a tenant gave notice to not extend its lease.
This loss was measured using discounted cash flows. The Company recognized an
impairment loss on real estate under development when it was
F-10
<PAGE> 80
ECHELON INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REFERENCES TO PERIODS ENDED SEPTEMBER 30 ARE UNAUDITED
determined that the carrying value of the property plus costs to complete
development of the property exceeded its market value.
The depreciable lives and carrying values of property are as follows:
<TABLE>
<CAPTION>
UNAUDITED DECEMBER 31,
DEPRECIABLE SEPTEMBER 30, ---------------
LIVES (YEARS) 1996 1995 1994
------------- ------------- ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Real estate development projects:
For sale and under development............. $ 32.5 $ 51.9 $ 52.8
Income producing:
Land.................................... 15.1 15.2 18.8
Buildings and improvements.............. 5-40 106.5 104.5 101.6
Equipment and other..................... 3-10 1.6 2.0 1.9
------ ------ ------
155.7 173.6 175.1
Other property:
Aircraft on operating lease................ 10 12.5 12.5 12.5
Equipment, furniture and vehicles.......... 2-25 0.0 0.1 0.6
------ ------ ------
168.2 186.2 188.2
Less: accumulated depreciation............... 35.3 32.6 24.7
allowance for losses................... 0.0 0.0 $ 16.8
------ ------ ------
$ 132.9 $153.6 $146.7
====== ====== ======
</TABLE>
(4) ASSETS HELD FOR SALE
At June 30, 1996, the Company's management adopted a plan to dispose of
certain non-strategic assets. These assets and their respective reserves have
been classified as "Assets Held for Sale" at September 30, 1996. Management
expects that the disposal of these assets will be completed within two years.
Assets held for sale consist of the following:
<TABLE>
<CAPTION>
PREVIOUS BALANCE SHEET CLASSIFICATION
------------------------------------------------------------------------ UNAUDITED
SEPTEMBER 30,
1996
-------------
(IN MILLIONS)
<S> <C>
Leases and loans receivable, net of $40.8 million valuation allowance... $27.1
Property, net of depreciation........................................... 2.4
Investments in unconsolidated affiliates................................ 3.3
-----
$32.8
=====
</TABLE>
As a result of the decision to dispose of these non-strategic assets, the
Company recognized a loss of $30.1 million at June 30, 1996. The Company
recognized this loss on leases and loans receivable in accordance with SFAS 114,
and on property and investments in unconsolidated affiliates in accordance with
SFAS 121. Assets held for sale are reflected at the lower of carrying amount or
fair value less cost to dispose.
F-11
<PAGE> 81
ECHELON INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REFERENCES TO PERIODS ENDED SEPTEMBER 30 ARE UNAUDITED
(5) LONG-TERM DEBT
Long-term debt outstanding is as follows:
<TABLE>
<CAPTION>
UNAUDITED DECEMBER 31,
INTEREST SEPTEMBER 30, -------------
RATE 1996 1995 1994
-------- ------------- ----- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
First mortgages................................... 8.0%(a) $ 0.7 $ 8.6 $ 6.8
Delayed equity obligation on finance lease........ 10.0% 19.7 21.9 23.3
Other............................................. 0.0 2.7 2.6
----- ----- -----
20.4 33.2 32.7
Less: current portion of long-term debt........... 2.5 10.2 8.3
----- ----- -----
$17.9 $23.0 $24.4
===== ===== =====
</TABLE>
- ---------------
(a) Weighted average interest rate at December 31, 1995.
In connection with an aircraft lease restructured in 1992, the Company
agreed to provide additional equity over the next eleven years. The equity
contributions will be paid to the nonrecourse debt holders by the Company and
collected from the lessee over the remaining lease term. The present value of
the additional equity using a 10% discount rate was $21.9 million and $23.3
million at December 31, 1995 and 1994, respectively, and is included in
long-term debt on the accompanying Balance Sheets.
On November 5, 1996, Echelon obtained a three-year secured loan from
Salomon Brothers Realty Corp. in the principal amount of $105 million. The loan
is secured by five of Echelon's commercial real estate properties, substantially
all of Echelon's real estate loan portfolio and certain additional collateral.
For additional consideration, and subject to certain conditions, Echelon may
extend the term of the loan for one or two additional one-year periods. The loan
requires mandatory monthly principal payments based on an amortization schedule
of 25 years (or, in the case of the real estate loan portfolio, the scheduled
principal payments actually received, if greater), provided, however, that the
scheduled amortization is accelerated to 18 years if the loan-to-value of
collateral ratio is greater than 75%. Additional principal payments may be due
upon the sale of individual items of collateral. Under the loan, monthly
payments of interest at the rate of LIBOR plus 2.95% per annum are due on the
unpaid principal balance.
If the loan-to-value of collateral ratio exceeds 75%, then Echelon will be
required to deposit the cash flow from the assets pledged as collateral into a
collection account to be disbursed monthly to pay scheduled loan payments,
property expenses, and other items and to fund certain reserves. Cash balances
remaining in such account would then be released to Echelon. Under the terms of
the loan, the lender has the right to give notice if it determines the
loan-to-value of collateral ratio exceeds 75% and Echelon has certain rights to
contest that determination. If the loan-to-value of collateral ratio exceeds
80%, then remaining cash balances in such account which would otherwise have
been released to Echelon will be applied monthly to reduce the principal amount
of the loan until the ratio is less than 80%. The imposition of such a
requirement could have a material adverse impact on Echelon's ability to
successfully implement its business plan because the items comprising the
collateral represent Echelon's key sources of operating cash flow. In addition,
the loan agreement contains covenants that require Echelon to maintain a ratio
of debt to total capitalization of not greater than 60% and to maintain certain
levels of liquidity during each year of the loan.
Debt maturities are $10.6 million, $6.0 million, $5.8 million, $97.9
million and $7.1 million for each of the years in the period 1996 through 2000,
respectively, including scheduled principal payments on the $105 million loan
discussed above.
F-12
<PAGE> 82
ECHELON INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REFERENCES TO PERIODS ENDED SEPTEMBER 30 ARE UNAUDITED
(6) RELATED PARTY TRANSACTIONS
The Company utilized accounting, legal, risk management, human resource,
tax, treasury, management, facility and office services of Florida Progress and
its affiliates and is billed for these services, including a portion of the
affiliates' overhead. Charges for these services and overhead were $1.6 million,
$1.4 million and $1.8 million in 1995, 1994 and 1993, respectively. These costs
were charged to Echelon using the affiliates' actual cost allocated to each
affiliate based on its pro rata usage of those services. Management believes
this method to be reasonable. Management's estimate of the increased level of
these services which would have been needed on a stand-alone basis was $2.5
million for the year ended December 31, 1995.
Florida Progress and its affiliates rent facility and office space in
several of the Company's office buildings for which the Company has received
payments of $2.2 million, $2.5 million and $2.1 million in 1995, 1994 and 1993,
respectively. A portion of these amounts were billed to the Company in
connection with the affiliates' allocations of facility services.
Florida Progress managed the cash and financing requirements of the Company
for the periods presented. Advances and payables between the Company and Florida
Progress, and its affiliates, consisted of the following at September 30, 1996
and at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
UNAUDITED DECEMBER 31,
SEPTEMBER 30, -----------------
1996 1995 1994
------------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Accounts and interest payable.......................... $ 1.9 $ 6.2 $ 6.5
Advances from Florida Progress......................... 101.1 250.0 283.8
------ ------ ------
Due to Florida Progress and affiliates................. $ 103.0 $ 256.2 $ 290.3
====== ====== ======
</TABLE>
Interest expense reflected in the accompanying consolidated financial
statements related to the intercompany advances from Florida Progress represents
interest allocated to the Company. The effective interest rate on the average
outstanding intercompany advances for the years ended December 31, 1995, 1994
and 1993 and for the nine month period ended September 30, 1996 was 6.0%, 6.6%,
7.5% and 7.2%, respectively.
(7) RETIREMENT BENEFIT PLANS
Pension Benefits. Florida Progress has a noncontributory defined benefit
pension plan covering its employees and those of certain subsidiaries, including
the Company. The benefits are based on length of service, compensation and
social security benefits. The participating companies make annual contributions
to the plan based on an actuarial determination and consideration of tax
regulations and funding requirements under federal law. Employees of the Company
will terminate employment with Florida Progress and employees vested with
Florida Progress will remain in Florida Progress's defined benefit pension plan
on the effective date of the Distribution. This liability will continue to be
reflected in Florida Progress's defined benefit pension plan after the
Distribution.
Based on actuarial calculations and the funded status of the pension plan,
the Company was not required to record an expense or contribute to the plan in
1995, 1994 or 1993. Net assets and accumulated benefits are not determined
separately for the participating subsidiaries of Florida Progress.
Other Postretirement Benefits. The Company, through Florida Progress,
provides certain health care and life insurance benefits for retired employees.
Employees become eligible for these benefits when they reach normal retirement
age. The Company accrues the employer's obligation for postretirement benefits
by the date employees attain full eligibility to receive such benefits.
Accumulated benefits are not determined
F-13
<PAGE> 83
ECHELON INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REFERENCES TO PERIODS ENDED SEPTEMBER 30 ARE UNAUDITED
separately for the participating subsidiaries of Florida Progress. The Company's
costs to date have been negligible.
(8) INVESTMENTS IN UNCONSOLIDATED AFFILIATES
The Company has a 50% interest in a joint venture which is engaged in the
business of leasing aircraft equipment. Additionally, the Company has
investments in limited partnerships and corporate joint ventures, of which no
investment exceeds 40%. The Company accounts for its investments in the joint
venture, limited partnerships and corporate joint ventures by the equity method.
The Company also owns 20.9% of the outstanding common stock of a non-publicly
traded entity which is accounted for by the cost method because the Company has
concluded it is unable to exercise significant influence over such entity. At
September 30, 1996 such investment was classified as "Assets Held for Sale" and
has been recorded at a fair value of zero. See Note 4.
At September 30, 1996 and at December 31, 1995 and 1994, investments in and
advances to unconsolidated affiliates were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -------------
1996 1995 1994
------------- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Joint venture.............................................. $31.4 $33.2 $34.5
Limited partnership interests, corporate joint ventures.... 1.5 3.6 6.3
Common stock............................................... 0.0 3.1 3.1
----- ----- -----
$32.9 $39.9 $43.9
===== ===== =====
</TABLE>
F-14
<PAGE> 84
ECHELON INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REFERENCES TO PERIODS ENDED SEPTEMBER 30 ARE UNAUDITED
The Company includes equity in earnings from unconsolidated partnerships
and joint ventures in other revenues. Presented below is combined summarized
financial information for partnerships and joint ventures accounted for under
the equity method as of September 30, 1996 and as of December 31, 1995 and 1994
and for the years ended December 31, 1995, 1994 and 1993. Amounts reflect 100%
of these entities' balances and results of their operations for these periods.
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------------
1996 1995 1994
------------- ------------- ------
(IN MILLIONS)
<S> <C> <C> <C>
ASSETS
Finance lease receivable..................................... $59.5 $ 63.0 $ 65.3
Property and equipment, net.................................. 3.1 3.4 13.1
Current assets............................................... 1.3 1.3 1.2
Other assets, net............................................ 0.0 12.8 14.5
----- ----- -----
$63.9 $ 80.5 $ 94.1
===== ===== =====
LIABILITIES AND EQUITY INTEREST
Long-term debt............................................... $ 0.0 $ 0.0 $ 8.1
Other noncurrent liabilities................................. 1.2 10.5 0.9
Other partners' equity....................................... 31.3 33.2 44.3
----- ----- -----
32.5 43.7 53.3
----- ----- -----
Company investment:
Advances................................................... 0.0 0.0 2.7
Equity interest............................................ 31.4 36.8 38.1
----- ----- -----
31.4 36.8 40.8
----- ----- -----
$63.9 $ 80.5 $ 94.1
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER DECEMBER 31,
30, ------------------
1996 1995 1994 1993
----------- ---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C> <C>
REVENUES AND EXPENSES
Revenues........................................................ $ 4.5 $8.2 $9.8 $9.0
Expenses........................................................ 0.4 2.8 4.0 2.3
---- ---- ---- ----
Combined net earnings of unconsolidated entities................ $ 4.1 $5.4 $5.8 $6.7
---- ---- ---- ----
Company's equity in net earnings of unconsolidated entities..... $ 2.1 $2.8 $3.0 $3.4
==== ==== ==== ====
</TABLE>
F-15
<PAGE> 85
ECHELON INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REFERENCES TO PERIODS ENDED SEPTEMBER 30 ARE UNAUDITED
(9) INCOME TAXES
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Components of income tax expense (benefit):
Payable currently:
Federal......................................................... $ 32.4 $ 15.2 $ 21.4
State........................................................... 4.7 1.1 2.2
------ ------ ------
37.1 16.3 23.6
------ ------ ------
Deferred, net:
Federal......................................................... (36.3) (18.6) (21.7)
State........................................................... (5.7) (1.9) (2.6)
------ ------ ------
(42.0) (20.5) (24.3)
------ ------ ------
$ (4.9) $ (4.2) $ (0.7)
====== ====== ======
</TABLE>
The provision for income taxes differs from income taxes computed at the
statutory federal income tax rate for each of the above years. The primary
differences between income taxes computed at statutory rates and the actual
income tax expense are detailed below:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Taxes computed at federal statutory income tax rate............. $(3.7) $(3.5) $ 2.3
Effect of change in tax rate on deferred assets/liabilities..... 0.0 0.0 3.7
Rate difference on leveraged lease deferred tax reversals....... (0.9) (0.8) (1.8)
Amortization of investment tax credits.......................... (0.3) (1.5) (1.4)
Investment tax credit basis difference.......................... 0.1 1.1 0.8
Other........................................................... (0.1) 0.5 0.3
----- ----- -----
$(4.9) $(4.2) $(0.7)
===== ===== =====
</TABLE>
The following summarizes the components of deferred tax liabilities and
assets at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1995 1994
------ ------
(IN MILLIONS)
<S> <C> <C>
Deferred tax liabilities:
Difference in tax basis of property................................ $ 8.7 $ 13.2
Difference in accounting for leveraged leases...................... 184.3 226.6
Other.............................................................. 11.4 10.5
----- -----
Total deferred tax liabilities:............................ 204.4 250.3
----- -----
Deferred tax assets:
Accrued book expenses.............................................. 18.5 22.2
Other.............................................................. 3.6 3.8
----- -----
Total deferred tax assets.................................. 22.1 26.0
----- -----
Net non-current deferred tax liabilities................... $182.3 $224.3
===== =====
</TABLE>
The Company expects the results of future operations will generate
sufficient taxable income to allow the utilization of deferred tax assets.
F-16
<PAGE> 86
ECHELON INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REFERENCES TO PERIODS ENDED SEPTEMBER 30 ARE UNAUDITED
(10) BUSINESS SEGMENTS
The Company's principle business segments are "Lending and Leasing" and
"Real Estate." Lending and Leasing includes leveraged leases, operating leases
and commercial finance loans. The airline industry is the primary industry
included in Lending and Leasing. See Note 3 for information regarding
concentration of risk. Real Estate includes office, commercial and industrial
leasing, land sales and marina operations.
Business segment information for the nine months ended September 30, 1996
and for the years ended December 31, 1995, 1994 and 1993 is summarized below. No
single customer accounted for 10% or more of unaffiliated revenues.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
UNAUDITED -------------------------------
NINE MONTHS 1995
ENDED -------------
SEPTEMBER 30,
1996 (IN MILLIONS) 1994 1993
------------- ------ ------
<S> <C> <C> <C> <C>
Revenues:
Lending and Leasing................................. $ 16.0 $ 29.4 $ 30.0 $ 34.6
Real Estate......................................... 32.6 18.2 18.8 31.9
----- ----- ----- -----
$ 48.6 $ 47.6 $ 48.8 $ 66.5
===== ===== ===== =====
Income from operations:
Lending and Leasing................................. $ (30.8) $ 2.1 $ 1.0 $ 6.5
Real Estate......................................... (12.4) (12.0) (10.2) (12.2)
----- ----- ----- -----
$ (43.2) $ (9.9) $ (9.2) $ (5.7)
===== ===== ===== =====
Identifiable assets:
Lending and Leasing................................. $ 347.0 $ 400.3 $478.8 $552.6
Real Estate......................................... 136.9 154.2 144.6 148.9
----- ----- ----- -----
$ 483.9 $ 554.5 $623.4 $701.5
===== ===== ===== =====
Depreciation:
Lending and Leasing................................. $ 0.9 $ 1.4 $ 1.6 $ 1.2
Real Estate......................................... 3.4 5.0 3.6 4.2
----- ----- ----- -----
$ 4.3 $ 6.4 $ 5.2 $ 5.4
===== ===== ===== =====
Additions to leases, loans and property:
Lending and Leasing................................. $ 0.0 $ 0.0 $ 5.7 $ 42.6
Real Estate......................................... 7.5 4.1 1.3 1.2
----- ----- ----- -----
$ 7.5 $ 4.1 $ 7.0 $ 43.8
===== ===== ===== =====
</TABLE>
(11) COMMITMENTS AND CONTINGENCIES
The Company is subject to regulation with respect to the environmental
effects of its operations. The Company's disposal of hazardous waste through
third party vendors may result in costs to clean up facilities found to be
contaminated. Federal and state statutes authorize governmental agencies to
compel responsible parties to clean up certain abandoned or uncontrolled
hazardous waste sites. The Company has been notified by the Environmental
Protection Agency that a former subsidiary is or could be a potentially
responsible party at one site. Liability for cleanup costs of this site is joint
and several. Based upon information currently available, the Company believes
that its liability for cleanup of this site will not be material and does not
F-17
<PAGE> 87
ECHELON INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REFERENCES TO PERIODS ENDED SEPTEMBER 30 ARE UNAUDITED
believe that it will be required to pay a significantly disproportionate share
of the total cleanup costs. In addition, the Company may also be responsible for
additional environmental cleanup at other sites. Based on information currently
available to the Company, the Company estimates that its proportionate share of
liability for cleaning up all sites ranges from $0.1 million to $1.0 million,
and it has reserved $0.5 million for potential costs that management estimates
to be probable. Management currently believes that the ultimate outcome of these
matters will not have a material adverse effect upon the Company's results of
operations, financial condition or liquidity.
Through a previous partnership, the Company remains contingently liable for
first mortgage bonds issued to residents of the life care communities owned by
the former partnership. The contingent liability reduces over time as those who
were residents at the time of the sale of the Company's interest discontinue
their residency. If the current owners fail to perform their obligations and if
the partnership assets, consisting primarily of land and buildings, were
worthless, the Company could be liable for an additional $32.2 million as of
December 31, 1995. The Company considers the incurrence of this liability to be
remote based on asset values and the indemnification agreement from the current
owners to the Company.
(12) SUBSEQUENT EVENTS
In October 1996, the Echelon Board of Directors adopted Amended and
Restated Articles of Incorporation which increased the number of authorized
common shares from 100 to 25,000,000, changed the par value from $1.00 to $0.01;
and converted each share of $1.00 par value common stock into 64,670.18 shares
of $.01 par value common stock. The conversion of common shares and the effect
on loss per share has been reflected in all periods presented. Additionally,
Echelon has authorized 10,000,000 shares of $.01 par value preferred stock. No
shares of preferred stock have been issued or are outstanding.
In October 1996, the Echelon Board of Directors approved several stock
based benefit plans, and reserved an aggregate of 1,200,000 shares of Echelon
common stock for issuance pursuant to the following plans:
Stock Option Plan. A maximum of 150,000 shares of Echelon Common Stock are
reserved for issuance under the plan. Under the Stock Option Plan, incentive
stock options, nonqualified stock options or any combination thereof may be
granted to any employee of Echelon. In general, the exercise price of the
options will be determined by the committee, but such price will not be less
than the market price of Echelon Common Stock on the date the option is granted.
Options will normally vest 20% each year after issuance over a period of five
years and will expire after 10 years.
Stock Purchase Plan. An aggregate of 75,000 shares of Echelon Common Stock
are reserved for issuance under the plan. Under the Stock Purchase Plan, all
employees will be given the opportunity to purchase shares of Echelon Common
Stock two times a year at a price equal to 85% of the market price of the stock
immediately prior to the beginning of each offering period. The Stock Purchase
Plan provides for two offering periods, the months of March and September, in
each of the years 1997-2006.
Echelon Long Term Incentive Plan ("LTIP"). An aggregate of 950,000 shares
of Echelon Common Stock are reserved for issuance under the plan. Under the
Echelon LTIP, restricted stock, incentive stock options, nonqualified stock
options and stock appreciation rights or any combination thereof may be granted
to Echelon employees. The exercise price of the options granted under the plan
will be determined in the discretion of the committee administering the plan,
which price may not be less than the market price of Echelon Common Stock on the
date the option is granted. Options will normally vest 20% each year after
issuance over a period of five years and will expire after 10 years. The
committee may condition awards of restricted stock and stock appreciations
rights upon satisfaction of performance criteria or other conditions.
F-18
<PAGE> 88
ECHELON INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REFERENCES TO PERIODS ENDED SEPTEMBER 30 ARE UNAUDITED
Directors' Plan. An aggregate of 25,000 shares of Echelon Common Stock are
reserved for issuance under the plan. Directors who are not employees of Echelon
("Non-Employee Directors") will receive an annual retainer fee of $15,000 paid
quarterly in the form of Echelon Common Stock. In addition to the annual
retainer, each year Non-Employee Directors who are elected or are continuing as
Non-Employee Directors as of the conclusion of Echelon's annual meeting of
stockholders will receive options to purchase 1,000 shares of Echelon Common
Stock. The exercise price of the options will be equal to the market price of
Echelon Common Stock on the date the option is granted. Options will vest fully
at the end of one year and will expire after five years.
Additionally in October 1996, the Board granted 273,232 shares of
restricted common stock to officers under the LTIP, and granted options to
purchase 134,840 common shares at an exercise price equal to the closing price
for Echelon Common Stock eight months after the completion of the Distribution.
(13) QUARTERLY DATA (UNAUDITED)
Summarized quarterly data for 1995 and 1994:
<TABLE>
<CAPTION>
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
1995
Revenue...................................... $ 10.7 $ 12.3 $ 10.7 $13.9
Net loss..................................... (1.2) (1.4) (1.3) (1.1)
1994
Revenue...................................... $ 9.5 $ 15.1 $ 11.9 $12.3
Net loss..................................... (1.1) (1.0) (1.2) (1.7)
</TABLE>
F-19
<PAGE> 89
INDEPENDENT AUDITORS' REPORT
To the Venturers of
Progress Potomac Capital Venture:
We have audited the accompanying balance sheets of Progress Potomac Capital
Venture as of December 31, 1995 and 1994, and the related statements of income,
changes in joint venturers' capital and cash flows for each of the years in the
three year period ended December 31, 1995. These financial statements are the
responsibility of Progress Potomac Capital Venture's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Progress Potomac Capital
Venture as of December 31, 1995 and 1994, and the results of its operations and
cash flows for each of the years in the three year period ended December 31,
1995, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
St. Petersburg, Florida
November 6, 1996
F-20
<PAGE> 90
PROGRESS POTOMAC CAPITAL VENTURES
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES:
Finance Lease Revenue................................ $5,379,114 $5,884,136 $6,345,395
Rental Income........................................ 741,046 741,046 741,046
Interest Income...................................... 219,650 335,899 372,597
---------- ---------- ----------
6,339,810 6,961,081 7,459,038
---------- ---------- ----------
EXPENSES:
Amortization of Management Fees...................... 0.0 60,097 18,917
Administration Fee................................... 60,000 60,000 60,000
Depreciation......................................... 444,000 444,000 265,933
Other................................................ 3,000 3,000 3,000
---------- ---------- ----------
507,000 567,097 347,850
---------- ---------- ----------
NET INCOME............................................. $5,832,810 $6,393,984 $7,111,188
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE> 91
PROGRESS POTOMAC CAPITAL VENTURES
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Cash.............................................................. $ 200,243 $ 186,710
Jet Engines (net of accumulated depreciation of $1,815,948 in 1995
and $1,371,948 in 1994)......................................... 3,384,052 3,828,052
Direct Financing Lease -- Continental Airlines.................... 56,854,337 62,682,327
Restricted Cash................................................... 1,258,314 827,625
Other Receivable.................................................. 222,660 507,403
Notes Receivable from Continental Airlines........................ 5,910,738 2,054,947
----------- -----------
Total Assets............................................ $67,830,344 $70,087,064
=========== ===========
LIABILITIES AND JOINT VENTURERS' CAPITAL
Accrued Expenses.................................................. $ 15,000 $ 15,000
Unearned Income................................................... 198,786 185,261
Maintenance Deposits.............................................. 1,258,314 827,625
----------- -----------
Total Liabilities............................................ 1,472,100 1,027,886
Joint Venturers' Capital:
Echelon......................................................... 33,179,122 34,529,589
Potomac......................................................... 33,179,122 34,529,589
----------- -----------
Total Joint Venturers' Capital............................... 66,358,244 69,059,178
----------- -----------
Total Liabilities and Joint Venturers' Capital.......... $67,830,344 $70,087,064
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE> 92
PROGRESS POTOMAC CAPITAL VENTURES
STATEMENTS OF CHANGES IN JOINT VENTURERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
ECHELON INTERNATIONAL POTOMAC CAPITAL
CORPORATION CORPORATION
CAPITAL ACCOUNT CAPITAL ACCOUNT TOTAL
--------------------- ---------------- ------------
<S> <C> <C> <C>
December 31, 1992........................... $40,129,021 $ 40,129,021 $ 80,258,042
Net Income................................ 3,555,594 3,555,594 7,111,128
Cash Distributions........................ (6,145,784) (6,145,784) (12,291,568)
Capital Contribution...................... 415,738 415,738 831,476
----------- ----------- ------------
December 31, 1993........................... 37,954,569 37,954,569 75,909,138
Net Income................................ 3,196,992 3,196,992 6,393,984
Cash Distributions........................ (6,621,972) (6,621,972) (13,243,944)
----------- ----------- ------------
December 31, 1994........................... 34,529,589 34,529,589 69,059,178
Net Income................................ 2,916,405 2,916,405 5,832,810
Cash Distributions........................ (4,266,872) (4,266,872) (8,533,744)
----------- ----------- ------------
December 31, 1995........................... $33,179,122 $ 33,179,122 $ 66,358,244
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE> 93
PROGRESS POTOMAC CAPITAL VENTURES
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income...................................... $ 5,832,810 $ 6,393,984 $ 7,111,188
Adjustments for Non Cash Items:
Depreciation................................. 444,000 444,000 265,933
Amortization................................. 0.0 60,097 18,917
Changes in Assets and Liabilities:
Restricted Cash.............................. (430,689) (6,327) (577,645)
Other Receivable............................. 284,743 252,695 (760,100)
Unearned Income.............................. 13,525 0.0 0.0
Maintenance Deposits......................... 430,689 6,327 577,645
---------- ---------- ----------
Net cash provided by operating
activities............................ 6,575,078 7,150,776 6,635,938
---------- ---------- ----------
INVESTING ACTIVITIES:
Proceeds from Collections of Leases............. 1,117,787 5,322,969 4,264,621
Proceeds from Collections of Notes Receivable... 854,412 770,207 556,534
---------- ---------- ----------
Net cash provided by investing
activities............................ 1,972,199 4,552,762 4,821,155
---------- ---------- ----------
FINANCING ACTIVITIES:
Distributions to Venturers...................... (8,533,744) (13,243,944) (11,460,092)
---------- ---------- ----------
Net Increase in Cash.............................. 13,533 0.8 (2,999)
Beginning Cash.................................... 186,710 186,702 189,701
---------- ---------- ----------
Ending Cash Balance............................... $ 200,243 $ 186,710 $ 186,702
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE> 94
PROGRESS POTOMAC CAPITAL VENTURES
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND PRINCIPLES OF PRESENTATION
Progress Potomac Capital Ventures ("PPCV") is a joint venture, formed in
February 1988, between Echelon International Corporation ("Echelon"), successor
to Progress Credit Corporation, and Potomac Capital Corporation ("Potomac"). The
purpose of the formation of the joint venture is to purchase, lease, and finance
aircraft and aircraft equipment. The joint venture is controlled 50/50 and all
decisions must be unanimously agreed to by the venturers. The income or loss
generated in each fiscal year is distributed annually based upon the pro rata
share of each venturer's capital accounts as of the end of the respective fiscal
year. The joint venture will be dissolved in 2027, unless all assets owned by
the joint venture are sold or disposed of prior to this date, at which time the
joint venture will be dissolved.
PPCV's operations consist of a direct finance lease and an operating lease.
The direct finance lease involves two DC10-30s that are currently on lease to
Continental Airlines ("Continental"). The lease was initiated in February of
1990 and expires in February of 2002. In 1992, Echelon and Potomac agreed to
revise the terms with Continental pursuant to which Continental issued a
deferred rent note for 4 months worth of rents (including interest) to be paid
back in 48 months. This note earns interest at 10.42% annually. Again in 1995,
both parties agreed to revise the terms of the Continental lease by deferring a
portion of the rent payable for 16 months, retroactive to February 1995, and
issuing another deferred rent note specific to the 1995 deferment. This note
earns interest at 8% annually, requires interest payments only for the first six
months, and principal and interest payments thereafter. The principal is
scheduled to be paid in full by 2000. The total amount of deferred rent notes
receivable from Continental as of December 31, 1995 and 1994, is $5,910,738 and
$2,054,947, respectively.
The operating lease involves two CFM-56 jet engines leased to America West.
The lease expires on December 31, 1997. As part of the leasing arrangement with
America West, America West is required to make payments to PPCV in order to
provide a maintenance and repair reserve for the engines. The funds deposited
are recorded as restricted cash as PPCV can only use the funds for maintenance
and repair. The funds are also recorded by PPCV as an other liability as any
excess funds will be returned to America West upon termination of the lease.
Aircraft and aircraft equipment leasing involves numerous risks, including
risks stemming from the obsolescence or physical deterioration of aircraft or
equipment and the possibility of defaults by lessees. In addition, fluctuations
in general business and economic conditions, the adoption of restrictive
regulations and legislation, changes in consumer demand for air travel,
fluctuations in fuel prices and other factors over which the lessors of aircraft
have no control could be expected to adversely affect the supply and demand of
the aircraft or aircraft leases and may cause cost increases related to the
leasing of aircraft that cannot be offset by increased revenues. The market for
aircraft and related equipment is currently characterized by a relatively large
supply of most types of aircraft and a relatively weak demand, which adversely
affects the marketability and near-term value of the aircraft leased assets.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
EARNED INCOME ON DIRECT FINANCING LEASE
Income on direct financing leases is recognized by a method which produces
a constant periodic rate of return on the outstanding investment in the lease.
F-25
<PAGE> 95
PROGRESS POTOMAC CAPITAL VENTURES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DEPRECIATION
The jet engines are depreciated on a straight line basis over sixteen
years.
INCOME TAXES
The joint venture is not a taxable entity. The taxable income is passed
through to each of the venturers as income is allocated according to the joint
venture agreement.
LEASES RECEIVABLE
Effective January 1, 1995, the joint venture adopted SFAS No. 114,
"Accounting by Creditors for the Impairment of a Loan," as amended by SFAS No.
118, "Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosure." These standards require the joint venture to compute present values
for impaired loans when determining the allowance for credit losses. There was
no impact on earnings as a result of implementing and applying these standards
to the Continental direct finance lease.
IMPAIRED ASSETS
The joint venture will be required to adopt SFAS No. 121, "Accounting for
the Impairment of the Long-Lived Assets and for Long-Lived Assets to be Disposed
Of", on January 1, 1996. This standard requires that long lived assets and
certain intangible assets be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable through future cash flows from the use and disposition of the asset.
The adoption of this standard is not expected to have a material impact on
earnings.
FINANCIAL INSTRUMENTS
Estimated fair value amounts have been determined by the joint venture
using the available market information and discounted cash flow analysis.
Judgment is required in interpreting market data to develop estimates of fair
value. Accordingly, the estimates may be materially different from the amounts
that the joint venture could realize in a current market transaction.
The joint venture has no derivative financial instruments, such as futures,
forwards, swaps or options contracts.
(2) FINANCIAL INSTRUMENTS
In the opinion of management , the estimated fair value of the Continental
notes receivable, at December 31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
CARRYING AMOUNT FAIR VALUE
--------------- ----------
<S> <C> <C>
1994....................................................... $ 2,054,947 $2,054,947
1995....................................................... $ 5,910,738 $5,910,738
========== ==========
</TABLE>
F-26
<PAGE> 96
PROGRESS POTOMAC CAPITAL VENTURES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(3) RENTAL INCOME UNDER OPERATING LEASE
The following is a schedule by years of future minimum rentals on
noncancelable leases as of December 31, 1995:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
-------------------------------------------------------------------------
<S> <C>
1996..................................................................... $ 795,144
1997..................................................................... 795,144
----------
Total minimum future rentals........................................ $1,590,288
==========
</TABLE>
(4) NET INVESTMENT IN DIRECT FINANCING LEASE
The following lists the components of the net investment in the direct
financing lease as of December 31:
<TABLE>
<CAPTION>
1994 1994
----------- -----------
<S> <C> <C>
Minimum lease payments receivable........................... $68,956,643 $81,163,747
Initial Direct Cost......................................... 1,079,446 1,331,767
Estimated residual value of the leased property............. 7,800,000 7,800,000
Less: Unearned income....................................... (20,981,752) (26,613,187)
----------- ------------
Net Investment in direct finance lease...................... $56,854,337 $62,682,327
=========== ============
</TABLE>
F-27
<PAGE> 97
APPENDIX TO ELECTRONIC FORMAT DOCUMENT
This Information Statement contains spaces for the following graphic and
image materials:
(1) The front cover will be folded. The inside front cover contains
four photographs: (a) an apartment building captioned Residential Real
Estate Development, (b) an office building captioned Commercial Real Estate
Development, (c) an airplane captioned Aircraft and Other Leases and (d)
employees reviewing documents captioned Real Estate Services and Property
Management.
(2) The fold-out portion of the front cover contains photographs of
real estate properties and maps. The left side contains (a) a map of the
State of Florida highlighting the cities where Echelon's properties are
located, (b) a map of the Tampa Bay area indicating where Echelon's
properties are located, (c) a photograph of the Barnett Tower and (d) a
photograph of Carillon. The right side contains photographs of McNulty
Station, Harborage of Bayboro, Highpoint Center, 100 Carillon, Promenade,
7th Avenue and Bay Isle Key Apartments.
(3) The inside back cover contains a photograph of the officers and
certain employees of Echelon.
<PAGE> 1
Exhibit 4.5
================================================================================
EXECUTION COPY
LOAN AGREEMENT
DATED AS OF NOVEMBER 5, 1996
by and among
ECHELON INTERNATIONAL CORPORATION
AS BORROWER,
SALOMON BROTHERS REALTY CORP.
AS LENDER
and
LASALLE NATIONAL BANK
AS COLLATERAL AGENT
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
GENERAL TERMS . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 2.1. The Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 2.2. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 2.3. Security for the Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 2.4. Borrower's Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 2.5. Principal and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 2.6. Voluntary Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 2.7. Mandatory Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 2.8. Application of Payments After Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 2.9. Method and Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 2.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 2.11. Release of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 2.12. Central Cash Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 2.13. Security Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 2.14. Mortgage Recording Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 2.15. Extension Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 2.16. General Collateral Agent Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 2.17. Reserve Account; Expense Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 2.18. Special Purpose Entity Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE III
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . 55
Section 3.1. Conditions Precedent to Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 3.2. Form of Loan Documents and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE IV
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 60
Section 4.1. Representations and Warranties of Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 4.2. Representations and Warranties as to the Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . 63
Section 4.3. Representations and Warranties as to the REO Properties
and the Additional Mortgageable Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 4.4. Representations and Warranties as to the Additional Aircraft Collateral . . . . . . . . . . . . . . 72
Section 4.5. Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE V
AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . 73
Section 5.1. Borrower Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
ARTICLE VI
NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . 90
Section 6.1. Borrower Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
ARTICLE VII
DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 7.1. Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Section 7.2. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 7.3. Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 7.4. Default Administration Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
ARTICLE VIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 97
Section 8.1. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 8.2. Lender's Discretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 8.3. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 8.4. Modification, Waiver in Writing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 8.5. Delay Not a Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Section 8.6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Section 8.7. Trial by Jury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Section 8.8. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 8.9. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 8.10. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 8.11. Preferences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 8.12. Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Section 8.13. Remedies of Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Section 8.14. Exhibits Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Section 8.15. Offsets, Counterclaims and Defenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Section 8.16. No Joint Venture or Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Section 8.17. Waiver of Marshalling of Assets Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Section 8.18. Waiver of Counterclaim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Section 8.19. Conflict; Construction of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Section 8.20. Brokers and Financial Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Section 8.21. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Section 8.22. Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Section 8.23. Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Section 8.24. Non-Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Exhibits
- --------
<S> <C> <C>
A - Assignment of Contracts, Licenses, Permits, Agreements, Warranties and Approvals (Form)
B - Note (Form)
C - Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing (Form)
D - Custodial Agreement (Form)
E - Aircraft Distribution Assignment (Form)
F-1 - Closing Date Opinion of Borrower Counsel
F-2 - Closing Date Opinion of Collateral Agent Counsel
G - Confidentiality Agreement
H - Financing Statements (Form)
I - Lien Search Reports
J - Intercreditor Agreement (Form)
K - Assignment of Rents and Leases (Form)
L - Collateral Assignment of Hedge Agreement (Form)
M - Collateral Assignment of Mortgage and Other Documents (Form)
N - Assignment of Participation Interest
Schedules
- ---------
1 - Additional Collateral Schedule
2 - Asset Schedule
3 - Allocated Loan Amount
4 - Initial Operating Budget
5 - Re-Leasing Costs and Replacement Reserve Costs
6 - Exception Report
7 - Payment Date Statement (Form)
</TABLE>
iii
<PAGE> 5
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement"), made as of November 5,
1996, is by and among SALOMON BROTHERS REALTY CORP., a New York corporation,
having an address at Seven World Trade Center, New York, New York 10048
("Lender"), ECHELON INTERNATIONAL CORPORATION, a Florida corporation, having an
address at One Progress Plaza, St. Petersburg, Florida 33701 ("Borrower"), and
LASALLE NATIONAL BANK, a nationally chartered bank, having an address at 135
South LaSalle Street, Suite 1740, Chicago, Illinois 60603, as collateral agent
for Lender ("Collateral Agent").
RECITALS
WHEREAS, Borrower desires to obtain from Lender the Loan in an
amount equal to the Loan Amount (each as hereinafter defined) to repay certain
indebtedness of Borrower, to make certain investments and for working capital
from time to time;
WHEREAS, Lender is unwilling to make the Loan unless Borrower
joins in the execution and delivery of this Agreement, the Note and the Loan
Documents (each as hereinafter defined) which shall establish the terms and
conditions of the Loan;
WHEREAS, Borrower has agreed to establish certain accounts and
to grant to the Collateral Agent, on behalf of the Lender, a security interest
therein upon the terms and conditions of the security agreement set forth in
Section 2.13; and
WHEREAS, LaSalle National Bank, in its capacity as the
Collateral Agent, is willing to join in the security agreement set forth in
Section 2.13 by execution and delivery of this Agreement in that capacity;
NOW, THEREFORE, in consideration of the making of the Loan by
the Lender and the covenants, agreements, representations and warranties set
forth in this Agreement, the parties hereby covenant, agree, represent and
warrant as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Definitions. For all purposes of this Agreement:
(1) the capitalized terms defined in this Article I have the meanings assigned
to them in this Article I, and include the plural as well as the singular; (2)
all accounting terms have the meanings assigned to them in accordance with GAAP;
(3) the words "herein", "hereof", and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Article,
Section, or other subdivision; and (4) the following terms have the following
meanings:
<PAGE> 6
"Accepted Practices" means such practices as commercial
mortgage collateral agents or banks would follow in the normal course of their
business in performing administrative and custodial duties with respect to
collateral which is generally similar to the Account Collateral; provided,
however, that "Accepted Practices" shall not be deemed to include any custodial
practices now followed by the Collateral Agent for any such collateral held for
its own account to the extent that such practices are more stringent than the
practices followed by commercial collateral agents or banks generally.
"Account Collateral" has the meaning provided in Section
2.13(a).
"Accounts" means all accounts (as defined in the UCC), now
owned or hereafter acquired by Borrower, and arising out of or in connection
with, the operation of the REO Properties and the Additional Mortgageable
Collateral and all present and future accounts receivable, inventory accounts,
contract rights, chattel paper, notes, acceptances, insurance policies,
Instruments, Documents or other rights to payment and all forms of obligations
owing at any time to the Borrower thereunder, whether now existing or hereafter
created or otherwise acquired by the Borrower, the Collection Account, the
Reserve Account, the Expense Account and all Proceeds thereof and all liens,
security interests, guaranties, remedies, privileges and other rights pertaining
thereto, and all rights and remedies of any kind forming the subject matter of
any of the foregoing. Without limiting the generality of the foregoing, the term
"Accounts" shall include:
(i) all income, Rents, issues, profits, revenues, deposits and
other benefits from the REO Properties and the Additional Mortgageable
Collateral;
(ii) all receivables and other obligations now existing or
hereafter arising or created out of the sale, lease, sublease, license,
concession or other grant of the right of the use and occupancy of
property or rendering of services by the Borrower or any operator or
manager of the REO Properties or the Additional Mortgageable Collateral
or other commercial space located at the REO Properties or the
Additional Mortgageable Collateral (including, without limitation, from
rental of space, halls, stores, and offices, and deposits securing
reservations of such space, exhibit or sales space of every kind,
license, lease, sublease and concession fees and rentals, health club
membership fees, food and beverage wholesale and retail sales of
merchandise, service charges, vending machine sales and proceeds, if
any, from business interruption or other loss of income insurance);
(iii) all sums of money, and all instruments, documents and
securities held in any accounts in connection therewith, or any demand,
time, savings or other account maintained with any bank or certificate
of deposit issued by any bank with the proceeds of such account; and
(iv) all of the records and books of account now or hereafter
maintained by or on behalf of the Borrower or the Manager in connection
with the operation of the REO Properties and/or the Additional
Mortgageable Collateral.
2
<PAGE> 7
"Additional Aircraft Collateral" means the "Collateral" as such
term is defined in the Pledge and Security Agreement.
"Additional Collateral" means the Additional Mortgageable
Collateral, the Marina Ground Lease and/or the Additional Aircraft Collateral,
as applicable.
"Additional Collateral Release Price" means, with respect to
any Transfer of Additional Collateral, (i) if the Excess Proceeds Test is
satisfied, 50% of the Capital Event Proceeds deposited into the Collection
Account in connection with such Transfer, or (ii) if the Excess Proceeds Test is
not satisfied, 100% of the Capital Event Proceeds deposited into the Collection
Account in connection with such Transfer.
"Additional Collateral Schedule" means the schedule of
Additional Collateral set forth on Schedule 1 attached hereto.
"Additional Mortgageable Collateral" means, at any time, the
Land (or the ground leasehold estate in the Land), the Improvements and the
Equipment (to the extent the same shall be deemed to be fixtures and owned by
the Borrower), and all of Borrower's rights, titles, interests and estates
appurtenant thereto, encumbered by the Borrower Mortgage (other than the Land,
the Improvements and the Equipment with respect to the REO Property).
"Affiliate" of any specified Person means any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities or other beneficial interests, by contract or otherwise; and the
terms "controlling" and "controlled" have the meanings correlative to the
foregoing.
"Aircraft Distribution Assignment" means the Pledge and
Security Agreement, dated as of the Closing Date, between the Borrower and the
Lender, substantially in the form attached hereto as Exhibit E, as such
agreement may be modified and supplemented and in effect from time to time.
"Allocated Loan Amount" means the portion of the Loan Amount
allocated to each Asset, as such amounts shall be adjusted from time to time as
hereinafter set forth:
(i) On the Closing Date, the Allocated Loan Amount for each
Asset shall initially equal the amount set forth in Schedule 3;
(ii) In the event that in connection with a sale following
foreclosure or any other event that results in the Lender's release of
its Lien (including, without limitation a 100% Taking or a 100%
casualty) with respect to an REO Property or a Mortgaged Property, the
Net Proceeds or Loss Proceeds are less than the Allocated Loan Amount
of the affected Asset, the Allocated Loan Amount for the remaining
Assets shall be increased by the amount of the shortfall, such increase
being allocated to each remaining Asset on a pro rata basis;
3
<PAGE> 8
(iii) Upon each payment of the Principal Indebtedness pursuant
to Section 2.6(a) or clause tenth of Section 2.12(b)(iii), the
Allocated Loan Amount for the Assets shall be decreased by the amount
of the principal payment, such decrease being allocated to each Asset
on a pro rata basis;
(iv) Upon each payment of the Scheduled Principal Payment
Amount pursuant to Section 2.12(b), (A) the REO Loan Allocation shall
be decreased by the amount of the portion of the Scheduled Principal
Payment Amount attributable to the REO Loan Allocation, such decrease
being allocated to each REO Property on a pro rata basis, and (B) the
Mortgage Loan Allocation shall be decreased by the amount of the
portion of the Scheduled Principal Payment Amount attributable to the
Mortgage Loan Allocation, such decrease being allocated to each
Mortgage Loan either (1) on a pro rata basis if the Scheduled Principal
Payment Amount with respect to the Mortgage Loans shall be based on a
25-year or 18-year amortization schedule or (2) in accordance with the
scheduled principal payment actually received during the related
Interest Accrual Period with respect to such Mortgage Loan if the
Scheduled Principal Payment Amount shall be equal to the scheduled
principal payments actually received with respect to the Mortgage Loans
during such Interest Accrual Period.
(v) In the event the Principal Indebtedness is reduced as a
result of (w) a Balloon Payment or prepayment of a Mortgage, (x) a
Transfer executed pursuant to Section 2.7(a), (y) the receipt of Loss
Proceeds with respect to a Taking or casualty affecting an REO Property
or a Mortgaged Property or (z) the receipt of Net Proceeds upon a sale
of an REO Property or a Mortgaged Property following foreclosure, the
Allocated Loan Amount for the affected Asset shall be reduced either
(a) to zero (in the case of a Balloon Payment, Transfer or a 100%
Taking or a 100% casualty where the Lender releases its Lien) or (b) by
the amount of the reduction in Principal Indebtedness (in the case of a
Mortgage prepayment or a casualty where the Lender does not release its
Lien or a less than 100% Taking), and, if after such reduction pursuant
to the foregoing clause (a) or (b) an additional payment of principal
is to occur pursuant to the terms hereof, the Allocated Loan Amount for
the unaffected Assets shall be decreased by the additional payment
amount, such decrease being allocated to such Assets on a pro rata
basis; and
(vi) Notwithstanding anything set forth above to the contrary
which provides for a pro rata allocation, (a) in the event Lender
requests and receives an updated Appraisal indicating that the relative
values of the Assets are inconsistent with their relative Allocated
Loan Amounts, Lender may by notice to Borrower in writing increase or
decrease the Allocated Loan Amount of any or all of the Assets in
accordance with such Appraisal to reflect such relative values, (b) in
the event Lender reasonably determines that the condition of one or
more of the Assets shall have suffered a Material Adverse Effect since
the most recent Appraisal or Appraisal update, Lender may, with the
mutual agreement of the Borrower, increase or decrease the Allocated
Loan Amount of any or all of the Assets as appropriate to reflect such
Material Adverse Effect and (c) Lender may increase or decrease the
Allocated Loan Amount of any or all of the Assets pursuant to Section
2.1(c), so long as after such increase or decrease the aggregate
Allocated Loan Amount equals the outstanding Principal Indebtedness.
4
<PAGE> 9
"Agreement" means this Agreement, as the same may from time to
time hereafter be modified, supplemented or amended.
"Appraisal" means an appraisal with respect to the REO
Properties, the Mortgaged Properties and the Additional Collateral made by an
Appraiser and delivered to the Lender, as any of the same may be updated by
recertification from time to time.
"Appraiser" means, with respect to the REO Properties and the
Mortgaged Properties, The Weitzman Group, Inc. or any other nationally
recognized appraiser acceptable to the Lender.
"Asset Schedule" means the schedule of Assets set forth on
Schedule 2 attached hereto.
"Asset Values" means (a) with respect to each REO Property, the
Lender's estimate of the current market value of such REO Property based upon
such methods of analysis as the Lender shall reasonably determine in its sole
discretion and (b) with respect to each Mortgage Loan, the least of (i) 85% of
the fair market value of the related Mortgaged Property, as stated in the
Appraisal delivered in connection with the closing of the Loan (unless an
Appraisal shall have been delivered after the Closing Date in which event as
stated in the most recent Appraisal delivered after the Closing Date), (ii) the
Lender's estimate of the current market value of the related Mortgaged Property
based upon such methods of analysis as the Lender shall reasonably determine in
its sole discretion, and (iii) outstanding principal balance of such Mortgage
Loan; provided, however, that in the event the Borrower requests an Appraisal of
one or more REO Properties or Mortgaged Properties pursuant to Section
2.12(b)(iv) or (v), then Asset Value shall be (x) with respect to such REO
Property for which the Borrower has requested an Appraisal, the fair market
value as stated in such Appraisal and (y) with respect to such Mortgage Loan for
which the Borrower has requested an Appraisal, the lesser of (1) 85% of the fair
market value of the related Mortgaged Property as stated in such Appraisal or
(2) the outstanding principal balance of such Mortgage Loan.
"Assets" means the Mortgage Loans and the REO Properties, as
more fully described in the Asset Schedule.
"Assignment" has the meaning provided in Section 5.1(V).
"Assignment of Participation Interest" means the Assignment of
Participation Interest between the Borrower and Lender, substantially in the
form attached hereto as Exhibit N, as such agreement may be modified and
supplemented and in effect time to time.
"Assignment of Rents and Leases" means, with respect to each
REO Property and Additional Mortgageable Collateral, an Assignment of Rents and
Leases, in the form attached hereto as Exhibit K, dated as of the date hereof,
granted by the Borrower to the Lender with respect to the Leases, as same may
thereafter from time to time be supplemented, amended, modified or extended by
one or more agreements supplemental thereto.
5
<PAGE> 10
"Balloon Payment" means the principal payment due at the
maturity of a Mortgage Loan.
"Barnett Tower Parking Lease" means that certain Parking Lease
Agreement (South Core Garage), dated as of March 7, 1989, between Bay Plaza
Development Group, as lessor, and Talquin Development Company, as lessee.
"Basic Carrying Costs" means the following costs with respect
to the REO Properties and the Additional Collateral: (i) Impositions and (ii)
insurance premiums for policies of insurance required to be maintained pursuant
to this Agreement or the other Loan Documents.
"Borrower" has the meaning provided in the first paragraph of
this Agreement or such person's successor in interest pursuant to Section 2.18
hereof.
"Borrower Mortgage" means, with respect to any REO Property or
Additional Mortgageable Collateral, a first priority Mortgage, Assignment of
Leases and Rents, Security Agreement and Fixture Filing or Deed of Trust,
Assignment of Leases and Rents, Security Agreement and Fixture Filing,
substantially in the form attached hereto as Exhibit C, dated as of the Closing
Date, granted by the Borrower to the Lender with respect to such REO Property or
Additional Mortgageable Collateral as security for the Loan, as same may
thereafter from time to time be supplemented, amended, modified or extended by
one or more agreements supplemental thereto.
"Borrower Release Price Contribution" means the amount to be
deposited by Borrower into the Capital Sub-Account of the Collection Account if
the Release Price for an Asset shall be greater than the Capital Event Proceeds
received in connection with the Transfer of such Asset or the discounted pay-off
of a Mortgage Loan, which amount shall be equal to the difference between such
Release Price and such Capital Event Proceeds.
"Business Day" means any day other than a Saturday and a Sunday
and a day on which federally insured depository institutions in the State of New
York, Florida, Texas, California or Washington are authorized or obligated by
law, governmental decree or executive order to be closed. When used with respect
to an Interest Determination Date, "Business Day" shall mean a day on which
banks are open for dealing in foreign currency and exchange in London and New
York City.
"Capital Expenditure Reserve Amount" means an amount equal to
the sum of (i) the monthly amount set forth on Schedule 5 for Re-Leasing Costs
and Replacement Reserve Costs with respect to each REO Property and Additional
Mortgageable Collateral and (ii) the monthly amount of Capital Improvement Costs
as reflected in the Operating Budget.
"Capital Expenditure Reserve Sub-Account" has the meaning
provided in Section 2.17(a).
"Capital Event Proceeds" means, as of any date of calculation,
(x) all Balloon Payments and principal prepayments received under the Mortgages
and proceeds of discounted pay-offs of Mortgage Loans and (y) with respect to
any Transfer, the gross proceeds actually
6
<PAGE> 11
received, less all reasonable costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses and any reasonable and customary
brokerage expenses, if applicable) incurred in connection with such Transfer.
"Capital Improvement Costs" means costs (other than Re-Leasing
Costs and Replacement Reserve Costs) incurred by the Borrower in connection with
replacements and capital repairs required to be made to the REO Properties or
the Additional Mortgageable Collateral (including, without limitation, repairs
to the structural components, roofs, building systems and parking lots).
"Capital Sub-Account" has the meaning provided in Section
2.12(a).
"Change of Control" means either (1) as to the Borrower, (a)
any person or "group" (within the meaning of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended) (i) shall have acquired beneficial
ownership of 20% or more of any outstanding class of capital stock having
ordinary voting power in the election of directors of the Borrower or (ii) shall
have obtained the power (whether or not exercised) to elect a majority of the
Borrower's directors, (b) the board of directors of the Borrower shall not
consist of a majority of Continuing Directors or (c) a "Change of Control"
(however denominated) under any other indebtedness of the Borrower shall occur,
or (2) in the event a SPE Transfer occurs, (i) the sale or transfer by Persons
who are the direct beneficial owners of the SPE Borrower as of the date of the
SPE Transfer of a majority of the direct right to distributions from the SPE
Borrower in the aggregate to Persons (other than an Affiliate) who were not
direct beneficial owners as of such date or (ii) the sale or transfer by such
direct beneficial owners of the SPE Borrower as of the date of the SPE Transfer
of a majority of the direct voting rights in the SPE Borrower to Persons (other
than an Affiliate) who were not direct beneficial owners as of such date.
"Closing Date" means the date on which this Agreement shall
become effective pursuant to Section 3.1, such date being November 5, 1996.
"Code" means the Internal Revenue Code of 1986, as amended, and
as it may be further amended from time to time, any successor statutes thereto,
and applicable U.S. Department of Treasury regulations issued pursuant thereto
in temporary or final form.
"Collateral" means, collectively, the "Collateral" under and as
defined in the Aircraft Distribution Assignment, the "Mortgaged Property" under
and as defined in the Borrower Mortgage, the "Contracts" under and as defined in
the Contract Assignment, the "Leases" and the "Rents" under and as defined in
the Assignment of Rents and Leases, the "Participation Interests" under the
Assignment of Participation Interest, and each "Mortgage Loan" under and as
defined in each Collateral Assignment of Mortgage.
"Collateral Agent" means LaSalle National Bank or such Person's
successor in interest or other successor.
"Collateral Assignment of Mortgage" means, with respect to any
Mortgage Loan, a Collateral Assignment of Mortgage and Other Documents, notice
of transfer or equivalent instrument, substantially in the form attached hereto
as Exhibit M, in recordable form, sufficient
7
<PAGE> 12
under the laws of the jurisdiction wherein the related Mortgaged Property is
located to reflect of record the collateral assignment of the Mortgage and other
recorded loan documents to the Lender.
"Collateral Security Instrument" means any right, document or
instrument, other than the Collateral Assignments of Mortgage, the Borrower
Mortgage and the Aircraft Distribution Assignment, given as security for the
Loan (including, without limitation, the Contract Assignment), as same may be
amended or modified from time to time.
"Collection Account" has the meaning provided in Section
2.12(a).
"Collection Account Bank" has the meaning provided in Section
2.12(a).
"Collection Period" means, with respect to any Payment Date,
the immediately preceding calendar month; provided, however, that in the case of
the first Payment Date, the "Collection Period" shall be the period from the
Closing Date to the end of the calendar month following the month in which the
Closing Date occurred.
"Commitment Fee" means the fee designated as such in the
Commitment Letter and payable by the Borrower to the Lender on the Closing Date.
"Commitment Letter" means the letter dated September 30, 1996,
entered into between Borrower and the Lender (including the Summary of Terms
attached thereto).
"Condemnation Proceeds" means, in the event of a Taking with
respect to any Asset or Additional Collateral, the proceeds in respect of such
Taking less all reasonable costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) incurred in connection with such
Taking.
"Contingent Obligation" means any obligation of the Borrower
guaranteeing any indebtedness, leases, dividends or other obligations ("primary
obligations") of any other Person (the "primary obligor") in any manner, whether
directly or indirectly. Without limiting the generality of the foregoing, the
term "Contingent Obligation" shall include any obligation of the Borrower,
whether or not contingent:
(i) to purchase any such primary obligation or any property
constituting direct or indirect security therefor;
(ii) to advance or supply funds (x) for the purchase or payment
of any such primary obligation or (y) to maintain working capital or
equity capital of the primary obligor;
(iii) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary
obligation; or
8
<PAGE> 13
(iv) otherwise to assure or hold harmless the owner of such
primary obligation against loss in respect thereof.
The amount of any Contingent Obligation shall be deemed to be an amount equal to
the stated or determinable amount of the primary obligation in respect of which
such Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof (assuming the
Borrower is required to perform thereunder) as determined by the Lender in good
faith.
"Continuing Directors" means the directors of the Borrower on
the Closing Date and each other director, if such other director's nomination
for election to the board of directors of the Borrower is recommended by a
majority of the then Continuing Directors.
"Contract Assignment" means, with respect to the REO Properties
and the Additional Mortgageable Collateral, the Assignment of Contracts,
Licenses, Permits, Agreements, Warranties and Approvals in the form attached
hereto as Exhibit A, dated as of the Closing Date and executed by the Borrower.
"Contracts" means all agreements to which the Borrower is a
party in connection with the construction, operation and management of the REO
Properties and/or the Additional Mortgageable Collateral (including, without
limitation, agreements for the sale, lease or exchange of goods or other
property and/or the performance of services by it, in each case whether now in
existence or hereafter arising or acquired), as any such agreements have been or
may be from time to time amended, supplemented or otherwise modified.
"Custodial Agreement" means the Custodial Agreement between the
Collateral Agent as custodian, the Borrower and the Lender, substantially in the
form attached hereto as Exhibit D, as such agreement may be modified and
supplemented and in effect from time to time.
"Debt" at any date of determination, shall mean, without
duplication, (a) all indebtedness of Borrower for borrowed money, (b) all
obligations of Borrower for the deferred purchase price of property or services
(other than current trade payable incurred in the ordinary course of such
Person's business), (c) all obligations of Borrower evidenced by notes, bonds,
debentures or other similar instruments, (d) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by Borrower (even though the rights and remedies of the seller
or lender under such agreement in the event of default are limited to
repossession or sale of such property), (e) all obligations of Borrower in
respect of leases required in accordance with GAAP, to be capitalized on
Borrower's balance sheet, (f) all obligations of Borrower as an account party
under acceptance, letter of credit or similar facilities, (g) all obligations of
Borrower to purchase, redeem, retire or otherwise acquire for value any equity
interest in respect of Borrower, and (h) all obligations of the kind referred to
in clauses (a) through (g) above secured by (or for which the holder of such
obligation has an existing right, contingent or otherwise, to be secured by) any
Lien on property (including, without limitation, accounts and contract rights)
owned by Borrower, whether or not Borrower has assumed or become liable for the
payment of such obligation; provided, however, that notwithstanding the
foregoing, the following shall be excluded from any determination of Debt
hereunder: (i) nonrecourse indebtedness in connection with aircraft leveraged
leases, (ii) deferred
9
<PAGE> 14
taxes, (iii) Contingent Obligations, (iv) other obligations of a contingent
nature reflected in the Borrower's balance sheet or in footnotes to any of
Borrower's financial statements, and (v) debt incurred in the ordinary course of
business for working capital with a term of not more than one year.
"Debt Covenant" has the meaning set forth in section 5.1(Y).
"Default" means the occurrence of any event which, but for the
giving of notice or the passage of time, or both, would be an Event of Default.
"Default Administration Fee" means an amount equal to the
product of (x) 1% and (y) the Principal Indebtedness as of the date the Default
Administration Fee becomes payable.
"Default Rate" means the per annum interest rate equal to 5.0%
per annum in excess of the rate otherwise applicable hereunder.
"Distribution Agreement" means the Distribution Agreement to be
entered into between the Borrower and Florida Progress Corporation,
substantially in the form delivered to the Lender prior to the Closing Date.
"Distributions" has the meaning set forth in the Joint Venture
Agreement.
"Documents" means all "documents" as defined in the UCC or
other receipts covering, evidencing or representing goods now owned or hereafter
acquired by the Borrower.
"Eligible Account" means an account that is: (i) an account
maintained with a federal or state chartered depository institution or trust
company, the short-term unsecured debt obligations of which (or, in the case of
a depository institution or trust company that is the principal subsidiary of a
holding company, the short-term unsecured debt obligations of such holding
company) are rated by the Rating Agencies not less than "A-1" (or the
equivalent), (ii) an account the deposits in which are fully insured by the FDIC
or (iii) a trust account maintained with the trust department of a federal or
state chartered depository institution or trust company acting in its fiduciary
capacity.
"Engineer" means Inspection & Valuation International or such
other Independent engineer as shall be approved by the Lender.
"Engineering Report" means the structural engineering reports
with respect to the REO Properties prepared by an Engineer and delivered to the
Lender in connection with the Loan and any amendments or supplements thereto
delivered to the Lender.
"Environmental Auditor" means Inspection & Valuation
International or such other Independent environmental auditor as shall be
approved by the Lender.
"Environmental Claim" means any notice, notification, request
for information, claim, administrative, regulatory or judicial action, suit,
judgment, demand or other
10
<PAGE> 15
communication (whether written or oral) by any Person or Governmental Authority
alleging or asserting liability with respect to the Borrower (based upon a
condition at any REO Property or Additional Mortgageable Property) or any REO
Property or Additional Mortgageable Collateral (whether for damages,
contribution, indemnification, cost recovery, compensation, injunctive relief,
investigatory, response, remedial or cleanup costs, damages to natural
resources, personal injuries, fines or penalties) arising out of, based on or
resulting from (i) the presence, Use or Release into the environment of any
Hazardous Substance, from or migrating onto any REO Property or Additional
Mortgageable Collateral, (ii) any fact, circumstance, condition or occurrence
forming the basis of any violation, or alleged violation, of any Environmental
Law in connection with an REO Property or Additional Mortgageable Collateral or
(iii) any alleged injury or threat of injury to health, safety or the
environment in connection with an REO Property or any Additional Mortgageable
Collateral.
"Environmental Laws" means any and all present and future
federal, state or local laws, statutes, ordinances or regulations, any judicial
or administrative orders, decrees or judgments thereunder, and any permits,
approvals, licenses, registrations, filings and authorizations, in each case as
now or hereafter in effect, relating to the environment, human health or safety,
or the Release or threatened Release of Hazardous Substances or otherwise
relating to the Use of Hazardous Substances.
"Environmental Reports" means a "Phase I Environmental Site
Assessment" (and, if necessary, a "Phase II Environmental Site Assessment") as
referred to in the ASTM Standards on Environmental Site Assessments for
Commercial Real Estate, E 1527-94, and an asbestos survey, with respect to the
Assets, prepared by an Environmental Auditor and delivered to the Lender and any
amendments or supplements thereto delivered to the Lender, and shall also
include any other environmental reports delivered to the Lender pursuant to
Section 5.1(E).
"Equipment" means all "equipment" as defined in the UCC, now or
hereafter owned by the Borrower or in which the Borrower has or shall acquire an
interest, now or hereafter located on, attached to or contained in or used in
connection with the REO Properties and/or the Additional Mortgageable
Collateral, and shall also mean and include all building materials, construction
materials, personal property constituting furniture, fittings, appliances,
apparatus, leasehold improvements, machinery, devices, interior improvements,
appurtenances, equipment, plant, furnishings, fixtures, computers, electronic
data processing equipment, telecommunications equipment and other fixed assets
now owned or hereafter acquired by the Borrower and now or hereafter used in the
operation of the business conducted at the REO Properties or the Additional
Mortgageable Collateral, and all Proceeds thereof and as well as all additions
to, substitutions for, replacements of or accessions to any of the items recited
as aforesaid and all attachments, components, parts (including spare parts) and
accessories, whether installed thereon or affixed thereto, and wherever located,
now or hereafter owned by the Borrower and used or intended to be used in
connection with, or with the operation of, the REO Properties or the Additional
Mortgageable Collateral or the buildings, structures, or other improvements now
or hereafter located at the REO Properties or the Additional Mortgageable
Collateral, or in connection with any construction being conducted or which may
be conducted thereon, all regardless of whether the same are located on the REO
Properties or the Additional Mortgageable Collateral or are located elsewhere
(including, without limitation, in warehouses or other storage facilities or in
the possession of or on the premises of a bailee, vendor or
11
<PAGE> 16
manufacturer) for purposes of manufacture, storage, fabrication or
transportation and all extensions and replacements to, and proceeds of, any of
the foregoing. Notwithstanding the foregoing, "Equipment" shall not include (a)
any personal property, desks, chairs, other office furniture, telecommunications
equipment, computers and other equipment (as defined in the UCC) now owned or
hereafter acquired by the Borrower that is used or intended to be used by the
Borrower in connection with the operation of its business and that is normally
located on, attached to, contained in or used in connection with an REO Property
as a result of such REO Property being the executive offices of the Borrower,
(b) any equipment (as defined in the UCC) now owned or hereafter acquired by the
Borrower that is used or is intended to be used by the Borrower in connection
with the operation of its business and that is normally located on, attached to,
contained in or used in connection with any asset or assets of the Borrower
other than an REO Property or an item of Additional Mortgageable Collateral, or
(c) any boats, motors or spare parts located at the Additional Mortgageable
Collateral designated "Marina" on Schedule 1 hereto (but shall specifically
include the docks, racks, forklift, crane and high and dry located at such
Additional Mortgageable Collateral).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated thereunder.
Section references to ERISA are to ERISA, as in effect at the date of this
Agreement and, as of the relevant date, any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" means any corporation or trade or business
that is a member of any group of organizations (i) described in Section 414(b)
or (c) of the Code of which the Borrower is a member and (ii) solely for
purposes of potential liability under Section 302(c)(11) of ERISA and Section
412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and
Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of
which the Borrower is a member.
"Event of Default" has the meaning set forth in Section 7.1.
"Exception Report" means the report prepared by the Borrower
and attached hereto as Schedule 6, setting forth as to each Asset and Additional
Collateral, any exceptions to the representations and warranties set forth in
Sections 4.2, 4.3 and 4.4.
"Excess Proceeds" means (a) if the Excess Proceeds Test is
satisfied, the excess of (i) the Capital Event Proceeds received in connection
with a Mortgage Loan that is repaid in full or the Transfer of an Asset or
Additional Collateral, over (ii) the applicable Release Price, or (b) if the
Excess Proceeds Test is not satisfied, zero.
"Excess Proceeds Test" means, as of any date of calculation,
the test that shall be satisfied if, after a Transfer of an Asset or Additional
Collateral or a payment in full of a Mortgage Loan by a Mortgagor, (a) the
Principal Indebtedness of the Loan is not greater than the product of the
aggregate Asset Value and 65% and (b) the quotient of the Principal Indebtedness
of the Loan after such Transfer or payment in full divided by the aggregate
Asset Value after such Transfer or payment in full, is not higher than the
quotient of the Principal Indebtedness of the Loan immediately prior to such
Transfer or payment in full divided by the aggregate Asset
12
<PAGE> 17
Value immediately prior to such Transfer or payment in full, giving effect to
(x) such Transfer or payment in full, (y) the application of the resulting
Capital Event Proceeds in accordance with this Agreement (as if this test had
been satisfied) and (z) the release of Lender's Lien on and/or security interest
in the related Asset or Additional Collateral.
"Excess Proceeds Test Notice" means a notice from Lender to
Borrower, a copy of which shall be delivered concurrently to Collateral Agent,
advising Borrower whether or not Borrower has satisfied the Excess Proceeds Test
and stating the applicable Release Price(s) and Excess Proceeds, if any.
"Expense Account" has the meaning provided in Section 2.17(e).
"Extension Date" means the First Extension Date and/or the
Second Extension Date, as applicable.
"Extension Fee" means an amount equal to the product of (x)
0.5% and (y) the Principal Indebtedness on the applicable Extension Date (after
giving effect to any principal payment made on such Extension Date).
"Extension Hedge Agreement" means an interest rate cap
agreement entered into on or prior to the applicable Extension Date by the
Borrower with an interest rate cap counterparty which has a long-term unsecured
debt rating of no lower than "A" from Standard & Poor's Ratings Group and
Moody's Investors Service, Inc. and for a term of not less than twelve months
pursuant to which the counterparty is obligated to pay to the Borrower interest
on a notional amount equal to an amount of the Principal Indebtedness as of the
applicable Extension Date satisfactory to the Lender at a rate per annum equal
to the positive difference, if any, between LIBOR and a rate per annum
satisfactory to the Lender.
"Fee Letter" means the letter dated October 31, 1996, entered
into between the Borrower and the Collateral Agent, with respect to the fees of
the Collateral Agent under this Agreement.
"First Extension Date" has the meaning set forth in Section
2.15(a).
"Fiscal Year" means the 12-month period ending on December 31st
of each year or such other fiscal year of the Borrower as the Borrower may
select from time to time with the prior consent of the Lender, such consent not
to be unreasonably withheld or delayed.
"GAAP" means generally accepted accounting principles in the
United States of America as of the date of the applicable financial report.
"General Intangibles" means all "general intangibles" as
defined in the UCC, now owned or hereafter acquired by the Borrower with respect
to the REO Properties and/or the Additional Collateral. Without limiting the
generality of the foregoing, the term "General Intangibles" shall include with
respect to the REO Properties and/or the Additional Collateral:
13
<PAGE> 18
(i) all obligations or indebtedness owing to the Borrower from
whatever source arising (other than Accounts, Rents, Instruments,
Inventory, Money, Contracts, Documents, Trademarks and Permits);
(ii) all unearned premiums accrued or to accrue under all
insurance policies for the REO Properties and the Additional Collateral
obtained by the Borrower, all proceeds of the conversion, voluntary or
involuntary, of any of the foregoing into cash or liquidated claims
(including, without limitation, proceeds of insurance, condemnation
awards, and all rights of the Borrower to refunds of real estate taxes
and assessments);
(iii) all royalties and license fees;
(iv) all trademark licenses, trademarks, rights in intellectual
property, goodwill, trade names, service marks, trade secrets,
copyrights, permits and licenses, together with the registrations
therefor and the goodwill appurtenant thereto; and
(v) all rights or claims in respect of refunds for taxes
paid.
"General Sub-Account" has the meaning provided in Section
2.12(a).
"Governmental Authority" means any national or federal
government, any state, regional, local or other political subdivision thereof
with jurisdiction and any Person with jurisdiction exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Ground Lease" has the meaning provided in Section 4.2(J).
"Ground Lease Event of Default" means, with respect to the
Additional Collateral designated on the Additional Collateral Schedule as the
"Marina", either the City of St. Petersburg has terminated the Marina Ground
Lease or the City of St. Petersburg has delivered to the Borrower notice that an
event which gives the City of St. Petersburg the right to terminate the Marina
Ground Lease has occurred and any applicable cure period has expired.
"Hazardous Substance" means, collectively, (i) any petroleum or
petroleum products or waste oils, explosives, radioactive materials, asbestos,
urea formaldehyde foam insulation, polychlorinated biphenyls ("PCBs"), lead in
drinking water, and lead-based paint, (ii) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definitions of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under any Environmental Law and (iii) any other chemical or any
other material or substance, exposure to which is now or hereafter prohibited,
limited or regulated under any Environmental Law.
"Hedge Assignment Agreement" means each Collateral Assignment
of Extension Hedge Agreement from the Borrower in favor of the Lender
substantially in the form of Exhibit L attached hereto.
14
<PAGE> 19
"Impositions" means all taxes (including, without limitation,
all real estate, ad valorem, sales (including those imposed on lease rentals),
use, single business, gross receipts, value added, intangible transaction
privilege, privilege or license or similar taxes), assessments (including,
without limitation, all assessments for public improvements or benefits, whether
or not commenced or completed within the term of the Borrower Mortgage), ground
rents, water, sewer or other rents and charges, excises, levies, fees
(including, without limitation, license, permit, inspection, authorization and
similar fees), and all other governmental charges, in each case whether general
or special, ordinary or extraordinary, foreseen or unforeseen, of every
character in respect of any REO Property or Additional Collateral, including any
Rents and Accounts (including all interest and penalties thereon), which at any
time prior to, during or in respect of the term hereof may be assessed or
imposed on or in respect of or be a Lien upon (i) the Borrower (including,
without limitation, all income, franchise, single business or other taxes
imposed on the Borrower for the privilege of doing business in the jurisdiction
in which any REO Property or Additional Collateral, or any other collateral
delivered or pledged to the Lender in connection with the Loan, is located) or
the Lender, (ii) any REO Property or Additional Collateral, or any other
collateral delivered or pledged to the Lender in connection with the Loan, or
any part thereof or any Rents therefrom or any estate, right, title or interest
therein, or (iii) any occupancy, operation, use or possession of, or sales from,
or activity conducted on, or in connection with any REO Property or Additional
Collateral or the leasing or use of any REO Property or Additional Collateral or
any part thereof, or the acquisition or financing of the acquisition of any REO
Property or Additional Collateral by the Borrower.
"Improvements" means all buildings, structures, fixtures and
improvements of every nature whatsoever situated on the Land on the Closing Date
or thereafter (including, without limitation, all gas and electric fixtures,
radiators, heaters, engines and machinery, boilers, ranges, elevators and
motors, plumbing and heating fixtures, carpeting and other floor coverings,
water heaters, awnings and storm sashes, and cleaning apparatus which are or
shall be attached to the Land or said buildings, structures or improvements and
including any additions, enlargements, extensions, modifications, repairs or
replacements thereto, but exclusive of those items which are the property of the
tenants of the related REO Property or Additional Collateral).
"Indebtedness" means the Principal Indebtedness, together with
all other obligations and liabilities due or to become due to the Lender
pursuant hereto, under the Note or in accordance with any of the other Loan
Documents, and all other amounts, sums and expenses paid by or payable to the
Lender hereunder or pursuant to the Note or any of the other Loan Documents.
"Indemnified Liabilities" has the meaning set forth in
Section 5.1(J).
"Indemnified Parties" has the meaning set forth in Section
5.1(I).
"Independent" means, when used with respect to any Person, a
Person who (i) does not have any direct financial interest or any material
indirect financial interest in the Borrower or in any Affiliate of the Borrower,
and (ii) is not connected with the Borrower or any Affiliate of the Borrower as
an officer, employee, promoter, underwriter, trustee, partner, director or
person performing similar functions.
15
<PAGE> 20
"Index Maturity" has the meaning set forth in the definition
of LIBOR.
"Instruments" means (i) all "instruments" as defined in the
UCC, "chattel paper" as defined in the UCC, or letters of credit, evidencing,
representing, arising from or existing in respect of, relating to, securing or
otherwise supporting the payment of, any of the Collateral (including, without
limitation, promissory notes, drafts, bills of exchange and trade acceptances)
and chattel paper obtained by the Borrower in connection with any REO Property
or Additional Collateral (including, without limitation, all ledger sheets,
computer records and printouts, data bases, programs, books of account and files
of the Borrower relating thereto) and (ii) notes or other obligations of
indebtedness owing to the Borrower with respect to any REO Property or
Additional Collateral from whatever source arising, in each case now owned or
hereafter acquired by the Borrower.
"Insurance Proceeds" means, in the event of a casualty with
respect to any Asset or Additional Mortgageable Collateral, the proceeds
received under any insurance policy less all reasonable costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses)
incurred in connection with such casualty.
"Insurance Requirements" means all material terms of any
insurance policy required pursuant to this Agreement or the Borrower Mortgage
and all material regulations and then current standards applicable to or
affecting any REO Property or Additional Mortgageable Collateral or any part
thereof or any use or condition thereof, which may, at any time, be recommended
by the Board of Fire Underwriters, if any, having jurisdiction over any REO
Property or Additional Mortgageable Collateral, or such other body exercising
similar functions.
"Intercreditor Agreement" means the Intercreditor Agreement,
dated as of the Closing Date, between the Borrower and the Lender, substantially
in the form attached hereto as Exhibit J, as such agreement may be modified and
supplemented and in effect from time to time.
"Interest Accrual Period" means, in connection with the
calculation of interest accrued with respect to any Payment Date, the period
from and including the preceding Payment Date to but excluding such Payment
Date; provided, however, that the first Interest Accrual Period for the Loan
shall be from the Closing Date to but excluding the first Payment Date.
"Interest Determination Date" means, in connection with the
calculation of interest accrued for any Interest Accrual Period, the second
Business Day preceding the first day of such Interest Accrual Period.
"Interest Reserve Sub-Account" has the meaning provided in
Section 2.17(a).
"Inventory" means all "inventory" as defined in the UCC,
whether now or hereafter existing or acquired, and which arises out of or is
used in connection with, directly or indirectly, the ownership and operation of
any REO Property or Additional Mortgageable Collateral, all Documents
representing the same and all Proceeds and products of such Inventory. Without
limiting the generality of the foregoing, the term "Inventory" shall include,
without limitation:
16
<PAGE> 21
(i) all goods, merchandise, raw materials, work in process and
other personal property, wherever located, now or hereafter owned or
held by the Borrower for manufacture, processing, the providing of
services or sale, use or consumption in the operation of any REO
Property or Additional Mortgageable Collateral (including, without
limitation, fuel, supplies and similar items and all substances
commingled therewith or added thereto); and
(ii) all rights and claims of the Borrower against anyone who
may store or acquire the Inventory for the account of the Borrower, or
from whom the Borrower may purchase the Inventory.
Notwithstanding the foregoing, "Inventory" shall not include any boats, motors
or spare parts located at the Additional Mortgageable Collateral designated
"Marina" on Schedule 1 hereto (but shall specifically include the docks, racks,
forklift, crane and high and dry located at such Additional Mortgageable
Collateral).
"Joint Venture" means Progress-Potomac Capital Ventures, the
joint venture created pursuant to the Joint Venture Agreement.
"Joint Venture Agreement" means the Joint Venture Agreement,
dated as of January 27, 1988 between Progress Financial Services, Incorporated
(a predecessor in interest to the Borrower) and Potomac Capital Investment
Corporation.
"Joint Venture Equipment" means "Equipment" as such term is
defined in the Joint Venture Agreement, such equipment being two 1973 DC 10-30
airplanes on direct finance lease to Continental Airlines.
"Land" has the meaning provided in the Borrower Mortgage.
"Lease Event of Default" means, with respect to the REO
Property identified on the Asset Schedule as "Barnett Tower", either the lessor
of parking spaces under the Barnett Tower Parking Lease has terminated the
Barnett Tower Parking Lease or such lessor has delivered to the Borrower notice
that an event which gives such lessor the right to terminate the Barnett Tower
Parking Lease has occurred and any applicable cure period has expired.
"Leases" means all leases, subleases, lettings, occupancy
agreements, tenancies and licenses either of a Mortgaged Property or by the
Borrower as landlord of an REO Property or Additional Mortgageable Collateral or
any part thereof now or hereafter entered into, and all amendments, extensions,
renewals and guarantees thereof, and all security therefor.
"Leasing Commissions" means leasing commissions incurred by the
Borrower in connection with leasing any REO Property or Additional Mortgageable
Collateral.
"Legal Requirements" means (a) all governmental statutes, laws,
rules, orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities (including, without limitation, Environmental Laws)
affecting either the Borrower or any REO Property or Additional Collateral or
any part thereof or the construction, use, alteration or
17
<PAGE> 22
operation thereof, or any part thereof (whether now or hereafter enacted and in
force), (b) all permits, licenses and authorizations and regulations relating
thereto, and (c) all covenants, agreements, restrictions and encumbrances
contained in any instruments, at any time in force affecting such REO Property
or Additional Collateral or any part thereof (including, without limitation, any
covenant, agreement, restriction or encumbrance which may (i) require repairs,
modifications or alterations in or to such REO Property or Additional Collateral
or any part thereof in a manner that may reasonably be expected to have a
Material Adverse Effect, or (ii) in any way limit the use and enjoyment thereof
in a manner that may reasonably be expected to have a Material Adverse Effect).
"Lender" has the meaning provided in the first paragraph of
this Agreement.
"Leverage Ratio" shall mean, at any date of determination, the
ratio of Debt at such date to Total Capitalization at such date, in each case as
reflected on Borrower's most recent quarterly financial statements delivered to
Lender pursuant to Section 5.1(R)(iii).
"LIBOR" means the rate per annum calculated as set forth
below:
(i) On each Interest Determination Date, LIBOR will be
determined on the basis of the offered rate for deposits of not less
than U.S. $1,000,000 for a period of one month (the "Index Maturity"),
commencing on such Interest Determination Date, which appears on
Telerate Page 3750 as of 11:00 a.m., London time (or such other page as
may replace the Telerate Page on that service for the purposes of
displaying London interbank offered rates of major banks). If no such
offered rate appears, LIBOR with respect to the relevant Interest
Accrual Period will be determined as described in (ii) below.
(ii) With respect to an Interest Determination Date on which no
such offered rate appears on Telerate Page 3750 as described in (i)
above, LIBOR shall be the arithmetic mean, expressed as a percentage,
of the offered rates for deposits in U.S. dollars for the Index
Maturity which appears on the Reuters Screen LIBO Page as of 11:00
a.m., London time, on such date. If, in turn, such rate is not
displayed on the Reuters Screen LIBO Page at such time, then LIBOR for
such date will be obtained from the preceding Business Day for which
the Reuters Screen LIBO Page displayed a rate for the Index Maturity.
(iii) If on any Interest Determination Date the Lender is
required but unable to determine LIBOR in the manner provided in
paragraphs (i) and (ii) above, LIBOR for the next Interest Accrual
Period shall be LIBOR as determined on the previous Interest
Determination Date or, in the case of the first Interest Determination
Date, 5.38%.
All percentages resulting from any calculations referred to in this Agreement
will be rounded upwards, if necessary, to the nearest multiple of 1/100 of 1%
and all U.S. dollar amounts used in or resulting from such calculations will be
rounded to the nearest cent (with one-half cent or more being rounded upwards).
"Lien" means any mortgage, deed of trust, lien (statutory or
other), pledge, hypothecation, assignment, preference, priority, security
interest, or any other encumbrance or
18
<PAGE> 23
charge on or affecting any Asset or Additional Collateral or any portion thereof
or the Borrower, or any interest therein (including, without limitation, any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, the filing of
any financing statement or similar instrument under the Uniform Commercial Code
or comparable law of any other jurisdiction, domestic or foreign, and
mechanic's, materialmen's and other similar liens and encumbrances).
"Liquidity Certificate" has the meaning provided in Section
5.1(Z)(3).
"Loan" means the loan made by the Lender to the Borrower
pursuant to the terms of this Agreement.
"Loan Amount" means an amount equal to $105,000,000.
"Loan Documents" means this Agreement, the Note, the Borrower
Mortgage, the Custodial Agreement, the Contract Assignment, the Aircraft
Distribution Assignment, the Assignment of Participation Interest, the
Collateral Assignments of Mortgage, each Hedge Assignment Agreement, and all
other agreements, instruments, certificates and documents delivered by or on
behalf of the Borrower or an Affiliate to evidence or secure the Loan or
otherwise in satisfaction of the requirements of this Agreement or the other
documents listed above as same may be amended or modified from time to time.
"Loan Liquidity Covenant" has the meaning provided in Section
5.1(Z)(2).
"Loss Proceeds" means Condemnation Proceeds and/or Insurance
Proceeds.
"Lost Note Affidavit" means an affidavit, executed by the
mortgagee or its assignee or the successor in interest of either of them, with
respect to a Mortgage Note, certifying that the Mortgage Note has been lost or
misplaced and the circumstances of such loss.
"LTV Notice" means a written notice from Lender to Borrower,
delivered not less than three Business Days prior to the end of an Interest
Accrual Period, a written copy of which shall be delivered concurrently to
Collateral Agent, advising Borrower that Borrower has failed to satisfy the LTV
Test and stating Lender's determination of the quotient of the Principal
Indebtedness of the Loan divided by the aggregate Asset Value.
"LTV Test" means, as of any date of calculation, the test that
shall be satisfied if the Principal Indebtedness of the Loan is not greater than
the product of the aggregate Asset Value and 75%.
"Marina Ground Lease" has the meaning set forth in Section
4.3(B)(ii).
"Material Adverse Effect" means a material adverse effect upon
(i) the business operations, properties, assets or condition (financial or
otherwise) of the Borrower, (ii) the ability of the Borrower to perform, or of
the Lender to enforce, any of the Loan Documents or (iii) the value of any Asset
or Additional Collateral or the operation thereof.
19
<PAGE> 24
"Maturity Date" means the Payment Date in November, 1999, or
such earlier date resulting from acceleration; provided, however, that if the
Maturity Date is extended pursuant to Section 2.15(a), the Maturity Date shall
be the Payment Date in November, 2000, and if the Maturity Date is extended
pursuant to Section 2.15(b), the Maturity Date shall be the Payment Date in
November, 2001.
"Money" means all moneys, cash, rights to deposit or savings
accounts or other items of legal tender obtained from or for use in connection
with the operation of the Assets or the Additional Collateral.
"Monthly Statement" has the meaning provided in Section
2.12(d).
"Mortgage" means, with respect to any Mortgage Loan, the
mortgage, deed of trust or other instrument creating a lien on or priority
ownership interest in a fee simple or leasehold estate in real property securing
a Mortgage Note. To the extent any such mortgage, deed of trust or other
instrument has been restated or amended, "Mortgage" shall mean such mortgage,
deed of trust or other instrument as so restated or amended.
"Mortgage Loan" means each of the mortgage loans collaterally
assigned to the Lender pursuant to the provisions of the Collateral Assignments
of Mortgage (including proceeds from the conversion or sale of any Mortgage
Loan) evidenced by a Mortgage Note and secured by a Mortgage, and identified in
the Asset Schedule.
"Mortgage Loan Allocation" means, at any time of calculation,
the aggregate outstanding Allocated Loan Amount of the Mortgage Loans.
"Mortgage Loan Release Price" means, with respect to any
Transfer of a Mortgage Loan, (i) if the Excess Proceeds Test is satisfied, 125%
of the Allocated Loan Amount for such Mortgage Loan or (ii) if the Excess
Proceeds Test is not satisfied, the greater of (A) the unpaid principal balance
of such Mortgage Loan as of the date of the Transfer and (B) 125% of the
Allocated Loan Amount for such Mortgage Loan.
"Mortgage Note" means the note or other evidence of the
indebtedness of a Mortgagor constituting a Mortgage Loan and secured by a
Mortgage.
"Mortgaged Property" means the underlying property that secures
a Mortgage Loan or tenancies under ground leases from those Mortgage Loans
secured by ground leases, together with any real or personal property, fixtures,
leases and other property or rights pertaining thereto.
"Mortgagor" means the obligor on a Mortgage Note.
"Multiemployer Plan" means a multiemployer plan defined as such
in Section 3(37) of ERISA to which contributions have been, or were required to
have been, made by Borrower or any ERISA Affiliate and which is covered by Title
IV of ERISA.
20
<PAGE> 25
"Net Proceeds" means either (x) the purchase price (at
foreclosure or otherwise) actually received by Lender from a third party
purchaser with respect to any one or more of the Assets and the Additional
Collateral, as a result of the exercise by the Lender of its rights, powers,
privileges and other remedies after the occurrence of an Event of Default or (y)
in the event that the Lender is the purchaser at foreclosure of any Asset or
Additional Collateral, the higher of (i) the amount of the Lender's credit bid
or (ii) such amount as shall be determined in accordance with applicable law,
and in either case minus all reasonable costs and expenses (including, without
limitation, all attorneys' fees and disbursements and any brokerage fees, if
applicable) incurred by the Lender in connection with the exercise of such
remedies; provided, however, that such costs and expenses shall not be deducted
to the extent such amounts previously have been added to the Indebtedness in
accordance with the terms of the Loan Documents or applicable law.
"Note" means, the note substantially in the form of Exhibit B
hereto, made by Borrower to the Lender pursuant to this Agreement, as such note
may be modified, amended, supplemented or extended.
"Officer's Certificate" means a certificate delivered to the
Lender by the Borrower which is signed by an authorized officer of the Borrower.
"Operating Budget" means, with respect to any Fiscal Year, the
operating budget for the REO Properties and Additional Collateral reflecting the
Borrower's projections of revenues, Property Expenses and Capital Improvement
Costs for such Fiscal Year on an annual and monthly basis and submitted by the
Borrower to the Lender for its approval in accordance with the provisions of
Section 5.1(R)(vi); provided, however, that until the first such Operating
Budget is so submitted and approved pursuant to Section 5.1(R)(vi), Operating
Budget means the budget set forth on Schedule 4.
"Origination Fee" means the fee designated as such in the
Commitment Letter and payable by the Borrower to the Lender on the Closing Date.
"Other Borrowings" means, with respect to the Borrower, without
duplication (but not including the Indebtedness) (i) all indebtedness of the
Borrower for borrowed money or for the deferred purchase price of property or
services, (ii) all indebtedness of the Borrower evidenced by a note, bond,
debenture or similar instrument, (iii) the face amount of all letters of credit
issued for the account of the Borrower and, without duplication, all
unreimbursed amounts drawn thereunder, (iv) all indebtedness of the Borrower
secured by a Lien on any property owned by the Borrower (whether or not such
indebtedness has been assumed), (v) all Contingent Obligations of the Borrower,
and (vi) all payment obligations of the Borrower under any interest rate
protection agreement (including, without limitation, any interest rate swaps,
caps, floors, collars or similar agreements) and similar agreements.
"Parent Liquidity Covenant" has the meaning provided in
Section 5.1(Z)(1).
"Participation" has the meaning provided in Section 5.1(V).
21
<PAGE> 26
"Payment Date" has the meaning provided in Section 2.5.
"Payment Date Statement" has the meaning provided in Section
2.12(d).
"PBGC" means the Pension Benefit Guaranty Corporation
established under ERISA, or any successor thereto.
"Permits" means all licenses, permits, variances and
certificates used in connection with the ownership, operation, use or occupancy
of any REO Property or Additional Collateral (including, without limitation,
business licenses, state health department licenses, licenses to conduct
business and all such other permits, licenses and rights, obtained from any
Governmental Authority or private Person concerning ownership, operation, use or
occupancy of such REO Property or Additional Collateral).
"Permitted Encumbrances" means, with respect to the REO
Properties and the Additional Mortgageable Collateral, collectively,
(i) the Lien created by the Borrower Mortgage or the other
Loan Documents of record,
(ii) all Liens and other matters disclosed on the Title
Insurance Policy concerning the REO Property and the Additional
Mortgageable Collateral,
(iii) Liens, if any, for Impositions imposed by any Governmental
Authority not yet delinquent or being contested in good faith and by
appropriate proceedings in accordance with the Borrower Mortgage,
(iv) Liens of warehousemen, mechanics, materialmen, workers,
repairmen, common carriers, landlords and other similar Liens arising
by operation of law or otherwise, not waived in connection herewith,
for amounts that are not yet due and payable or which are being
diligently contested in good faith by the Borrower by appropriate
proceedings in accordance with the Borrower Mortgage,
(v) attachment or judgment Liens individually or in the
aggregate not in excess of $1,000,000 (exclusive of any amounts (i)
bonded to the reasonable satisfaction of the Lender or (ii) covered by
insurance from an insurance carrier reasonably satisfactory to Lender
as to which the insurance company has not disclaimed or disputed in
writing its obligations for coverage);
(vi) deposits or pledges to secure obligations under workmen's
compensation, social security or similar laws, or under unemployment
insurance;
(vii) deposits or pledges to secure bids, tenders, contracts
(other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds and other obligations of like
nature arising in the ordinary course of business,
22
<PAGE> 27
(viii) rights of existing and future tenants and residents as
tenants only pursuant to Leases,
(ix) Liens permitted pursuant to Section 6.1(C),
(x) zoning restrictions, easements, rights-of-way,
restrictions on use of real property and other similar encumbrances
incurred or entered into in the ordinary course of business which
restrictions or encumbrances do not have a Material Adverse Effect,
(xi) matters shown on the Surveys, and
(xii) Permitted Secured Debt;
and, with respect to the Mortgage Loans, Liens on a Mortgaged Property in
existence on the Closing Date, which Liens do not have a Material Adverse
Effect.
"Permitted Investments" means any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
including those issued by the Lender or its Affiliates:
(i) direct obligations of, or obligations fully guaranteed as
to payment of principal and interest by, (x) the United States or any
agency or instrumentality thereof provided such obligations are backed
by the full faith and credit of the United States of America, or (y)
FHLMC, FNMA, the Federal Farm Credit System or the Federal Home Loan
Banks;
(ii) fully FDIC-insured demand and time deposits in or
certificates of deposit of, or bankers' acceptances issued by, any bank
or trust company, savings and loan association or savings bank;
provided, that the commercial paper or long-term unsecured debt
obligations of such depository institution or trust company have the
highest rating available for such securities by the Rating Agencies;
(iii) repurchase obligations with respect to any security
described in clause (i) above entered into with a depository
institution or trust company (acting as principal) described in clause
(ii) above;
(iv) general obligations of or obligations guaranteed by any
State of the United States or the District of Columbia receiving the
highest long-term unsecured debt rating available for such securities
by the Rating Agencies;
(v) securities bearing interest or sold at a discount that are
issued by any corporation incorporated under the laws of the United
States of America or any State thereof or the District of Columbia and
rated by the Rating Agencies in their highest long-term unsecured
rating categories at the time of such investment or contractual
commitment providing for such investment;
23
<PAGE> 28
(vi) commercial or finance company paper (including both
non-interest-bearing discount obligations and interest-bearing
obligations payable on demand or on a specified date not more than one
year after the date of issuance thereof) that is rated by the Rating
Agencies in their highest short-term unsecured debt rating available at
the time of such investment or contractual commitment providing for
such investment, and is issued by a corporation the outstanding senior
long-term debt obligations of which are then rated by the Rating
Agencies in their highest rating available in their long-term unsecured
debt ratings;
(vii) guaranteed reinvestment agreements acceptable to the
Rating Agencies issued by any bank, insurance company or other
corporation rated in the highest long-term unsecured rating levels
available to such issuers by the Rating Agencies throughout the
duration of such agreements; and
(viii) units of taxable money market funds which funds are
regulated investment companies and seek to maintain a constant net
asset value per share, are rated in the highest rating level available
by the Rating Agencies and have been designated in writing by the
Lender as a Permitted Investment with respect to this definition;
provided, however, that no instrument or security shall be a Permitted
Investment if such instrument or security evidences (x) a right to receive only
interest payments or (y) the right to receive principal and interest payments
derived from an underlying investment at a yield to maturity in excess of 120%
of the yield to maturity at par of such underlying investment.
"Permitted Secured Debt" means, with respect to the Mortgage
Loan designated as "Life Care" on the Asset Schedule, and more specifically the
portion of the related Mortgaged Property constituting the Lakeport Phase II
independent living facility, the mortgage held by Barnett Bank of Pinellas
County, Florida ("Barnett Bank"), securing certain construction financing
provided by Barnett Bank, which mortgage has a first priority Lien on such
Mortgaged Property as of the Closing Date, and the mortgage held by Sun Bank,
National Association, as trustee for the holders of the Phase II Junior Bonds,
which mortgage has a second priority Lien on such Mortgaged Property as of the
Closing Date.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, estate, trust, unincorporated association,
any federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
"Personal Property" means the personal property which either
secures the Mortgage Loans or secured the mortgage loan related to Additional
Mortgageable Collateral which is acquired by the Borrower.
"Plan" means an employee benefit or other plan established or
maintained by the Borrower or any ERISA Affiliate during the five-year period
ended prior to the date of this Agreement or to which the Borrower or any ERISA
Affiliate makes, is obligated to make or has, within the five-year period ended
prior to the date of this Agreement, been required to make
24
<PAGE> 29
contributions and that is covered by Title IV of ERISA or Section 302 of ERISA
or Section 412 of the Code, other than a Multiemployer Plan.
"Post-Closing Items Reserve Sub-Account" has the meaning set
forth in Section 2.17(a).
"Principal Indebtedness" means the principal amount of the Loan
outstanding from time to time.
"Proceeds" shall have the meaning given in the UCC and, in any
event, shall include, without limitation, all proceeds, product, offspring,
rents, profits or receipts, in whatever form, arising from the Collateral.
Without limiting the generality of the foregoing, the term "Proceeds" shall
include:
(i) cash, Instruments and other property received, receivable
or otherwise distributed in respect of or in exchange for any or all of
the Collateral or any REO Property or Additional Collateral;
(ii) the collection, sale, lease, sublease, concession,
exchange, assignment, licensing or other disposition of, or realization
upon, any item or portion of the Collateral or any REO Property or
Additional Collateral (including, without limitation, all claims of the
Borrower against third parties for loss of, damage to, destruction of,
or for proceeds payable under, or unearned premiums with respect to,
policies of insurance in respect of, any Collateral or any REO Property
or Additional Collateral now existing or hereafter arising);
(iii) any and all proceeds of any insurance, indemnity, warranty
or guaranty payable to the Borrower from time to time with respect to
any of the Collateral or any REO Property or Additional Collateral;
(iv) any and all payments (in any form whatsoever) made or due
and payable to the Borrower from time to time in connection with the
requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the Collateral or any REO Property or Additional
Collateral by any Governmental Authority (or any Person acting under
color of Governmental Authority); and
(v) any and all other amounts from time to time paid or
payable under or in connection with any of the Collateral or any REO
Property or Additional Collateral.
"Property Expenses" means, with respect to the REO Properties
and the Additional Mortgageable Collateral, the following costs and expenses
(including, without limitation, as set forth in the Operating Budget), but only
to the extent that they (x) are paid to Persons who are generally in the
business of providing such goods and services, (y) are reasonable for the types
of goods or services provided in the geographical area in which such goods or
services are provided and (z) do not constitute Capital Improvement Costs,
Re-Leasing Costs or Replacement Reserve Costs:
25
<PAGE> 30
(a) Impositions;
(b) insurance premiums for policies of insurance required to
be maintained pursuant to this Agreement or the other Loan Documents;
(c) the cost of all electricity, oil, gas, water, steam, heat,
ventilation, air conditioning and any other energy, utility or similar
item and overtime services;
(d) payments required under contracts for services (including,
without limitation, service contracts for heating, ventilation and air
conditioning systems, elevators, landscape maintenance, pest
extermination, security, furniture, trash removal, answering service
and credit checks);
(e) wages, benefits, payroll taxes, uniforms, the cost of
cleaning supplies, insurance costs and all related expenses for on-site
property management and maintenance personnel (including, without
limitation, housekeeping employees, porters and general repair,
maintenance and security employees);
(f) costs required in connection with the enforcement of any
Lease (including, without limitation, reasonable attorneys' fees,
charges for lock changes and storage and moving expenses for furniture,
fixtures and equipment);
(g) advertising and rent-up expenses (including, without
limitation, leasing services, tenant rent concessions, promotions for
existing and prospective tenants, banners and signs);
(h) cleaning, janitorial service, maintenance and repair
expenses (including, without limitation, for supplies, tools and
equipment);
(i) any expense the total cost of which is passed through to
tenants pursuant to executed Leases so long as the tenants are
obligated to pay any shortfall within one hundred and twenty (120) days
after the end of each Fiscal Year;
(j) legal, accounting, auditing and other professional fees and
expenses incurred in connection with the ownership, leasing and
operation of the REO Properties and the Additional Collateral
(including, without limitation, collection costs and expenses);
(k) permits, licenses and registration fees and costs;
(l) any expense necessary in order to prevent a breach under
a Lease;
(m) any expense necessary in order to prevent or cure a
violation of any applicable Legal Requirements;
(n) costs and expenses of any appraisals, valuations,
surveys, inspections, environmental assessments or market studies;
26
<PAGE> 31
(o) costs and expenses of security and security systems
provided to and/or installed and maintained;
(p) costs of title, UCC, litigation and other searches and
costs of maintaining the Lien of the Borrower Mortgage on any REO
Property or Additional Collateral and the security interest in any
related Collateral;
(q) fees and expenses of property managers contracted with by
the Borrower to perform management, administrative, payroll or other
services in connection with the operation of the REO Properties and the
Additional Collateral;
(r) any other costs and expenses contemplated by the Operating
Budget and/or customarily incurred in connection with operating
properties and businesses similar in type and character;
(s) security deposits which are due and payable to tenants
under the Leases; and
(t) any other category of property expense approved by the
Lender.
"Quarterly Statement" has the meaning set forth in Section
2.12(d).
"Rating Agencies" means at least two of Fitch Investors
Service, L.P., Moody's Investors Service, Inc., Duff & Phelps Credit Rating Co.
and Standard & Poor's Ratings Services.
"Refinancing Fee" means the fee payable by the Borrower to the
Lender on any Payment Date in connection with a voluntary prepayment pursuant to
Section 2.6(a) or a mandatory prepayment pursuant to Section 2.7 in an amount
equal to 1.0% of the Principal Indebtedness that is prepaid or on the Maturity
Date in connection with a repayment pursuant to Section 2.5(a) in an amount
equal to 0.5% of the Principal Indebtedness that is repaid; provided, however,
that the Refinancing Fee shall not apply to:
(a) a mandatory prepayment pursuant to Section 2.7(a) resulting
from any Transfer of an REO Property or Additional Collateral to a
Person that is not an Affiliate of Borrower on an arms-length basis, as
determined by Lender,
(b) a mandatory prepayment pursuant to Section 2.7(a) resulting
from Balloon Payments or any other prepayment in full of a Mortgage
Loan,
(c) while Borrower is not in compliance with the LTV Test, a
mandatory prepayment pursuant to Section 2.7(a) resulting from any
refinancing of any Assets and/or Additional Collateral occurring in
order to achieve compliance with the LTV Test, but only to the extent
of the Required Proceeds plus an amount equal to the lesser of (i)
$5,000,000 and (ii) the aggregate proceeds arising from such
refinancings in excess of the Required Proceeds,
27
<PAGE> 32
(d) the initial $5,000,000 of Principal Indebtedness
voluntarily prepaid pursuant to Section 2.6(a) (other than prepayments
in connection with transactions referred to in clauses (a)-(c) above),
or
(e) repayment of the Loan on the Maturity Date if (1) the
Lender does not offer to extend to Borrower a new loan in a principal
amount at least equal to the outstanding Principal Indebtedness and
with a spread over LIBOR equal to or less than the spread on the Loan
or (2) the Lender is no longer in the business of underwriting and
making commercial mortgage loans;
provided, further, that in the event of either a voluntary prepayment of the
Principal Indebtedness on any Payment Date or the repayment of the Principal
Indebtedness on the Maturity Date with funds obtained from the Lender in
connection with a refinancing of the Assets and Additional Collateral, the
Refinancing Fee calculated as described above shall be credited against any fees
paid in connection with the refinancing and shall remain payable to the extent
such Refinancing Fee exceeds any fees paid in connection with the refinancing.
"Refinancing Loan" has the meaning provided in Section 5.1(X).
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment (including, without limitation, the movement
of Hazardous Substances through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata).
"Release Price" means the Additional Collateral Release Price,
the Mortgage Loan Release Price or the REO Property Release Price, as
applicable.
"Re-Leasing Costs" means TI Costs and Leasing Commissions
projected to be incurred on a monthly basis in connection with renewing existing
Leases or executing new Leases on the REO Properties and the Additional
Mortgageable Collateral designated as the "Industrial Warehouse" on the schedule
of Additional Collateral.
"Remedial Work" has the meaning provided in Section 5.1(D)(i).
"Rent Roll" has the meaning provided in Section 4.3(P).
"Rents" means all income, rents, issues, profits, revenues
(including all oil and gas or other mineral royalties and bonuses), deposits
(other than security deposits) and other benefits from any REO Property or
Additional Collateral. Without limiting the generality of the foregoing, the
"Rents" shall include all receivables and other obligations now existing or
hereafter arising or created out of the sale, lease, sublease, license,
concession or other grant of the right of the use and occupancy of property or
rendering of services by the Borrower (including, without limitation, from the
rental of any office space, retail space, warehouse and manufacturing space or
other space, halls, and offices, and deposits securing reservations of such
space, exhibit or sales space of every kind, license, lease, sublease and
concession fees and rentals and proceeds, if any, from business interruption or
other loss of income insurance relating
28
<PAGE> 33
to the use, enjoyment and occupancy of such REO Property or Additional
Mortgageable Collateral).
"REO Loan Allocation" means the aggregate outstanding Allocated
Loan Amount of the REO Properties.
"REO Property" means, at any time, (x) the Land (or the ground
leasehold estate in the Land), the Improvements and the Equipment (to the extent
the same shall be deemed to be fixtures and owned by the Borrower), and all of
Borrower's rights, titles, interests and estates appurtenant thereto, encumbered
by the Borrower Mortgage (other than the Land, the Improvements and the
Equipment with respect to the Additional Mortgageable Collateral) and (y) any
Mortgaged Property acquired in foreclosure or by deed-in-lieu of foreclosure or
otherwise in the course of servicing the Mortgage Loans, together with any
Improvements thereon and any Personal Property situated thereon.
"REO Property Release Price" means, with respect to any
Transfer of an REO Property, (i) if the Excess Proceeds Test is satisfied, 125%
of the Allocated Loan Amount for such REO Property or (ii) if the Excess
Proceeds Test is not satisfied, the greater of (A) 100% of the Capital Event
Proceeds deposited into the Collection Account in connection with such Transfer
and (B) 125% of the Allocated Loan Amount for such REO Property.
"Replacement Reserve Costs" means costs of replacements and
repairs projected to be incurred on a monthly basis in connection with the REO
Properties and the Additional Mortgageable Collateral.
"Required Proceeds" means the proceeds of a refinancing of one
or more of the Assets and/or Additional Collateral undertaken by Borrower to
reduce the Principal Indebtedness in order to achieve compliance with the LTV
Test, but only to the extent of the proceeds necessary to achieve such
compliance.
"Reserve Account" has the meaning provided in Section 2.17(a).
"Second Extension Date" has the meaning set forth in Section
2.15(b).
"Scheduled Principal Payment Amount" means, on each Payment
Date so long as no Event of Default has occurred and is continuing, the sum of
(a) with respect to the REO Loan Allocation, an amount equal to the monthly
principal payment that would be payable on such Payment Date on a loan in the
amount of the then current REO Loan Allocation, assuming that (i) the interest
rate on such loan was equal to the interest rate on the Loan for the related
Interest Accrual Period, and (ii) such loan was paid in equal monthly
installments of principal and interest sufficient to amortize such loan fully
over a period of 25 years less the number of months from and including the
Closing Date to and including the month of such Payment Date, plus (b) with
respect to the Mortgage Loan Allocation, an amount equal to the greater of (1)
the scheduled principal payments actually received during the related Interest
Accrual Period (except in the case of the initial Interest Accrual Period in
which case during the period from November 1, 1996 to but excluding the initial
Payment Date) (excluding in either such case any Balloon Payments or principal
prepayments) and (2) an amount equal to the monthly principal payment that would
be
29
<PAGE> 34
payable on such Payment Date on a loan in the amount of the then current
Mortgage Loan Allocation, assuming that (A) the interest rate on such loan was
equal to the interest rate on the Loan for the related Interest Accrual Period,
and (B) such loan was paid in equal monthly installments of principal and
interest sufficient to amortize such loan fully over a period of 25 years less
the number of months from and including the Closing Date to and including the
month of such Payment Date; provided, however, that if Borrower is not in
compliance with the LTV Test on such Payment Date, and if the Principal
Indebtedness of the Loan is not greater than the product of the aggregate Asset
Value and 80%, the Scheduled Principal Payment Amount shall be calculated as set
forth above except that in clause (a)(ii) and clause (b)(2)(B), the loan shall
be assumed to amortize fully over 18 years (rather than 25 years).
"Securities Exchange Act of 1934" means the Securities Exchange
Act of 1934, as amended.
"Special Purpose Entity" means a Person, other than an
individual, which (i) is formed or organized solely for the purpose of acquiring
and directly holding an ownership interest in the Assets and the Additional
Collateral, (ii) does not engage in any business unrelated to the Assets and the
Additional Collateral, (iii) does not have any assets other than those related
to its interest in the Assets and the Additional Collateral or any indebtedness
other than as permitted by this Agreement, the Borrower Mortgage or the other
Loan Documents, (iv) has its own separate books and records and has its own
accounts, in each case which are separate and apart from the books and records
and accounts of any other Person, (v) is subject to all of the limitations on
powers set forth in Section 2.18 as of the date of formation of such Special
Purpose Entity and (vi) holds itself out as being a Person separate and apart
from any other Person.
"SPE Borrower" has the meaning set forth in Section 2.18.
"SPE Option" has the meaning set forth in Section 2.18.
"SPE Transfer" has the meaning set forth in Section 2.18.
"Subject Property" has the meaning set forth in Section 4.3.
"Survey" means a certified as-built title survey of an REO
Property or Additional Mortgageable Collateral prepared by a registered
Independent surveyor and in form and content satisfactory to the Lender and the
company issuing the Title Insurance Policy for such REO Property or Additional
Mortgageable Collateral.
"Taking" means a taking or voluntary conveyance during the term
hereof of all or part of an REO Property or Additional Mortgageable Collateral,
or any interest therein or right accruing thereto or use thereof, as the result
of, or in settlement of, any condemnation or other eminent domain proceeding by
any Governmental Authority or a private taking affecting the such REO Property
or Additional Mortgageable Collateral or any portion thereof whether or not the
same shall have actually been commenced.
30
<PAGE> 35
"Tax and Insurance Escrow Sub-Account" has the meaning set
forth in Section 2.17(a).
"TI Costs" means tenant improvement payments, allowances and
other costs incurred by the Borrower in connection with renewing existing Leases
or executing new Leases on the REO Properties and Additional Mortgageable
Collateral.
"Timely Environmental Report" has the meaning set forth in
Section 5.1(E)(iv).
"Title Insurance Policy" means, with respect to each REO
Property and Additional Mortgageable Collateral, a mortgagee's title insurance
policy or policies (a) issued by Lawyer's Title Insurance Corporation or other
title companies satisfactory to the Lender which policy or policies shall be in
form ALTA 1992 (with waiver of arbitration provisions) (with co-insurance or
reinsurance as Lender may require reasonably satisfactory to the Lender), naming
the Lender as the insured party, (b) insuring the Borrower Mortgage as being a
first lien upon the REO Property or Additional Mortgageable Collateral, (c)
showing no encumbrances against such REO Property or Additional Mortgageable
Collateral (whether junior or superior to the Borrower Mortgage) which are not
acceptable to the Lender other than Permitted Encumbrances, (d) in an amount
acceptable to the Lender, and (e) otherwise in form and content acceptable to
the Lender. Such Title Insurance Policy shall include the following endorsements
or affirmative coverages to the extent available in form and substance
reasonably acceptable to the Lender: variable rate endorsement; survey
endorsement; comprehensive endorsement; first loss endorsement; access coverage;
tax parcel coverage; contiguity (if applicable) coverage; and such other
endorsements as the Lender shall reasonably require in order to provide
insurance against specific risks identified by the Lender in connection with the
REO Properties and the Additional Mortgageable Collateral.
"Total Capitalization" shall mean, at any date of
determination, the sum of Debt and book equity of Borrower at such date, each as
reflected in the Borrower's quarterly financial statement.
"Trademark" means the trademark licenses, trademarks, rights in
intellectual property, trade names, service marks and copyrights relating to any
REO Property or Additional Mortgageable Collateral or the license to use
intellectual property granted by the Borrower or other proprietary business
information relating to the Borrower's policies, procedures, manuals and trade
secrets.
"Transaction" means the transaction contemplated by the Loan
Documents.
"Transaction Costs" means all costs and expenses paid or
payable by the Borrower relating to the Transaction (including, without
limitation, appraisal fees, legal fees and accounting fees, the costs of
obtaining Engineering Reports and Environmental Reports, Lender's other
out-of-pocket expenses and any other costs and expenses described in Section
8.23).
"Transfer" means any transfer, sale, assignment or conveyance
of all or any portion of the Assets or the Additional Collateral, as determined
by Lender, and "Transfers" shall have meanings correlative to the foregoing.
31
<PAGE> 36
"UCC" means with respect to any Collateral, the Uniform
Commercial Code as in effect on the date hereof in the state where such
Collateral is located, as amended from time to time; provided, that if by reason
of mandatory provisions of law, the perfection or the effect of perfection or
non-perfection of the security interest in any item or portion of the Collateral
is governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the state where such Collateral is located, "UCC" shall mean the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or
non-perfection.
"UCC Searches" has the meaning specified in Section 3.1(L).
"Use" means, with respect to any Hazardous Substance, the
generation, manufacture, processing, distribution, handling, use, treatment,
recycling or storage of such Hazardous Substance or transportation of such
Hazardous Substance.
"Welfare Plan" means an employee welfare benefit plan as
defined in Section 3(1) of ERISA established or maintained by the Borrower or
any ERISA Affiliate or that covers any current or former employee of the
Borrower or any ERISA Affiliate (with respect to such employee's relationship to
such entities).
ARTICLE II
GENERAL TERMS
Section 2.1. The Loan. (a) Subject to the terms and conditions
of this Agreement, on the Closing Date the Lender shall lend to the Borrower the
Loan Amount. The proceeds of the Loan shall be used solely for the purposes
identified in Section 2.2 hereof. On the Closing Date, upon the satisfaction of
the conditions set forth in Section 3.1, the Lender shall initiate a wire or
other transfer of immediately available funds equal to the Loan Amount, minus
(x) the Commitment Fee and the Origination Fee (net of the unspent due diligence
deposit paid to the Lender by the Borrower pursuant to the Commitment Letter),
minus (y) the fee payable by the Borrower to Chase Securities, Inc. for advisory
services in arranging the Transaction (which fee the Lender shall wire to an
account of Chase Securities, Inc. on the Closing Date) and minus (z) the amount
to be deposited in the Post-Closing Items Reserve Sub-Account pursuant to
Section 2.17(e), to an account designated by the Borrower.
(b) The Loan shall constitute one general obligation of the
Borrower to the Lender and shall be secured by the security interest in and
Liens granted upon all of the Collateral, and by all other security interests
and Liens at any time or times hereafter granted by the Borrower to the Lender
or to the Collateral Agent on behalf of the Lender.
(c) The Lender shall have a one-time right exercisable on or
prior to May 15, 1997 by notice to Borrower in writing to increase or decrease
the Allocated Loan Amount of any or all of the Assets as
32
<PAGE> 37
appropriate in the judgment of the Lender to reflect changes in the relative
values of the Assets. In addition, the Lender shall have the right by notice to
the Borrower in writing to increase or decrease the Allocated Loan Amount of any
or all of the Assets as appropriate in the judgment of the Lender to reflect
changes in the relative values of the Assets (based on an event described in
clause (i) or (ii) below, as the case may be), exercisable if (i) a Lease Event
of Default has occurred and has not been cured and/or (ii) on or before the
first anniversary of the Closing Date, the Borrower shall not have caused the
Lien for unpaid taxes encumbering the Mortgaged Property related to the Mortgage
Loan identified on the Asset Schedule as "Marquardt" as of the Closing Date to
be discharged, paid off or otherwise removed in its entirety.
Section 2.2. Use of Proceeds. Proceeds of the Loan Amount shall
be used for the following purposes: (a) to repay certain indebtedness of
Borrower, to make certain investments and for working capital, (b) to fund the
Post-Closing Items Reserve Sub-Account, (c) to pay to the Lender the Commitment
Fee and the Origination Fee and (d) to pay to counsel to each of the Lender, the
Collateral Agent and the Borrower its respective fees, expenses and
disbursements.
Section 2.3. Security for the Loan. The Note and Borrower's
obligations hereunder and under the other Loan Documents shall be secured by (a)
the Mortgage Loans pursuant to the Collateral Assignments of Mortgage, the
Assignment of Participation Interest and other Loan Documents, (b) the REO
Properties and the Additional Mortgageable Collateral pursuant to the Borrower
Mortgage, (c) the Additional Aircraft Collateral pursuant to the Aircraft
Distribution Assignment, (d) the Hedge Assignment Agreements, if any, (e) the
Contract Assignment, (f) the Marina Ground Lease pursuant to the Assignment of
Rents and Leases, and (g) the security interest and Liens granted in this
Agreement and in the other Loan Documents.
Section 2.4. Borrower's Note. The Borrower's obligation to pay
the principal of and interest on the Loan and all other amounts due under the
Loan Documents shall be evidenced by the Note, duly executed and delivered by
the Borrower on the Closing Date. The Note shall be payable as to principal,
interest and all other amounts due under the Loan Documents, as specified in
this Agreement, with a final maturity on the Maturity Date. The Lender is hereby
authorized to endorse on the schedule attached to the Note (or on a continuation
of such schedule attached to the Note and made a part thereof) an appropriate
notation evidencing the date and amount of each payment of principal, interest
or other amounts due under the Loan Documents, in respect thereof. Such schedule
shall, absent manifest error, constitute prima facie evidence of the accuracy of
the information contained therein. The failure of the Lender to make a notation
on the schedule to the Note as aforesaid shall not affect the obligations of the
Borrower hereunder or under the Note or any other Loan Document in any respect.
At no time shall the aggregate original principal amount of the Note exceed the
Loan Amount.
Section 2.5. Principal and Interest. (a) The Borrower shall pay
to the Lender interest on the Principal Indebtedness of the Loan from the
Closing Date to but excluding the date the Loan shall be paid in full at the
interest rate provided in Section 2.5(b) below. Interest on the Loan shall
accrue on the Principal Indebtedness commencing on the Closing Date and shall be
payable in arrears on December 10, 1996, and on the tenth day of each and every
month thereafter through the month in which the Maturity Date occurs, unless, in
any such case, such day is not a Business Day, in which event such interest
shall be payable on the first Business Day following such date (such date for
any particular month, the "Payment Date"). The Lender shall calculate LIBOR on
each Interest Determination Date for the related Interest Accrual Period and
33
<PAGE> 38
promptly deliver a notice to the Borrower of such rate for such period. The
entire outstanding Principal Indebtedness of the Loan and the Note, together
with all accrued but unpaid interest thereon and all other amounts due under the
Loan Documents, shall be due and payable by the Borrower to the Lender on the
Maturity Date. Interest shall be computed on the basis of a 360 day year and the
actual number of days elapsed.
(b) For the first Interest Accrual Period, the Principal
Indebtedness shall bear interest at a rate of 8.33% per annum. For each Interest
Accrual Period thereafter, the Principal Indebtedness shall bear interest at a
rate per annum equal to LIBOR determined as of the Interest Determination Date
immediately preceding such Interest Accrual Period plus 2.95%.
(c) Principal payments on the Loan shall be made on each
Payment Date in an amount equal to (i) the Scheduled Principal Payment Amount
and (ii) the amount, if any, payable pursuant to clause tenth of Section
2.12(b)(iii).
(d) After an Event of Default has occurred and is continuing,
Borrower shall pay to the Lender interest at the Default Rate on any amount
owing to the Lender not paid when due until such amount is paid in full.
Section 2.6. Voluntary Prepayment. (a) Borrower may voluntarily
prepay the Loan in whole or in part on a Payment Date; provided, however, that,
any such prepayment shall be accompanied by an amount representing all accrued
interest on the portion of the Loan being prepaid and other amounts then due
under the Loan Documents (including, without limitation, the Refinancing Fee, if
any).
(b) In the event of any such voluntary prepayment, the Borrower
shall give the Lender written notice of its intent to prepay, which notice shall
be given at least five Business Days prior to the date upon which prepayment is
to be made and shall specify the Payment Date on which such prepayment is to be
made and the amount of such prepayment (which shall not be less than $1,000,000,
or, if less, the outstanding balance of the Loan). If any such notice is given,
the amount specified in such notice shall be due and payable on the date
specified therein (unless such notice is revoked by the Borrower prior to the
date specified therein in which event the Borrower shall immediately reimburse
the Lender for any costs incurred in connection with the giving of such notice
and its revocation).
Section 2.7. Mandatory Prepayment. (a) So long as both no Event
of Default has occurred and is continuing and the Indebtedness has not been
accelerated, the Borrower may Transfer any Asset or Additional Collateral at any
time; provided, however, that (i) the Borrower shall have given the Lender at
least 10 Business Days' prior written notice of the Transfer and the anticipated
Capital Event Proceeds of such Transfer, (ii) the Transfer shall be (A) to a
Person that is not an Affiliate of Borrower and on an arms-length basis, as
reasonably determined by Lender, or (B) approved in writing by Lender, and (iii)
on the date of the consummation of any such Transfer, the Borrower shall deposit
or cause to be deposited in the Capital Sub-Account of the Collection Account
(1) the Capital Event Proceeds of such Transfer plus (2) an amount equal to the
accrued and unpaid interest through the date of such deposit with respect to the
portion of the Principal Indebtedness to be prepaid with such Capital Event
Proceeds, plus (3) the Borrower Release Price Contribution, if any.
Notwithstanding the foregoing, with respect to the Mortgage
34
<PAGE> 39
Loan designated as "Marquardt" on the Asset Schedule, such Transfer may be of
only a portion of the related Mortgaged Property. Within 5 Business Days' of
Lender's receipt of Borrower's notice of a Transfer, Lender shall deliver to
Borrower an Excess Proceeds Test Notice with respect to such Transfer.
(b) Except as otherwise provided in Section 2.12(e) in the
event Loss Proceeds are required to be made available for restoration pursuant
to the Borrower Mortgage, in the event of a casualty or a Taking of an REO
Property or Additional Mortgageable Collateral, in whole or in part, the
Borrower shall deposit or cause to be deposited all Loss Proceeds received by
the Borrower with respect to such REO Property or Additional Mortgageable
Collateral into the General Sub-Account of the Collection Account in accordance
with Section 2.12(a) and shall, on the Payment Date occurring on or immediately
following the receipt of the Loss Proceeds, apply the Loss Proceeds solely to
make the payments required pursuant to clause third of Section 2.12(b)(i) or
2.12(b)(iii) of this Agreement.
(c) The Borrower shall deposit or cause to be deposited into
the Capital Sub-Account of the Collection Account (A) the Capital Event Proceeds
constituting a Balloon Payment or prepayment or proceeds of a discounted pay-off
of a Mortgage Loan, plus (B) an amount equal to the accrued and unpaid interest
through the date of such deposit, with respect to the portion of the Principal
Indebtedness to be prepaid with such Capital Event Proceeds, plus (C) with
respect to a discounted pay-off of a Mortgage Loan, the Borrower Release Price
Contribution, if any.
(d) Upon payment or prepayment of the Loan in full, Borrower
shall pay to Lender, in addition to the amounts specified in Section 2.6,
Section 2.7 and Section 2.12, as applicable, any other amounts then due and
payable to Lender pursuant to the Loan Documents.
Section 2.8. Application of Payments After Event of Default.
All proceeds relating to any repayments of the Loan after the occurrence and
during the continuance of an Event of Default shall be applied to pay: first,
any reasonable out-of-pocket costs and expenses of the Collateral Agent and the
Lender, in that order, arising as a result of such repayment or Event of
Default; second, any accrued and unpaid interest then payable with respect to
the Loan or the portion thereof being repaid; third, the Refinancing Fee, if
any, due under the terms of this Agreement; fourth, the Default Administration
Fee, if any; and fifth, the outstanding principal amount of the Loan or the
portion thereof being repaid.
Section 2.9. Method and Place of Payment. Except as otherwise
specifically provided herein, all payments and prepayments under this Agreement
and the Note shall be made to the Lender not later than 2:00 p.m., New York City
time, on the date when due and shall be made in lawful money of the United
States of America by wire transfer in federal or other immediately available
funds to its account at Mellon Bank, Pittsburgh, Pennsylvania (ABA No.
043000261, Account No. 117-7107, Reference: Echelon International). Any funds
received by the Lender after such time shall, for all purposes hereof, be deemed
to have been paid on the next succeeding Business Day. The Lender shall notify
the Borrower in writing of any changes in the account to which payments are to
be made. All payments made by the Borrower hereunder, or by the Borrower under
the other Loan Documents, shall be made irrespective of, and without any
deduction for, any set-offs or counterclaims.
35
<PAGE> 40
Section 2.10. Taxes. All payments made by the Borrower under
the Note and this Agreement shall be made free and clear of, and without
deduction or withholding for or on account of, any present or future income,
stamp or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or assessed
by any Governmental Authority (other than taxes imposed on the income of the
Lender).
Section 2.11. Release of Collateral. (a) Notwithstanding any
other provision of this Agreement or any other Loan Document, simultaneously
with a Transfer (including, in the case of the Mortgage Loan designated as
"Marquardt" on the Asset Schedule, a Transfer in part of the related Mortgaged
Property), or a payment in full, of an Asset or Additional Collateral and the
proper application of the related Capital Event Proceeds, accrued and unpaid
interest deposit and Borrower Release Price Contribution, if any, all as
described in Sections 2.7 and 2.12 hereof, the Lender shall release the Lien of
the Borrower Mortgage, the Collateral Assignment of Mortgage or the Aircraft
Distribution Assignment, as applicable, and UCC-1 financing statements and any
other Liens in favor of the Lender relating to such Asset or Additional
Collateral and shall execute all documentation reasonably requested of the
Lender with respect to such release.
(b) If (i) the Lender receives Loss Proceeds with respect to an
Asset or Additional Collateral in the event of a Taking or casualty affecting
100% of such Asset or Additional Collateral as described in Section 2.12(e),
(ii) in the case of casualty only, such Loss Proceeds together with the Borrower
Release Price Contribution, if any, are equal to the applicable Release Price,
and (iii) such Loss Proceeds (and Borrower Release Price Contribution, if any)
are applied to reduce the Indebtedness in accordance with Sections 2.7(b) and
2.12(b)(i) or (iii), the Lender shall simultaneously with such application
release the Lien of the Borrower Mortgage or Collateral Assignment of Mortgage,
as applicable, and UCC-1 financing statements and any other Liens in favor of
the Lender relating to the such Asset or Additional Collateral and shall execute
all documentation reasonably requested of the Lender with respect to such
release; provided, that in the case of a casualty only, the Lender shall not
have any obligation to release its Lien unless and until it has received the
payment of the Principal Indebtedness in an amount equal to the applicable
Release Price.
(c) Upon repayment of the Loan and all other amounts due
hereunder and under the Loan Documents in full in accordance with the terms
hereof and thereof, the Lender shall, as promptly as possible after such
payment, release its Liens with respect to all Collateral.
Section 2.12. Central Cash Management.
(a) Collection Account; Deposits to and Withdrawals from the
Collection Account. (i) On or before the Closing Date, the Borrower shall
establish and maintain with Collateral Agent, as collection account bank (each
such bank or other financial institution at which the Collection Account may be
established and maintained, the "Collection Account Bank") an account with a
separate and unique identification number and entitled "LaSalle National Bank
(as Collateral Agent for Salomon Brothers Realty Corp.) pursuant to a Loan
Agreement dated as of November 5, 1996 among Echelon International Corporation,
Salomon Brothers Realty Corp. and LaSalle National Bank, as such Collateral
Agent" (the "Collection Account"). The Collection Account shall be an Eligible
Account and shall be comprised of two sub-accounts: the "General Sub-Account"
and the "Capital Sub-Account".
36
<PAGE> 41
(ii) So long as (x) both no Event of Default shall have
occurred and be continuing and the Indebtedness has not been accelerated and (y)
the Borrower shall be in compliance with the LTV Test:
(a) the Borrower shall deposit in the General
Sub-Account not later than the close of business on the Business Day
prior to each Payment Date, funds sufficient to pay (1) the interest
then due and payable on the Note for such Interest Accrual Period, (2)
the Scheduled Principal Payment Amount and (3) any other amounts under
this Agreement, the Note or the Loan Documents due on such Payment
Date, and
(b) the Borrower shall deposit directly into the Capital
Sub-Account the Capital Event Proceeds resulting from the consummation
of any Transfer or the Balloon Payment, prepayment or discounted
pay-off of any Mortgage Loan and shall deposit in the Capital
Sub-Account not later than the close of business on the Business Day
prior to the Business Day on which such Capital Event Proceeds are to
be applied to prepay the Principal Indebtedness (1) an amount equal to
the accrued and unpaid interest with respect to the portion of the
Principal Indebtedness to be prepaid with such Capital Event Proceeds
through the date of such prepayment of the Principal Indebtedness and
(2) if applicable, any Borrower Release Price Contribution due in
connection with any such Transfer or discounted pay-off.
(iii) Upon the Lender's delivery to the Borrower and the
Collateral Agent of an LTV Notice (and, in such event, until the Borrower shall
be in compliance with the LTV Test) or upon the occurrence and during the
continuance of an Event of Default and the acceleration of the Indebtedness, the
Borrower shall deposit:
(A) in the General Sub-Account, (1) scheduled payments
of interest and principal on the Mortgage Loans, (2) any distributions
from the Joint Venture to which the Borrower is entitled and (3) the
Rents and Money received from Accounts or under Leases and derived from
the REO Property and the Additional Mortgageable Collateral and all
Proceeds thereof (other than Capital Event Proceeds), in each case no
later than the Business Day following collection and receipt thereof;
and
(B) in the Capital Sub-Account, (1) simultaneously with
the consummation of any Transfer or the receipt of any Balloon Payment
or prepayment of any Mortgage Loan giving rise to Capital Event
Proceeds, all such Capital Event Proceeds plus (2) not later than the
close of business on the Business Day prior to the Business Day on
which such Capital Event Proceeds are to be applied to prepay the
Principal Indebtedness, an amount equal to the accrued and unpaid
interest with respect to the portion of the Principal Indebtedness to
be prepaid with such Capital Event Proceeds through the date of such
prepayment of the Principal Indebtedness plus (3) if applicable, any
Borrower Release Price Contribution due in connection with any such
Transfer, Balloon Payment or prepayment.
So long as the Collateral Agent has not received written notice from the Lender
that an Event of Default has occurred and is continuing and the Indebtedness has
been accelerated, the Collateral Agent shall distribute such funds on deposit in
the Collection Account in accordance with
37
<PAGE> 42
Section 2.12(b)(iii). After the Collateral Agent has received written notice
from the Lender that an Event of Default has occurred and is continuing and the
Indebtedness has been accelerated,
(w) all Rents and Money received from Accounts or under
Leases and derived from the Assets and the Additional Collateral and
all Proceeds thereof shall be payable to the Lender or as otherwise
directed by the Lender,
(x) the Lender shall make deposits, or cause deposits to
be made, of such Rents, Money and Proceeds to the Collection Account,
and the Borrower shall cooperate with the Lender in the making of such
deposits or causing such deposits to be made,
(y) the Borrower shall not have any right to make any
withdrawals from the Collection Account without the prior written
consent of the Lender, and
(z) Proceeds on deposit in the Collection Account may be
applied by the Collateral Agent on behalf of the Lender for the payment
of the Indebtedness pursuant to Section 2.8 of this Agreement.
(b) Distribution of Cash. (i) So long as (x) both no Event of
Default shall have occurred and be continuing and the Indebtedness has not been
accelerated and (y) the Borrower shall be in compliance with the LTV Test, on
each Payment Date, the Collateral Agent shall withdraw the funds on deposit in
the General Sub-Account on such Payment Date, and shall apply such funds, in
each case to the extent of the amounts set forth in the related Payment Date
Statement delivered by Borrower, as follows:
first, to the payment of the fees of the Collateral Agent
payable pursuant to the Fee Letter and of any indemnification to which
an Indemnified Party is entitled pursuant to Sections 5.1(I) and
5.1(J);
second, to the payment to the Lender of the interest then due
and payable on the Note with respect to the related Interest Accrual
Period and the Refinancing Fee, if any, and Extension Fee, if any; and
third, to the payment to the Lender of the Principal
Indebtedness in an amount equal to the Scheduled Principal Payment
Amount then due and payable on the Note for such Payment Date, and any
additional amount to which the Lender is entitled pursuant to Section
2.7(b) of this Agreement.
(ii) So long as (x) both no Event of Default shall have
occurred and be continuing and the Indebtedness has not been accelerated and (y)
the Borrower shall be in compliance with the LTV Test, on the Business Day on
which any Capital Event Proceeds are deposited in the Capital Sub-Account, the
Collateral Agent shall apply such funds, together with additional funds of the
Borrower necessary to make the payments described below, as follows:
first, to the payment to Lender of the Principal Indebtedness
in an amount equal to the applicable Release Price (unless the funds in
the Capital Sub-Account arise (1) from a partial prepayment of a
Mortgage Loan, in which event in an amount equal to the
38
<PAGE> 43
amount of such partial prepayment or (2) from a Transfer of a
portion of the Mortgaged Property related to the Mortgage Loan
designated as "Marquardt" on the Asset Schedule in which event in an
amount equal to the entire Capital Event Proceeds of such Transfer, in
each case until the Lender has received aggregate payments of the
Principal Indebtedness from partial prepayments and Transfers of the
applicable Mortgage Loan in an amount equal to the related applicable
Release Price), in each case together with the payment of accrued and
unpaid interest on the amount of the Principal Indebtedness being
prepaid; and
second, subject to the satisfaction of the Excess Proceeds
Test, to Borrower in an amount equal to Excess Proceeds.
(iii) During any period that the Borrower is not in compliance
with the LTV Test, on each Payment Date, the Collateral Agent shall withdraw an
amount equal to the collected funds on deposit in the Collection Account as of
the close of business on the last Business Day of the immediately preceding
Collection Period, and shall apply such funds, in each case to the extent of the
amounts set forth in the related Payment Date Statement delivered by the
Borrower, as follows:
first, to the payment of the fees of the Collateral Agent
payable pursuant to the Fee Letter;
second, to the payment of any indemnification to which an
Indemnified Party is entitled pursuant to Sections 5.1(I) and 5.1(J);
third, to the payment to the Lender of the interest then due
and payable on the Note with respect to the related Interest Accrual
Period and the Refinancing Fee and Extension Fee, if any;
fourth, to the payment to the Lender of the Principal
Indebtedness in an amount equal to the Scheduled Principal Payment
Amount then due and payable on the Note for such Payment Date, and any
additional amount to which Lender is entitled pursuant to Section
2.7(b) of this Agreement;
fifth, to the Expense Account in the amount described in
Section 2.17(f);
sixth, to the Tax and Insurance Escrow Sub-Account in an amount
equal to the portion of the annual Basic Carrying Costs with respect to
the REO Properties projected in the then-current Operating Budget;
seventh, to the Interest Reserve Sub-Account in the amount
required pursuant to Section 2.17(c);
eighth, with respect to the REO Properties and the Additional
Mortgageable Collateral, to the Capital Expenditure Reserve Sub-Account
in an amount equal to the Capital Expenditure Reserve
Amount;
39
<PAGE> 44
ninth, with respect to the REO Properties and the Additional
Collateral, to the extent of Capital Improvement Costs not provided for
in the Capital Expenditure Reserve Sub-Account, to Borrower in an
amount, if any, for immediate Capital Improvement Costs as approved by
Lender in writing; and
tenth, to the Borrower unless the Loan to Value Ratio is
greater than 80%, in which event, to the repayment of the Principal
Indebtedness until the Loan to Value Ratio is reduced below 80%.
(iv) Notwithstanding anything in this Agreement to the
contrary, if Lender delivers an LTV Notice to Borrower, and if within ten (10)
Business Days of Borrower's receipt of such LTV Notice, Borrower shall deliver
to Lender a notice stating that Borrower requests the determination of the fair
market value of any one or more of the REO Properties or Mortgaged Properties by
an Appraiser selected by Lender, then the following procedure shall apply:
(1) Lender shall direct the scope and the process of
determining such fair market value by the Appraiser which
process shall employ methods which are customary at such time
for the determination of the fair market value of property or
assets comparable to the Asset(s) to be valued;
(2) Borrower shall pay all fees and disbursements of
such Appraiser and shall cooperate with the Appraiser and
Lender in the process of determining such fair market value(s)
(including, without limitation, by making available to the
Appraiser any information reasonably requested from Borrower
and by assisting the Appraiser and Lender in determining such
fair market value(s) within ten (10) Business Days of
Borrower's notice);
(3) during the period of the Appraiser's determination
of the fair market value(s), Sections 2.12(a)(iii) and
2.12(b)(iii) shall control with respect to the collection and
application of Money; provided, that no amounts shall be
released from the Collection Account with respect to the
Scheduled Principal Payment Amount or the payment, if any, to
be made pursuant to clause tenth of Section 2.12(b)(iii), in
each case, to the extent such amounts, or any portion thereof,
would not be payable to Lender if Borrower were in compliance
with the LTV Test;
(4) if, using the Asset Values determined pursuant to
the Appraisal delivered by the Appraiser for the REO Properties
or Mortgaged Properties in question and otherwise using the
Asset Values determined by Lender, the Borrower satisfies the
LTV Test, then the entire amounts in the Collection Account,
Expense Account and Reserve Account (including any interest
thereon) shall be released to Borrower other than the amount of
any Capital Event Proceeds and Loss Proceeds which shall be
applied to the Principal Indebtedness; and
(5) if, using the Asset Values determined pursuant to
the Appraisal delivered by the Appraiser for the REO
Properties or Mortgaged Properties in
40
<PAGE> 45
question and otherwise using the Asset Values determined by
Lender, the Borrower remains out of compliance with the LTV
Test, then the amounts in the Collection Account shall be
collected and applied as described in Sections 2.12(a)(iii) and
2.12(b)(iii) until the Borrower is brought into compliance with
the LTV Test (at which time the entire amounts in the
Collection Account, Expense Account and Reserve Account
(including any interest thereon) shall be released to Borrower
other than the amount of any Capital Event Proceeds and Loss
Proceeds which shall be applied to the Principal Indebtedness).
(v) Notwithstanding anything in this Agreement to the
contrary, if Lender delivers an Excess Proceeds Test Notice to Borrower, and if
within ten (10) Business Days of Borrower's receipt of such Excess Proceeds Test
Notice, Borrower shall deliver to Lender a written notice stating that Borrower
requests the determination of the fair market value of any one or more of the
REO Properties or Mortgaged Properties by an Appraiser selected by Lender, then
the following procedure shall apply:
(1) Lender shall direct the scope and the process of
determining such fair market value by the Appraiser which
process shall employ methods which are customary at such time
for the determination of the fair market value of property or
assets comparable to the Asset(s) to be valued;
(2) Borrower shall pay all fees and disbursements of
such Appraiser and shall cooperate with the Appraiser and
Lender in the process of determining such fair market value(s)
(including, without limitation, by making available to the
Appraiser any information reasonably requested from Borrower
and by assisting the Appraiser and Lender in determining such
fair market value(s) within ten (10) Business Days of
Borrower's notice);
(3) during the period of the Appraiser's determination
of the fair market value(s), no Excess Proceeds shall be
released from the Capital Sub-Account;
(4) if, using the Asset Values determined pursuant to
the Appraisal delivered by the Appraiser for the REO Properties
or Mortgaged Properties in question and otherwise using the
Asset Values determined by Lender, the Borrower satisfies the
Excess Proceeds Test, then such Excess Proceeds shall be
released from the Capital Sub-Account and applied to the
Principal Indebtedness or to pay the Excess Proceeds to
Borrower in accordance with Section 2.12(b)(ii); and
(5) If, using the Asset Values determined pursuant to
the Appraisal delivered by the Appraiser for the REO Properties
or Mortgaged Properties in question and otherwise using the
Asset Values determined by Lender, the Borrower does not
satisfy the Excess Proceeds Test, then such Excess Proceeds
shall be released from the Capital Sub-Account and applied
solely to the Principal Indebtedness in accordance with Section
2.12(b)(ii).
41
<PAGE> 46
(c) Permitted Investments. The Borrower shall direct the
Collateral Agent in writing to invest and reinvest any balance in the Collection
Account, from time to time in Permitted Investments; provided, however, that,
(i) the maturity of the Permitted Investments on deposit therein shall be at the
discretion of the Borrower, but in any event no later than the Business Day
immediately preceding the date on which such funds are required to be withdrawn
therefrom pursuant to Section 2.12(b) of this Agreement, (ii) after the
Collateral Agent has received written notice from the Lender that an Event of
Default has occurred and is continuing, the Borrower shall not have any right to
direct investment of the balance in the Collection Account, (iii) all such
Permitted Investments shall be held in the name of the Collateral Agent on
behalf of the Collection Account, and (iv) if the Borrower shall fail to direct
the Collateral Agent with respect to Permitted Investments, the Collateral Agent
shall invest and reinvest any balance in the Collection Account in the type of
Permitted Investment described in clause (viii) of the definition of "Permitted
Investments". Lender and Collateral Agent shall have no liability for any loss
in investments of funds in the Collection Account that are invested in Permitted
Investments (unless, in the case of the Collateral Agent, invested contrary to
Lender's direction) and no such loss shall affect the Borrower's obligation to
fund, or liability for funding, the Collection Account. The Borrower shall
include all earnings on the Collection Account as income of the Borrower for
federal and applicable state tax purposes.
(d) Monthly, Quarterly and Payment Date Statements. With
respect to each Collection Period during any period in which the Borrower is not
in compliance with the LTV Test, the Borrower shall cause to be prepared and
delivered to the Lender a statement (each, a "Monthly Statement") no later than
five Business Days after the end of such Collection Period setting forth the
aggregate deposits to and withdrawals from the Collection Account and the
opening and closing balances in such account. With respect to each Payment Date
and the related Collection Period and Interest Accrual Period, the Borrower
shall prepare and deliver, or shall cause to be prepared and delivered to the
Collateral Agent and the Lender, a statement (each, a "Payment Date Statement")
no later than the second Business Day prior to such Payment Date with respect to
each of the items below, setting forth the following:
(i) if the Borrower is not in compliance with the LTV Test,
the aggregate deposits to the Collection Account during the related
Collection Period for each category of deposits under this Agreement
and the opening and closing balances in the Collection Account;
(ii) the amount of interest then due and payable on the Note
with respect to the Interest Accrual Period (including the applicable
number of days and interest rate which were applied in determining such
amount);
(iii) the amount of the Refinancing Fee, if any, then due and
payable;
(iv) the amount of the Extension Fee, if any, then due and
payable;
(v) the amount of any fees and expenses of the Collateral
Agent pursuant to the Fee Letter and any indemnification to which an
Indemnified Party is entitled under this Agreement;
42
<PAGE> 47
(vi) the following information with respect to the Principal
Indebtedness in a format acceptable to Lender: (1) the Principal
Indebtedness as of the preceding Payment Date, (2) the Scheduled
Principal Payment Amount payable to the Lender pursuant to Section
2.12(b) on such Payment Date, (3) any other principal paid to the
Lender pursuant to Section 2.12(b)(ii) since the prior Payment Date and
payable to the Lender pursuant to clause tenth of Section 2.12(b)(iii)
on the current Payment Date, (4) the Principal Indebtedness on the
current Payment Date (taking into account such payments) and, (5) the
total Allocated Loan Amount as of the prior Payment Date, any changes
in Allocated Loan Amount of each Asset since the prior Payment Date,
any changes in Allocated Loan Amount of each Asset on the current
Payment Date, and the final Allocated Loan Amount of each Asset on the
current Payment Date;
(vii) if the Borrower is not in compliance with the LTV Test,
the amounts, if any, to be deposited in the Expense Account and the
Reserve Account;
(viii) the amount payable to the Borrower, if any, pursuant to
Section 2.12(b); and
(ix) a cash flow report with respect to the related Collection
Period in a format acceptable to Lender describing (1) on a Mortgage
Loan-by-Mortgage Loan basis, the monthly principal collections,
interest collections, total principal and interest collections, and
prior month and current month unpaid principal balance, (2) on the
basis of each individual REO Property or item of Additional
Mortgageable Collateral, the related income, Property Expenses, Capital
Improvement Costs, TI Costs, Leasing Commissions and net operating
income, (3) with respect to the Additional Aircraft Collateral, the
related lease payments received by the Joint Venture and (4) the total
cash flow resulting from the preceding clauses (1), (2) and (3);
(x) a liquidation activity report in a format acceptable to
Lender describing with respect to each Asset or Additional Collateral
that has been the subject of a Transfer or other liquidation since the
prior Payment Date, the related Capital Event Proceeds or other
proceeds, the Excess Proceeds, if any, and the applicable Release
Price; and
(xi) a summary report of Lease modifications and similar
proposals with respect to the REO Property and Additional Mortgageable
Collateral during the related Collection Period.
The Payment Date Statement shall be substantially in the form attached hereto as
Schedule 7; provided, however, that the Lender may request format modifications
and reasonable expansion of the data set forth therein from time to time after
the Closing Date. Concurrently with the delivery of the quarterly financial
statements as required under Section 5.1(R)(iii), the Borrower shall prepare and
deliver, or shall cause to be prepared and delivered, to the Collateral Agent
and the Lender a statement (each, a "Quarterly Statement") in form and substance
satisfactory to the Lender, setting forth with respect to each of the REO
Properties and the Additional Mortgageable Collateral and, to the extent
received from the Mortgagors, each of the Mortgaged Properties:
43
<PAGE> 48
(i) an operating statement detailing (x) the historic accrued
operating revenues and the historic accrued operating expenses, in each
case, with respect to such property during the twelve month period
ending on the last day of the month in which such calculation is being
made in the preceding year, (y) the accrued operating revenues, the
accrued operating expenses and the actual TI Costs and Leasing
Commissions paid, in each case, with respect to such property during
the most recent calendar quarter (or, in the case of the initial
Quarterly Statement, the most recent four calendar quarters) and (z) if
the Borrower is not in compliance with the LTV Test, a categorized list
of Property Expenses on a line-by-line basis, Capital Improvement
Costs, Re-Leasing Costs and Replacement Reserve Costs paid or to be
paid or reimbursed or to be reimbursed for the REO Properties and the
Additional Mortgageable Collateral with respect to such quarter and, if
the Borrower is not in compliance with the LTV Test, the amounts
related to such Property Expenses, Capital Improvement Costs,
Re-Leasing Costs and Replacement Reserve Costs that have been withdrawn
from the Expense Account and the Reserve Account during such Collection
Period;
(ii) a current property rent roll (by property and by tenant)
and occupancy level report (expressing the level as a percentage based
upon rentable square footage) and a list of any tenants included on
such rent roll in default;
(iii) for any Leases entered into by the Borrower since the
delivery of the prior statement (or, in the case of the initial
statement, since the Closing Date) with a new or renewal tenant, any
free rent in connection with such Leases; and
(iv) any additional information reasonably requested by the
Lender.
(e) Loss Proceeds. In the event of a casualty or Taking with
respect to any REO Property or the Additional Mortgageable Collateral, unless
pursuant to the Mortgage the Loss Proceeds are to be made available to the
Borrower for restoration, all Loss Proceeds shall be paid directly to the
General Sub-Account of the Collection Account to satisfy the requirements of
Section 2.7(b). If the Loss Proceeds may be made available for restoration
pursuant to the Mortgage and the Borrower elects to restore the related REO
Property or Additional Mortgageable Collateral, such Loss Proceeds shall be held
by the Collateral Agent in a segregated interest-bearing escrow account in the
name of the Collateral Agent on behalf of the Lender to be withdrawn by the
Collateral Agent for delivery to the Borrower from time to time to pay
restoration costs pursuant to a schedule reasonably acceptable to the Lender and
the Borrower. If any Loss Proceeds are received by the Borrower, such Loss
Proceeds shall be received in trust for the Lender, shall be segregated from
other funds of the Borrower, and shall be forthwith paid to the Collateral Agent
to the extent necessary to comply with this Agreement.
(f) The Collateral Agent's Reliance. The Collateral Agent may
rely and shall be protected in acting or refraining from acting upon any written
notice, instruction or request furnished to it hereunder and believed by it to
be genuine and to have been signed or presented by the proper party or parties.
The Collateral Agent may rely on notice from the Lender as to the occurrence and
continuance of an Event of Default, without further written notice by the Lender
to the contrary.
44
<PAGE> 49
Section 2.13. Security Agreement. (a) Pledge of Accounts. To
secure the full and punctual payment and performance of all of the Indebtedness,
the Borrower hereby assigns, conveys, pledges and transfers to the Collateral
Agent on behalf of the Lender, and grants a first and continuing security
interest in and to, the following property, whether now owned or existing or
hereafter acquired or arising and regardless of where located (collectively, the
"Account Collateral"):
(i) all of the Borrower's right, title and interest in the
Collection Account, the Reserve Account and the Expense Account and all
Money and Permitted Investments, if any, from time to time deposited or
held in the Collection Account, Reserve Account and Expense Account;
(ii) all interest, dividends, Money, Instruments and other
property from time to time received, receivable or otherwise payable in
respect of, or in exchange for, any of the foregoing until such time as
such items are disbursed from the Collection Account, Reserve Account
or Expense Account; and
(iii) to the extent not covered by clause (i) or (ii) above,
all Proceeds of any or all of the foregoing.
(b) Covenants. Each of the Collection Account, the Reserve
Account and the Expense Account shall be subject to such applicable laws, and
such applicable regulations of the Board of Governors of the Federal Reserve
System and of any other banking authority or Governmental Authority, as may now
or hereafter be in effect, and to the rules, regulations and procedures of the
Collateral Agent relating to demand deposit accounts from time to time in
effect.
(c) Financing Statements; Further Assurances. On the Closing
Date, the Borrower will execute and deliver to the Lender for filing a financing
statement or statements in connection with the Account Collateral in the form
required to properly perfect the Collateral Agent's security interest on behalf
of the Lender in the Account Collateral to the extent that it may be perfected
by such a filing. From time to time, at the expense of the Borrower, the
Borrower shall promptly execute and deliver all further instruments, and take
all further action, that the Lender may reasonably request, in order to perfect
and protect the pledge and security interest granted or purported to be granted
hereby, or to enable the Collateral Agent to exercise and enforce the Collateral
Agent's rights and remedies hereunder with respect to, any Account Collateral.
The Collateral Agent shall not be responsible for the determination of the
financing statements and other instruments necessary to perfect such security
interest or for the filing of such financing statements and other instruments at
the locations necessary to perfect such security interest and shall be entitled
to rely on an opinion of counsel to the Borrower as to perfection of such
security interest.
(d) Transfers and Other Liens. The Borrower shall not sell or
otherwise dispose of any of the Account Collateral other than pursuant to the
terms hereof, or create or permit to exist any Lien upon or with respect to all
or any of the Account Collateral, except for the Lien granted to the Collateral
Agent under this Agreement.
45
<PAGE> 50
(e) No Waiver. Every right and remedy granted to the Collateral
Agent under this Agreement or by law may be exercised by the Collateral Agent at
any time and from time to time, and as often as the Collateral Agent may deem it
expedient. Any and all of the Collateral Agent's rights with respect to the
pledge of and security interest in the Account Collateral granted hereunder
shall continue unimpaired, and the Borrower shall be and remain obligated in
accordance with the terms hereof, notwithstanding (i) any proceeding of the
Borrower under the United States Bankruptcy Code or any bankruptcy, insolvency
or reorganization laws or statutes of any state, (ii) the release or
substitution of Account Collateral at any time, or of any rights or interests
therein or (iii) any delay, extension of time, renewal, compromise or other
indulgence granted by the Collateral Agent in the event of any Default with
respect to the Account Collateral or otherwise hereunder. No delay or extension
of time by the Collateral Agent in exercising any power of sale, option or other
right or remedy hereunder, and no notice or demand which may be given to or made
upon the Borrower by the Collateral Agent, shall constitute a waiver thereof, or
limit, impair or prejudice the Collateral Agent's right, without notice or
demand, to take any action against the Borrower or to exercise any other power
of sale, option or any other right or remedy.
(f) Collateral Agent Appointed Attorney-In-Fact. The Borrower
hereby irrevocably constitutes and appoints the Collateral Agent as the
Borrower's true and lawful attorney-in-fact, with full power of substitution, at
any time after the occurrence and during the continuation of an Event of
Default, to execute, acknowledge and deliver any instruments and to exercise and
enforce every right, power, remedy, option and privilege of the Borrower with
respect to the Account Collateral, and do in the name, place and stead of the
Borrower, all such acts, things and deeds for and on behalf of and in the name
of the Borrower with respect to the Account Collateral, which the Borrower could
or might do or which the Lender may deem necessary or desirable to more fully
vest in the Collateral Agent the rights and remedies provided for herein with
respect to the Account Collateral and to accomplish the purposes of this
Agreement. The foregoing powers of attorney are irrevocable and coupled with an
interest.
(g) Continuing Security Interest; Termination. This Section
2.13 shall create a continuing pledge of and security interest in the Account
Collateral and shall remain in full force and effect until payment in full by
the Borrower of the Indebtedness. Upon payment in full by the Borrower of the
Indebtedness, the Borrower shall be entitled to the return, upon its request and
at its expense, of such of the Account Collateral as shall not have been sold or
otherwise applied pursuant to the terms hereof, and, upon written notification
by the Lender to the Collateral Agent that the Indebtedness has been paid in
full, the Collateral Agent shall release all Money held in any account held by
the Collateral Agent and shall execute such instruments and documents as may be
reasonably requested by the Borrower to evidence such termination and the
release of the pledge and lien hereof; provided, however, that the Borrower
shall pay on demand all of the Collateral Agent's expenses in connection
therewith (including reasonable attorneys' fees and disbursements).
(h) Right of Set-off. The Collateral Agent waives any and all
rights it may have at law or otherwise to set off or make any claim against the
Account Collateral, except for the payment of the Collateral Agent's fees and
expenses (including the reasonable fees and disbursements of the Collateral
Agent's counsel) for the maintenance of the Account Collateral.
46
<PAGE> 51
Section 2.14. Mortgage Recording Taxes. The Lien to be created
by the Borrower Mortgage is intended to encumber the REO Property or Additional
Mortgageable Collateral described therein in an amount equal to the Loan Amount.
On the Closing Date, the Borrower shall, contemporaneously with filing the
Borrower Mortgage, pay all state, county and municipal recording and all other
taxes imposed upon the execution and recordation of the Borrower Mortgage.
Section 2.15. Extension Options. (a) Not later than the
September, 1999 Payment Date, Borrower, at its option, may notify the Lender in
writing that Borrower desires to extend the Maturity Date of the Loan to the
Payment Date in November, 2000 from the Payment Date in November, 1999 (the
"First Extension Date"). The Maturity Date shall be extended pursuant to
Borrower's request, provided that the following conditions are satisfied as of
the First Extension Date: (i) the Borrower shall have paid to the Lender the
Extension Fee, (ii) no Event of Default shall have occurred and be continuing,
(iii) the Lender shall not have notified the Borrower that the Borrower does not
meet the LTV Test on or prior to the October, 1999 Payment Date, and (iv) if
required by Lender, Borrower shall have entered into an Extension Hedge
Agreement and delivered to Lender a Hedge Assignment Agreement with respect
thereto.
(b) Not later than the September, 2000 Payment Date, Borrower,
at its option, may notify the Lender in writing that Borrower desires to extend
the Maturity Date of the Loan to the Payment Date in November, 2001 from the
Payment Date in November, 2000 (the "Second Extension Date"). The Maturity Date
shall be extended pursuant to Borrower's request, provided that the following
conditions are satisfied as of the Second Extension Date: (i) the Borrower shall
have paid to the Lender the Extension Fee, (ii) no Event of Default shall have
occurred and be continuing, (iii) the Lender shall not have notified the
Borrower that the Borrower does not meet the LTV Test on or prior to the
October, 2000 Payment Date, and (iv) if required by Lender, Borrower shall have
entered into an Extension Hedge Agreement and delivered to Lender a Hedge
Assignment Agreement with respect thereto.
Section 2.16. General Collateral Agent Provisions.
(a) Appointment. The Lender hereby designates and appoints
LaSalle National Bank, as the Collateral Agent of the Lender under this
Agreement and authorizes LaSalle National Bank, as the Collateral Agent for the
Lender, to take such action on its behalf under the provisions of this Agreement
and to exercise such powers and perform such duties as are expressly delegated
to the Collateral Agent by the terms of this Agreement and the Custodial
Agreement, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Collateral Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with the Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Collateral Agent.
(b) Collateral Agent's Right to Perform. If the Borrower fails
to perform any covenant or obligation contained herein after the expiration of
any applicable notice and cure periods and such failure shall continue for a
period of five Business Days after the Borrower's receipt of written notice
thereof from the Collateral Agent, the Collateral Agent may, but shall
47
<PAGE> 52
have no obligation to, itself perform, or cause performance of, such covenant or
obligation, and the reasonable fees and expenses of the Collateral Agent
incurred in connection therewith shall be payable by the Borrower to the
Collateral Agent upon demand. Notwithstanding the foregoing, the Collateral
Agent shall have no obligation to send written notice to the Borrower of any
such failure unless directed in writing to do so by the Lender, except that the
Collateral Agent shall not have the right set forth in this Section 2.16(b) to
perform unless such written notice has been sent to the Borrower.
(c) Standard of Care. Beyond the exercise of reasonable care in
the custody or disbursements thereof and the duty to act in accordance with the
terms of this Agreement, the Collateral Agent shall not have any duty as to any
Account Collateral or any income thereon in its possession or control or in the
possession or control of any agents for, or of the Collateral Agent, or the
preservation of rights against any Person or otherwise with respect thereto. The
Collateral Agent shall be deemed to have exercised reasonable care in the
custody of the Account Collateral in its possession if the Account Collateral is
accorded treatment in accordance with the Accepted Practices.
(d) Exculpatory Provisions. Neither the Collateral Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be responsible in any manner to the Lender for any recitals,
statements, representations or warranties made by the Borrower or any officer
thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Collateral Agent under or in connection with, this Agreement
or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement, the Note or any
other Loan Document or for any failure of the Borrower to perform its
obligations hereunder or thereunder. The Collateral Agent shall not be under any
obligation to the Lender to ascertain or to inquire as to the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the properties, books or records of the Borrower. The Collateral Agent
shall not be required to take any discretionary actions hereunder except at the
written direction of the Borrower and/or the Lender, it being understood and
agreed that the Collateral Agent's duties hereunder shall be wholly ministerial
in nature and the Collateral Agent shall not be responsible for calculating any
financial ratios or generating any reports for the Lender. The Collateral Agent
shall not be under any obligation or duty to perform any act which, in the
Collateral Agent's sole reasonable judgment, could involve it in expense or
liability or to institute or defend any suit in respect hereof, or to advance
any of its own monies, unless the Lender or the Borrower, as the case may be,
shall have offered to the Collateral Agent reasonable security or indemnity
against such expense, liability, suit or advance.
(e) Indemnification. The Borrower shall indemnify and hold the
Collateral Agent, and its agents, employees and officers harmless from and
against any loss, cost or damage (including, without limitation, reasonable
attorneys' fees and disbursements) incurred by the Collateral Agent in
connection with the transactions contemplated hereby, excluding any loss, cost
or damage arising as a result of Collateral Agent's failure to adopt and follow
Accepted Practices, bad faith, willful misconduct or violation of applicable
law. The indemnification set forth in this paragraph shall survive the
satisfaction and payment of the Indebtedness and the termination of this
Agreement.
48
<PAGE> 53
(f) Collateral Agent's Reliance. The Collateral Agent shall be
entitled to rely, and shall be fully protected in relying, upon any note,
writing, resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person or Persons pursuant to the terms hereof and upon
advice and statements of legal counsel and other experts selected by the
Collateral Agent. The Collateral Agent may deem and treat the payee of the Note
as the owner thereof for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the Collateral Agent.
The Collateral Agent shall be fully justified in failing or refusing to take any
action under this Agreement unless it shall first receive such advice or
concurrence of the Lender as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lender against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Collateral Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement in accordance with a
request of the Lender, and such request and any action taken or failure to act
pursuant thereto shall be binding upon the Lender and all future holders of the
Note.
(g) Notice of Default. The Collateral Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Collateral Agent has received written notice from the
Lender referring to this Agreement, describing such Default or Event of Default
and stating that such notice is a "notice of default". The Collateral Agent
shall take such action with respect to such Default or Event of Default as shall
be directed by the Lender, including any action under this Agreement.
(h) Non-Reliance on Collateral Agent. Neither the Collateral
Agent nor any of its officers, directors, employees, agents, attorneys-in-fact
or Affiliates has made any representations or warranties to the Lender and no
act by the Collateral Agent hereinafter taken (including any review of the
affairs of the Borrower) shall be deemed to constitute any representation or
warranty by the Collateral Agent to the Lender. Except for notices, reports and
other documents expressly required to be furnished to the Lender by the
Collateral Agent hereunder, the Collateral Agent shall not have any duty or
responsibility to provide the Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of the Borrower which may come into
the possession of the Collateral Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
(i) Removal and Resignation. The Collateral Agent shall have
the right to resign as collateral agent hereunder and each of the Lender and the
Borrower shall have the right to remove the Collateral Agent as collateral agent
hereunder, in each case upon 30 days' notice to the other parties to this
Agreement. In the event of such resignation, the Lender, or in the event of such
removal, the party initiating the removal shall appoint a successor Collateral
Agent with the consent of the Borrower in the case of a resignation or the
consent of the party not initiating the removal, in the case of a removal (in
any such case, such consent not to be unreasonably withheld or delayed). No such
removal of or resignation by the Collateral Agent shall become effective until a
successor Collateral Agent shall have accepted such appointment and executed an
instrument by which it shall have assumed all of the rights and obligations of
the Collateral Agent hereunder. If no such successor Collateral Agent is
appointed within 60 days after receipt of the
49
<PAGE> 54
resigning Collateral Agent's notice of resignation or removal, the resigning
Collateral Agent may petition a court for the appointment of a successor
Collateral Agent. In connection with any removal of or resignation by the
Collateral Agent, (A) the removed or resigning Collateral Agent shall (1) duly
assign, transfer and deliver to the successor Collateral Agent this Agreement
and all Money and Permitted Investments held by it hereunder, (2) execute such
financing statements and other instruments as may be necessary to assign to the
successor Collateral Agent the security interest existing in favor of the
retiring Collateral Agent hereunder, and to otherwise give effect to such
succession and (3) take such other actions as may be reasonably required by the
Borrower, the Lender or the successor Collateral Agent in connection with the
foregoing and (B) the successor Collateral Agent shall establish in its name, as
agent for Lender, as secured party, a Collection Account and any other accounts
established pursuant to the terms of this Agreement.
(j) Individual Capacity. The Collateral Agent and its
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Borrower or any Affiliate, as though the Collateral
Agent were not the Collateral Agent hereunder, or under the other Loan
Documents.
Section 2.17 Reserve Account; Expense Account. (a) Purpose. On
or before the Closing Date, the Borrower shall establish and maintain with the
Collateral Agent an account which shall be an Eligible Account and shall be
designated the Reserve Account (the "Reserve Account") for the benefit of the
Lender until the Loan is paid in full. The Reserve Account shall be an Eligible
Account and shall be comprised of four sub-accounts: the "Capital Expenditure
Reserve Sub-Account", the "Interest Reserve Sub-Account", the "Tax and Insurance
Escrow Sub-Account" and the "Post-Closing Items Reserve Sub-Account"; provided,
however, that the Borrower and the Collateral Agent shall not be required to
establish the Capital Expenditure Reserve Sub-Account, the Interest Reserve
Sub-Account or the Tax and Insurance Escrow Sub-Account until the second
Business Day after the Lender notifies the Borrower and the Collateral Agent for
the first time that the Borrower is not in compliance with the LTV Test.
(b) Capital Expenditure Reserve Sub-Account. If the Borrower is
not in compliance with the LTV Test, pursuant to Section 2.12(b)(iii), the
Borrower shall deposit in the Capital Expenditure Reserve Sub-Account on each
Payment Date, the amount referred to in clause eighth of Section 2.12(b)(iii).
Any and all Moneys remitted to the Capital Expenditure Reserve Sub-Account,
together with any Permitted Investments in which such Moneys are or will be
invested or reinvested during the terms of this Agreement, shall be held in the
Capital Expenditure Reserve Sub-Account and shall be withdrawn by the Collateral
Agent promptly upon written request of Borrower to pay or reimburse any Re-
Leasing Costs, Replacement Reserve Costs and/or Capital Improvement Costs that
are in progress or have been completed by Borrower. Not less than three Business
Days prior to Borrower's delivery of a request to the Collateral Agent to
withdraw any funds from the Capital Expenditure Reserve Sub-Account, Borrower
shall provide the Lender with written notice (with a copy to the Collateral
Agent) of such request (including therein a statement of the purpose for the
withdrawal; a cross-reference, if applicable, to the Engineering Report,
Environmental Report or approved Operating Budget and copies of invoices and
other materials demonstrating the work done in connection with the Re-Leasing
Costs, Replacement Reserve Costs and/or Capital Improvement Costs for which
reimbursement or payment is sought by Borrower). With respect to any proposed
Capital Improvements Costs not identified in the Engineering Reports,
Environmental Reports or the
50
<PAGE> 55
Operating Budget, Borrower may submit to the Lender and the Collateral Agent an
Officer's Certificate specifying in reasonable detail the Capital Improvement
Costs that Borrower desires to pay, or cause to be paid from the Capital
Expenditure Reserve Sub-Account, and, within five (5) Business Days of the
receipt of such Officer's Certificate, the Lender shall deliver to Borrower and
the Collateral Agent a written statement that sets forth the Capital Improvement
Costs that were specified in such Officer's Certificate which have been approved
by the Lender, such approval not to be unreasonably withheld. In the event the
Borrower funds the Capital Expenditure Reserve Sub-Account while out of
compliance with the LTV Test and subsequently achieves compliance with the LTV
Test, the Lender and the Collateral Agent shall promptly release to the Borrower
all amounts on deposit therein. In the event Borrower elects not to withdraw all
amounts on deposit in the Capital Expenditure Reserve Sub-Account and satisfies
the outstanding Indebtedness in full, the Lender and the Collateral Agent shall
release any and all amounts remaining on deposit in the Capital Expenditure
Reserve Sub-Account to Borrower on the Payment Date on which the outstanding
Indebtedness is repaid in full.
(c) Interest Reserve Sub-Account. If the Borrower is not in
compliance with the LTV Test, pursuant to Section 2.12(b)(iii), the Borrower
shall deposit in the Interest Reserve Sub-Account on each Payment Date an amount
satisfactory to Lender; provided, however, that the amount required to be on
deposit in the Interest Reserve Sub-Account as of any Payment Date shall not
exceed two months interest on the outstanding Principal Indebtedness (taking
into account principal payments made on such Payment Date) at the interest rate
payable on the Note for the succeeding Interest Accrual Period. Any and all
Moneys remitted to the Interest Reserve Sub-Account, together with any Permitted
Investments in which such Moneys are or will be invested or reinvested during
the terms of this Agreement shall be held in the Interest Reserve Sub-Account
and shall be withdrawn by the Collateral Agent promptly upon written request of
Borrower to pay interest on the Loan. In the event Borrower funds the Interest
Reserve Sub-Account while out of compliance with the LTV Test and subsequently
achieves compliance with the LTV Test or does not withdraw all amounts on
deposit in the Interest Reserve Sub-Account and satisfies the outstanding
Indebtedness in full, the Lender and the Collateral Agent shall release any and
all amounts on deposit in the Interest Reserve Sub-Account to Borrower on the
Business Day on which the Borrower complies with the LTV Test or on which the
outstanding Indebtedness is repaid in full.
(d) Tax and Insurance Escrow Sub-Account. If the Borrower is
not in compliance with the LTV Test, pursuant to Section 2.12(b)(iii), the
Borrower shall deposit in the Tax and Insurance Escrow Sub-Account on each
Payment Date, the amount referred to in clause sixth of Section 2.12(b)(iii).
Any and all Moneys remitted to the Tax and Insurance Escrow Sub-Account,
together with any Permitted Investments in which such Moneys are or will be
invested or reinvested during the term of this Agreement, shall be held in the
Tax and Insurance Escrow Sub-Account and shall be withdrawn by the Collateral
Agent promptly upon written request of Borrower to pay Basic Carrying Costs. Not
less than three Business Days prior to Borrower's delivery of a request to the
Collateral Agent to withdraw any funds from the Tax and Insurance Escrow
Sub-Account, Borrower shall provide the Lender with written notice (with a copy
to the Collateral Agent) of such request (including therein a statement of the
purpose for the withdrawal and copies of invoices and other materials relating
to such Impositions and insurance premiums). In the event Borrower funds the Tax
and Insurance Escrow Sub-Account while out of compliance with the LTV Test and
subsequently achieves compliance with the LTV Test or elects not to
51
<PAGE> 56
withdraw all amounts on deposit in the Tax and Insurance Escrow Sub-Account and
satisfies the outstanding Indebtedness in full, the Lender and the Collateral
Agent shall release any and all amounts on deposit in the Tax and Insurance
Escrow Sub-Account to Borrower on the Business Day on which the Borrower
complies with the LTV Test or the Payment Date on which the outstanding
Indebtedness is repaid in full.
(e) Post-Closing Items Reserve Sub-Account. On the Closing
Date, Lender shall deposit in the Post-Closing Items Reserve Sub-Account out of
the proceeds of the Loan an amount equal to $2,000,000. Any and all Moneys
remitted to the Post-Closing Items Reserve Sub-Account together with any
Permitted Investments in which such Moneys are or will be invested or reinvested
during the term of this Agreement shall be held in the Post-Closing Items
Reserve Sub-Account and shall be withdrawn by the Collateral Agent (i) after
the Collateral Agent has received written notice from the Lender that an Event
of Default has occurred and is continuing and the Indebtedness has been
accelerated, promptly upon written request of Lender to pay the Principal
Indebtedness or (ii) upon written request of the Borrower to pay the Principal
Indebtedness. In the event (1) the Borrower notifies the Lender in writing that
the Borrower has fulfilled each affirmative covenant set forth in Section
5.1(BB) (including therein reasonable supporting documentation), and the Lender
concurs with such fulfillment, or (2) after the Transfer of each Asset or
Additional Collateral that was the subject of an affirmative covenant set forth
in Section 5.1(BB) or the resolution of such affirmative covenant in a manner
acceptable to Lender, the Lender elects to release the funds on deposit in the
Post-Closing Items Reserve Sub-Account, the Lender and the Collateral Agent
shall release any and all amounts remaining on deposit in the Post-Closing Items
Reserve Sub-Account to Borrower. In the event all amounts on deposit in the
Post-Closing Items Reserve Sub-Account are not withdrawn and the Borrower
satisfies the outstanding Indebtedness in full, the Lender and the Collateral
Agent shall release any and all amounts remaining on deposit in the Post-Closing
Items Reserve Sub-Account to Borrower on the Payment Date on which the
outstanding Indebtedness is repaid in full.
(f) Expense Account. Upon receipt of written notice from the
Lender that the Borrower is not in compliance with the LTV Test, the Borrower
shall establish and maintain with the Collateral Agent an account which shall be
an Eligible Account and shall be designated the Expense Account (the "Expense
Account") for the benefit of the Lender until the Loan is paid in full. If the
Borrower is not in compliance with the LTV Test, pursuant to Section
2.12(b)(iii), the Borrower shall deposit in the Expense Account on each Payment
Date an amount equal to the amount of Property Expenses (other than Basic
Carrying Costs) shown on the current Operating Budget for the calendar month
immediately following the calendar month in which such Payment Date occurs. Any
and all Moneys remitted to the Expense Account together with any Permitted
Investments in which such Moneys are or will be invested or reinvested during
the terms of this Agreement, shall be held in the Expense Account and shall be
withdrawn by the Collateral Agent promptly upon written request of Borrower to
pay or reimburse (i) any Property Expenses (other than Basic Carrying Costs)
shown on the Operating Budget, currently due to be paid and not previously paid
or reimbursed and (ii) any Property Expenses (other than Basic Carrying Costs)
not shown on the Operating Budget but approved by Lender in writing for payment
or reimbursement. In the event Borrower funds the Expense Account while out of
compliance with the LTV Test and subsequently achieves compliance with the LTV
Test or does not withdraw all amounts on deposit in the Expense Account and
satisfies the outstanding Indebtedness in full, the Lender and the Collateral
Agent shall release any and all amounts on deposit in the Expense
52
<PAGE> 57
Account to Borrower on the Business Day on which the Borrower complies with the
LTV Test or on which the outstanding Indebtedness is repaid in full.
(g) Investment of Funds. All or a portion of any Moneys in the
Reserve Account and the Expense Account shall be invested and reinvested, so
long as the Collateral Agent has not received written notice from the Lender
that an Event of Default has occurred and is continuing, by the Collateral Agent
in accordance with written instructions delivered by Borrower, or after the
Collateral Agent has received written notice from the Lender that an Event of
Default has occurred and is continuing, by the Lender, in one or more Permitted
Investments. So long as the Collateral Agent has not received written notice
from the Lender that an Event of Default has occurred and is continuing, all
such Permitted Investments shall be made in the name of the Borrower, and after
the Collateral Agent has received written notice from the Lender that an Event
of Default has occurred and is continuing, all such Permitted Investments shall
be made in the name of the Lender or as otherwise directed by the Lender.
Borrower or the Lender, as applicable, shall cause all income or other gain from
investments of Money held in the Reserve Account or the Expense Account to be
deposited in the Reserve Account or the Expense Account, as applicable,
immediately upon receipt and any loss resulting from such investments shall be
charged to the Reserve Account or the Expense Account, as applicable. Borrower
shall include all such income or gain on the Reserve Account and the Expense
Account as income of Borrower for federal and applicable state tax purposes.
(h) Event of Default. After the Collateral Agent has received
written notice from the Lender that an Event of Default has occurred and is
continuing and the Indebtedness has been accelerated, the Borrower shall not be
permitted to make any withdrawals from the Reserve Account or the Expense
Account without the prior written consent of the Lender and the Lender may
liquidate any Permitted Investments of the amount on the deposit in the Reserve
Account and the Expense Account and use such amounts in immediately available
funds to make payments on account of the Loan in accordance with the priorities
set forth in Section 2.8.
Section 2.18 Special Purpose Entity Successor. The Borrower
shall have a one-time right exercisable at any time during the term of this
Agreement (the "SPE Option") to Transfer all of its right, title and interest
in, to and under the Assets and the Additional Collateral (the "SPE Transfer")
to a newly formed Special Purpose Entity (the "SPE Borrower") upon not less than
15 Business Days' irrevocable written notice to Lender of Borrower's election to
exercise the SPE Option; provided, however, that no SPE Transfer shall occur
unless Borrower shall have submitted the formation and organizational documents
of such Special Purpose Entity to Lender for Lender's approval and Lender shall
have approved such formation and organizational documents. Concurrently with
Borrower's exercise of the SPE Option, Borrower shall deliver an Officer's
Certificate with respect to the SPE Borrower, containing the following
representations:
(i) The SPE Borrower at all times since its formation has been
a duly formed and existing corporation, limited partnership or limited
liability company, as applicable, under the laws of the state of its
formation, and a Single-Purpose Entity. The SPE Borrower is duly
qualified as a foreign corporation, limited liability company or
limited partnership in the other jurisdictions in which the Mortgaged
Property, REO Property or Additional Mortgageable Collateral is
located.
53
<PAGE> 58
(ii) The SPE Borrower at all times since its formation has
complied with the provisions of its formation and organizational
documents and the laws of the state of its formation relating to
corporations, limited partnerships or limited liability companies, as
applicable.
(iii) All customary formalities regarding the corporate, limited
partnership or limited liability company existence of the SPE Borrower
have been observed at all times since its formation.
(iv) The SPE Borrower has at all times since its formation
accurately maintained its financial statements, accounting records and
other corporation, limited partnership or limited liability company (as
applicable) documents separate from those of its shareholders, members
or constituent partners (as applicable), Affiliates of its
shareholders, members or constituent partners (as applicable) and any
other Person. The SPE Borrower has not at any time since its formation
commingled its assets with those of its shareholders, members or
constituent partners (as applicable), any Affiliates of its
shareholders, members or constituent partners (as applicable), or any
other Person. The SPE Borrower has at all times since its formation
accurately maintained its own bank accounts and separate books of
account.
(v) The SPE Borrower has at all times since its formation paid
its own liabilities from its own separate assets.
(vi) The SPE Borrower has at all times since its formation
identified itself in all dealings with the public, under the SPE
Borrower's own name and as a separate and distinct entity. The SPE
Borrower has not at any time since its formation identified itself as
being a division or a part of any other entity. The SPE Borrower has
not at any time since its formation identified its members or
constituent partners (as applicable) or any Affiliates of its
shareholders, members or constituent partners (as applicable) as being
a division or part of the SPE Borrower.
(vii) The SPE Borrower has been at all times since its formation
adequately capitalized in light of the nature of its business.
(viii) The SPE Borrower has not at any time since its formation
assumed or guaranteed the liabilities of its shareholders, members or
constituent partners, as applicable (or any predecessor corporation,
partnership or limited liability company), any Affiliates of its
shareholders, members or constituent partners (as applicable), or any
other Persons, except for liabilities relating to the Assets or
Additional Collateral and except as permitted by or pursuant to this
Agreement. The SPE Borrower has not at any time since its formation
acquired obligations or securities of its shareholders, members or
constituent partners, as applicable (or any predecessor corporation,
partnership or limited liability company), or any Affiliates of its
shareholders, members or constituent partners (as applicable). The SPE
Borrower has not at any time since its formation made loans to its
members or constituent partners, as applicable (or any predecessor
corporation, partnership or limited liability company), or any
Affiliates of its shareholders, members or constituent partners (as
applicable).
54
<PAGE> 59
(ix) The SPE Borrower has not at any time since its formation
entered into and was not a party to any transaction with its members or
constituent partners, as applicable (or any predecessor corporation,
partnership or limited liability company) or any Affiliates of its
shareholders, members or constituent partners (as applicable), except
for in the ordinary course of business of the SPE Borrower on terms
which are no less favorable to SPE Borrower than would be obtained in a
comparable arm's length transaction with an unrelated third party.
If Borrower properly exercises the SPE Option, then, on the date on which the
SPE Transfer occurs, (a) Borrower shall assign to the SPE Borrower, and the SPE
Borrower shall assume from the Borrower, in writing, all of Borrower's rights
and obligations under this Agreement, the Note and the Loan Documents, (b)
Borrower and SPE Borrower shall execute, deliver, acknowledge and record or
file, as appropriate, all necessary documents to ensure the maintenance of
Lender's first priority Liens on and security interest in the Collateral, and
(c) Borrower and the SPE Borrower shall take such other actions and execute,
deliver and acknowledge such other documents as necessary to give effect to SPE
Borrower's succession to Borrower's right, title, interest and obligations in,
to and under the Assets, the Additional Collateral, this Agreement and the other
Loan Documents.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1. Conditions Precedent to Effectiveness. This
Agreement shall become effective and the Lender shall be obligated to fund the
Loan on the date that all of the following conditions shall have been satisfied
(or waived in accordance with Section 8.4) (the "Closing Date"):
(A) Loan Agreement. The Borrower shall have executed and
delivered this Agreement to the Lender.
(B) Note. The Borrower shall have executed and delivered to the
Lender the Note.
(C) Borrower Mortgage; Assignment of Rents and Leases. The
Borrower shall have executed and delivered to the Lender the duly executed
Borrower Mortgage in recordable form with respect to each REO Property and
Additional Mortgageable Collateral and such Borrower Mortgage shall have been
filed of record in the appropriate filing office in the jurisdiction in which
the related REO Property or Additional Mortgageable Collateral is located or
irrevocably delivered to a title agent for such recordation. The Borrower shall
have executed and delivered to the Lender the Assignments of Rents and Leases in
recordable form.
(D) Collateral Assignments of Mortgage. With respect to each
Mortgage Loan, the Borrower shall have executed and delivered to the Lender a
Collateral Assignment of Mortgage.
55
<PAGE> 60
(E) Contract Assignment. The Borrower shall have executed and
delivered to the Lender a Contract Assignment with respect to each REO Property
and Additional Mortgageable Collateral being financed.
(F) Custodial Agreement, Assignment of Participation Interest
and Intercreditor Agreement. The Lender shall have received the executed
Custodial Agreement, Assignment of Participation Interest and Intercreditor
Agreement.
(G) Aircraft Distribution Assignment. The Borrower shall
have delivered to the Lender the executed Aircraft Distribution Assignment.
(H) Opinions of Counsel. The Lender shall have received from
Trenam Kemker Scharf Barkin Frye O'Neill & Mullis, counsel to the Borrower, its
legal opinions in substantially the form attached hereto as Exhibit F-1 as to
corporate and security interest matters, the enforceability of the Borrower
Mortgage and certain other real estate matters. The Lender shall have received
from Ungaretti & Harris, outside counsel to the Collateral Agent, and from
in-house counsel to the Collateral Agent, their legal opinions substantially in
the form attached hereto as Exhibit F-2 with respect to corporate matters. Each
such legal opinion shall be addressed to the Lender and, as applicable, the
Collateral Agent or the Borrower, dated the Closing Date, and in form and
substance satisfactory to Lender and its counsel.
(I) Organizational Documents. The Lender shall have received
with respect to Borrower its certificate of incorporation, as amended, modified
or supplemented to the Closing Date, as filed with the Secretary of State in the
jurisdiction of organization and in effect on the Closing Date and certified to
be true, correct and complete by the appropriate Secretary of State as of a date
not more than 10 days prior to the Closing Date, together with a good standing
certificate from such Secretary of State and a good standing certificate from
the Secretaries of State (or the equivalent thereof) of each other State in
which Borrower is required to be qualified to transact business.
(J) Certified Resolutions, etc. The Lender shall have received
a certificate of the secretary or assistant secretary of Borrower dated the
Closing Date, certifying (i) the names and true signatures of its incumbent
officers authorized to sign the Loan Documents to which the Borrower is a party,
(ii) the certificate of incorporation and by-laws of the Borrower, in each case,
as in effect on the Closing Date, and (iii) the resolutions of the board of
directors of Borrower approving and authorizing the execution, delivery and
performance of the Loan Documents.
(K) Financing Statements. The Borrower shall have executed and
delivered to Lender all financing statements specified on Exhibit H attached
hereto and such financing statements shall have been filed of record in the
appropriate filing offices in each of the appropriate jurisdictions or
irrevocably delivered to a title agent for such recordation.
(L) Lien Search Reports. The Lender shall have received
satisfactory reports of UCC (collectively, the "UCC Searches"), tax lien and
judgment searches conducted by a search firm acceptable to the Lender with
respect to the Collateral and the Borrower, such searches to be conducted in
each of the locations set forth on Exhibit I attached hereto.
56
<PAGE> 61
(M) Insurance. The Lender shall have received certificates of
insurance demonstrating insurance coverage in respect of each of the REO
Properties and the Additional Mortgageable Collateral of types, in amounts, with
insurers and otherwise in compliance with the terms, provisions and conditions
set forth in the Borrower Mortgage. Such certificates shall indicate that the
Lender and the Collateral Agent are named additional insureds as their interests
may appear and shall contain a loss payee endorsement in favor of the Lender and
the Collateral Agent with respect to the property policies required to be
maintained under the Borrower Mortgage.
(N) Title Insurance Policy. The Lender shall have received a
marked commitment (in form and substance satisfactory to Lender) to issue the
Title Insurance Policy in respect of each REO Property and the Additional
Mortgageable Collateral with the amount of the insurance reasonably acceptable
to the Lender subject only to such exceptions as are satisfactory to Lender for
each REO Property and the Additional Mortgageable Collateral.
(O) Environmental Matters. The Lender shall have received an
Environmental Report prepared by an Environmental Auditor with respect to each
of the Assets, which Environmental Report shall be acceptable to the Lender.
(P) Consents, Licenses, Approvals, etc. The Lender shall have
received copies of all consents, licenses and approvals, if any, required in
connection with the execution, delivery and performance by the Borrower, and the
validity and enforceability, of the Loan Documents, and such consents, licenses
and approvals shall be in full force and effect.
(Q) Survey. The Lender shall have received the Survey with
respect to each REO Property and Additional Mortgageable Collateral which shall
be in form and substance satisfactory to Lender.
(R) Engineering Report. The Lender shall have received the
Engineering Report with respect to the REO Properties prepared by the Engineer,
which Engineering Report shall be acceptable to Lender.
(S) Closing Statement. The Lender shall have received a
detailed closing statement from the Borrower in a form acceptable to the Lender,
which includes a complete description of the Borrower's sources and uses of
funds on the Closing Date.
(T) Site Inspection. The Lender shall have performed, or caused
to be performed on its behalf, an on- site due diligence review of each Asset
and Additional Collateral satisfactory to Lender in its sole discretion.
(U) No Default or Event of Default. No Default with respect to
the payment of money or Event of Default shall have occurred and be continuing
on such date either before or after the execution and delivery of this
Agreement.
(V) No Injunction. No law or regulation shall have been
adopted, no order, judgment or decree of any Governmental Authority shall have
been issued, and no litigation shall be pending or threatened, which in the good
faith judgment of the Lender would enjoin, prohibit
57
<PAGE> 62
or restrain, or impose or result in the imposition of any material adverse
condition upon, the making or repayment of the Loan or the consummation of the
Transaction.
(W) Representations and Warranties. The representations and
warranties herein and in the other Loan Documents shall be true and correct on
such date both before and after giving effect to the making of the Loan.
(X) Financial Information. The Lender shall have received
acceptable financial information relating to the Assets and Additional
Collateral owned by the Borrower. Such information shall include the following,
to the extent reasonably available:
(i) operating statements for the current year (including
actual to date information, an annual budget and trailing twelve month
data in hard copy and on diskette) and for not less than the two
preceding years (including tenant improvements costs, leasing
commissions, capital reserves, major repairs, replacement items and
occupancy rates in hard copy and on diskette),
(ii) copies of Leases with respect to tenants occupying more
than 10% of the rentable square footage of any of the Mortgaged
Properties, the REO Properties or the Additional Mortgageable
Collateral or contributing more than 10% of the revenue for any of the
Mortgaged Properties, the REO Properties or the Additional Mortgageable
Collateral, a copy of the standard lease form and tenant lease
abstracts, if available,
(iii) property rent roll data, for the current year and for not
less than the two preceding years, on a tenant by tenant basis in hard
copy and on diskette (including name, square footage, lease term,
expiration date, renewal options, base rent per square foot, sales
volume psf, percentage rent terms, additional rent clauses (including
stops, offsets, and other special provisions), escalation clauses for
increase in operating expense, maintenance, insurance, real estate
taxes and utilities, assignment, sublet and cancellation provisions and
purchase options),
(iv) current prospective property leasing information
(including asking rent rates for available space, amount of current
vacant space out for signature and under negotiation, typical tenant
improvement cost per square foot (new versus renewal) and leasing
concessions (free rent), leasing commissions (new versus renewal) and
historical turnover ratio),
(v) current real estate tax bills and historical real estate
tax bills of record for the Mortgaged Properties, the REO Properties
and the Additional Mortgageable Collateral for not less than the two
preceding years,
(vi) insurance certificates indicating the type and amount
of coverage, and
(vii) the most recent annual consolidated financial statements
and unaudited quarterly consolidated financial statements of the
Borrower.
58
<PAGE> 63
The annual consolidated financial statements relating to the Mortgaged
Properties, the REO Properties or the Additional Collateral shall be either (x)
audited by a "Big Six" accounting firm or another firm of certified public
accountants acceptable to the Lender in its sole discretion or (y) done in
accordance with agreed upon procedures acceptable to the Lender to be performed
by a "Big Six" accounting firm or another firm of certified public accountants
acceptable to the Lender in its sole discretion to create similar information;
provided, that if the Mortgaged Properties, the REO Properties or the Additional
Collateral were not audited, but the operations of the Mortgaged Properties, the
REO Properties or the Additional Collateral were included in the audited
financial statements of another entity, a certification from the certified
public accounting firm which performed the audit to the effect that the
financial statements of the Mortgaged Properties, the REO Properties or the
Additional Collateral, as applicable, are consistent with the financial
statements of the Mortgaged Properties, the REO Properties or the Additional
Collateral, as applicable, included in the audited consolidated financial
statements of such entity is acceptable in lieu of audited financial statements
for the Mortgaged Properties, the REO Properties or the Additional Collateral.
(Y) Pro-Forma Financial Statement. The Lender shall have
received (i) the initial pro forma financial statement for each REO Property and
Additional Mortgageable Collateral for the following twelve months (including on
an annual and monthly basis a break-down of projected revenues and Property
Expenses and a budget of Capital Improvement Costs), (ii) a financial statement
that forecasts projected revenues and operating expenses for not less than three
to five years (including the assumptions used in such forecast), and (iii) any
local office and industrial market study and/or research and demographics report
prepared for the Borrower and/or commercially available.
(Z) Additional Real Estate Matters. The Lender shall have
received such other real estate related certificates and documentation relating
to each REO Property and Additional Mortgageable Collateral as may have been
reasonably requested by Lender. Such documentation shall include the following,
to the extent reasonably available:
(i) certificates of occupancy issued by the appropriate local
Governmental Authority of the jurisdiction in which the REO Property or
the Additional Mortgageable Collateral is located,
(ii) letters from the appropriate local Governmental Authority
of the jurisdiction in which the REO Property or the Additional
Mortgageable Collateral is located, certifying that such REO Property
or Additional Mortgageable Collateral is in compliance with all
applicable zoning laws, rules and regulations, or a zoning endorsement
to the applicable Title Insurance Policy with respect to such REO
Property or Additional Mortgageable Collateral or an opinion of zoning
counsel to such effect,
(iii) abstracts of all Leases in effect at the REO Property or
the Additional Mortgageable Collateral and copies of such of the Leases
as Lender may request (in addition to the copies delivered above), and
(iv) graphics (including interior and exterior photographs
and rental brochures).
59
<PAGE> 64
(AA) Transaction Costs. The Borrower shall have paid all
Transaction Costs for which bills have been submitted in accordance with the
provisions of Section 8.23.
(BB) Additional Matters. The Lender shall have received such
other certificates, opinions, documents and instruments relating to the Loan as
may have been reasonably requested by the Lender. All corporate and other
proceedings, all other documents (including, without limitation, all documents
referred to herein and not appearing as exhibits hereto) and all legal matters
in connection with the Loan shall be reasonably satisfactory in form and
substance to the Lender.
Section 3.2. Form of Loan Documents and Related Matters. The
Note and all of the certificates, agreements, legal opinions and other documents
and papers referred to in this Article III, unless otherwise specified, shall be
delivered to the Lender, and shall be satisfactory in form and substance to the
Lender in its sole discretion (unless the form thereof is prescribed herein).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1. Representations and Warranties of Borrower. The
Borrower represents and warrants that, as of the Closing Date:
(A) Organization. The Borrower (i) is a duly organized and
validly existing Florida corporation in good standing under the laws of the
State of Florida, (ii) has the requisite corporate power and authority to own
its properties (including, without limitation, the Assets and the Additional
Collateral) and to carry on its business as now being conducted and is qualified
to do business in the jurisdictions in which any of the Mortgaged Properties,
REO Properties or Additional Collateral are located, and (iii) has the requisite
corporate power to execute and deliver, and perform its obligations under, this
Agreement, the Note, the Borrower Mortgage, the Collateral Assignments of
Mortgage and all of the other Loan Documents to which it is a party.
(B) Authorization; No Conflict; Consents and Approvals. The
execution and delivery by the Borrower of this Agreement, the Note, the Borrower
Mortgage, the Collateral Assignments of Mortgage and each of the other Loan
Documents, the Borrower's performance of its obligations hereunder and
thereunder and the creation of the security interests and Liens provided for in
this Agreement and the other Loan Documents to which it is a party (i) have been
duly authorized by all requisite corporate action on the part of the Borrower,
(ii) will not violate any provision of any Legal Requirements, any order of any
court or other Governmental Authority, Borrower's organizational documents or
any indenture or material agreement or other instrument to which the Borrower is
a party or by which the Borrower is bound, and (iii) will not be in conflict
with, result in a breach of, or constitute (with due notice or lapse of time or
both) a default under, or result in the creation or imposition of any Lien of
any nature whatsoever upon any of the property or assets of the Borrower
pursuant to, any such indenture or material agreement or instrument. Other than
those obtained or filed on or prior to the Closing Date, the Borrower is not
required to obtain any consent, approval or authorization from, or to file any
60
<PAGE> 65
declaration or statement with, any Governmental Authority or other agency in
connection with or as a condition to the execution, delivery or performance of
this Agreement, the Note, the Borrower Mortgage or the other Loan Documents
executed and delivered by the Borrower on or prior to the Closing Date.
(C) Enforceability. This Agreement, the Note, the Borrower
Mortgage and each other Loan Document executed by the Borrower in connection
with the Loan (including, without limitation, any Collateral Security
Instrument), is the legal, valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with its terms, subject to
bankruptcy, insolvency and other limitations on creditors' rights generally and
to equitable principles. This Agreement, the Note, the Borrower Mortgage and
such other Loan Documents are not subject to any right of rescission, set-off,
counterclaim or defense by the Borrower (including the defense of usury), nor
will the operation of any of the terms of this Agreement, the Note, the Borrower
Mortgage and such other Loan Documents, or the exercise of any right thereunder,
render the Borrower Mortgage unenforceable against the Borrower, in whole or in
part, or subject to any right of rescission, set-off, counterclaim or defense by
the Borrower, including the defense of usury, and the Borrower has not asserted
any right of rescission, set-off, counterclaim or defense with respect thereto.
(D) Litigation. Except as disclosed in writing to Lender, there
are no actions, suits or proceedings at law or in equity by or before any
Governmental Authority or other agency now pending and served or, to the best
knowledge of the Borrower, threatened against the Borrower or any of the
Mortgaged Properties, REO Properties or Additional Collateral that are
reasonably likely to result in a Material Adverse Effect.
(E) Agreements. The Borrower is not in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement or instrument to which it is a party or by
which the Borrower or any Mortgaged Property, REO Property or Additional
Collateral is bound which default is reasonably likely to result in a Material
Adverse Effect. The Borrower is not a party to any agreement or instrument or
subject to any restriction which is reasonably likely to have a Material Adverse
Effect.
(F) No Bankruptcy Filing. The Borrower is not contemplating
either the filing of a petition by it under any state or federal bankruptcy or
insolvency laws or the liquidation of all or a major portion of its assets or
property. The Borrower has no knowledge of any Person contemplating the filing
of any such petition against it.
(G) Solvency. Giving effect to the transactions contemplated
hereby, the fair market value of the Borrower's assets exceeds and will,
immediately following the making of the Loan, exceed the Borrower's total
liabilities (including, without limitation, subordinated, unliquidated, disputed
and contingent liabilities). The fair market value of the Borrower's assets is
and will, immediately following the making of the Loan, be greater than the
Borrower's probable liabilities (including the maximum amount of its contingent
liabilities on its debts as such debts become absolute and matured). The
Borrower's assets do not and, immediately following the making of the Loan will
not, constitute unreasonably small capital to carry out its business as
conducted or as proposed to be conducted. The Borrower does not intend to, and
does not believe that it will, incur debts and liabilities (including, without
limitation, Contingent
61
<PAGE> 66
Liabilities and other commitments) beyond its ability to pay such debts as they
mature (taking into account the timing and amounts to be payable on or in
respect of obligations of the Borrower).
(H) Other Debt. Except for the debt permitted under Section
6.1(C), the Borrower has not borrowed or received other debt financing secured
by the Assets and the Additional Collateral or any part thereof.
(I) Full and Accurate Disclosure. No statement of fact made by
or on behalf of the Borrower in this Agreement or in any of the other Loan
Documents contains any untrue statement of a material fact or omits to state any
material fact necessary to make statements contained herein or therein not
misleading. There is no fact presently known to the Borrower which has not been
disclosed to the Lender which is likely to result in a Material Adverse Effect.
(J) Financial Information. All financial data concerning the
Borrower and the Assets and the Additional Collateral that has been delivered by
the Borrower to Lender is true, complete and correct in all material respects
(subject to any formatting changes resulting from the merger described in the
following sentence). Since the delivery of such data, except as otherwise
disclosed in writing to Lender (including, without limitation, as contemplated
by the Distribution Agreement and the merger of the Borrower with certain of its
Affiliates, pursuant to which the Borrower is the surviving corporation), there
has been no change in the financial position of the Borrower or the Assets and
the Additional Collateral, or in the results of operations of the Borrower,
which change is reasonably likely to result in a Material Adverse Effect. The
Borrower has not incurred any obligation or liability, contingent or otherwise,
not reflected in such financial data which might have a Material Adverse Effect
on its business operations or the Assets and the Additional Collateral.
(K) Investment Company Act; Public Utility Holding Company Act.
The Borrower is not (i) an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended, (ii) a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of either a "holding company" or a "subsidiary
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended, or (iii) subject to any other federal or state law or regulation
which purports to restrict or regulate its ability to borrow money.
(L) Use of Proceeds; Margin Regulations. The Borrower will use
the proceeds of the Loan for the purposes described in Section 2.2. No part of
the proceeds of the Loan will be used for the purpose of purchasing or acquiring
any "margin stock" within the meaning of Regulation U of the Board of Governors
of the Federal Reserve System or for any other purpose which would be
inconsistent with such Regulation U or any other Regulations of such Board of
Governors, or for any purposes prohibited by Legal Requirements.
(M) No Prior Assignment. The Lender is the assignee of the
Borrower's interest under the Leases. There are no prior assignments of the
Leases or any portion of the Rent due and payable or to become due and payable
which are presently outstanding.
62
<PAGE> 67
(N) No Defaults. No Default or Event of Default exists under
or with respect to any Loan Document.
(O) Intellectual Property. All material trademarks, trade names
and service marks that the Borrower owns or has pending are in good standing and
uncontested. There is no right under any trademark, trade name or service mark
necessary to the business of the Borrower as presently conducted or as the
Borrower contemplates conducting its business. To the best knowledge of the
Borrower, the Borrower has not infringed, is not infringing, and has not
received notice of infringement with respect to asserted trademarks, trade names
and service marks of others. There is no infringement by others of material
trademarks, trade names and service marks of the Borrower.
(P) Plans and Welfare Plans. The assets of the Borrower are not
treated as "plan assets" under regulations currently promulgated under ERISA.
Each Plan and each Multiemployer Plan is in compliance in all material respects
with, and has been administered in all material respects in compliance with, its
terms and the applicable provisions of ERISA, the Code and any other federal or
state law, and no event or condition has occurred and is continuing as to which
the Borrower would be under an obligation to furnish a report to the Lender
under Section 5.1(U)(i). Other than an application for a favorable determination
letter with respect to a Plan, there are no pending issues or claims before the
Internal Revenue Service, the United States Department of Labor or any court of
competent jurisdiction related to any Plan or Welfare Plan. No event has
occurred, and there exists no condition or set of circumstances, in connection
with any Plan or Welfare Plan under which the Borrower or any ERISA Affiliate,
directly or indirectly (through an indemnification agreement or otherwise),
could be subject to any material risk of liability under Section 409 or 502(i)
of ERISA or Section 4975 of the Code. No Welfare Plan provides or will provide
benefits, including, without limitation, death or medical benefits (whether or
not insured) with respect to any current or former employee of the Borrower or
any ERISA Affiliate beyond his or her retirement or other termination of service
other than (i) coverage mandated by applicable law, (ii) death or disability
benefits that have been fully provided for by fully paid up insurance or (iii)
severance benefits.
(Q) Location of Chief Executive Offices. The location of the
Borrower's principal place of business and chief executive office is One
Progress Plaza, St. Petersburg, Florida 33701.
(R) Not Foreign Person. The Borrower is not a "foreign
person" within the meaning of Section 1445(f)(3) of the Code.
(S) Labor Matters. The Borrower is not a party to any
collective bargaining agreements.
Section 4.2. Representations and Warranties as to the Mortgage
Loans. The Borrower hereby represents and warrants to the Lender that, as to
each Mortgage Loan, as of the Closing Date, other than as set forth in the
Exception Report:
(A) Asset Schedule. The information set forth on the Asset
Schedule is complete, true and correct in all material respects.
63
<PAGE> 68
(B) Owner of Mortgage Loan. The Borrower is the sole owner and
holder of the Mortgage Loan (or in the case of the Mortgage Loans designated as
"Madison" and "Continuum" on the Asset Schedule, a participation interest
therein) free and clear of any and all Liens, claims, participations or
contingent interests, shared appreciation features, equities, pledges, charges
or security interests of any nature.
(C) Modifications. The terms of the Mortgage Note and the
Mortgage have not been altered, modified or waived in any material respect,
except by a written instrument which has been recorded, if necessary, to protect
the interest of the Lender and which has been delivered as part of the Pledge
Documents to the Lender. The Asset Schedule reflects all such alterations,
modifications and waivers with respect to the information set forth on the Asset
Schedule.
(D) Taxes, Assessments, etc; No Advances. All real estate
taxes, governmental assessments on real estate, water, sewer and municipal
charges, leasehold payments or ground rents which previously became due and
owing have been paid, or an escrow of funds has been established in an amount
sufficient to pay for every such item which remains unpaid and which has been
assessed but is not yet due and payable. Neither the Borrower nor any Affiliate
thereof has advanced funds, or induced, solicited or knowingly received any
advance of funds by a party other than the Mortgagor or an Affiliate thereof,
directly or indirectly, for the payment of any amount of principal or interest
required by the Mortgage.
(E) Proceedings. There is no proceeding pending or, to the
actual knowledge of the Borrower, threatened for the total or partial
condemnation of the Mortgaged Property.
(F) Enforceability; No Bankruptcy. The Mortgage Note, the
related Mortgage, any guarantees delivered in connection with the making of the
related Mortgage Loan and, in the case of the Mortgage Loan designated as "Life
Care" on the Asset Schedule, the purchase option provided for in the loan
documentation are genuine, and each is the legal, valid and binding obligation
of the maker thereof, enforceable in accordance with its terms, subject to the
provisions of bankruptcy, insolvency, reorganization or moratorium, or laws
relating to or affecting the rights of creditors generally, and principles of
equity, whether considered at law or in equity. No Mortgagor is a debtor in any
state or federal bankruptcy or insolvency proceeding.
(G) Future Advances. The proceeds of the Mortgage Loan have
been fully disbursed, there is no requirement for future advances thereunder and
any and all requirements as to completion of any on-site or off-site
improvements and as to disbursements of any escrow funds therefor have been
complied with. All costs, fees and expenses incurred in making, or closing or
recording the Mortgage Loans were paid or capitalized, and the Mortgagor is not
entitled to any refund of any amounts paid under the Mortgage Note or Mortgage.
(H) Title Policy. Each Mortgage Loan is covered by an ALTA
mortgagee title insurance policy or such other generally acceptable form of
policy in the jurisdiction where the Mortgaged Property is located, issued by
Commonwealth Land Title Company, Chicago Title Insurance Corporation, First
American Title Insurance Company or other title insurer acceptable to FNMA and
FHLMC and qualified to do business in the jurisdiction where the Mortgaged
Property is located, insuring the Borrower (or in the case of the Mortgage Loans
designated as
64
<PAGE> 69
"Madison" and "Continuum" on the Asset Schedule, Madison Savings and Loan
Association or Borrower and Xerox Credit Corporation, respectively), its
respective successors and assigns, as to the first (or in the case of the
Lakeport Phase II independent living facility portion of the Mortgaged Property
related to the Mortgage Loan designated as "Life Care" on the Asset Schedule,
third) priority lien of the Mortgage, in an amount equal to or exceeding the
outstanding principal balance of the Mortgage Loan, subject to the Permitted
Encumbrances. Except for the Mortgage Loans designated as "Madison" and
"Continuum" on the Asset Schedule, the Borrower (or a predecessor in interest to
the Borrower) is the sole named insured of such mortgagee title insurance
policy, the assignment to the Lender of the Borrower's (or such predecessor's)
interest in such mortgagee title insurance policy does not require the consent
of or notification to the insurer, and such mortgagee title insurance policy is
in full force and effect. No claims have been made under such mortgagee title
insurance policy by any prior holder of the related Mortgage. No claims have
been made under such mortgagee title insurance policy by the Borrower, and the
Borrower has not done, by act or omission, anything that would impair the
coverage of such mortgagee title insurance policy.
(I) Defenses. No action of the Borrower has caused the Mortgage
Loan to be subject to any valid right of rescission, set-off, counterclaim or
defense (including the defense of usury), nor will the operation of any of the
terms of the Mortgage Note or the Mortgage, or the exercise of any right
thereunder, render either the Mortgage Note or the Mortgage unenforceable, in
whole or in part, or subject to any right of rescission, set-off, counterclaim
or defense (including the defense of usury), and no such valid right of
rescission, set-off, counterclaim or defense has been asserted in writing with
respect thereto.
(J) Ground Leases. Other than the Mortgaged Properties related
to the Mortgage Loans identified on the Asset Schedule as "Madison Building",
"Plaza Del Rio", and "Vine Street-Olympia" and "Vine Street-Town Square" (in the
case of each "Vine Street" Mortgaged Property, with respect to the parking annex
only), no Mortgage Loan is secured by a mortgage on a leasehold interest. With
respect to any Mortgage Loan that is secured in whole or material part by the
interest of a Mortgagor as a lessee under a ground lease of a Mortgaged Property
(in each case, a "Ground Lease"):
(i) such Ground Lease or memorandum thereof or a separate
agreement signed by the applicable lessor has been duly recorded; such
Ground Lease by its terms permits the interest of the lessee thereunder
to be encumbered by the related Mortgage; and there has been no
material change in the terms of such Ground Lease since its
recordations;
(ii) such Ground Lease is not subject to any Liens or
encumbrances other than the related Mortgage, subject to the Permitted
Encumbrances;
(iii) such Ground Lease is in full force and effect and no
default has occurred and is continuing under such Ground Lease;
(iv) the related leasehold Mortgage conforms and complies with
such Ground Lease, does not constitute a violation or default under the
Ground Lease, and is and shall at all times constitute a valid Lien
(subject only to Permitted Encumbrances) on Mortgagor's interest in and
under the Ground Lease;
65
<PAGE> 70
(v) the Ground Lease grants any leasehold mortgagee standard
protections necessary to protect the security of a leasehold mortgagee
(including the right of the leasehold mortgagee to receive notice of
lessee's default under the Ground Lease, the right of the leasehold
mortgagee, with adequate time, to cure such default and, in the case of
incurable defaults of lessee, the right of the leasehold mortgagee to
enter into a new Ground Lease with lessor on the same terms as the
existing Ground Lease);
(vi) the Ground Lease has an original term which extends not
less than ten (10) years beyond the term of the leasehold Mortgage;
(vii) the fee estate of the lessor under the Ground Lease is
encumbered by the Ground Lease and, other than the Mortgaged Properties
related to the Mortgage Loans identified on the Asset Schedule as
"Madison Building" and "Plaza del Rio", the lien of any present or
future fee mortgages are and will be subject and subordinate to Ground
Lease; and
(viii) such Ground Lease may not be amended, modified, or
cancelled without the prior written consent of the leasehold mortgagee.
(K) Defaults. There is no default, breach, violation or event
of acceleration existing under the Mortgage or the Mortgage Note and, to the
actual knowledge of Borrower, no event which, with the passage of time or with
notice and the expiration or any grace or cure period, would constitute a
default, breach, violation or event of acceleration. Borrower has not waived any
default, breach, violation or event of acceleration.
(L) Lien; Priority. The Mortgage is a valid and enforceable
first (or in the case of the Lakeport Phase II independent living facility
portion of the Mortgaged Property related to the Mortgage Loan designated as
"Life Care" on the Asset Schedule, third) Lien on the Mortgaged Property and the
Mortgaged Property is free and clear of all encumbrances and Liens having
priority over the Lien of the Mortgage except for Liens for real estate taxes
and special assessments not yet due and payable, except for the Permitted
Encumbrances. Any security agreement, chattel mortgage or equivalent document
related to the Mortgage and delivered to the Lender establishes in the Borrower
a valid and enforceable first Lien on the property described therein, and the
Borrower has full right to assign the same pursuant to this Agreement.
(M) Release. No portion of the Mortgaged Property has been
released as collateral securing the Mortgage Loan. No instrument of release or
waiver has been executed in connection with the Mortgage Loan, and the Mortgagor
has not been released, in whole or in part.
(N) Mechanic's Liens. There are no mechanics or similar Liens
or claims which have been filed for work, labor or material (and no rights are
outstanding that under law could give rise to such Lien) affecting the Mortgaged
Property that are, or may be, Liens prior or equal to, or coordinate with, the
Lien of the Mortgage.
66
<PAGE> 71
(O) Pledge Documents. The items listed on the Collateral
Agent's initial custodial receipt relating to the mortgage file have been
delivered to the Collateral Agent as custodian in accordance with the Custodial
Agreement.
(P) Hazard Insurance. The Mortgaged Property is covered by a
hazard insurance policy in an amount equal to one hundred (100%) percent of the
replacement cost of the improvements located thereon. The insurance policy is in
full force and effect, all premiums due thereunder have been paid and no notice
of cancellation of the insurance policy or non-payment of premiums issued by the
insurer has been received by the Borrower. The insurance policy is the valid and
binding obligation of the insurer and contains a standard mortgagee clause
naming the Borrower, its successors and assigns, as mortgagee. The Mortgage
obligates the Mortgagor to maintain all such insurance at Mortgagor's cost and
expense, and upon the Mortgagor's failure to do so, authorizes the holder of the
Mortgage to obtain and maintain such insurance at Mortgagor's cost and expense
and to seek reimbursement therefor from the Mortgagor.
(Q) Customary Remedies. The Mortgage contains customary and
enforceable provisions which render the rights and remedies of the holder
thereof adequate for the realization against the Mortgaged Property of the
benefits of the security, including, in the case of a Mortgage designated as a
deed of trust, by trustee's sale, and by judicial foreclosure. There is no
homestead or other exemption available to the Mortgagor which would materially
interfere with the right to sell the Mortgaged Property at a trustee's sale or
the right to foreclose the Mortgage.
(R) Hazardous Substances. The Mortgaged Property has neither
been used for the storage, treatment or disposal of Hazardous Substances, nor
been listed by any Governmental Authority as containing any Hazardous Substance.
(S) Zoning, Etc. No improvement located on or being part of the
Mortgaged Property is in violation of any applicable zoning law or regulation
which violation is reasonably likely to result in a Material Adverse Effect. All
inspections, licenses and certificates required to be made or issued with
respect to all occupied portions of the Mortgaged Property and, with respect to
the use and occupancy of the same, including but not limited to certificates of
occupancy and fire underwriting certificates, have been made or obtained from
the appropriate authorities and the Mortgaged Property is lawfully occupied
under applicable law.
(T) Escrow Payments. All escrow payments required under the
Mortgage are in possession of the Borrower, except to the extent applied as
permitted in the Mortgage. All escrow payments have been collected in compliance
with all applicable federal, state and local laws and regulations and the terms
of the Mortgage Note and the Mortgage. If funds are being escrowed, such escrow
of funds is not prohibited by applicable law. No escrow payments, deposits or
other charges or payments due to the Borrower have been capitalized under the
Mortgage Note or the Mortgage.
(U) Compliance. The Mortgage Loan has been originated and
serviced in accordance with, and meets or is exempt from, any and all applicable
federal, state and local laws, regulations and other requirements, including,
without limitation, usury, truth-in-lending,
67
<PAGE> 72
real estate settlement procedures, consumer credit protection, equal credit
opportunity or disclosure laws as well as the terms of the respective Mortgage
Loan documents except for violations that are not reasonably likely to result in
a Material Adverse Effect. The collection and servicing practices used with
respect to the Mortgage Note and the Mortgage have been, in all respects, legal,
proper, prudent and customary in the mortgage servicing business except for
violations that are not reasonably likely to result in a Material Adverse
Effect. The servicing files and the information contained therein is correct and
complete in all material respects.
Section 4.3. Representations and Warranties as to the REO
Properties and the Additional Mortgageable Collateral. The Borrower hereby
represents and warrants to the Lender that, as to each REO Property and
Additional Mortgageable Collateral (such REO Property or Additional Mortgageable
Collateral, the "Subject Property"), as of the Closing Date, other than as set
forth in the Exception Report:
(A) Asset Schedule. The information set forth on the Asset
Schedule is complete, true and correct in all material respects.
(B) Title to the Subject Property.
(i) Other than with respect to the wet slip area of the
Additional Mortgageable Collateral designated on the schedule of
Additional Collateral as the "Marina", the Borrower owns good,
marketable and insurable fee simple title to the Subject Property, free
and clear of all Liens, other than the Permitted Encumbrances
applicable to the Subject Property. Other than with respect to the
Subject Property identified on the schedule of Additional Collateral as
the "Marina" or on the Asset Schedule as "Barnett Tower" and "Highpoint
Center" (in such cases, with respect to parking space leases only), the
Subject Property or any portion thereof is not a leasehold interest.
There are no outstanding options to purchase or rights of first refusal
or restrictions on transferability affecting the Subject Property.
(ii) As to the wet slip area of the Additional Mortgageable
Collateral designated on the Additional Collateral Schedule as the
"Marina", the Borrower is the owner of a valid and subsisting interest
as tenant under the ground lease dated October 24, 1986, between
Borrower and The City of St. Petersburg (the " Marina Ground Lease ");
the Marina Ground Lease is in full force and effect, and there are no
defaults thereunder and no event has occurred or is occurring which
after notice or passage of time or both will result in such a default;
the Marina Ground Lease is not subject to any Lien, charge or
encumbrance of any kind and is prior to all Liens, charges and
encumbrances whatsoever on the fee interest of the landlord thereunder,
other than the Permitted Encumbrances; and Borrower owns all
Improvements located on the real property demised under the Marina
Ground Lease in fee, free and clear of all Liens, encumbrances and
charges, other than the Permitted Encumbrances.
(C) Compliance. The Borrower, the Subject Property and the
Borrower's use thereof and operations thereat comply with all applicable Legal
Requirements (including, without limitation, building and zoning ordinances and
codes) and all applicable Insurance Requirements, except for violations that
are not reasonably likely to result in a Material Adverse Effect. The
68
<PAGE> 73
Borrower is not in default or violation of any order, writ, injunction, decree
or demand of any Governmental Authority, except for violations that are not
reasonably likely to result in a Material Adverse Effect.
(D) Condemnation. No taking has been commenced or, to the
Borrower's actual knowledge, is contemplated with respect to all or any portion
of the Subject Property or for the relocation of roadways providing access to
the Subject Property.
(E) Utilities and Public Access. The Subject Property has
adequate rights of access to public ways and is served by water, electric,
sewer, sanitary sewer and storm drain facilities. All public utilities necessary
to the continued use and enjoyment of the Subject Property as presently used and
enjoyed are located in the public right-of-way abutting the premises. All such
utilities are connected so as to serve the Subject Property without passing over
other property. All roads necessary for the full utilization of the Subject
Property for its current purpose have been completed and dedicated to public use
and accepted by all Governmental Authorities or are the subject of access
easements for the benefit of the Subject Property.
(F) Environmental Compliance. Except for matters set forth in
the Environmental Reports delivered to Lender in connection with the origination
of the Loan and in the additional matrices and information delivered in writing
to Lender prior to the date hereof; provided, however, that the representations
set forth in clauses (i)-(v) below are made, in the case of the Additional
Mortgageable Collateral only, to the best knowledge of the Borrower:
(i) The Borrower is in compliance with all applicable
Environmental Laws (which compliance includes, but is not limited to,
the possession by the Borrower of all environmental, health and safety
permits, licenses and other governmental authorizations required in
connection with the ownership and operation of the Subject Property
under all Environmental Laws), except for violations that are not
reasonably likely to result in a Material Adverse Effect.
(ii) There is no Environmental Claim pending or, to the actual
knowledge of the Borrower, threatened, and no penalties arising under
Environmental Laws have been assessed, against the Borrower or against
any Person whose liability for any Environmental Claim the Borrower has
retained or assumed either contractually or by operation of law. No
investigation or review is pending or, to the actual knowledge of the
Borrower, threatened by an Governmental Authority, citizens group,
employee or other Person with respect to any alleged failure by the
Borrower or the Subject Property to have any environmental, health or
safety permit, license or other authorization required under, or to
otherwise comply with, any Environmental Law or with respect to any
alleged liability of Borrower for any Use or Release of any Hazardous
Substances.
(iii) There have been and are no past or present Releases of any
Hazardous Substances that are reasonably likely to form the basis of
any Environmental Claim against the Borrower or against any Person
whose liability for any Environmental Claim the Borrower has retained
or assumed either contractually or by operation of law, except for
claims which are not reasonably likely to result in a Material Adverse
Effect.
69
<PAGE> 74
(iv) Without limiting the generality of the foregoing, there is
not present at, on, in or under the Subject Property, PCB-containing
equipment, asbestos or asbestos containing materials, underground
storage tanks or surface impoundments for Hazardous Substances, lead in
drinking water (except in concentrations that comply with all
Environmental Laws), or lead-based paint.
(v) No Liens are presently recorded with the appropriate land
records under or pursuant to any Environmental Law with respect to the
Subject Property and no Governmental Authority has been taking or is in
the process of taking any action to subject the Subject Property to
Liens under any Environmental Law.
(vi) There have been no material environmental investigations,
studies, audits, reviews or other analyses conducted by or that are in
the possession of the Borrower in relation to the Subject Property
which have not been made available to the Lender.
(G) Borrower Mortgage and Other Liens. The Borrower Mortgage
creates a valid and enforceable first priority Lien on the Subject Property
described therein, as security for the repayment of the Indebtedness, subject
only to the Permitted Encumbrances applicable to the Subject Property. Each
Collateral Security Instrument establishes and creates a valid, subsisting and
enforceable Lien on and a security interest in, or claim to, the rights and
property described therein, to the extent of the Borrower's rights therein. All
property covered by any Collateral Security Instrument will be subject to a UCC
financing statement filed and/or recorded, as appropriate (or irrevocably
delivered to an agent for such recordation or filing) in all places necessary to
perfect a valid first priority Lien with respect to the rights and property that
are the subject of such Collateral Security Instrument to the extent governed by
the UCC.
(H) Assessments. There are no pending or, to the actual
knowledge of the Borrower, proposed special or other assessments for public
improvements or otherwise affecting the Subject Property, nor are there any
contemplated improvements to the Subject Property that may result in such
special or other assessments.
(I) No Joint Assessment; Separate Lots. Borrower has not
suffered, permitted or initiated the joint assessment of the Subject Property
(i) with any other real property constituting a separate tax lot, and (ii) with
any portion of the Subject Property which may be deemed to constitute personal
property, or any other procedure whereby the lien of any taxes which may be
levied against such other real property or personal property shall be assessed
or levied or charged to the Subject Property as a single Lien. The Subject
Property is comprised of one or more parcels, each of which constitutes a
separate tax lot and none of which constitutes a portion of any other tax lot.
(J) No Prior Assignment. The Lender is the collateral assignee
of the Borrower's interest under the Leases. There are no prior assignments of
the Leases or any portion of the Rent due and payable or to become due and
payable that are presently outstanding.
(K) Permits; Certificate of Occupancy. Borrower has obtained
all Permits necessary to the use and operation of the Subject Property, except
where the failure to obtain such Permits is not reasonably likely to have a
Material Adverse Effect. The use being made of
70
<PAGE> 75
the Subject Property is in conformity in all material respects with the
certificate of occupancy and/or Permits for the Subject Property and any other
restrictions, covenants or conditions affecting the Subject Property.
(L) Flood Zone. No portion of the Subject Property is located
in a flood hazard area as defined by the Federal Insurance Administration,
except as shown on the Survey.
(M) Physical Condition. Except for matters set forth in the
Engineering Reports (including any updates to the cash flow models), the Subject
Property is free of structural defects and all building systems contained
therein are in good working order subject to ordinary wear and tear.
(N) Security Deposits. The Borrower is in compliance with all
Legal Requirements relating to all security deposits with respect to the Subject
Property.
(O) No Encroachments. Except as shown on the Survey, (i) all of
the Improvements which were included in determining the appraised value of the
Subject Property lie wholly within the boundaries and building restriction lines
of the Subject Property, except for matters which are not reasonably likely to
have a Material Adverse Effect, (ii) no improvements on adjoining properties
encroach upon the Subject Property, and (iii) no easements or other encumbrances
upon the Subject Property encroach upon any of the Improvements, except those
which are insured against by title insurance.
(P) Leases. The Subject Property was not subject to any Leases
as of the date of the rent roll delivered to Lender in connection with the
making of the Loan (the "Rent Roll") other than the Leases described therein. No
person has any possessory interest in the Subject Property or right to occupy
the same except under and pursuant to the provisions of the Leases and any
subleases delivered thereunder. The location and size of each leased premises,
and the commencement and expiration date of each such Lease and the rent
currently payable thereunder is accurately set forth on the Rent Roll. None of
such Leases has been assigned, modified, supplemented or amended in any way that
would render inaccurate any material information contained in the Rent Roll and,
except in connection with the Loan, the Borrower has not assigned, pledged or
hypothecated its right, title or interest in, to or under the Lease or of the
rentals thereunder. No tenant under any Lease has any right or option to
purchase the Subject Property or any portion thereof. Except as may be set forth
in the Leases, no tenant under any Lease has any right or option to renew,
extend or cancel the Lease. Borrower has satisfied all of the construction and
other obligations of a material nature to be performed by Borrower as the
landlord under the Leases, and Borrower has made any and all required payments
to be made by Borrower as the landlord under the Leases for tenant improvements.
There are no "free rent" or other rental concessions under the existing Leases
effective during the term of this Agreement. All rental under the Leases has
been paid through October 1996, and no rent under the Leases has been paid more
than one month in advance. No actions, whether voluntary or involuntary, are
pending against any tenant of the Subject Property under the bankruptcy or
insolvency laws of the United States or any state or territory of the United
States. The current Leases are in full force and effect and there are no
defaults thereunder by either party and no conditions which with the passage of
time and/or notice would constitute defaults thereunder, and there are no
existing
71
<PAGE> 76
defenses, offsets or counterclaims held by any tenant of the Subject Property
against the enforcement of the Lease by Borrower.
Section 4.4. Representations and Warranties as to the
Additional Aircraft Collateral. The Borrower hereby represents and warrants to
the Lender that, as to the Additional Aircraft Collateral, as of the Closing
Date, other than as set forth in the Exception Report:
(A) Asset Schedule. The information set forth on the Asset
Schedule is complete, true and correct in all material respects.
(B) Ownership. The Borrower is the sole owner and holder of a
fifty percent (50%) interest in, to and under the Joint Venture Agreement, free
and clear of any and all Liens, claims, encumbrances, participations or
contingent interests, equities, pledges, charges, assignments or security
interests of any nature. The remaining fifty (50%) interest under the Joint
Venture Agreement is held solely by Potomac Capital Investment Corporation.
(C) Joint Venture Equipment. The Joint Venture has not
Transferred Joint Venture Equipment, or any portion thereof, or any of the Joint
Venture's ownership interest therein. The Joint Venture Equipment and the leases
thereof are the only assets held by the Joint Venture. The Joint Venture (or the
lessee on its behalf) maintains with respect to the Joint Venture Equipment all
insurance policies with respect thereto required to be maintained pursuant to
all agreements to which the Joint Venture is a party or applicable law. The
Joint Venture is the sole owner and holder of the Joint Venture Equipment, free
and clear of any and all Liens, claims, encumbrances, participations or
contingent interests, equities, pledges, charges, assignments or security
interests of any nature.
(D) Enforceability. The Joint Venture Agreement is the legal,
valid and binding obligation of the Joint Venturers, is in full force and
effect, and is enforceable in accordance with its terms.
(E) Modifications. The terms of the Joint Venture Agreement
have not been altered, modified or waived in any respect, except by a written
instrument which has been delivered to the Custodian pursuant to the Custodial
Agreement. The Asset Schedule reflects all such alterations, modifications and
waivers.
(F) Taxation. The Joint Venture has at all times been, and will
be, taxed as a partnership for federal income tax purposes.
(G) Compliance. The Joint Venture and its activities and
operations comply with all applicable Legal Requirements, except for violations
that are not reasonably likely to result in a Material Adverse Effect. The Joint
Venture is not in default or violation of any order, writ, injunction, decree or
demand of any Governmental Authority.
(H) Consents. All consents and approvals required in connection
with the delivery and performance by Borrower, and the validity and
enforceability, of the Aircraft Distribution Assignment, have been obtained by
Borrower.
72
<PAGE> 77
(I) Defaults. Borrower is not in default, or in breach of any
of its obligations, under the Joint Venture Agreement.
(J) Litigation. There are no actions, suits or proceedings at
law or in equity by or before any Governmental Authority or other agency now
pending and served, or, to the best knowledge of the Borrower, threatened under
the Joint Venture Agreement or against the Joint Venture or any Joint Venture
Equipment.
Section 4.5. Survival of Representations. The Borrower agrees
that (i) all of the representations and warranties of the Borrower set forth in
Sections 4.1, 4.2, 4.3 and 4.4 and elsewhere in this Agreement and in the other
Loan Documents delivered on the Closing Date are made as of the Closing Date,
and (ii) all such representations and warranties made by the Borrower shall
survive the delivery of the Note and making of the Loan and continue for so long
as any amount remains owing to the Lender under this Agreement, the Note or any
of the other Loan Documents; provided, however, that the representations set
forth in Section 4.3(F) shall survive in perpetuity. All representations,
warranties, covenants and agreements made in this Agreement or in the other Loan
Documents shall be deemed to have been relied upon by the Lender and the
Collateral Agent notwithstanding any investigation heretofore or hereafter made
by the Lender or the Collateral Agent or on their behalf.
ARTICLE V
AFFIRMATIVE COVENANTS
Section 5.1. Borrower Covenants. The Borrower covenants and
agrees that, from the date hereof and until payment in full of the
Indebtedness:
(A) Existence; Compliance with Legal Requirements; Insurance.
The Borrower shall do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its existence as a Florida corporation,
rights, licenses, Permits and franchises necessary for the conduct of its
business and comply with all Legal Requirements and Insurance Requirements
applicable to it and the REO Properties and the Additional Collateral, except
where the failure to comply is not reasonably likely to have a Material Adverse
Effect. The Borrower shall at all times maintain, preserve and protect all
franchises and trade names and preserve all the remainder of its property
necessary for the continued conduct of its business and keep the REO Properties
and the Additional Mortgageable Collateral in good repair, working order and
condition, except for reasonable wear and use, and from time to time make, or
cause to be made, all reasonably necessary repairs, renewals, replacements,
betterments and improvements thereto. The Borrower shall keep the REO Properties
and the Additional Mortgageable Collateral insured at all times, by financially
sound and reputable insurers, to such extent and against such risks, and
maintain liability and such other insurance, as is more fully provided in the
Borrower Mortgage.
(B) Impositions and Other Claims. The Borrower shall pay and
discharge all Impositions, as well as all lawful claims for labor, materials and
supplies or otherwise, which could become a Lien, all as more fully provided in,
and subject to any rights to contest contained
73
<PAGE> 78
in, the Borrower Mortgage. The Borrower shall pay all Basic Carrying Costs with
respect to the Borrower and the REO Properties and the Additional Mortgageable
Collateral in accordance with the provisions of the Borrower Mortgage, subject,
however, to the Borrower's rights to contest payment of Impositions in
accordance with the Borrower Mortgage. The Borrower's obligation to pay Basic
Carrying Costs pursuant to this Agreement shall include, to the extent permitted
by applicable law, Impositions resulting from future changes in law which impose
upon the Lender an obligation to pay any property taxes or other Impositions or
which otherwise adversely affect the Lender's interests.
(C) Litigation. The Borrower shall give prompt written notice
to the Lender of any litigation or governmental proceedings pending or
threatened (in writing) against the Borrower that is reasonably likely to result
in a Material Adverse Effect.
(D) Environmental Remediation.
(i) If any investigation, site monitoring, cleanup,
removal, restoration or other remedial work of any kind or
nature is required pursuant to an order or directive of any
Governmental Authority or under any applicable Environmental
Law (collectively, the "Remedial Work"), because of or in
connection with the current or future presence, suspected
presence, Release or suspected Release of a Hazardous
Substance on, under or from an REO Property or Additional
Mortgageable Collateral or any portion thereof (in the
case of Additional Mortgageable Collateral only, in violation
of applicable Environmental Law), the Borrower shall
promptly commence and diligently prosecute to completion all
such Remedial Work, and shall conduct such Remedial Work in
accordance with the National Contingency Plan promulgated under
the Comprehensive Environmental Response, Compensation and
Liability Act, if applicable, and in accordance with other
applicable Environmental Laws. In all events, such Remedial Work
shall be commenced within 90 days after any demand therefor
by the Lender or such shorter period as may be required under
any applicable Environmental Law; provided,however, that the
Borrower shall not be required to commence such Remedial Work
within the above specified time periods: (x) if prevented
from doing so by any Governmental Authority, (y) if
commencing such Remedial Work within such time periods would
result in the Borrower or such Remedial Work violating any
Environmental Law or (z) if the Borrower, at its expense and
after prior notice to Lender, is contesting by
appropriate legal, administrative or other proceedings
conducted in good faith and with due diligence the need to
perform Remedial Work, as long as (1) the Borrower is permitted
by the applicable Environmental Laws to delay performance of
the Remedial Work pending such proceedings, (2) neither the REO
Property or Additional Mortgageable Collateral, as applicable,
nor any part thereof or interest therein will be sold,
forfeited or lost if the Borrower performs the Remedial Work
being contested, and the Borrower would have the opportunity to
do so, in the event of the Borrower's failure to prevail in the
contest, (3) the Lender would not, by virtue of such permitted
contest, be exposed to any risk of any civil liability for
which the Borrower has not furnished additional security as
provided in clause (4) below, or to any risk of criminal
liability, and neither the REO Property or Additional
Mortgageable Collateral, as applicable, nor any interest therein
would be subject to the imposition of any lien for which the
Borrower has not furnished additional security as provided in
clause (4) below, as a result of the
74
<PAGE> 79
failure to perform such Remedial Work and (4) the Borrower shall have
furnished to the Lender additional security in respect of the Remedial
Work being contested and the loss or damage that may result from the
Borrower's failure to prevail in such contest in such amount as may be
reasonably requested by the Lender.
(ii) If requested by the Lender, all Remedial Work under clause
(i) above shall be performed by contractors, and under the supervision
of a consulting Engineer, each approved in advance by the Lender which
approval will not be unreasonably withheld or delayed. All costs and
expenses reasonably incurred in connection with such Remedial Work
shall be paid by the Borrower. If the Borrower does not timely commence
and diligently prosecute to completion the Remedial Work, the Lender
may (but shall not be obligated to), upon 30 days prior written notice
to Borrower of its intention to do so, cause such Remedial Work to be
performed. The Borrower shall pay or reimburse the Lender on demand for
all expenses (including reasonable attorneys' fees and disbursements,
but excluding internal overhead, administrative and similar costs of
the Lender) reasonably relating to or incurred by the Lender in
connection with monitoring, reviewing or performing any Remedial Work
in accordance herewith.
(iii) The Borrower shall not commence any Remedial Work under
clause (i) above, nor enter into any settlement agreement, consent
decree or other compromise relating to any Hazardous Substances or
Environmental Laws which is reasonably likely to have a Material
Adverse Effect without providing notice to the Lender as provided in
Section 5.1(F). Notwithstanding the foregoing, if the presence or
threatened presence of Hazardous Substances on, under or about any REO
Property or Additional Mortgageable Collateral poses an immediate
threat to the health, safety or welfare of any Person or the
environment, or is of such a nature that an immediate response is
necessary or required under applicable Environmental Law, the Borrower
may complete all necessary Remedial Work. In such events, the Borrower
shall notify Lender as soon as practicable and, in any event, within
three Business Days, of any action taken.
(E) Environmental Matters; Inspection.
(i) The Borrower shall not permit a Hazardous Substance to be
present on, under or to emanate from an REO Property or Additional
Mortgageable Collateral, or migrate from adjoining property controlled
by the Borrower onto or into an REO Property or Additional Mortgageable
Collateral, except under conditions permitted by applicable
Environmental Laws. In the event that such Hazardous Substances are
present on, under or emanate from an REO Property or Additional
Mortgageable Collateral (in the case of Additional Mortgageable
Collateral only, in violation of applicable Environmental Law), or
migrate onto or into the REO Property or Additional Mortgageable
Collateral (in the case of Additional Mortgageable Collateral only, in
violation of applicable Environmental Law), the Borrower shall cause
the removal or remediation of such Hazardous Substances, in accordance
with this Agreement and Environmental Laws (including, where
applicable, the National Contingency Plan promulgated pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act).
The Borrower shall use best efforts to prevent, and to seek the
remediation of, any migration of Hazardous Substances onto or into an
REO Property or
75
<PAGE> 80
Additional Collateral, from any adjoining property (in the case of
Additional Mortgageable Collateral only, in violation of applicable
Environmental Law).
(ii) Upon reasonable prior written notice, the Lender shall
have the right, except as otherwise provided under Leases, at all
reasonable times to enter upon and inspect all or any portion of a
Mortgaged Property, an REO Property or Additional Mortgageable
Collateral, provided that (1) such inspections shall not unreasonably
interfere with the operation or the tenants, residents or occupants of
such property and (2) with respect to any Mortgaged Property, (x) the
Borrower consents to such inspection, which consent shall not be
unreasonably withheld and (y) the Borrower has the right to allow such
access under any related Mortgage. If the Lender has reasonable grounds
to suspect that Remedial Work may be required, the Lender shall notify
the Borrower and, thereafter, may select a consulting Engineer to
conduct and prepare reports of such inspections (with notice to the
Borrower prior to the commencement of such inspection). The Borrower
shall be given a reasonable opportunity to review any reports, data and
other documents or materials reviewed or prepared by the Engineer, and
to submit comments and suggested revisions or rebuttals to same. The
inspection rights granted to the Lender in this Section 5.1(E) shall be
in addition to, and not in limitation of, any other inspection rights
granted to the Lender in this Agreement, and shall expressly include
the right (if the Lender suspects that Remedial Work may be required)
to conduct soil borings, establish ground water monitoring wells and
conduct other customary environmental tests, assessments and audits.
(iii) The Borrower agrees to bear and shall pay or reimburse the
Lender on demand for all sums advanced and expenses incurred (including
reasonable attorneys' fees and disbursements, but excluding internal
overhead, administrative and similar costs of the Lender) reasonably
relating to, or incurred by Lender in connection with, the inspections
and reports described in this Section 5.1(E) (to the extent such
inspections and reports relate to any Mortgaged Property, REO Property
or Additional Collateral) in the following situations:
(x) If the Lender has reasonable grounds to believe, at
the time any such inspection is ordered, that there exists an
occurrence or condition that could lead to an Environmental
Claim;
(y) If any such inspection reveals an occurrence or
condition that is reasonably likely to lead to an
Environmental Claim; or
(z) If an Event of Default with respect to the Mortgaged
Property, REO Property or Additional Mortgageable Collateral
exists at the time any such inspection is ordered, and such
Event of Default relates to any representation, covenant or
other obligation pertaining to Hazardous Substances,
Environmental Laws or any other environmental matter.
(iv) Prior to the acquisition by Borrower of title to any
Mortgaged Property (whether as a result of, or by acceptance of a deed
in lieu of, foreclosure or otherwise) after the Closing Date, Borrower
shall obtain an Environmental Report with respect to
76
<PAGE> 81
such Mortgaged Property and deliver a copy of same to the Collateral
Agent; provided, however, that Borrower shall not be required to obtain
such Environmental Report prior to acquisition of title if Borrower has
in its possession an Environmental Report dated less than twelve months
prior to the date on which Borrower shall acquire title to such
Mortgaged Property (a " Timely Environmental Report"); provided,
further, that notwithstanding Borrower's possession of a Timely
Environmental Report, Borrower shall obtain an Environmental Report of
such Mortgaged Property if there has been a material change in the
purpose for which the Mortgaged Property is used since the preparation
of the prior Environmental Report and the new purpose is reasonably
likely to create new risks of liabilities arising from Environmental
Laws that did not exist as a result of the prior purpose. Borrower
shall not acquire title to any Mortgaged Property after the Closing
Date unless such acquisition is not reasonably likely, based upon the
Environmental Report, to have a Material Adverse Effect.
(v) Borrower shall not obtain title to a Mortgaged Property as
a result of or in lieu of foreclosure or otherwise, and shall not
otherwise acquire possession of any Mortgaged Property, if as a result
of any such actions, Borrower or Lender would be considered to hold
title to, to be a "mortgagee-in-possession" of, or to be an "owner" or
"operator" of, such Mortgaged Property within the meaning of
Environmental Laws unless Borrower has previously determined, based on
a Timely Environmental Report that meets the requirements of the first
sentence of clause (iv) above that: (A) such Mortgaged Property is in
material compliance with applicable Environmental Laws and (B) there
are no circumstances present at such Mortgaged Property relating to the
Use, treatment, storage or disposal of any Hazardous Substances for
which investigation, testing monitoring, containment, clean-up or
remediation is reasonably likely to be required under any Environmental
Law.
(F) Environmental Notices. The Borrower shall promptly
provide notice to Lender of:
(i) any Environmental Claim asserted by any Governmental
Authority with respect to any Hazardous Substance on, in, under or
emanating from any Mortgaged Property, REO Property or Additional
Mortgageable Collateral, which might reasonably be expected to involve
remediation cost or liability greater than $50,000;
(ii) any proceeding, investigation or inquiry commenced or
threatened in writing by any Governmental Authority, against the
Borrower, with respect to the presence, suspected presence, Release or
threatened Release of Hazardous Substances from or onto, in or under
any property not owned by Borrower (including, without limitation,
proceedings under the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended, 42 U.S.C. Section 9601, et
seq.), which might involve remediation cost or liability greater than
$50,000;
(iii) all Environmental Claims asserted or threatened against
the Borrower, against any other party occupying any Mortgaged Property,
REO Property or Additional Mortgageable Collateral or any portion
thereof which become known to the Borrower or against any Mortgaged
Property, REO Property or Additional Mortgageable
Collateral,
77
<PAGE> 82
which might reasonably be expected to involve remediation cost or
liability greater than $50,000;
(iv) the discovery by the Borrower of any occurrence or
condition on any Mortgaged Property, REO Property or Additional
Mortgageable Collateral or on any real property adjoining any Mortgaged
Property, REO Property or Additional Mortgageable Collateral which
could reasonably be expected to involve remediation cost or liability
greater than $50,000; and
(v) the commencement or completion of any Remedial Work with
respect to an REO Property or Additional Mortgageable Collateral.
(G) Copies of Notices. The Borrower shall transmit to the
Lender copies of any citations, orders, notices or other written communications
received from any Person and any notices, reports or other written
communications submitted to any Governmental Authority with respect to the
matters described in Section 5.1(F).
(H) Environmental Claims. The Lender may join and participate
in, as a party if the Lender so determines, any legal or administrative
proceeding or action concerning any Mortgaged Property, REO Property, Additional
Mortgageable Collateral or any portion thereof under any Environmental Law, if,
in the Lender's reasonable judgment, the interests of the Lender will not be
adequately protected by the Borrower; provided, however, that the Lender shall
not participate in day-to-day decision making with respect to environmental
compliance. Borrower shall pay or reimburse the Lender on demand for all
reasonable sums advanced and expenses incurred (including reasonable attorneys'
fees and disbursements, but excluding internal overhead, administrative and
similar costs of the Lender) incurred by the Lender in connection with any such
action or proceeding.
(I) Environmental Indemnification. The Borrower shall
indemnify, reimburse, defend, and hold harmless the Lender, Collateral Agent and
each of its respective parents, subsidiaries, Affiliates, directors, officers,
employees, representatives, agents, successors, assigns and attorneys
(collectively, the "Indemnified Parties") for, from, and against all demands,
claims, actions or causes of action, assessments, losses, damages, liabilities,
costs and expenses (including, without limitation, interest, penalties,
reasonable attorneys' fees, disbursements and expenses, and reasonable
consultants' fees, disbursements and expenses (but excluding internal overhead,
administrative and similar costs of the Lender and the Collateral Agent)),
asserted against, resulting to, imposed on, or incurred by any Indemnified
Party, directly or indirectly, in connection with any of the following (except
to the extent same are directly and solely caused by the fraud, bad faith, gross
negligence or willful misconduct of any Indemnified Party and except that any
Indemnified Party shall not be indemnified against claims resulting from actions
taken with respect to investigation or remediation of any REO Property,
Additional Mortgageable Collateral or Mortgaged Property after the Lender
forecloses its Lien or security interest upon such REO Property or Additional
Mortgageable Collateral unless and to the extent such indemnification relates to
any of the following which occurred while the Borrower owned such REO Property
or Additional Mortgageable Collateral):
78
<PAGE> 83
(i) events, circumstances, or conditions which are alleged
to, or do, form the basis for an Environmental Claim;
(ii) any pollution or threat to human health or the environment
that is related in any way to the Borrower's or any previous owner's or
operator's management, use, control, ownership or operation of such REO
Property or Additional Mortgageable Collateral (including, without
limitation, all on-site and off-site activities involving Hazardous
Substances), and whether occurring, existing or arising prior to or
from and after the date hereof, and whether or not the pollution or
threat to human health or the environment is described in the
Environmental Reports;
(iii) any Environmental Claim against any Person whose liability
for such Environmental Claim the Borrower has or may have assumed or
retained either contractually or by operation of law; or
(iv) the breach of any representation, warranty or covenant set
forth in Section 4.3(F) and Sections 5.1(D) through 5.1(I), inclusive.
The provisions of and undertakings and indemnification set
forth in this Section 5.1(I) shall survive the satisfaction and payment of the
Indebtedness and termination of this Agreement.
(J) General Indemnity. The Borrower shall indemnify, protect,
and hold the Indemnified Party harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses (including, without limitation, attorneys' fees and
legal expenses whether or not suit is brought and settlement costs) and
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by, or asserted against the Indemnified Parties, in any way relating to or
arising out of the Loan Documents or any of the transactions contemplated
therein (collectively, the "Indemnified Liabilities"), to the extent that any of
the Indemnified Liabilities results, directly or indirectly, from any claim made
(whether or not in connection with any legal action, suit, or proceeding) by or
on behalf of any Person other than the parties to this Agreement; provided,
however, that no Indemnified Party shall have the right to be indemnified
hereunder for its own or any other Indemnified Party's fraud, bad faith, gross
negligence or willful misconduct. The provisions of and undertakings and
indemnification set forth in this Section 5.1(J) shall survive the satisfaction
and payment of the Indebtedness and termination of this Agreement.
(K) Access. The Borrower shall permit agents, representatives
and employees of the Lender to inspect any Mortgaged Property, REO Property or
Additional Mortgageable Collateral or any part thereof at such reasonable times
as may be requested by the Lender upon reasonable advance notice, subject,
however, to the limitations set forth in the first sentence of Section
5.1(E)(ii).
(L) Notice of Default. The Borrower shall promptly advise the
Lender of any change in the Borrower's condition, financial or otherwise, which
is reasonably likely to have a Material Adverse Effect, or of the occurrence of
any Default or Event of Default.
79
<PAGE> 84
(M) Cooperate in Legal Proceedings. Except with respect to any
claim by the Borrower against the Lender, the Borrower shall cooperate fully
with the Lender with respect to any proceedings before any Governmental
Authority which may in any way affect the rights of the Lender hereunder or any
rights obtained by the Lender under any of the Loan Documents and, in connection
therewith, not prohibit the Lender, at its election, from participating in any
such proceedings.
(N) Perform Loan Documents. The Borrower shall observe, perform
and satisfy all the terms, provisions, covenants and conditions required to be
observed, performed or satisfied by it, and shall pay when due all costs, fees
and expenses required to be paid by it, under the Loan Documents executed and
delivered by the Borrower.
(O) Insurance Benefits. The Borrower shall cooperate with the
Lender in obtaining for the Lender the benefits of any Insurance Proceeds
lawfully or equitably payable to the Lender in connection with any Mortgaged
Property, REO Property or Additional Mortgageable Collateral. The Lender shall
be reimbursed for any expenses reasonably incurred in connection therewith
(including attorneys' fees and disbursements and the payment by the Borrower of
the expense of an Appraisal on behalf of the Lender in case of a fire or other
casualty affecting a Mortgaged Property, REO Property or Additional Mortgageable
Collateral or any part thereof, but excluding internal overhead, administrative
and similar costs of the Lender) out of such Insurance Proceeds.
(P) Further Assurances.
(i) With respect to each REO Property, Additional Mortgageable
Collateral and Mortgaged Property as of the Closing Date, the Borrower
shall file at its sole cost and expense the Borrower Mortgage or
Collateral Assignment of Mortgage, as applicable, of record in all
applicable recording offices of each applicable jurisdiction and
promptly provide the Lender with certified copies thereof with evidence
of recording indicated thereon. With respect to each Mortgaged Property
for which the Borrower acquires title thereto pursuant to a foreclosure
or acceptance of a deed-in-lieu of foreclosure or otherwise after the
Closing Date, the Borrower shall (x) record at the Borrower's sole cost
and expense a Borrower Mortgage to secure the Loan from the Lender in
an amount equal to the Principal Indebtedness together with all
necessary UCC financing statements relating to the perfection of Liens
on Personal Property situated on such Mortgaged Property, and promptly
provide the Lender (or such other Person as the Lender may designate),
certified copies of the Borrower Mortgage and such financing statements
with evidence of recording or filing indicated thereon and (y) in
connection with and prior to the recordation of the Borrower Mortgage
referred to in clause (x) above, with respect to such Mortgaged
Property, provide to the Lender a title insurance policy for the
benefit of the Lender in an amount not less than the Allocated Loan
Amount for such Mortgaged Property and a legal opinion from counsel
satisfactory to the Lender and addressed to the Lender, to the effect
that such Borrower Mortgage is binding and enforceable in accordance
with its terms, in each case in form and substance reasonably
satisfactory to the Lender.
(ii) The Borrower shall, at the Borrower's sole cost and
expense:
80
<PAGE> 85
(a) upon the Lender's reasonable request therefor given
from time to time (but not more than once during each six month period
following the Closing Date), pay for (1) reports of UCC, tax lien,
judgment and litigation searches with respect to the Borrower and (2)
searches of title to any REO Property or Additional Collateral, each
such search to be conducted by search firms designated by the Lender in
each of the locations designated by the Lender;
(b) furnish to the Lender all existing instruments,
documents, boundary surveys, footing or foundation surveys,
certificates, plans and specifications, title and other insurance
reports and agreements, and each and every other document, certificate,
agreement and instrument required to be furnished pursuant to the terms
of the Loan Documents or reasonably requested by the Lender in
connection therewith;
(c) execute and deliver to the Lender such documents,
instruments, certificates, assignments and other writings, and do such
other acts necessary, to evidence, preserve and/or protect the
Collateral at any time securing or intended to secure the Note, as the
Lender may reasonably require (including, without limitation, amended
or replacement Borrower Mortgage, UCC financing statements or
Collateral Security Instruments); and
(d) do and execute all and such further lawful and
reasonable acts, conveyances and assurances for the better and more
effective carrying out of the intents and purposes of this Agreement
and the other Loan Documents, as the Lender shall reasonably require
from time to time.
(Q) Property Management. In the event the Borrower proposes to
enter into a property management agreement with respect to the REO Property
and/or the Additional Mortgageable Collateral after the Closing Date, the
Borrower shall obtain the prior written consent of the Lender to the form of
such property management agreement, such consent not to be unreasonably withheld
or delayed, and shall obtain the prior written agreement of the property manager
that the property management agreement is subordinate in all respects to the
Lien of the Borrower Mortgage.
(R) Financial Reporting.
(i) The Borrower shall keep and maintain or shall cause to be
kept and maintained on a Fiscal Year basis in accordance with GAAP
consistently applied, books, records and accounts reflecting in
reasonable detail all of the financial affairs of the Borrower and all
items of income and expense in connection with each Asset and
Additional Collateral and in connection with any services, equipment or
furnishings provided in connection with the operation of each REO
Property and Additional Mortgageable Collateral, whether such income or
expense may be realized by the Borrower or by any other Person
whatsoever. The Lender shall have the right from time to time at all
times during normal business hours upon reasonable prior written notice
to the Borrower to examine such books, records and accounts at the
office of the Borrower or other Person maintaining such books, records
and accounts and to make such copies or extracts thereof as the Lender
shall desire. After the occurrence of an Event of Default
81
<PAGE> 86
with respect to the Borrower or an Asset or Additional Collateral and
for so long as such Event of Default is continuing, the Borrower shall
pay any costs and expenses incurred by the Lender to examine the
Borrower's accounting records with respect to any Asset or Additional
Collateral, as the Lender shall reasonably determine to be necessary or
appropriate in the protection of the Lender's interest.
(ii) The Borrower shall furnish to the Lender annually, within
90 days following the end of each Fiscal Year, a complete copy of the
Borrower's financial statement audited by an Independent certified
public accountant acceptable to the Lender covering the Borrower's
financial position and results of operations (including, but not
reporting separately on, the Assets and the Additional Collateral) for
such Fiscal Year and containing a statement of revenues and expenses, a
statement of assets and liabilities and a statement of the Borrower's
equity, all of which shall be in form and substance acceptable to the
Lender. The Lender shall have the right from time to time to review the
auditing procedures used in the preparation of such annual financial
statements and to request reasonable additional procedures. Together
with the Borrower's annual financial statements, the Borrower shall
furnish to the Lender an Officer's Certificate certifying as of the
date thereof (x) that the annual financial statements present fairly in
all material respects the results of operations and financial condition
of Borrower all in accordance with GAAP consistently applied, and (y)
whether there exists an Event of Default or Default, and if such Event
of Default or Default exists, the nature thereof, the period of time it
has existed and the action then being taken to remedy same.
(iii) The Borrower shall furnish to the Lender, within 45 days
following the end of the first three Fiscal Year quarters a true,
complete and correct quarterly financial statement with respect to
Borrower (including, but not reporting separately on said Assets and
Additional Collateral) for that quarter.
(iv) The Borrower shall furnish or shall cause the Manager to
furnish to the Lender, within 15 Business Days after request, such
further information with respect to the operation of any REO Property
or Additional Collateral and the financial affairs of the Borrower as
may be reasonably requested by the Lender, including all business plans
prepared for the Borrower.
(v) The Borrower shall furnish to the Lender, within 15
Business Days after request, such further information regarding any
Plan or Multiemployer Plan and any reports or other information
required to be filed under ERISA as may be reasonably requested by the
Lender.
(vi) Not later than the Closing Date and, subsequently, at
least 30 days prior to the end of each of the Borrower's Fiscal Years,
the Borrower shall submit or cause to be submitted to the Lender for
its approval an Operating Budget for the Borrower's Property Expenses
for the next Fiscal Year for the REO Properties and the Additional
Collateral. Until approved by Lender, the Operating Budget approved by
Lender for the preceding Fiscal Year shall remain in effect for all
purposes of this Agreement.
82
<PAGE> 87
(S) Conduct of Business. The Borrower shall cause the operation
of each REO Property and Additional Mortgageable Collateral to be conducted at
all times in a manner consistent with at least the level of operation of such
REO Property and Additional Mortgageable Collateral as of the Closing Date,
including, without limitation, the following:
(i) to maintain or cause to be maintained the standard of such
REO Property and Additional Mortgageable Collateral at all times at a
level not lower than that maintained by prudent managers of similar
facilities or land in the region where such REO Property and Additional
Mortgageable Collateral is located;
(ii) to operate or cause to be operated each REO Property and
Additional Mortgageable Collateral in a prudent manner in compliance in
all material respects with applicable Legal Requirements and Insurance
Requirements relating thereto and maintain or cause to be maintained
all licenses, Permits and any other agreements necessary for the
continued use and operation of such REO Property and Additional
Collateral, except where the failure to maintain such items is not
reasonably likely to have a Material Adverse Effect; and
(iii) to maintain or cause to be maintained sufficient Inventory
and Equipment of types and quantities at each REO Property and
Additional Mortgageable Collateral to enable the Borrower to operate
such REO Property and Additional Collateral without any Material
Adverse Effect.
(T) Single-Purpose Entity. If pursuant to Section 2.18,
Borrower exercises the SPE Option, then, from and after the SPE Transfer:
(i) The Borrower at all times shall continue to be a duly
formed and validly existing corporation, limited liability company or
limited partnership, as applicable, under the laws of the State of its
formation and a Single-Purpose Entity.
(ii) The Borrower shall at all times comply with the provisions
of its charter, limited liability company agreement or limited
partnership agreement, as applicable, and the laws of the State of its
formation relating to corporations, limited liability companies or
limited partnerships, as applicable.
(iii) The Borrower shall observe all customary formalities
regarding its existence.
(iv) The Borrower shall accurately maintain its financial
statements, accounting records and other corporate documents separate
from those of its shareholders, members or partners, Affiliates of its
shareholders, members or partners and any other Person. The Borrower
shall not commingle its assets with those of its shareholders, members
or partners, any Affiliates of its shareholders, members or partners,
or any other Person. The Borrower shall continue to accurately maintain
its own bank accounts and separate books of account.
83
<PAGE> 88
(v) The Borrower shall continue to pay its own liabilities
from its own separate assets.
(vi) The Borrower shall continue to identify itself in all
dealings with the public, under its own name or trade names and as a
separate and distinct entity. The Borrower will not identify itself as
being a division or a part of any other entity. The Borrower will not
identify its members or partners or any Affiliates of its shareholders,
members or partners as being a division or part of the Borrower.
(vii) The Borrower shall continue to be adequately capitalized
in light of the nature of its business.
(viii) The Borrower shall not assume or guarantee the liabilities
of its shareholders, members or partners (or any predecessor
corporation), any Affiliates of its shareholders, members or partners,
or any other Persons, except for liabilities relating to the Assets
and/or the Additional Collateral and except as permitted by or pursuant
to this Agreement. The Borrower shall not acquire obligations or
securities of its shareholders, members or partners (or any predecessor
corporation, partnership or limited liability company), or any
Affiliates of its shareholders, members or partners other than the
capital stock of, or limited partnership or membership interests in,
its subsidiaries. The Borrower shall not make loans to its
shareholders, members or partners (or any predecessor corporation), or
any Affiliates of its shareholders, members or partners.
(ix) The Borrower shall not enter into or be a party to any
transaction with its shareholders, members or partners (or any
predecessor corporation, partnership or limited liability company) or
any Affiliates of its shareholders, members or partners, except for in
the ordinary course of business on terms which are no less favorable to
the Borrower than would be obtained in a comparable arm's length
transaction with an unrelated third party.
(U) ERISA. The Borrower shall deliver to the Lender as soon as
possible, and in any event within ten days after the Borrower knows or has
reason to believe that any of the events or conditions specified below with
respect to any Plan or Multiemployer Plan has occurred or exists, a statement
signed by a senior financial officer of the Borrower setting forth details
respecting such event or condition and the action, if any, that the Borrower or
its ERISA Affiliate proposes to take with respect thereto (and a copy of any
report or notice required to be filed with or given to PBGC by the Borrower or
an ERISA Affiliate with respect to such event or condition):
(i) any reportable event, as defined in Section 4043(b) of
ERISA and the regulations issued thereunder, with respect to a Plan, as
to which PBGC has not by regulation waived the requirement of Section
4043(a) of ERISA that it be notified within 30 days of the occurrence
of such event (provided that a failure to meet the minimum funding
standard of Section 412 of the Code or Section 302 of ERISA, including,
without limitation, the failure to make on or before its due date a
required installment under Section 412(m) of the Code or Section 302(e)
of ERISA, shall be a reportable event
84
<PAGE> 89
regardless of the issuance of any waivers in accordance with Section
412(d) of the Code); and any request for a waiver under Section 412(d)
of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice
of intent to terminate any Plan or any action taken by the Borrower or
an ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section 4042
of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Borrower or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer
Plan by the Borrower or any ERISA Affiliate that results in material
liability under Section 4201 or 4204 of ERISA (including the obligation
to satisfy secondary liability as a result of a purchaser default) or
the receipt by the Borrower or any ERISA Affiliate of notice from a
Multiemployer Plan that it is in reorganization or insolvency pursuant
to Section 4241 or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Borrower or any ERISA Affiliate of the
Borrower to enforce Section 515 of ERISA, which proceeding is not
dismissed within 30 days;
(vi) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result in
the loss of tax-exempt status of the trust of which such Plan is a part
if the Borrower or an ERISA Affiliate of the Borrower fails to timely
provide security to the Plan in accordance with the provisions of said
Sections; and
(vii) the imposition of a lien or a security interest in
connection with a Plan.
(V) Assignment or Participation of Note. In the event that the
Lender notifies the Borrower that a secondary market sale (an "Assignment") of,
or a sale of a participation interest (a "Participation") in, the Note to
another party is a desirable course of action with respect to the Loan, then the
Borrower shall cooperate with the Lender, in the preparation of any information
(other than Appraisals, Environmental Reports and Engineering Reports)
reasonably necessary or incidental to such Assignment or Participation with
respect to the Collateral which is reasonably within the possession or control
of the Borrower or is obtainable by the Borrower and shall in good faith enter
into any amendments to this Agreement necessary to accomplish the Assignment or
Participation; provided, however, that the Lender shall bear any third party
out-of-pocket costs incurred by the Borrower in preparing any information or
obtaining any amendments.
85
<PAGE> 90
(W) Joint Venture Agreement.
(1) Borrower shall fully comply with all of its covenants and
obligations under the Joint Venture Agreement.
(2) To the extent the Borrower has the power under the Joint
Venture Agreement, the Borrower shall cause the Joint Venture to have
all Distributions timely made and fully distributed at the first
available time in accordance with the terms of the Joint Venture
Agreement with no funds being retained by the Joint Venture as its
property.
(3) During any period that Borrower shall not be in compliance
with the LTV Test, Borrower shall cause all Distributions made by the
Joint Venture to be directly deposited in the Collection Account.
(X) Refinancing Loan. If during the term of the Loan or upon
maturity, the Borrower or any Affiliate of the Borrower proposes to obtain a
loan from any Person (other than the Lender) and to cause the proceeds of such
loan to be used to pay or prepay the Loan in whole or in part (including,
without limitation, on the Maturity Date or otherwise pursuant to Section 2.6(a)
or 2.7(a)) (any such loan, a "Refinancing Loan"), the Borrower shall provide to
the Lender in writing the material terms of such Refinancing Loan. The Lender
shall have ten (10) calendar days from the receipt of such terms to offer to the
Borrower a loan on the same material terms as the terms provided by the other
lender. If the Lender shall offer to the Borrower a loan with the same material
terms as the terms provided by the Borrower to the Lender, the Borrower shall
accept, and enter into, the loan offered by the Lender and shall not accept, or
enter into, such Refinancing Loan. If the Lender declines to offer a loan on the
same material terms and the Borrower subsequently either proposes to obtain a
Refinancing Loan with financial terms less advantageous to the Borrower than
those previously disclosed to the Lender or does not consummate a Refinancing
Loan on the terms provided within forty-five (45) days of the Lender declining
to offer a loan on the same material terms, then the Borrower shall provide the
Lender with a further opportunity to make the Refinancing Loan in accordance
with the timing provisions set forth above.
(Y) Debt Covenant. The Borrower shall at all times throughout
the term of the Loan maintain a Leverage Ratio equal to or less than 60% (the
"Debt Covenant"). Simultaneously with the delivery of Borrower's annual and
quarterly financial statements pursuant to Section 5.1(R)(ii) and (iii),
Borrower shall deliver to Lender an Officer's Certificate (including reasonable
supporting documentation) with respect to Borrower's compliance or noncompliance
with the Debt Covenant; provided, however, that if Borrower exercises the SPE
Option, SPE Borrower shall not be required to comply with this Section 5.1(Y).
(Z) Liquidity Covenants.
(1) Pursuant to the Distribution Agreement, Borrower has agreed
to maintain at all times liquidity of not less than (a) $27,000,000
during the first year of the Loan, (b) $25,000,000 during the second
year of the Loan, and (c) $17,000,000 during the third year of the Loan
(the "Parent Liquidity Covenant"); provided, however , that any failure
86
<PAGE> 91
of Borrower to maintain the Parent Liquidity Covenant shall not
constitute an Event of Default under this Agreement.
(2) Borrower shall maintain at all times liquidity of not less
than (a) $14,000,000 during the first year of the Loan, (b) $13,000,000
during the second year of the Loan, (c) $9 million during the third
year of the Loan, and (d) $15,000,000 during the fourth and fifth years
of the Loan, if applicable (the " Loan Liquidity Covenant").
(3) Borrower shall deliver to Lender, simultaneously with the
delivery of Borrower's annual and quarterly financial statements, an
Officer's Certificate (including reasonable supporting documentation)
with respect to Borrower's compliance or noncompliance with the Parent
Liquidity Covenant and the Loan Liquidity Covenant during the
immediately preceding quarter (the "Liquidity Certificate"); provided,
however, that no certification with respect to the Parent Liquidity
Covenant shall be required after the First Extension Date.
(4) If Borrower shall at any time during the term of the Loan
be out of compliance with any of the Debt Covenant, the Parent
Liquidity Covenant and/or the Loan Liquidity Covenant, Borrower
immediately shall deliver notice of such noncompliance to Lender.
(5) Notwithstanding anything in this Agreement to the contrary,
if Borrower exercises the SPE Option, SPE Borrower shall not be
required to comply with this Section 5.1(Z).
(AA) Market Value. Borrower shall cooperate with Lender and
provide Lender with such information as Lender shall reasonably request in order
to determine the market value for any Asset.
(BB) Post-Closing Matters. Promptly following the Closing Date,
the Borrower shall use commercially reasonable efforts to execute the following
transactions:
(i) with respect to the Marina Ground Lease, amend the Marina
Ground Lease to by its terms permit the leasehold estate to be
mortgaged and to grant any leasehold mortgagee standard protections
necessary to protect the security of a leasehold mortgagee (including
the right of the leasehold mortgagee to receive notice of lessee's
default under the Marina Ground Lease, the right of the leasehold
mortgagee with adequate time to cure such default and, in the case of
incurable lessee defaults, the right of the leasehold mortgagee to
enter into a new ground lease with lessor on the same terms as the
existing ground lease);
(ii) with respect to the Barnett Tower Parking Lease, amend the
Barnett Tower Parking Lease to grant any lender to the Borrower as
lessee thereunder standard protections necessary to protect the
security of such lender as the collateral assignee of lessee's interest
in, to and under the Barnett Tower Parking Lease (including the right
of the lender to receive notice of the lessee's default under the
Barnett Tower Parking Lease and the right of the lender with adequate
time to cure such default);
87
<PAGE> 92
(iii) with respect to each of the REO Properties or Mortgage
Loans designated on the Asset Schedule as set forth below obtain and
deliver to Lender the following fully executed Leases or Lease
extensions:
<TABLE>
<CAPTION>
Term Base
REO Property/ Square (in Rent
Mortgage Loan Tenant Floor Feet years) (psf)
------------- ------ ----- ---- ----- -----
<S> <C> <C> <C> <C> <C>
Highpoint Florida Power Ste. 770 1,831 10 $22.54
Vine Street - State of WA entire 43,382 5 $10.22
Town Square VI building
Vine Street - State of WA entire 46,957 5 $ 9.35
Olympia/405 building
Black Lake
Vine Street - State of WA entire 24,875 5 $10.76
Olympia - 421 building
Black Lake
</TABLE>
(iv) with respect to each of the Mortgage Loans designated on
the Asset Schedule as set forth below obtain and deliver to Lender
fully executed tenant estoppel certificates in form and substance
satisfactory to Lender from the following tenants:
<TABLE>
<CAPTION>
Mortgage Loan Tenant Floor
------------- ------ -----
<S> <C> <C>
Continuum The Continuum Company, Inc. entire
building
Marquardt Kaiser Marquardt, Inc. entire
building
Vine St. - Capital View I State of Washington Department of Social and Health entire
Services building
Vine St. - Capital View II State of Washington Department of Social and Health 1, 4
Services
Vine St. - Capital View II State of Washington Department of Labor and 3
Industries
Vine St. - Capital View II State of Washington Department of Transportation 2
Vine St. - Olympia/405 Black State of Washington Department of Licensing entire
Lake Blvd. building
</TABLE>
88
<PAGE> 93
<TABLE>
<CAPTION>
Mortgage Loan Tenant Floor
------------- ------ -----
<S> <C> <C>
Vine St. - Olympia/421 Black State of Washington Department of Licensing entire
Lake Blvd. building
Vine St. - Town Square VI State of Washington Department of General entire
Administration building
</TABLE>
(v) with respect to the Mortgage Loan designated on the Asset
Schedule as "Madison Building", deliver to Lender written evidence
satisfactory to Lender that such Mortgage Loan shall not be
cross-defaulted to other mortgage loans between Madison Savings and
Loan Association (or its successor or assign), as lender, and the
Mortgagor, as borrower;
(vi) deliver to the Lender copies of all major executed Leases
in effect at the Mortgaged Properties identified as "Madison Building"
and "Plaza del Rio" on the Asset Schedule;
(vii) deliver to Lender an Operating Budget for Fiscal Year
1996;
(viii) deliver to Lender true and complete copies of all of
the insurance policies required under the Borrower Mortgage;
(ix) deliver to Lender the Environmental Report with respect to
the Mortgaged Property securing the Mortgage Loan identified on the
Asset Schedule as "Marquardt"; and
(x) deliver to Lender fully executed tenant estoppel
certificates in form and substance satisfactory to Lender from tenants
whose leased premises constitute in aggregate, as to each REO Property
and Mortgaged Property (other than the Mortgaged Property securing the
Mortgage Loan identified on the Asset Schedule as "Life Care"), not
less than 75% of the occupied area of such REO Property or Mortgaged
Property;
provided, however, that any failure of the Borrower to consummate any of the
transactions set forth in this Section 5.1(BB) shall not constitute an Event of
Default under this Agreement.
(CC) Cooperation Covenant. Following the Closing Date, the
Borrower shall cooperate with the Lender with respect to the following matters:
(i) the Borrower shall deliver to the Lender, promptly upon
its receipt thereof, notice from the ground lessor of any default by
the ground lessee under the Marina Ground Lease and notice from the
lessor of any default by the lessee under the Barnett Tower Parking
Lease;
(ii) the Borrower shall promptly deliver to the Lender the pro
forma financial statements for each REO Property described in Section
3.1(Y) not delivered prior to the Closing Date;
89
<PAGE> 94
(iii) the Borrower shall use its best efforts to improve the
quality of the financial information delivered and reported to the
Lender with respect to the Mortgage Loans from the quality level of
such information delivered and reported with respect to the Mortgage
Loans prior to the Closing Date; and
(iv) in the event a Ground Lease Event of Default has occurred
and has not been cured, provide to the Lender additional collateral
reasonably satisfactory to the Lender of reasonably equivalent value to
the diminution in value of the Additional Collateral designated on the
Additional Collateral Schedule as the "Marina".
(DD) Ground Leases. With respect to the Marina Ground Lease and
with respect to any Mortgage Loan secured by a Ground Lease regarding which the
Borrower becomes the owner of the leasehold interest after the Closing Date, the
Borrower shall:
(i) preserve the leasehold estate created by such Ground
Lease and forever warrant and defend same to Lender;
(ii) perform all of the covenants and conditions required to be
performed by the leasehold owner under the Ground Lease and do all
things necessary to preserve unimpaired the leasehold owner's right
thereunder;
(iii) not amend or modify the Ground Lease or release the
landlord thereunder from any obligations imposed upon it thereby
without the prior written consent of the Lender, which consent shall
not be unreasonably withheld;
(iv) immediately send a copy of any notice of default under any
Ground Lease received from the related lessor to the Lender; and
(v) in the case of the Marina Ground Lease only, comply with
all of the terms, provisions and conditions of the form of Borrower
Mortgage attached hereto (other than with respect to the creation,
perfection and enforcement of the Lien of a Borrower Mortgage) as if
the Borrower had granted the Lender a first priority Borrower Mortgage
with respect to the Marina Ground Lease.
ARTICLE VI
NEGATIVE COVENANTS
Section 6.1. Borrower Negative Covenants. The Borrower
covenants and agrees that, until payment in full of the Indebtedness, it will
not do, directly or indirectly, any of the following unless the Lender consents
thereto in writing:
(A) Liens on the Assets. Incur, create, assume, or permit to
exist, any Lien with respect to the Assets or Additional Collateral or its
property, income or profits or the income or profits therefrom, except: (i)
Liens in favor of Lender and (ii) the Permitted Encumbrances.
90
<PAGE> 95
(B) Transfer. Except as expressly permitted by or pursuant to
this Agreement or the Borrower Mortgage, Transfer any of the Assets or
Additional Collateral.
(C) Other Borrowings. Incur, create, assume, become or be
liable in any manner with respect to Other Borrowings secured by any of the
Assets or the Additional Collateral, except that with respect to SPE Borrower
only, SPE Borrower may incur loans from its members or partners or such members'
or partners' Affiliates, provided that (a) such loans are subordinate to the
Loan and unsecured, (b) the terms of such loans provide that the related member
or partner shall not take any judicial or non-judicial action to commence any
foreclosure proceeding with respect thereto for so long as any of the
Indebtedness remains outstanding, (c) the proceeds of such loans are used by SPE
Borrower to pay expenses (including Property Expenses) or closing costs relating
to the Assets and/or the Additional Collateral or to make interest payments on
the Loan; and (d) such Loans are on terms satisfactory to Lender.
(D) Dissolution; Merger or Consolidation. Dissolve, terminate,
liquidate, merge with or consolidate into another Person in a manner in which
the Borrower is not the surviving entity.
(E) Change In Business. As to SPE Borrower only, cease to be a
Single-Purpose Entity, or make any material change in the scope or nature of its
business objectives, purposes or operations, or undertake or participate in
activities other than the continuance of its present business.
(F) Debt Cancellation. Cancel or otherwise forgive or release
any material claim or debt owed to the Borrower by any Person, except for
adequate consideration or in the ordinary course of Borrower's business.
(G) Affiliate Transactions. Enter into, or be a party to, any
transaction with an Affiliate of the Borrower in connection with the Assets or
the Additional Collateral, except in the ordinary course of business and on
terms which are no less favorable to Borrower or such Affiliate than would be
obtained in a comparable arm's length transaction with an unrelated third party.
(H) Creation of Easements. Except as expressly permitted by or
pursuant to the Borrower Mortgage, create, or permit any REO Property or
Additional Mortgageable Collateral or any part thereof to become subject to, any
easement, license or restrictive covenant, other than a Permitted Encumbrance.
(I) Misapplication of Funds. Distribute any Rents or Moneys
received from Accounts or under Leases or any Proceeds of the Assets or the
Additional Collateral in violation of the provisions of Section 2.12, or
misappropriate any security deposit or portion thereof.
(J) Certain Restrictions. Enter into any agreement which
expressly restricts the ability of the Borrower to enter into amendments,
modifications or waivers of any of the Loan Documents.
91
<PAGE> 96
(K) Assignment of Licenses and Permits. Assign or transfer any
of its interest in any Permits pertaining to any REO Property or Additional
Mortgageable Collateral, or assign, transfer or remove or permit any other
Person to assign, transfer or remove any records pertaining to any REO Property
or Additional Mortgageable Collateral.
(L) Place of Business. Change its chief executive office or its
principal place of business without giving the Lender at least 30 days' prior
written notice thereof and promptly providing the Lender such information as the
Lender may reasonably request in connection therewith.
(M) Leases. Enter into, amend or cancel Leases, except as
permitted by or pursuant to the Borrower Mortgage.
(N) Management Agreement. In the event after the Closing Date,
the Borrower enters into a property management agreement with respect to the REO
Property or Additional Mortgageable Collateral, (i) surrender, terminate or
cancel the property management agreement, (ii) reduce or consent to either the
reduction of the term of or the assignment of the property management agreement,
(iii) increase or consent to the increase of the amount of any charges under the
property management agreement, or (iv) otherwise modify, change, supplement,
alter or amend, or waive or release any of its rights and remedies under, the
property management agreement in any material respect, the Lender agreeing not
to unreasonably withhold or delay its consent to any of the foregoing.
(O) Plans and Welfare Plans. Knowingly engage in or permit any
transaction in connection with which the Borrower or any ERISA Affiliate could
be subject to either a material civil penalty or tax assessed pursuant to
Section 502(i) or 502(l) of ERISA or Section 4975 of the Code, permit any
Welfare Plan to provide benefits, including without limitation, medical benefits
(whether or not insured), with respect to any current or former employee of the
Borrower beyond his or her retirement or other termination of service other than
(i) coverage mandated by applicable law, (ii) death or disability benefits that
have been fully provided for by paid up insurance or otherwise or (iii)
severance benefits (unless such coverage is provided after notification of and
with the reasonable approval of the Lender), permit the assets of the Borrower
to become "plan assets", whether by operation of law or under regulations
promulgated under ERISA or adopt, amend (except as may be required by applicable
law) or increase the amount of any benefit or amount payable under, or permit
any ERISA Affiliate to adopt, amend (except as may be required by applicable
law) or increase the amount of any benefit or amount payable under, any Plan or
Welfare Plan, except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not result in a
material increase in benefits expense to the Borrower or any ERISA Affiliate.
(P) Parent Liquidity Covenant. Modify the Parent Liquidity
Covenant.
(Q) Joint Venture Agreement.
(1) Assign, pledge, encumber, hypothecate or otherwise Transfer
a security or ownership interest in Borrower's interest in, to and
under the Joint Venture Agreement,
92
<PAGE> 97
(2) cease, to the extent within its authority, to be a joint
venturer under the Joint Venture Agreement,
(3) cause or permit the Transfer of any Joint Venture Equipment
or modify the material economic terms of the direct finance leases
under which the Joint Venture is lessor of the Joint Venture Equipment,
(4) cause or permit to be placed on, or granted with respect
to, any Joint Venture Equipment any Lien, claim, encumbrance,
participation or contingent interests, equity, pledge, charge,
assignment or other security interests of any nature,
(5) cause or, to the extent within its authority, permit the
modification, amendment, alteration, termination or cancellation of the
Joint Venture Agreement,
(6) cause or, to the extent within its authority, permit the
dissolution of the Joint Venture,
(7) cause or, to the extent within its authority, permit the
Joint Venture to be taxed other than as a partnership for federal
income tax purposes,
(8) grant any consent or approval to any action or agreement,
or cause or permit any action to be taken or agreement to be entered
into, by the Joint Venture without the prior written consent or
approval of the Lender, and
(9) cause or, to the extent within its authority, permit any
Distribution not to be fully distributed to the joint venturers at the
first available time under the Joint Venture Agreement.
ARTICLE VII
DEFAULTS
Section 7.1. Event of Default. The occurrence of one or more
of the following events shall be an "Event of Default" hereunder:
(i) if on any Payment Date the Borrower fails to pay any
accrued and unpaid interest on the Loan, the Scheduled Principal
Payment Amount and other principal amount, if any, referred to in
clause tenth of Section 2.12(b)(iii) then due and payable in accordance
with the provisions hereof;
(ii) if the Borrower fails (a) to pay the outstanding
Indebtedness on the Maturity Date or (b) to deposit into the Collection
Account the amount required pursuant to Section 2.7(a), 2.7(b) or
2.7(c), respectively;
(iii) if the Borrower fails to pay any other amount payable
pursuant to this Agreement or any other Loan Document when due and
payable in accordance with the
93
<PAGE> 98
provisions hereof or thereof, as the case may be, and such failure
continues for 10 days after Lender delivers written notice thereof to
Borrower;
(iv) if any representation or warranty made herein or in any
other Loan Document, or in any report, certificate, financial statement
or other Instrument, agreement or document furnished by the Borrower in
connection with this Agreement, the Note or any other Loan Document
executed and delivered by the Borrower, shall be false in any material
respect as of the date such representation or warranty was made;
(v) if the Borrower makes an assignment for the benefit of
creditors;
(vi) if a receiver, liquidator or trustee shall be appointed
for the Borrower or if the Borrower shall be adjudicated a bankrupt or
insolvent, or if any petition for bankruptcy, reorganization or
arrangement pursuant to federal bankruptcy law, or any similar federal
or state law, shall be filed by or against, consented to, or acquiesced
in by, the Borrower or if any proceeding for the dissolution or
liquidation of the Borrower shall be instituted; provided, however,
that if such appointment, adjudication, petition or proceeding was
involuntary and not consented to by the Borrower upon the same not
being discharged, stayed or dismissed within 45 days, or if the
Borrower shall generally not be paying its debts as they become due;
(vii) if the Borrower attempts to delegate its obligations or
assign its rights under this Agreement, any of the other Loan Documents
or any interest herein or therein, or if any Transfer occurs other than
in accordance with the Borrower Mortgage or any other Loan Document and
such delegation or assignment of rights or impermissible Transfer
continues or is not corrected for 10 days after the Lender delivers
written notice thereof to the Borrower;
(viii) if any provision of Borrower's organizational documents
affecting the purpose for which the Borrower is formed is amended or
modified in any material respect which may adversely affect the Lender
or the Collateral Agent, or if the Borrower or, as to the SPE Borrower,
its general partner or managing member fails to perform or enforce the
provisions of Borrower's organizational documents or attempts to
dissolve the Borrower, or if the SPE Borrower breaches any of its
representations, warranties or covenants set forth in Section 2.18 or
6.1(E);
(ix) if an Event of Default as defined or described in the
Note, the Borrower Mortgage or any other Loan Document occurs, whether
as to the Borrower or any REO Property or Additional Collateral or all
or any portion of any REO Property or Additional Collateral;
(x) if the Borrower shall continue to be in Default under any
of the other terms, covenants or conditions of this Agreement (other
than Section 5.1(Z)(1) hereof), the Note, the Borrower Mortgage or the
other Loan Documents, for 10 days after notice to the Borrower from the
Lender or its successors or assigns, in the case of any Default which
can be cured by the payment of a sum of money (other than Events of
Default pursuant to clauses (i) and (ii) above as to which the grace
period, if any, set forth therein is
94
<PAGE> 99
applicable), or for 45 days after notice from the Lender or its
successors or assigns, in the case of any other Default (unless
otherwise provided herein or in such other Loan Document); provided,
however, that if such non-monetary Default is susceptible of cure but
cannot reasonably be cured within such 45 day period and the Borrower
shall have commenced to cure such Default within such 45 day period and
thereafter diligently and expeditiously proceeds to cure the same, such
45 day period shall be extended for an additional 45 days;
(xi) a Change of Control has occurred; or
(xii) if Borrower shall be obligated, but shall fail, to comply
with the Loan Liquidity Covenant and such failure to comply shall not
be cured within 10 Business Days of the occurrence of such failure;
then, upon the occurrence of any such Event of Default and at any time
thereafter while the Event of Default is continuing, Lender or its successors or
assigns, may, in addition to any other rights or remedies available to it
pursuant to this Agreement, the Note, the Borrower Mortgage, the Collateral
Assignments of Mortgage, the Aircraft Distribution Assignment and the other Loan
Documents, or at law or in equity, take such action, without notice or demand,
as the Lender or its successors or assigns, deems advisable to protect and
enforce its rights against the Borrower and in and to all or any portion of the
Assets and the Additional Collateral (including, without limitation, declaring
the entire Indebtedness to be immediately due and payable) and may enforce or
avail itself of any or all rights or remedies provided in the Loan Documents
against Borrower and/or the Assets and the Additional Collateral (including,
without limitation, all rights or remedies available at law or in equity).
Section 7.2. Remedies. (a) Upon the occurrence of an Event of
Default, all or any one or more of the rights, powers, other remedies available
to the Lender against the Borrower under this Agreement, the Note, the Borrower
Mortgage, the Collateral Assignment of Mortgages, the Aircraft Distribution
Assignment or any of the other Loan Documents executed by or with respect to the
Borrower, or at law or in equity may be exercised by the Lender at any time and
from time to time while the Event of Default is continuing, whether or not all
or any portion of the Indebtedness shall be declared due and payable, and
whether or not the Lender shall have commenced any foreclosure proceeding or
other action for the enforcement of its rights and remedies under any of the
Loan Documents with respect to all or any portion of the Assets and the
Additional Collateral. Any such actions taken by the Lender shall be cumulative
and concurrent and may be pursued independently, singly, successively, together
or otherwise, at such time and in such order as Lender may determine in its sole
discretion, to the fullest extent permitted by law, without impairing or
otherwise affecting the other rights and remedies of Lender permitted by law,
equity or contract or as set forth herein or in the other Loan Documents.
(b) In the event of the foreclosure or other action by Lender
to enforce its remedies in connection with all or any portion of the Assets and
the Additional Collateral, Lender shall apply all Net Proceeds received to repay
the Indebtedness in accordance with Section 2.8, the Indebtedness shall be
reduced to the extent of such Net Proceeds and the remaining portion of the
Indebtedness shall remain outstanding and secured by the Borrower Mortgage, the
Collateral
95
<PAGE> 100
Assignments of Mortgage, the Aircraft Distribution Assignment and the other Loan
Documents, it being understood and agreed by the Borrower that the Borrower is
liable for the repayment of all the Indebtedness; provided, however, that the
Note shall be deemed to have been accelerated only to the extent of the Net
Proceeds actually received by the Lender with respect to the Assets and the
Additional Collateral and applied in reduction of the Indebtedness evidenced by
the Note in accordance with the provisions of the Note, after payment by the
Borrower of all transaction costs and expenses and costs of enforcement.
(c) Upon the occurrence of any Event of Default and while the
Event of Default is continuing, the Lender may, but without any obligation to do
so and without notice to or demand on the Borrower and without releasing the
Borrower from any obligation hereunder, take any action to cure such Event of
Default in such manner and to such extent as the Lender may deem necessary to
protect the security of its Lien on any REO Property or Additional Collateral.
The Lender is authorized to enter upon any REO Property or Additional Collateral
upon reasonable notice to the Borrower for such purposes or appear in, defend,
or bring any action or proceeding to protect its interest in the REO Property or
Additional Collateral or to foreclose the Borrower Mortgage, Collateral
Assignments of Mortgage or Aircraft Distribution Assignment or collect the
Indebtedness, and the cost and expense thereof (including reasonable attorneys'
fees to the extent permitted by law), with interest at the Default Rate for the
period after notice from the Lender that such cost or expense was incurred to
the date of payment to the Lender, shall constitute a portion of the
Indebtedness, shall be secured by the Borrower Mortgage, Collateral Assignments
of Mortgage and Aircraft Distribution Assignment and shall be due and payable to
the Lender upon demand therefor.
Section 7.3. Remedies Cumulative. The rights, powers and
remedies of the Lender under this Agreement shall be cumulative and not
exclusive of any other right, power or remedy which the Lender may have against
the Borrower pursuant to this Agreement or the other Loan Documents executed by
or with respect to Borrower, or existing at law or in equity or otherwise. The
Lender's rights, powers and remedies may be pursued singly, concurrently or
otherwise, at such time and in such order as the Lender may determine in the
Lender's sole discretion. No delay or omission to exercise any remedy, right or
power accruing upon an Event of Default shall impair any such remedy, right or
power or shall be construed as a waiver thereof, but any such remedy, right or
power may be exercised from time to time and as often as may be deemed
expedient. A waiver of any Default or Event of Default shall not be construed to
be a waiver of any subsequent Default or Event of Default or to impair any
remedy, right or power consequent thereon. Notwithstanding any other provision
of this Agreement, the Lender reserves the right to seek a deficiency judgment
or preserve a deficiency claim, in connection with the foreclosure of the
Borrower Mortgage, Collateral Assignments of Mortgage or Aircraft Distribution
Assignment on any REO Property or Additional Collateral, to the extent necessary
to foreclose on other REO Property or Additional Collateral.
Section 7.4. Default Administration Fee. At any time after the
occurrence of an Event of Default and the acceleration of the Indebtedness, as
reimbursement and compensation for the additional internal expenditures,
administrative expenses, fees and other costs associated with actions to be
taken in connection with such Event of Default, and regardless of whether Lender
shall have commenced the exercise of any remedies pursuant to Section 7.2, the
Default Administration Fee shall be payable by Borrower to Lender upon demand.
96
<PAGE> 101
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Survival. This Agreement and all covenants,
agreements, representations and warranties made herein and in the certificates
delivered pursuant hereto shall survive the execution and delivery of this
Agreement, the making by the Lender of the Loan hereunder and the execution and
delivery by the Borrower to the Lender of the Note, and shall continue in full
force and effect so long as any portion of the Indebtedness is outstanding and
unpaid. Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and assigns of such
party. All covenants, promises and agreements in this Agreement contained, by or
on behalf of the Borrower, shall inure to the benefit of the respective
successors and assigns of the Lender. Nothing in this Agreement or in any other
Loan Document, express or implied, shall give to any Person other than the
parties and the holder of the Note, the Borrower Mortgage, the Collateral
Assignments of Mortgage, the Aircraft Distribution Assignment and the other Loan
Documents, and their legal representatives, successors and assigns, any benefit
or any legal or equitable right, remedy or claim hereunder.
Section 8.2. Lender's Discretion. Whenever pursuant to this
Agreement, the Lender exercises any right given to it to approve or disapprove,
or any arrangement or term is to be satisfactory to the Lender, the decision of
the Lender to approve or disapprove or to decide whether arrangements or terms
are satisfactory or not satisfactory shall (except as is otherwise specifically
herein provided) be in the sole discretion of the Lender and shall be final and
conclusive.
Section 8.3. Governing Law. (a) This Agreement was negotiated
in New York, and made by the Lender and accepted by the Borrower in the State of
New York, and the proceeds of the Note delivered pursuant hereto were disbursed
from New York, which State the parties agree has a substantial relationship to
the parties and to the underlying transaction embodied hereby, and in all
respects (including, without limitation, matters of construction, validity and
performance), this Agreement and the obligations arising hereunder shall be
governed by, and construed in accordance with, the laws of the State of New York
applicable to contracts made and performed in such State and any applicable law
of the United States of America.
(b) Any legal suit, action or proceeding against the Lender or
the Borrower arising out of or relating to this Agreement shall be instituted in
any federal or state court in New York, New York. The Borrower hereby (i)
irrevocably waives, to the fullest extent permitted by applicable law, any
objection which it may now or hereafter have to the laying of venue of any such
suit, action or proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum,
and (ii) irrevocably submits to the jurisdiction of any such court in any such
suit, action or proceeding.
Section 8.4. Modification, Waiver in Writing. No
modification, amendment, extension, discharge, termination or waiver of any
provision of this Agreement, the Note or any other Loan Document, or consent to
any departure by the Borrower therefrom, shall in any event
97
<PAGE> 102
be effective unless the same shall be in a writing signed by the party against
whom enforcement is sought, and then such waiver or consent shall be effective
only in the specific instance, and for the purpose, for which given. Except as
otherwise expressly provided herein, no notice to or demand on the Borrower
shall entitle the Borrower to any other or future notice or demand in the same,
similar or other circumstances.
Section 8.5. Delay Not a Waiver. Neither any failure nor any
delay on the part of the Lender in insisting upon strict performance of any
term, condition, covenant or agreement, or exercising any right, power, remedy
or privilege hereunder, or under the Note, or of any other Loan Document, or any
other instrument given as security therefor, shall operate as or constitute a
waiver thereof, nor shall a single or partial exercise thereof preclude any
other future exercise, or the exercise of any other right, power, remedy or
privilege. In particular, and not by way of limitation, by accepting payment
after the due date of any amount payable under this Agreement, the Note or any
other Loan Document, the Lender shall not be deemed to have waived any right
either to require prompt payment when due of all other amounts due under this
Agreement, the Note or the other Loan Documents, or to declare a default for
failure to effect prompt payment of any such other amount.
Section 8.6. Notices. All notices, consents, approvals and
requests required or permitted hereunder or under any other Loan Document shall
be given in writing and shall be effective for all purposes if hand delivered to
the Person specified herein or sent by (a) certified or registered United States
mail, postage prepaid, or (b) overnight prepaid delivery service, either
commercial or United States Postal Service, with proof of attempted delivery,
and by telecopier (with answer back acknowledged), addressed if to Lender at its
address set forth on the first page hereof, Attention: Peter Levine, if to the
Collateral Agent at its address set forth on the first page hereof, and if to
the Borrower at its address set forth on the first page hereof, Attention: Larry
J. Newsome, or at such other address and Person as shall be designated from time
to time by any party hereto, as the case may be, in a written notice to the
other parties hereto in the manner provided for in this Section 8.6. A copy of
all notices, consents, approvals and requests directed to the Lender shall be
delivered to Latham & Watkins, 885 Third Avenue, New York, New York 10022,
Attention: Brian Krisberg, Esq.; a copy of all notices, consents, approvals and
requests directed to the Borrower shall be delivered to Trenam, Kemker, Scharf,
Barkin, Frye, O'Neill & Mullis, 2700 Barnett Plaza, 101 East Kennedy Boulevard,
Tampa, Florida 33601-1102, Attention: Albert O'Neill, Esq. and a copy of all
notices, consents, approvals and requests directed to Collateral Agent shall be
delivered to the Collateral Agent at its address set forth on the first page
hereof, Attention: Thomas Quinlan, Jr. A notice shall be deemed to have been
given: in the case of hand delivery, at the time of delivery; in the case of
registered or certified mail, when delivered or three Business Days after
mailing; or in the case of overnight prepaid delivery and telecopy, on the
Business Day after the same was sent. A party receiving a notice which does not
comply with the technical requirements for notice under this Section 8.6 may
elect to waive any deficiencies and treat the notice as having been properly
given.
SECTION 8.7. TRIAL BY JURY. THE BORROWER, TO THE FULLEST EXTENT
THAT IT MAY LAWFULLY DO SO, WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING,
INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY ANY PARTY HERETO WITH
RESPECT TO THIS AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS.
98
<PAGE> 103
Section 8.8. Headings. The Article and Section headings in
this Agreement are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.
Section 8.9. Assignment. The Borrower may not sell, assign or
transfer any interest in the Loan Documents or any portion thereof (including,
without limitation, the Borrower's rights, title, interests, remedies, powers
and duties hereunder and thereunder). The Lender shall have the right to assign
or participate this Agreement and/or any of the other Loan Documents and the
obligations hereunder to any Person. In the case of an Assignment by the Lender,
(a) the assignee shall have, to the extent of such Assignment, the same rights,
benefits and obligations as it would have if it were the original "Lender"
hereunder and (b) upon any such substitution of the Lender, a replacement
"Lender signature page" shall be executed by the Lender and attached to this
Agreement and thereupon become a part of this Agreement. Each potential assignee
or participant lender shall be required to sign a confidentiality agreement in
the form of Exhibit G hereto which shall provide for protection of all
proprietary and confidential information of the Borrower and the Lender shall
procure same and provide a copy to the Borrower. Subject to the preceding
sentence, each participating lender shall be entitled to receive all information
received by the Lender under this Agreement. The Borrower shall keep
confidential to the same extent as such potential assignee or participant lender
shall have agreed in such confidentiality agreement all information relating to
such proposed Assignment or Participation and the identity of such potential
assignee or participant. After the effectiveness of any Participation, the
Lender shall provide notice to the Borrower of the identity, address and other
pertinent information pertaining to the participant lender. Notwithstanding
anything in this Agreement to the contrary, after an Assignment by the Lender,
the "Lender" (prior to the Assignment) shall continue to have the benefits of
any rights or indemnifications and shall continue to have the obligations
contained herein which such Lender had during the period such party was "Lender"
hereunder.
Section 8.10. Severability. Wherever possible, each provision
of this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement. In any such event, the parties hereto shall negotiate in good faith
to agree upon a substitute provision that has the same economic effect.
Section 8.11. Preferences. The Lender shall have no obligation
to marshal any assets in favor of the Borrower or any other party or against or
in payment of any or all of the obligations of Borrower pursuant to this
Agreement, the Note or any other Loan Document. To the extent the Borrower makes
a payment or payments to the Lender for the Borrower's benefit, which payment or
proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or proceeds
received, the obligations hereunder or part thereof intended to be satisfied
shall be revived and continue in full force and effect, as if such payment or
proceeds had not been received by Lender.
99
<PAGE> 104
Section 8.12. Waiver of Notice. The Borrower shall not be
entitled to any notices of any nature whatsoever from the Lender or the
Collateral Agent except with respect to matters for which this Agreement or the
other Loan Documents specifically and expressly provide for the giving of notice
by the Lender to the Borrower and except with respect to matters for which the
Borrower is not, pursuant to applicable Legal Requirements, permitted to waive
the giving of notice. The Borrower hereby expressly waives the right to receive
any notice from Lender or the Collateral Agent with respect to any matter for
which this Agreement or the other Loan Documents does not specifically and
expressly provide for the giving of notice by Lender to Borrower.
Section 8.13. Remedies of Borrower. In the event that a claim
or adjudication is made that the Lender or its agents have unreasonably delayed
acting in any case where by law or under this Agreement, the Note, the Borrower
Mortgage, the Collateral Assignments of Mortgage or the other Loan Documents,
the Lender or such agent, as the case may be, has an obligation to act promptly,
the Borrower agrees that neither the Lender nor its agents shall be liable for
any monetary damages, and the Borrower's sole remedies shall be limited to
commencing an action seeking injunctive relief or declaratory judgment.
Section 8.14. Exhibits Incorporated. The information set forth
on the cover, heading and recitals hereof, and the Exhibits attached hereto, are
hereby incorporated herein as a part of this Agreement with the same effect as
if set forth in the body hereof.
Section 8.15. Offsets, Counterclaims and Defenses. Any assignee
of the Lender's interest in and to this Agreement, the Note, the Borrower
Mortgage and the other Loan Documents shall take the same free and clear of all
offsets, counterclaims or defenses which are unrelated to this Agreement, the
Note, the Borrower Mortgage, the Collateral Assignments of Mortgage and the
other Loan Documents which the Borrower may otherwise have against any assignor
or this Agreement, the Note, the Borrower Mortgage, the Collateral Assignments
of Mortgage and the other Loan Documents, and no such unrelated counterclaim or
defense shall be interposed or asserted by the Borrower in any action or
proceeding brought by any such assignee upon this Agreement, the Note, the
Borrower Mortgage, the Collateral Assignments of Mortgage and other Loan
Documents and any such right to interpose or assert any such unrelated offset,
counterclaim or defense in any such action or proceeding is hereby expressly
waived by the Borrower.
Section 8.16. No Joint Venture or Partnership. The Borrower and
the Lender intend that the relationship created hereunder be solely that of
borrower and lender. Nothing herein is intended to create a joint venture,
partnership, tenancy-in-common, or joint tenancy relationship between the
Borrower and the Lender nor to grant the Lender any interest in the REO
Property, Mortgaged Property or Additional Collateral other than that of
mortgagee or lender.
Section 8.17. Waiver of Marshalling of Assets Defense. To the
fullest extent the Borrower may legally do so, the Borrower waives all rights to
a marshalling of the assets of Borrower, and others with interests in the
Borrower, and of the Assets and the Additional Collateral, or to a sale in
inverse order of alienation in the event of foreclosure of the interests hereby
created, and agrees not to assert any right under any laws pertaining to the
marshalling of
100
<PAGE> 105
assets, the sale in inverse order of alienation, homestead exemption, the
administration of estates of decedents, or any other matters whatsoever to
defeat, reduce or affect the right of the Lender under the Loan Documents to a
sale of any Assets or Additional Collateral for the collection of the
Indebtedness without any prior or different resort for collection, or the right
of the Lender to the payment of the Indebtedness out of the Net Proceeds of the
Assets and the Additional Collateral in preference to every other claimant
whatsoever.
Section 8.18. Waiver of Counterclaim. The Borrower hereby
waives the right to assert a counterclaim, other than compulsory counterclaim,
in any action or proceeding brought against it by the Lender or its agents.
Section 8.19. Conflict; Construction of Documents. In the event
of any conflict between the provisions of this Agreement and the provisions of
the Note, the Mortgages, the Collateral Assignments of Mortgages or any of the
other Loan Documents, the provisions of this Agreement shall prevail. The
parties hereto acknowledge that they were represented by counsel in connection
with the negotiation and drafting of the Loan Documents and that the Loan
Documents shall not be subject to the principle of construing their meaning
against the party which drafted same.
Section 8.20. Brokers and Financial Advisors. The Borrower and
the Lender hereby represent that they have dealt with no financial advisors,
brokers, underwriters, placement agents, agents or finders in connection with
the transactions contemplated by this Agreement (other than, in the case of the
Borrower, Chase Securities, Inc.). The Borrower and the Lender hereby agree to
indemnify and hold the other and the Collateral Agent harmless from and against
any and all claims, liabilities, costs and expenses of any kind in any way
relating to or arising from a claim by any Person that such Person acted on
behalf of the indemnifying party in connection with the transactions
contemplated herein. The provisions of this Section 8.20 shall survive the
expiration and termination of this Agreement and the repayment of the
Indebtedness.
Section 8.21. Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed and delivered
shall be an original, but all of which shall together constitute one and the
same instrument.
Section 8.22. Estoppel Certificates. The Borrower and Lender
each hereby agree at any time and from time to time upon not less than 15 days
prior written notice by the Borrower or the Lender to execute, acknowledge and
deliver to the party specified in such notice, a statement, in writing,
certifying that this Agreement is unmodified and in full force and effect (or if
there have been modifications, that the same, as modified, is in full force and
effect and stating the modifications hereto), and stating whether or not, to the
knowledge of such certifying party, any Default or Event of Default has occurred
and is then continuing, and, if so, specifying each such Default or Event of
Default; provided, however, that it shall be a condition precedent to Lender's
obligation to deliver the statement pursuant to this Section 8.22, that the
Lender shall have received, together with Borrower's request for such statement,
an Officer's Certificate stating that to the actual knowledge of the Borrower no
Default or Event of Default exists as of the date of such certificate (or
specifying such Default or Event of Default).
101
<PAGE> 106
Section 8.23. Payment of Expenses. The Borrower shall pay all
Transaction Costs, which shall include, without limitation, (a) reasonable
out-of-pocket costs and expenses of the Lender in connection with (i) the
negotiation, preparation, execution and delivery of the Loan Documents and the
documents and instruments referred to therein and the diligence conducted in
connection with the Transaction, (ii) the creation, perfection or protection of
the Lender's Liens in the Collateral (including, without limitation, fees and
expenses for title and lien searches or amended or replacement Borrower
Mortgage, UCC Financing Statements or Collateral Security Instruments, title
insurance premiums and filing and recording fees, third party due diligence
expenses for the Assets and Additional Collateral plus travel expenses,
accounting firm fees and costs of the Appraisals, Environmental Reports (and an
environmental consultant), and the Engineering Reports), (iii) the negotiation,
preparation, execution and delivery of any amendment, waiver or consent relating
to any of the Loan Documents and the negotiation, preparation, execution and
delivery of any documents and instruments in connection with the SPE Transfer,
and (iv) the preservation of rights under and enforcement of the Loan Documents
and the documents and instruments referred to therein, including any
restructuring or rescheduling of the Indebtedness, (b) the reasonable fees,
expenses and disbursements of counsel to the Lender in connection with all of
the foregoing, (c) all fees and expenses of the Collateral Agent and (d)
Lender's reasonable out-of-pocket travel expenses in connection with site visits
contemplated in this Agreement. Prior to retention of third parties, the Lender
shall consult with the Borrower regarding the services required, the procurement
of good faith estimates, and the third parties selected to assure that costs
will be reasonable in scope and amount. Notwithstanding anything above to the
contrary, other than the Appraisals delivered in connection with the making of
the Loan and any updates, recertifications or new Appraisals delivered pursuant
to Section 2.12(b)(iv) or (v), the Borrower shall not have any obligation to pay
for the cost of Appraisals of the Assets or Additional Collateral.
Section 8.24. Non-Recourse. Anything contained herein, in the
Note or in any other Loan Document to the contrary notwithstanding, no recourse
shall be had for the payment of the principal or interest on the Note or for any
other Indebtedness hereunder or for any claim based hereon or thereon or
otherwise in respect hereof or thereof against (a) the Borrower, any partner,
agent, contractor, director, officer, member, consultant, manager, stockholder,
subscriber to capital stock, incorporator, beneficiary, participant, trustee or
advisor of the Borrower, any partner or member in the Borrower, or any partner
or member therein; (b) any legal representative, heir, estate, successor or
assign of any thereof; (c) any corporation (or any officer, director, employee
or shareholder thereof), partnership (or any partner thereof), individual or
entity to which any ownership interest in the Borrower shall have been
transferred; (d) any purchaser of any asset of the Borrower; or (e) any other
Person, for any deficiency or other sum owing with respect to the Note or any
other Indebtedness or arising under this Agreement or any Loan Document. It is
understood that the Note and any other Indebtedness under or with respect to
this Agreement and any other Loan Document may not be enforced against any
Person described in clauses (a) through (e) above; provided, however, that the
foregoing provisions of this paragraph shall not (i) prevent recourse to the
Assets, the Additional Collateral, any Borrower Mortgage, any Collateral
Assignment of Mortgage, the Aircraft Distribution Assignment, any Collateral
Security Instrument or other instrument or document which is pledged by the
Borrower to the Lender pursuant to the Loan Documents, (ii) in the event of any
actual fraud, misappropriation or misapplication of funds or intentional
misrepresentation, estop the Lender from instituting or prosecuting a legal
action or proceeding
102
<PAGE> 107
or otherwise making a claim against the Person or Persons committing such actual
fraud, misappropriating or misapplying such funds, or making such intentional
misrepresentation, or the recipient or beneficiary of such actual fraud,
misappropriation or misapplication or intentional misrepresentation, whether or
not such Person, recipient or beneficiary, is any Person described in clauses
(a) through (e) above, for losses caused by such actual fraud, misappropriation
or misapplication or intentional misrepresentation, (iii) constitute a waiver,
release or discharge of any indebtedness or obligation evidenced by the Note or
secured by the Loan Documents, and the same shall continue until paid or
discharged in full, and (iv) prevent recourse to the Borrower if an Event of
Default occurs, the Lender forecloses on the Mortgage Loan identified on the
Asset Schedule as "Marquardt" and the related Net Proceeds are applied to repay
the Indebtedness, but in such event only to the extent of the positive
difference, if any, between the Allocated Loan Amount of such Mortgage Loan and
such Net Proceeds (but not more than the amount of the Lien for unpaid taxes
encumbering the related Mortgaged Property as of the Closing Date); provided,
further, that the foregoing clause (iv) shall not be of any force or effect in
the event (1) the Lender reallocates the Allocated Loan Amount of the Mortgage
Loan identified on the Asset Schedule as "Marquardt" pursuant to the right
granted in clause (ii) of the second sentence of Section 2.1(c) or reduces the
Asset Value of such Mortgage Loan based upon the Lien for unpaid taxes
encumbering the related Mortgaged Property as of the Closing Date not having
been discharged, paid off or otherwise removed in its entirety or (2) the
Principal Indebtedness of the Loan is less than the product of the aggregate
Asset Value and 70%, assuming for this purpose that the Lender is deemed to have
reduced the Asset Value of such Mortgage Loan based upon the same reason as
aforesaid.
[Signature Page Follows]
103
<PAGE> 108
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized representatives, all as
of the day and year first above written.
LENDER:
SALOMON BROTHERS REALTY CORP.,
a New York corporation
By:
---------------------------------------------------
Name: Peter Levine
Title: Vice President
BORROWER:
ECHELON INTERNATIONAL CORPORATION,
a Florida corporation
By:
---------------------------------------------------
Name: Larry J. Newsome
Title: Senior Vice President
COLLATERAL AGENT:
LASALLE NATIONAL BANK,
a nationally chartered bank
By:
---------------------------------------------------
Name: Thomas Quinlan, Jr.
Title: Trust Officer
104
<PAGE> 1
Exhibit 4.6
PROMISSORY NOTE
$105,000,000
New York, New York
November 5, 1996
FOR VALUE RECEIVED, the undersigned, ECHELON INTERNATIONAL
CORPORATION, a Florida corporation (the "Maker"), promises to pay to the order
of Salomon Brothers Realty Corp., a New York corporation (together with any
subsequent holder of this Note, the "Holder") at its office located at Seven
World Trade Center, New York, New York 10048, or at such other address as the
Holder may from time to time designate in writing, the principal sum of One
Hundred Five Million Dollars ($105,000,000), or so much thereof as may be
advanced from time to time, together with interest thereon, and all other
amounts payable under the Loan Documents, such principal, interest and other
amounts to be payable as provided in the Loan Agreement.
This Note is the Note referred to in that certain Loan
Agreement, dated as of October 31, 1996, among the Maker, as borrower, the
Holder, as lender, and LaSalle National Bank, as collateral agent (as modified
and supplemented and in effect from time to time, the "Loan Agreement").
Reference to the Loan Agreement is hereby made for a statement of the rights of
the Holder and the duties and obligations of the Maker, but neither this
reference to the Loan Agreement nor any provision thereof shall affect or
impair the absolute and unconditional obligation of the Maker to pay the
principal, interest and other amounts, if any, payable with respect to this
Note when due. Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in the Loan Agreement. The outstanding
principal amount shall bear interest at the rates provided for in the Loan
Agreement.
This Note is secured by the Borrower Mortgage and the certain
other Loan Documents and Liens described in the Loan Agreement.
The principal sum evidenced by this Note, together with
accrued interest and other sums or amounts due hereunder, shall become
immediately due and payable at the option of the Holder upon the occurrence of
any Event of Default in accordance with the provisions of the Loan Agreement.
With respect to the amounts due pursuant to this Note, the
Maker waives the following: (1) all rights of exemption of property from levy
or sale under execution or other process for the collection of debts under the
Constitution or laws of the United States or any state thereof; (2) demand,
presentment, protest, notice of dishonor, notice of nonpayment, suit against
any party, diligence in collection of this Note, and all other requirements
necessary to enforce this Note, except for notices required by Governmental
Authorities and notices required by the Loan Agreement; and (3) any further
receipt by or acknowledgement of any Collateral now or hereafter deposited as
security for the Loan.
In no event shall the amount of interest (and any other sums
or amounts that are deemed to constitute interest under applicable Legal
Requirements) due or payable hereunder (including interest calculated at the
Default Rate) exceed the maximum rate of interest designated by applicable
Legal Requirements (the "Maximum Amount"), and in the event such payment is
inadvertently paid by the Maker or inadvertently received by the Holder, then
such excess sum shall be credited as a payment of principal, and if in excess
of such balance, shall be immediately returned
<PAGE> 2
to the Maker upon such determination. It is the express intent hereof that the
Maker not pay and the Holder not receive, directly or indirectly, interest in
excess of the Maximum Amount.
The Holder shall not by any act, delay, omission or otherwise
be deemed to have modified, amended, waived, extended, discharged or terminated
any of its rights or remedies, and no modification, amendment, waiver,
extension, discharge or termination of any kind shall be valid unless in
writing and signed by the Holder. All rights and remedies of the Holder under
the terms of this Note and applicable statutes or rules of law shall be
cumulative, and may be exercised successively or concurrently. The Maker agrees
that there are no defenses, equities or setoffs with respect to the obligations
set forth herein, and to the extent any such defenses, equities, or setoffs may
exist, the same are hereby expressly released, forgiven, waived and forever
discharged.
Wherever possible, each provision of this Note shall be
interpreted in such manner as to be effective and valid under applicable Legal
Requirements, but if any provision of this Note shall be prohibited by or
invalid under applicable Legal Requirements, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Note.
The Holder may, at its option, release any Collateral given to
secure the indebtedness evidenced hereby, and no such release shall impair the
obligations of the Maker to the Holder.
This Note was negotiated in New York, and made by the Maker
and accepted by the Holder in the State of New York, and the proceeds of this
Note were disbursed from New York, which State the parties agree has a
substantial relationship to the parties and to the underlying transaction
embodied hereby, and in all respects (including, without limitation, matters of
construction, validity and performance), this Note and the obligations arising
hereunder shall be governed by, and construed in accordance with, the laws of
the State of New York applicable to contracts made and performed in such State
and any applicable law of the United States of America.
The provisions of this Note shall be subject to the
non-recourse provisions of Section 8.24 of the Loan Agreement, which provisions
are incorporated by reference as if herein set forth in full.
THE MAKER, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO,
WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING (INCLUDING, WITHOUT
LIMITATION, ANY TORT ACTION), BROUGHT BY ANY PARTY HERETO WITH RESPECT TO THIS
NOTE OR THE OTHER LOAN DOCUMENTS. THE MAKER AGREES THAT THE HOLDER MAY FILE A
COPY OF THIS WAIVER WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING,
VOLUNTARY AND BARGAINED AGREEMENT OF THE MAKER IRREVOCABLY TO WAIVE ITS RIGHT
TO TRIAL BY JURY, AND THAT, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO,
ANY DISPUTE OR CONTROVERSY WHATSOEVER BETWEEN THE MAKER AND THE HOLDER SHALL
INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING
WITHOUT A JURY.
2
<PAGE> 3
IN WITNESS WHEREOF, the Maker has caused this Note to be
properly executed on the date of the notarial acknowledgements below, and has
authorized this Note to be dated as of the day and year first above written.
ECHELON INTERNATIONAL CORPORATION,
a Florida corporation
By:
-------------------------------
Name: Larry J. Newsome
Title: Senior Vice President
Florida Documentary Stamp Taxes in the amount of $367,500.00 have been paid and
the stamps affixed to the Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing securing this Note, and cancelled.
3
<PAGE> 4
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On the ____ day of __________________, 1996, before me
personally came _______________ to me known, who, being by me duly sworn, did
depose, acknowledge and say that he/she resides at ___________________________,
that he/she is the ______________ of ECHELON INTERNATIONAL CORPORATION, the
corporation described in and which executed the foregoing instrument; and that
he/she signed his/her name thereto by order of the board of directors of said
corporation.
---------------------------------
Notary Public
My commission expires:
- -----------------------
4
<PAGE> 1
Exhibit 4.7
PREPARED BY AND
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Latham & Watkins
885 Third Avenue
New York, New York 10022
Attention: Kim N.A. Boras, Esq.
For recording purposes only
-------------------------------
ECHELON INTERNATIONAL CORPORATION
One Progress Plaza
St. Petersburg, Florida 33701
(Mortgagor)
to
SALOMON BROTHERS REALTY CORP.
Seven World Trade Center
New York, New York 10048
(Mortgagee)
------------------------------------
MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
------------------------------------
Dated: November 5, 1996
------------------------------------
DUPLICATE ORIGINALS OF THIS MORTGAGE HAVE BEEN RECORDED IN THE PUBLIC RECORDS
OF HILLSBOROUGH COUNTY, FLORIDA, ALACHUA COUNTY, FLORIDA, LEON COUNTY, FLORIDA,
AND PINELLAS COUNTY, FLORIDA. FLORIDA DOCUMENTARY STAMP TAXES IN THE AMOUNT OF
$367,500.00 AND FLORIDA INTANGIBLE TAXES IN THE AMOUNT OF $210,000.00 HAVE BEEN
PAID TO THE CLERK OF THE COURT OF HILLSBOROUGH COUNTY, FLORIDA, AND EVIDENCE OF
SUCH PAYMENT HAS BEEN NOTED ON THE MORTGAGE RECORDED IN HILLSBOROUGH COUNTY.
<PAGE> 2
TABLE OF CONTENTS
Page No.
<TABLE>
<S> <C> <C>
1. Payment of Obligations and Incorporation of Covenants, Conditions and Agreements. . . . . . . . . . . . . . 6
2. Warranty of Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4. Payment of Taxes, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5. Condemnation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6. Leases and Rents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7. Maintenance of Mortgaged Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8. Transfer or Encumbrance of the Mortgaged Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9. Changes in the Laws Regarding Taxation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10. No Credits on Account of the Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11. Documentary Stamps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
12. Controlling Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
13. Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
14. Performance of Other Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
15. Further Acts, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
16. Recording of Mortgage, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
17. Reporting Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
18. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
19. Late Payment Charge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
20. Right to Cure Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
21. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
22. Right of Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
23. Reasonable Use and Occupancy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
24. Security Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
25. Actions and Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
26. Waiver of Setoff and Counterclaim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
27. Contest of Certain Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
28. Recovery of Sums Required to Be Paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
29. Marshalling, Waiver of Redemption and Other Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
30. Hazardous Substances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
31. Handicapped Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
32. Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
33. Waiver of Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
34. Remedies of Mortgagor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
35. Sole Discretion of Mortgagee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
36. Non-Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
37. No Oral Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
38. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
39. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
40. Headings, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
41. Duplicate Originals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
42. Definitions; Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
43. Homestead. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
44. Assignments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
45. Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
46. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
47. Time of Essence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
48. Statute of Limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
49. Non-Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
50. Future Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
iii
<PAGE> 5
THIS MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY
AGREEMENT AND FIXTURE FILING (as the same may from time to time be extended,
renewed or modified, this "Mortgage"), is made and executed this 5th day of
November, 1996, by ECHELON INTERNATIONAL CORPORATION, a Florida corporation
("Mortgagor"), as successor to the entities, and by operation of the
transactions, described on Schedule 1 hereto, as applicable, having its
principal place of business at One Progress Plaza, St. Petersburg, Florida
33701, to SALOMON BROTHERS REALTY CORP., a New York corporation ("Mortgagee"),
having its principal place of business at Seven World Trade Center, New York,
New York 10048.
W I T N E S S E T H:
To secure the payment of an indebtedness in the original
principal sum of One Hundred Five Million Dollars ($105,000,000) lawful money
of the United States of America, to be paid with interest according to a
certain Loan Agreement, dated as of even date herewith, among Mortgagor, as
borrower, Mortgagee, as lender, and LaSalle National Bank, as collateral agent
(as the same may be extended, renewed, supplemented or modified, the "Loan
Agreement"; capitalized terms used herein and not defined having the meanings
ascribed thereto in the Loan Agreement), as evidenced by that certain Note
executed and delivered by Mortgagor pursuant to the Loan Agreement (as the same
may be extended, renewed, supplemented, exchanged, substituted, replaced or
modified, collectively, the "Note"), and as security for the payment and
performance of Mortgagor's obligations hereunder and under the Loan Documents
(collectively, the "Obligations"), Mortgagor GRANTS, BARGAINS, SELLS,
ALIENATES, ENFEOFFS, CONVEYS, CONFIRMS, WARRANTS, PLEDGES, ASSIGNS and
HYPOTHECATES unto Mortgagee the real property described in Exhibit A attached
hereto (the "Land") and Mortgagor's right, title and interest in and to the
buildings, structures and improvements of every nature whatsoever now or
hereafter located thereon (including, but not limited to, all gas and electric
fixtures, radiators, heaters, docks and docking facilities, engines and
machinery, boilers, ranges, elevators and motors, plumbing, heating and air
conditioning fixtures, carpeting and other floor coverings, water heaters,
awnings and storm sashes, and cleaning apparatus which are or shall be attached
to the Land or said buildings, structures or improvements) (the
"Improvements");
TOGETHER WITH: all right, title, interest and estate of Mortgagor now owned, or
hereafter acquired, in and to the following property, rights, interest and
estates (the Land, the Improvements together with the following property,
rights, interests and estates being hereinafter described are collectively
referred to herein as the "Mortgaged Property"):
(a) all easements, rights-of-way, strips and gores of
land, streets, ways, alleys, passages, sewer rights, water, water courses,
water rights and powers, air rights and development rights, and all estates,
rights, titles, interests, privileges, liberties, tenements, hereditaments and
appurtenances of any nature whatsoever, in any way belonging, relating to or
pertaining to the Land and the Improvements and the reversion and reversions,
remainder and remainders, and all land lying in the bed of any street, road or
avenue, opened or proposed, in front of or adjoining the Land, to the center
line thereof and all the estates, rights, titles, interests, dower and rights
of dower, curtesy and rights of curtesy, property, possession, claim and demand
whatsoever, both at law and in equity, of
1
<PAGE> 6
Mortgagor of, in and to the Land and the Improvements and every part and parcel
thereof, with the appurtenances thereto;
(b) all "equipment" as defined in the Uniform Commercial
Code, as adopted and enacted by the State or States where any of the Mortgaged
Property is located (the "Uniform Commercial Code"), now or hereafter owned by
Mortgagor or in which Mortgagor has or shall acquire an interest, now or
hereafter located on, attached to or contained in or used in connection with
the Mortgaged Property, and shall also mean and include all building materials,
construction materials, personal property constituting furniture, fittings,
appliances, apparatus, leasehold improvements, machinery, devices, interior
improvements, appurtenances, equipment, plant, furnishings, fixtures,
computers, electronic data processing equipment, telecommunications equipment
and other fixed assets now owned or hereafter acquired by Mortgagor which are
used in the operation of the business conducted at the Mortgaged Property; and
all proceeds thereof, as well as all additions to, substitutions for,
replacements of or accessions to any of the items recited as aforesaid and all
attachments, components, parts (including spare parts) and accessories, whether
installed thereon or affixed thereto, and wherever located, now or hereafter
owned by Mortgagor and used or intended to be used in connection with, or with
the operation of, the Land or the Improvements, or in connection with any
construction being conducted or which may be conducted thereon, all regardless
of whether the same are located on the Mortgaged Property or are located
elsewhere (including without limitation, in warehouses or other storage
facilities or in the possession of or on the premises of a bailee, vendor or
manufacturer) for purposes of manufacture, storage, fabrication or
transportation and all extensions, additions, improvements, betterments,
renewals, substitutions and replacements to, and proceeds of, any of the
foregoing (collectively, the "Equipment"); provided, however, that with respect
to any items which are leased and not owned by Mortgagor, the Equipment shall
include the leasehold interest only of Mortgagor, together with any options to
purchase any of said items and any additional or greater rights with respect to
such items which Mortgagor may hereafter acquire; and provided, further, that
"Equipment" shall not include (a) any personal property, desks, chairs, other
office furniture, telecommunications equipment, computers and other equipment
(as defined in the Uniform Commercial Code) now owned or hereafter acquired by
Mortgagor that is used or intended to be used by Mortgagor in connection with
the operation of its business and that is normally located on, attached to,
contained in or used in connection with any portion of the Mortgaged Property
as a result of such portion of the Mortgaged Property being the executive
offices of Mortgagor, (b) any equipment (as defined in the Uniform Commercial
Code) now owned or hereafter acquired by Mortgagor that is used or intended to
be used by Mortgagor in connection with the operation of its business and that
is normally located on, attached to, contained in or used in connection with
any asset or assets of Mortgagor other than the Mortgaged Property, or (c) any
boats, motors or spare parts located at the portion of the Mortgaged Property
designated "Marina" on Schedule 1 to the Loan Agreement (but shall specifically
include the docks, racks, forklift, crane and high and dry located at such
portion of the Mortgaged Property);
(c) all awards or payments, including interest thereon,
which may heretofore and hereafter be made with respect to the Mortgaged
Property or any portion thereof or any rights appurtenant thereto, whether from
the exercise of the right of eminent domain (including, but not limited to, any
transfer made in lieu of or in anticipation of the exercise of said rights), or
for a
2
<PAGE> 7
change of grade, or for any other injury to or decrease in the value of the
Land and the Improvements;
(d) all leases, subleases, lettings, occupancy
agreements, tenancies and licenses by Mortgagor as landlord of the Mortgaged
Property or any part thereof now or hereafter entered into, and all amendments,
extensions, renewals and guarantees thereof, and all security therefor
(collectively, the "Leases") and all income, rents, rent equivalents, issues,
profits, revenues (including all oil and gas or other mineral royalties and
bonuses), deposits and other benefits from the Land and the Improvements
(including, without limitation, all receivables, and other obligations now
existing or hereafter arising or created out of the sale, lease, sublease,
license, concession or other grant of the right of the use and occupancy of
property or rendering of services by Mortgagor or any operator or manager of
the Mortgaged Property or the commercial space located in the Improvements or
acquired from others (including, without limitation, from the rental of any
office space, retail space or other space, halls, stores, and offices, and
deposits securing reservations of such space, exhibit or sales space of every
kind, license, lease, sublease and concession fees and rentals, health club
membership fees, food and beverage wholesale and retail sales, service charges,
vending machine sales and proceeds, if any, from business interruption or other
loss of income insurance)) (collectively, the "Rents") and all proceeds from
the sale or other disposition of the Leases and the right to receive and apply
the Rents to the payment of the Obligations;
(e) all proceeds of and any unearned premiums on any
insurance policies covering the Mortgaged Property (including, without
limitation, the right to receive and apply the proceeds of any insurance,
judgments, or settlements made in lieu thereof, for damage to the Mortgaged
Property);
(f) the right, in the name and on behalf of Mortgagor, to
appear in and defend any action or proceeding brought with respect to the
Mortgaged Property and to commence any action or proceeding to protect the
interest of Mortgagee in the Mortgaged Property;
(g) all accounts (as defined in the Uniform Commercial
Code) now owned or hereafter acquired by Mortgagor arising out of or in
connection with, the operation of the Mortgaged Property (including, without
limitation, the Collection Account, the Reserve Account and the Expense
Account, subject to the security interest of the Collateral Agent therein), and
all present and future accounts receivable, inventory accounts, contract
rights, chattel paper, notes, acceptances, insurance policies, Instruments,
Documents, or other rights to payment and all forms of obligations owing at any
time to Mortgagor thereunder, whether now existing or hereafter created or
otherwise acquired by Mortgagor, and all proceeds thereof and all liens,
security interests, guaranties, remedies, privileges and other rights
pertaining thereto, and all rights and remedies of any kind forming the subject
matter of any of the foregoing (including, without limitation, (i) all income,
Rents, issues, profits, revenues, deposits and other benefits from the
Mortgaged Property, (ii) all receivables and other obligations now existing or
hereafter arising or created out of the sale, lease, sublease, license,
concession or other grant of the right of the use and occupancy of property or
rendering of services with respect to the Mortgaged Property by Mortgagor or
any operator or manager of the Mortgaged Property or other commercial space
located at the Mortgaged Property or acquired from others (including, without
limitation the generality of the foregoing, from rental of space, halls,
stores, and
3
<PAGE> 8
offices, and deposits securing reservations of such space, exhibit or sales
space of every kind, license, lease, sublease and concession fees and rentals,
health club membership fees, food and beverage wholesale and retail sales of
merchandise, service charges, vending machine sales and proceeds, if any, from
business interruption or other loss of income insurance), (iii) all sums of
money, and all instruments, documents and securities held in any accounts in
connection with the Mortgaged Property, or any demand, time, savings or other
account maintained with any bank or certificate of deposit issued by any bank
with the proceeds of such account and (iv) all of the records and books of
account now or hereafter maintained by or on behalf of Mortgagor in connection
with the operation of the Mortgaged Property) (collectively, the "Accounts");
(h) all proceeds (as defined in the Uniform Commercial
Code) thereof and, in any event, shall include, without limitation, all
proceeds, products, offspring, rents, profits or receipts, in whatever form,
arising from the Mortgaged Property (including, without limitation, (i) cash,
instruments and other property received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Mortgaged Property; (ii) the
collection, sale, lease, sublease, concession, exchange, assignment, licensing
or other disposition of, or realization upon, any item or portion of the
Mortgaged Property (including, without limitation, all claims of Mortgagor
against third parties for loss of, damage to, destruction of, or for proceeds
payable under, or unearned premiums with respect to, policies of insurance in
respect of, any the Mortgaged Property now existing or hereafter arising);
(iii) any and all proceeds of any insurance, indemnity, warranty or guaranty
payable to Mortgagor from time to time with respect to any of the Mortgaged
Property; (iv) any and all payments (in any form whatsoever) made or due and
payable to Mortgagor from time to time in connection with the requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Mortgaged Property by any Governmental Authority (or any person acting under
color of Governmental Authority); and (v) any and all other amounts from time
to time paid or payable under or in connection with any of the Mortgaged
Property) (collectively, the "Proceeds");
(i) all agreements to which Mortgagor is a party and
which are executed in connection with the construction, operation and
management of the Equipment and Improvements located on the Mortgaged Property
(including, without limitation, the agreements for the sale, lease or exchange
of goods or other property and/or the performance of services by it, in each
case whether now in existence or hereafter arising or acquired) as any such
agreements have been or may be from time to time amended, supplemented or
otherwise modified (collectively, "Contracts");
(j) all "documents" as defined in the Uniform Commercial
Code or other receipts covering, evidencing or representing goods now owned or
hereafter acquired by Mortgagor with respect to the Mortgaged Property
(collectively, "Documents");
(k) all trademark licenses, trademarks, rights in intellectual
property, trade names, service marks and copyrights relating to the Mortgaged
Property or the license to use intellectual property such as computer software
owned or licensed by Mortgagor or other proprietary business information
relating to Mortgagor's policies, procedures, manuals and trade secrets with
respect to the Mortgaged Property (collectively, "Trademarks");
4
<PAGE> 9
(l) all "general intangibles" as defined in the Uniform
Commercial Code, now owned or hereafter acquired by Mortgagor with respect to
the Mortgaged Property (including, without limitation, (i) all obligations or
indebtedness owing to Mortgagor with respect to the Mortgaged Property from
whatever source arising (other than Accounts, Rents, Instruments, Inventory,
Contracts, Documents, Trademarks and Permits), (ii) all unearned premiums
accrued or to accrue under all insurance policies for the Mortgaged Property
obtained by Mortgagor, all proceeds of the conversion, voluntary or
involuntary, of any of the foregoing into cash or liquidated claims (including,
without limitation, proceeds of insurance, condemnation awards, and all rights
of Mortgagor to refunds of real estate taxes and assessments), (iii) all
royalties and license fees with respect to the Mortgaged Property, (iv) all
trademark licenses, trademarks, rights in intellectual property, goodwill,
trade names, service marks, trade secrets, copyrights, permits and licenses,
together with the registrations therefor and the goodwill appurtenant thereto
with respect to the Mortgaged Property, and (v) all rights or claims in respect
of refunds for taxes paid with respect to the Mortgaged Property (collectively,
"General Intangibles");
(m) all (i) "instruments" as defined in the Uniform
Commercial Code, "chattel paper" as defined in the Uniform Commercial Code, or
letters of credit, evidencing, representing, arising from or existing in respect
of, relating to, securing or otherwise supporting the payment of, any of the
Mortgaged Property (including, without limitation, promissory notes, drafts,
bills of exchange and trade acceptances) and chattel paper obtained by Mortgagor
in connection with the Mortgaged Property (including, without limitation, all
ledger sheets, computer records and printouts, databases, programs, books of
account and files of Mortgagor relating thereto) and (ii) notes or other
obligations of indebtedness owing to Mortgagor with respect to the Mortgaged
Property from whatever source arising, in each case now owned or hereafter
acquired by Mortgagor (collectively, "Instruments");
(n) all "inventory" as defined in the Uniform Commercial
Code, whether now or hereafter existing or acquired, and which arises out of or
is used in connection with, directly or indirectly, the ownership and operation
of the Mortgaged Property, all Documents representing the same and all Proceeds
and products of same (collectively, "Inventory"). Without limiting the
generality of the foregoing, the term "Inventory" shall include, without
limitation:
(i) all goods, merchandise, raw materials, work in process
and other personal property, wherever located, now or hereafter owned
or held by Mortgagor for manufacture, processing, the providing of
services or sale, use or consumption in the operation of the Mortgaged
Property (including, without limitation, fuel, supplies and similar
items and all substances commingled therewith or added thereto); and
(ii) all rights and claims of Mortgagor against anyone who
may store or acquire the Inventory for the account of Mortgagor, or
from whom Mortgagor may purchase the Inventory.
Notwithstanding the foregoing, "Inventory" shall not include any boats, motors
or spare parts located at the portion of the Mortgaged Property designated as
the "Marina" on Schedule 1 to the Loan Agreement (but shall specifically
include the docks, racks, forklift, crane and high and dry located at such
portion of the Mortgaged Property); and
5
<PAGE> 10
(o) all licenses, permits, variances and certificates
used in connection with the ownership, operation, use or occupancy of the
Mortgaged Property (including, without limitation, business licenses, state
health department licenses, food service licenses, liquor licenses, licenses to
conduct business and all such other permits, licenses and rights, obtained from
any Governmental Authority or private Person concerning ownership, operation,
use or occupancy of the Mortgaged Property) (collectively, "Permits");
TO HAVE AND TO HOLD the above granted and described Mortgaged
Property unto and to the use and benefit of Mortgagee, IN TRUST, WITH POWER OF
SALE, and Mortgagor does hereby bind itself, its successors and assigns to
WARRANT AND FOREVER DEFEND the title to the Mortgaged Property unto Mortgagee;
PROVIDED, HOWEVER, these presents are upon the express
condition that, if the Obligations shall be paid to Mortgagee at the time and
in the manner provided in the Loan Agreement and this Mortgage and if Mortgagor
shall abide by and comply with each and every covenant and condition set forth
herein and in the other Loan Documents in a timely manner, these presents and
the estate hereby granted shall cease, terminate and be void;
AND Mortgagor represents and warrants to and covenants and
agrees with Mortgagee as follows:
1. Payment of Obligations and Incorporation of Covenants,
Conditions and Agreements. Mortgagor will pay the Obligations pertaining to
Mortgagor at the time and in the manner provided in the Loan Documents and in
this Mortgage. All the covenants, conditions and agreements of Mortgagor
contained in the Loan Documents are hereby made a part of this Mortgage to the
same extent and with the same force as if fully set forth herein.
2. Warranty of Title. Mortgagor warrants that Mortgagor has good,
marketable and insurable fee simple title to the Land and Improvements and has
the full power, authority and right to execute, deliver and perform its
obligations under this Mortgage and to encumber, mortgage, give, grant,
bargain, sell, alienate, enfeoff, convey, confirm, warrant, pledge, assign and
hypothecate the same and that Mortgagor possesses an unencumbered fee estate in
the Land and the Improvements and that it owns the Mortgaged Property free and
clear of all liens, encumbrances and charges whatsoever except as expressly set
forth in paragraph "(g)" of the granting clauses hereof and except for those
exceptions shown on Schedule B to the Title Insurance Policy insuring the lien
of this Mortgage and that this Mortgage is and will remain a valid and
enforceable first lien on and security interest in the Mortgaged Property
(except as expressly set forth in paragraph "(g)" of the granting clauses),
subject only to the Permitted Encumbrances. Mortgagor shall forever warrant,
defend and preserve such title and the validity and priority of the lien of
this Mortgage and shall forever warrant and defend the same to Mortgagee
against the claims of all persons whomsoever. All material Permits, including,
without limitation, certificates of completion and occupancy permits required
for the legal use, occupancy and operation of the Mortgaged Property for the
purposes to which it is presently used, have been obtained or are in the
process of being obtained and, to the extent the same have been obtained, are
in full force and effect (including, without limitation, any applicable liquor
6
<PAGE> 11
licenses). Mortgagor shall keep and maintain all Permits necessary for the
operation of the Mortgaged Property for the purposes to which it is presently
used.
3. Insurance. (a) Mortgagor, at its sole cost and expense, will
keep the Improvements and Equipment insured during the entire term of this
Mortgage with the coverage and in the amounts required hereunder or under the
Loan Agreement for the mutual benefit of Mortgagor and Mortgagee against loss
or damage by fire and against loss or damage by other risks and hazards covered
by a standard extended coverage insurance policy (including, without
limitation, riot and civil commotion, vandalism, malicious mischief, burglary
and theft on the "Special Form" (formerly an "All Risk" form)). Such insurance
shall be in an amount (i) equal to at least the then full replacement cost of
the Improvements and Equipment (exclusive of the cost of foundations and
footings), without deduction for physical depreciation, and (ii) such that the
insurer would not deem Mortgagor a co-insurer under said policies. The policies
of insurance carried in accordance with this paragraph shall be paid annually
in advance and shall contain the "Replacement Cost Endorsement" with a waiver
of depreciation.
(b) Mortgagor, at its sole cost and expense, for the mutual
benefit of Mortgagor and Mortgagee, shall also obtain and maintain or cause to
be obtained and maintained during the entire term of this Mortgage the
following policies of insurance:
(i) Flood insurance if any part of the Mortgaged Property is
located in an area identified by the Federal Emergency Management
Agency as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance
Act of 1968 (and any amendment or successor act thereto) in an amount
at least equal to the maximum limit of coverage available with respect
to the Improvements and Equipment under said Act.
(ii) Comprehensive public liability insurance, including broad form
property damage, blanket contractual and personal injuries (including
death resulting therefrom) coverages and containing minimum limits per
occurrence of Two Million Dollars ($2,000,000).
(iii) Business interruption insurance (including rental value) in an
annual aggregate amount equal to the estimated gross revenues from the
Leases of the Mortgaged Property, including, without limitation, the
loss of all rents and additional rents payable by all of the lessees
under the Leases (whether or not such Leases are terminable in the
event of a fire or casualty), such insurance to cover losses for a
period of at least one year after the date of the fire or casualty in
question. The amount of such insurance shall be increased from time to
time during the term of this Mortgage (but not more than once in any
12 month period) as and when the gross revenues from the Leases of the
Mortgaged Property increase, including, without limitation, increases
from new Leases and renewal Leases entered into in accordance with the
terms of this Mortgage, to reflect all increased rent and increased
additional rent payable by all of the lessees under such renewal
Leases and all rent and additional rent payable by all of the lessees
under such new Leases.
7
<PAGE> 12
(iv) Insurance against loss or damage from (x) leakage of sprinkler
systems and (y) explosion of steam boilers, air conditioning
equipment, high pressure piping, machinery and equipment, pressure
vessels or similar apparatus now or hereafter installed in the
Improvements (without exclusion for explosions), in an amount at least
equal to the Loan Amount.
(v) Worker's compensation insurance coverage in amounts not
less than statutory minimums for all persons employed by Mortgagor on
the Mortgaged Property. Such worker's compensation insurance shall
comply with all requirements of applicable local, state and federal
law. Mortgagor shall also maintain or cause to be maintained
"Employers Liability" insurance in amounts not less than required by
statute, except as may be unrestricted by law; and
(vi) Such other insurance as may from time to time be
reasonably required by Mortgagee in order to protect its interests.
(c) All policies of insurance (the "Policies") required pursuant
to Section 3(b) shall be issued by an insurer which has a claims paying ability
rating of not less than "A" by Standard & Poor's Corporation plus an equivalent
rating as established by one other nationally recognized statistical rating
organization satisfactory to Mortgagee or A:V or better as to claims paying
ability by AM Best, (ii) shall name Mortgagee as an additional insured and
contain a standard noncontributory mortgagee clause naming Mortgagee (and/or
such other party as may be designated by Mortgagee) as the party to which all
payments made by such insurance company shall be paid, (iii) shall be
maintained throughout the term of this Mortgage without cost to Mortgagee, (iv)
shall contain such provisions as Mortgagee deems reasonably necessary or
desirable to protect its interest (including, without limitation, endorsements
providing that neither Mortgagor, Mortgagee nor any other party shall be a
co-insurer under said Policies and that Mortgagee shall receive at least thirty
(30) days prior written notice of any modification, reduction or cancellation),
(v) shall contain a waiver of subrogation against Mortgagee and (vi) shall be
reasonably satisfactory in form and substance to Mortgagee and reasonably
approved by Mortgagee as to amounts, form, risk coverage, deductibles, loss
payees and insureds. Mortgagor shall pay the premiums for such Policies as the
same become due and payable. Copies of said Policies, certified as true and
correct by Mortgagor, or certificates thereof, shall be delivered to Mortgagee.
Not later than fifteen (15) days prior to the expiration date of each of the
Policies, Mortgagor will deliver to Mortgagee satisfactory evidence of the
renewal of each Policy. The insurance coverage required under Section 3(b) may
be effected under a blanket policy or policies covering the Mortgaged Property
and other property and assets not constituting a part of the Mortgaged
Property; provided that any such blanket policy shall specify, except in the
case of general liability insurance, the portion of the total coverage of such
policy that is allocated exclusively to the Mortgaged Property, and any
sublimits in such blanket policy applicable to the Mortgaged Property, which
amounts shall not be less than the amounts required pursuant to Section 3(b)
and which shall in any case comply in all other respects with the requirements
of this Section 3.
(d) If the Mortgaged Property shall be damaged or destroyed, in
whole or in part, by fire or other casualty, Mortgagor shall give prompt notice
thereof to Mortgagee.
8
<PAGE> 13
(i) In case of loss covered by Policies, Mortgagee may either
(A) jointly with Mortgagor settle and adjust any claim (unless at the
time of the settlement of such claim a monetary Event of Default has
occurred and is continuing, in which event Mortgagee may settle and
adjust such claim without the consent of Mortgagor) or (B) allow
Mortgagor to agree with the insurance company or companies on the
amount to be paid upon the loss; provided, that as to any individual
casualty, Mortgagor may adjust losses aggregating not in excess of
$500,000 if such adjustment is carried out in a competent and timely
manner, and provided that in any case Mortgagee shall and is hereby
authorized to collect and receipt for any such insurance proceeds. The
reasonable expenses incurred by Mortgagee in the adjustment and
collection of insurance proceeds shall become part of the Obligations
and be secured hereby and shall be reimbursed by Mortgagor to
Mortgagee upon demand therefor.
(ii) In the event of any insured damage to or destruction of
the Mortgaged Property or any part thereof (herein called an "Insured
Casualty") where the aggregate amount of the loss, as reasonably
determined by an independent insurance adjuster, is less than
twenty-five percent (25%) of the Loan Amount, and if, in the
reasonable judgment of Mortgagee, the Mortgaged Property can be
restored within six (6) months of settlement of the claim to an
economic unit not less valuable (including an assessment of the impact
of the termination of any Leases due to such Insured Casualty) and not
less useful than the same was prior to the Insured Casualty, and after
such restoration will adequately secure the Obligations, or if
Mortgagee otherwise elects to allow Mortgagor to restore the Mortgaged
Property, then, if no Event of Default (as hereinafter defined) shall
have occurred and be then continuing, the proceeds of insurance (after
reimbursement of any reasonable expenses incurred by Mortgagee in
connection with the collection of any applicable insurance proceeds)
shall be made available to reimburse Mortgagor for the cost of
restoring, repairing, replacing or rebuilding the Mortgaged Property
or part thereof subject to the Insured Casualty, as provided for
below; and Mortgagor hereby covenants and agrees forthwith to commence
and diligently to prosecute such restoring, repairing, replacing or
rebuilding; provided always, that Mortgagor shall pay all costs (and
if required by Mortgagee, Mortgagor shall deposit the total thereof
with Mortgagee in advance) of such restoring, repairing, replacing or
rebuilding in excess of the net proceeds of insurance made available
pursuant to the terms hereof (the "Deficient Amount").
(iii) Except as provided above, the proceeds of insurance collected
upon any Insured Casualty shall be held in an Eligible Account by
Mortgagee and shall, at the option of Mortgagee in its sole
discretion, be applied to the payment of the Obligations as provided
in Section 2.12(e) of the Loan Agreement (provided that any such
prepayment shall be without prepayment penalty) or applied to
reimburse Mortgagor for the cost of restoring, repairing, replacing or
rebuilding the Mortgaged Property or part thereof subject to the
Insured Casualty, in the manner set forth below.
(iv) In the event that proceeds of insurance (after reimbursement of
any reasonable expenses incurred by Mortgagee in connection with the
collection of any applicable insurance proceeds), if any, shall be
made available to Mortgagor for the restoring, repairing, replacing or
rebuilding of the Mortgaged Property, Mortgagor hereby covenants to
restore, repair,
9
<PAGE> 14
replace or rebuild the same to be of at least equal value and of
substantially the same character as prior to such damage or
destruction, all to be effected in accordance with applicable law and
plans and specifications approved in advance by Mortgagee, such
approval not to be unreasonably withheld or delayed. Mortgagor shall
pay all costs (and if required by Mortgagee, Mortgagor shall deposit
the total thereof with Mortgagee in advance) of such restoring,
repairing, replacing or rebuilding in excess of the net proceeds of
insurance made available pursuant to the terms hereof.
(v) In the event Mortgagor is entitled to reimbursement out of
insurance proceeds held by Mortgagee, such proceeds shall be disbursed
from time to time upon Mortgagee (or at Mortgagee's election, the
Collateral Agent) being furnished with (A) evidence reasonably
satisfactory to it of the estimated cost of completion of the
restoration, repair, replacement and rebuilding, (B) funds, or, at
Mortgagee's option, assurances reasonably satisfactory to Mortgagee
that such funds are available, sufficient in addition to the proceeds
of insurance to complete the proposed restoration, repair, replacement
and rebuilding, and (C) such architect's certificates, waivers of
lien, contractor's sworn statements, title insurance endorsements,
bonds, plats of survey and such other evidences of cost, payment and
performance as Mortgagee may reasonably require and approve; and
Mortgagee may, in any event, require that all plans and specifications
for such restoration, repair, replacement and rebuilding be submitted
to and approved by Mortgagee prior to commencement of work such
approval not to be unreasonably withheld or delayed. All proceeds of
rental or business interruption insurance shall be deposited into the
Collection Account in accordance with Section 2.12(a) of the Loan
Agreement. Mortgagee may retain a construction consultant to inspect
such work and review Mortgagor's request for payments and Mortgagor
shall, on demand by Mortgagee, reimburse Mortgagee for the reasonable
fees and disbursements of such consultant. No payment made prior to
the final completion of the restoration, repair, replacement and
rebuilding shall exceed ninety percent (90%) of the value of the work
performed from time to time; funds other than proceeds of insurance
shall be disbursed prior to disbursement of such proceeds; and at all
times, the undisbursed balance of such proceeds remaining in the hands
of Mortgagee, together with funds deposited for that purpose or
irrevocably committed, to or with Mortgagee by or on behalf of
Mortgagor for that purpose, shall be at least sufficient in the
reasonable judgment of Mortgagee to pay for the cost of completion of
the restoration, repair, replacement or rebuilding, free and clear of
all liens or claims for lien. Any surplus which may remain out of
insurance proceeds held by Mortgagee after payment of such costs of
restoration, repair, replacement or rebuilding shall be paid to
Mortgagor so long as no Event of Default has occurred and is
continuing.
(e) Mortgagor shall not carry separate insurance, concurrent in kind
or form or contributing in the event of loss, with any insurance required under
this paragraph; provided, however, that notwithstanding the foregoing,
Mortgagor may carry insurance not required under this Mortgage if any such
insurance affecting the Mortgaged Property shall be for the mutual benefit of
Mortgagor and Mortgagee, as their respective interests may appear, and shall be
subject to all other provisions of this paragraph.
10
<PAGE> 15
4. Payment of Taxes, etc. Subject to the provisions of Section 27
hereof and the applicable provisions of the Loan Agreement, Mortgagor shall pay
all Impositions (including, without limitation, all taxes, assessments, water
rates and sewer rents) now or hereafter levied or assessed or imposed against
the Mortgaged Property or any part thereof, and all ground rents, maintenance
charges, other governmental impositions and other charges (including, without
limitation, vault charges and license fees for the use of vaults, chutes and
similar areas adjoining the Land), now or hereafter levied or assessed or
imposed against the Mortgaged Property or any part thereof (the "Other
Charges"), as the same become due and payable. Subject to the terms of the Loan
Agreement, Mortgagor will deliver to Mortgagee evidence satisfactory to
Mortgagee that the Impositions and Other Charges have been so paid or are not
then delinquent no later than thirty (30) days following the date on which the
Impositions and/or Other Charges would otherwise be delinquent if not paid.
Mortgagor shall not suffer and shall promptly cause to be paid and discharged
any lien or charge whatsoever (other than Permitted Encumbrances) which may be
or become a lien or charge against the Mortgaged Property, and shall promptly
pay for all utility services provided to the Mortgaged Property.
5. Condemnation.
(a) Mortgagor shall promptly give Mortgagee written notice of the
actual or threatened commencement of any proceeding for a Taking and shall
deliver to Mortgagee copies of any and all papers served in connection with
such proceedings. Mortgagee is hereby irrevocably appointed as Mortgagor's
attorney-in-fact, coupled with an interest, with exclusive power to collect,
receive and retain any Condemnation Proceeds for said Taking. With respect to
any compromise or settlement in connection with such proceeding, Mortgagee will
jointly with Mortgagor compromise and reach settlement (unless at the time of
such Taking a monetary Event of Default has occurred and is continuing, in
which event Mortgagee may compromise and reach settlement without the consent
of Mortgagor). Notwithstanding the foregoing provisions of this Section 5(a),
Mortgagor is authorized to negotiate, compromise and settle, without
participation by the Mortgagee, Condemnation Awards of up to $500,000 in
connection with any Taking. Notwithstanding any Taking, Mortgagor shall
continue to pay the Obligations at the time and in the manner provided for in
the Note, in this Mortgage and the other Loan Documents and the Obligations
shall not be reduced until any Condemnation Proceeds therefor shall have been
actually received after expenses of collection and applied by Mortgagee to the
discharge of the Obligations. Mortgagee shall not be limited to the interest
paid on the Condemnation Proceeds by the condemning authority, but shall be
entitled to receive out of the Condemnation Proceeds interest at the rate or
rates provided in the Loan Documents.
(b) Mortgagor shall cause the Condemnation Proceeds to be paid
directly to Mortgagee as provided in Section 2.12(e) of the Loan Agreement.
Except as otherwise provided in Section 5(c), Mortgagee may, in its sole
discretion, apply any such Condemnation Proceeds to the reduction or discharge
of the Obligations (whether or not then due and payable) provided that any such
prepayment shall be without prepayment penalty. If Condemnation Proceeds in
respect of such Taking are applied to the payment of the Obligations, Mortgagor
shall be relieved of any duty to restore, repair, replace or rebuild the
Mortgaged Property.
11
<PAGE> 16
(c) With respect to a Taking in part, which shall mean any Taking
which does not render the Mortgaged Property physically or economically
unsuitable in the reasonable judgment of Mortgagee for the use to which it was
devoted prior to the Taking, Mortgagor shall cause the Condemnation Proceeds to
be paid to Mortgagee to be applied to reimburse Mortgagor for the cost of
repairing, replacing, restoring or rebuilding the Mortgaged Property as
follows:
(i) Provided that Condemnation Proceeds shall be made available to
Mortgagor for the restoring, repairing, replacing or rebuilding of the
Mortgaged Property, Mortgagor hereby covenants to restore, repair,
replace or rebuild the same to be of at least equal value and of
substantially the same character as prior to the Taking, all to be
effected in accordance with applicable law and plans and
specifications approved in advance by Mortgagee, such approval not to
be unreasonably withheld. Mortgagor shall pay all costs (and if
required by Mortgagee, Mortgagor shall deposit the total thereof with
Mortgagee in advance) of such restoring, repairing, replacing or
rebuilding in excess of the Condemnation Proceeds made available
pursuant to the terms hereof.
(ii) The Condemnation Proceeds held by Mortgagee shall be held in
an Eligible Account by Mortgagee and shall be disbursed from time to
time upon Mortgagee (or at Mortgagee's election, the Collateral Agent)
being furnished with (A) evidence satisfactory to it of the estimated
cost of completion of the restoration, repair, replacement and
rebuilding, (B) funds, or, at Mortgagee's option, assurances
satisfactory to Mortgagee that such funds are available, sufficient in
addition to the Condemnation Proceeds to complete the proposed
restoration, repair, replacement and rebuilding, and (C) such
architect's certificates, waivers of lien, contractor's sworn
statements, title insurance endorsements, bonds, plats of survey and
such other evidences of cost, payment and performance as Mortgagee may
reasonably require and approve; and Mortgagee may, in any event,
require that all plans and specifications for such restoration,
repair, replacement and rebuilding be submitted to and approved by
Mortgagee, which approval shall not be unreasonably withheld or
delayed, prior to commencement of work. Mortgagee may retain a
construction consultant to inspect such work and review Mortgagor's
request for payments and Mortgagor shall, on demand by Mortgagee,
reimburse Mortgagee for the reasonable fees and disbursements of such
consultant. No payment made prior to the final completion of the
restoration, repair, replacement and rebuilding shall exceed ninety
percent (90%) of the value of the construction work performed from
time to time; funds other than Condemnation Proceeds shall be
disbursed prior to disbursement of such proceeds; and at all times,
the undisbursed balance of such proceeds remaining in the hands of
Mortgagee, together with funds deposited for that purpose or
irrevocably committed to or with Mortgagee by or on behalf of
Mortgagor for that purpose, shall be at least sufficient in the
reasonable judgment of Mortgagee to pay for the cost of completion of
the restoration, repair, replacement or rebuilding, free and clear of
all liens or claims for lien. Any surplus which may remain out of
Condemnation Proceeds held by Mortgagee after payment of such costs of
restoration, repair, replacement or rebuilding shall be paid to
Mortgagor so long as no Event of Default has occurred and is
continuing.
(d) If the Mortgaged Property is sold, through foreclosure or
otherwise, prior to the receipt by Mortgagee of any such Condemnation Proceeds,
Mortgagee shall have the right, whether
12
<PAGE> 17
or not a deficiency judgment on the Note shall have been sought, recovered or
denied, to have reserved in any Foreclosure decree a right to receive said
award or payment, or a portion thereof sufficient to pay the Obligations. In no
case shall any such application reduce or postpone any payments otherwise
required pursuant to the Loan Agreement, other than the final payment on the
Note.
6. Leases and Rents. (a) Mortgagor does hereby absolutely and
unconditionally assign to Mortgagee, Mortgagor's right, title and interest in
all current and future Leases and Rents, it being intended by Mortgagor that
this assignment constitutes a present, absolute assignment and not an
assignment for additional security only. Such assignment to Mortgagee shall not
be construed to bind Mortgagee to the performance of any of the covenants,
conditions or provisions contained in any such Lease or otherwise impose any
obligation upon Mortgagee. Mortgagor agrees to execute and deliver to Mortgagee
such additional instruments, in form and substance satisfactory to Mortgagee,
as may hereafter be requested by Mortgagee to further evidence and confirm such
assignment. Nevertheless, subject to the terms of this paragraph, Mortgagee
grants to Mortgagor a revocable license to operate and manage the Mortgaged
Property and to collect the Rents. Any portion of the Rents held by Mortgagor
shall be held in trust for the benefit of Mortgagee for use in the payment of
the Obligations. Upon an Event of Default, the license granted to Mortgagor
herein shall automatically be revoked, and Mortgagee shall immediately be
entitled to possession of all Rents, whether or not Mortgagee enters upon or
takes control of the Mortgaged Property. Mortgagee is hereby granted and
assigned by Mortgagor the right, at its option, upon revocation of the license
granted herein, to enter upon the Mortgaged Property in person, by agent or by
court-appointed receiver to collect the Rents. Any Rents collected after the
revocation of the license may be applied toward payment of the Obligations in
such priority and proportions as Mortgagee in its discretion shall deem proper.
(b) Mortgagor shall not enter into any Leases (other than
Leases providing for rental rates comparable to then-existing local market
rates and terms and with conditions commercially reasonable and consistent with
then- prevailing market terms and conditions) without the prior written consent
of Mortgagee which consent shall not be unreasonably withheld or delayed,
provided, that Mortgagee's consent shall be deemed to have been given if
Mortgagee fails to reject or consent to a proposed lease within 10 business
days' receipt thereof; and, further, provided, that no such consent shall be
required with respect to Leases for space which constitute less than 5% of the
net rentable square footage of any building or buildings that constitute a
discrete project that comprises a portion of the Mortgaged Property (each such
project, a "Project"). Mortgagor shall furnish Mortgagee with an abstract of
the significant terms of each new Lease (whether or nor consent shall be
required) at least five (5) business days' prior to the execution of such
Lease, and Mortgagor shall furnish Mortgagee with executed copies of all
Leases. Notwithstanding anything to the contrary in the foregoing sentences of
this Section 6(b), during any period in which the Loan to Value Ratio shall
equal or exceed 80%, Mortgagor shall not enter into any Leases without the
prior written consent of Mortgagee. All renewals (except pursuant to the terms
of Leases then in effect) or amendments of Leases shall provide for rental
rates comparable to then-existing local market rates and terms and conditions
commercially reasonable and consistent with then-prevailing market terms and
conditions. All renewals (except pursuant to the terms of Leases then in
effect) or amendments of Leases which do not satisfy the requirements of the
preceding sentence shall be subject to the prior approval of Mortgagee, not to
be unreasonably withheld or delayed, provided, that any such renewal or
13
<PAGE> 18
amendment shall be deemed approved if Mortgagee fails to approve or disapprove
any such renewal or amendment within 10 business days' receipt thereof by
Mortgagee. All Leases executed after the date hereof shall provide that they
are subordinate to this Mortgage and that the lessee agrees to attorn to
Mortgagee. Mortgagee agrees, upon the request of any tenant under a Lease for
space in excess of 5% of the net rentable square footage of a Project, to
execute and deliver a non-disturbance agreement in form reasonably satisfactory
to Mortgagee; and Mortgagee shall not unreasonably refuse to execute and
deliver such a nondisturbance agreement, upon Mortgagor's request, with respect
to any tenant under a Lease for 5% or less of the net rentable square footage
of a Project. Mortgagor (i) shall observe and perform all the obligations
imposed upon the lessor under the Leases and shall not do or permit to be done
anything to impair the value of the Leases as security for the Obligations;
(ii) shall promptly send copies to Mortgagee of all notices of default which
Mortgagor shall send or receive thereunder; (iii) shall enforce all of the
material terms, covenants and conditions contained in the Lease upon the part
of the lessee thereunder to be observed or performed, short of termination
thereof; (iv) shall not collect any of the Rents more than one (1) month in
advance; (v) shall not execute any other assignment of lessor's interest in the
Leases or Rents; (vi) shall not alter, modify or change the terms of the Leases
without the prior written consent of Mortgagee (which consent shall not be
unreasonably withheld or delayed, and provided that if Mortgagee fails to grant
or withhold its consent within ten (10) business days of Mortgagee's receipt of
Mortgagor's written request for consent, Mortgagee shall be deemed to have
granted its consent to such alteration, modification or change), or, except if
Tenant is in default thereunder, cancel or terminate the Leases or accept a
surrender thereof; (vii) shall not convey or transfer or suffer or permit a
conveyance or transfer of the Mortgaged Property or of any interest therein so
as to effect a merger of the estates and rights of, or a termination or
diminution of the obligations of, lessees thereunder; (viii) shall not alter,
modify or change the terms of any guaranty of the Leases or cancel or terminate
such guaranty without the prior written consent of Mortgagee; and (ix) shall
not consent to any assignment of or subletting under the Leases not in
accordance with their terms, without the prior written consent of Mortgagee,
which shall not be unreasonably withheld or delayed, and provided that if
Mortgagee fails to grant or withhold its consent within ten (10) business days
of Mortgagee's receipt of Mortgagor's written request for consent, Mortgagee
shall be deemed to have granted its consent to such assignment or subletting.
The provisions of the foregoing clauses (i), (vi), (viii) and (ix) shall not be
applicable to leases for space which constitutes 5% or less of the net rentable
square footage of a Project.
(c) Following the occurrence and during the continuance of any
Event of Default, Mortgagor shall, upon Mortgagee's request, if permitted by
any applicable Legal Requirements, turn over to Mortgagee the security deposits
(and any interest theretofore earned thereon) with respect to all or any
portion of the Mortgaged Property, to be held by Mortgagee subject to the terms
of the Leases.
(d) Mortgagor represents, warrants and where applicable, covenants
that:
(i) Mortgagor has good title to the Leases and Rents
hereby assigned and authority to assign them, and no other person or
entity has any right, title or interest therein;
(ii) Mortgagor has, or within sixty (60) days of the date
hereof will have, delivered to Mortgagee true correct and complete
copies of all leases to which Mortgagor is a
14
<PAGE> 19
party or successor-in-interest and otherwise to the extent in
Mortgagor's possession, affecting all or any portion of the Mortgaged
Property, including all amendments and modifications existing as of
the date hereof;
(iii) Mortgagor has not executed or entered into any
material modifications or amendments of any of the Leases other than
written modifications or amendments that have been disclosed to
Mortgagee in writing;
(iv) except as provided herein, no Rents or Leases have
been or will be assigned, mortgaged or pledged by Mortgagor;
(v) no Rents have been or will be anticipated, waived,
released, discounted, set-off or compromised except in the ordinary
course of Mortgagor's business and in accordance with reasonable
commercial practice; and
(vi) Mortgagor has not received or accepted any payments
or installments of Rents under any leases more than one (1) month in
advance except for security deposits.
(e) To the fullest extent permitted by applicable law, Mortgagor
hereby indemnifies and holds Mortgagee harmless from all liability, damage or
expense imposed on or incurred by Mortgagee from any claims under the Leases,
including, without limitation, any claims by Mortgagor with respect to payments
of Rents made directly to Mortgagee during the continuation of an Event of
Default and claims by tenants for security deposits or for rental payments more
than one (1) month in advance and not delivered to Mortgagee, but excluding any
liability, loss or damage which may be incurred by Mortgagee by reason of
Mortgagee's gross negligence or intentional misconduct following an Event of
Default and exercise by Mortgagee of its rights pursuant hereto or pursuant to
the Leases. All amounts indemnified against hereunder, including reasonable
attorneys' fees, if paid by Mortgagee shall bear interest at the Default Rate
and shall be payable by Mortgagor immediately upon demand and shall be secured
hereby.
(f) Upon request by Mortgagee, Mortgagor shall deliver to
Mortgagee a copy of the executed originals of all Leases and after an Event of
Default executed originals thereof.
(g) Mortgagor hereby authorizes and directs the tenants under the
Leases to pay Rents to Mortgagee upon written demand by Mortgagee provided such
demand shall be given only if an Event of Default exists, without further
consent of Mortgagor, and the tenants may rely upon any such written statement
delivered by Mortgagee to the tenants. Any such payment to Mortgagee shall
constitute payment to Mortgagee under the applicable Leases.
7. Maintenance of Mortgaged Property. Mortgagor shall cause the
Mortgaged Property to be maintained in a good and safe condition and repair.
The Improvements and the Equipment shall not be removed, demolished or
materially altered (except for normal replacement in the ordinary course of
business of the Equipment or pursuant to Leases in effect from time to time)
without the consent of Mortgagee which shall not unreasonably be withheld or
delayed. Subject to the provisions of Section 27, Mortgagor shall promptly
comply with all Legal Requirements. Mortgagor shall or
15
<PAGE> 20
shall cause its tenants to promptly repair, replace or rebuild any part of the
Mortgaged Property that becomes damaged, worn or dilapidated and Mortgagor
shall or shall cause its tenants to complete and pay for any structure at any
time in the process of construction or repair on the Land. Mortgagor shall not
initiate, join in, acquiesce in, or consent to any change in any private
restrictive covenant, zoning law or other public or private restriction,
limiting or defining the uses which may be made of the Mortgaged Property or
any part thereof without consent of Mortgagee which shall not be unreasonable
withheld or delayed. If under applicable zoning provisions the use of all or
any portion of the Mortgaged Property is or shall become a nonconforming use,
Mortgagor will not cause or permit such nonconforming use to be discontinued or
abandoned without the express written consent of Mortgagee. Mortgagor shall not
(i) change the use of the Land in any material respect, (ii) permit or suffer
to occur any waste on or to the Mortgaged Property or to any portion thereof or
(iii) take any steps whatsoever to convert the Mortgaged Property, or any
portion thereof, to a condominium or cooperative form of management.
8. Transfer or Encumbrance of the Mortgaged Property. (a)
Mortgagor acknowledges that Mortgagee has examined and relied on the
creditworthiness and experience of Mortgagor in owning and operating properties
such as the Mortgaged Property in agreeing to make the Loan secured hereby, and
that Mortgagee will continue to rely on Mortgagor's ownership of the Mortgaged
Property as a means of maintaining the value of the Mortgaged Property as
security for repayment of the Obligations. Mortgagor acknowledges that
Mortgagee has a valid interest in maintaining the value of the Mortgaged
Property so as to ensure that, should Mortgagor default in the repayment of the
Obligations, Mortgagee can recover the Obligations by a sale of the Mortgaged
Property. Mortgagor shall not, without the prior written consent of Mortgagee,
sell, convey, alienate, mortgage, encumber, pledge or otherwise transfer the
Mortgaged Property or any part thereof, or permit the Mortgaged Property or any
part thereof to be sold, conveyed, alienated, mortgaged, encumbered, pledged or
otherwise transferred.
(b) A sale, conveyance, alienation, mortgage, encumbrance, pledge
or transfer within the meaning of this Section 8 shall be deemed to include (i)
an installment sales agreement wherein Mortgagor agrees to sell the Mortgaged
Property or any part thereof for a price to be paid in installments; (ii) an
agreement by Mortgagor leasing all or a substantial part of the Mortgaged
Property for other than actual occupancy by a space tenant thereunder or a
sale, assignment or other transfer of, or the grant of a security interest in,
Mortgagor's right, title and interest in and to any Leases or any Rents; and
(iii) a transfer of a direct or indirect ownership interest or voting right in
the Borrower that would cause a Change of Control to occur.
(c) Subject to the provisions of the Loan Agreement, Mortgagee may
predicate its decision to grant or withhold consent hereunder on Mortgagee's
satisfaction, in its sole and absolute discretion, with all relevant factors
(including, without limitation, the creditworthiness of the proposed transferee
and such proposed transferee's management experience), and, in the case of any
transfer of title to the Mortgaged Property, upon the execution of an
assumption agreement in form and substance acceptable to Mortgagee and the
payment of all costs and expenses incurred by Mortgagee in connection with the
assumption (including, without limitation, reasonable attorneys' fees).
Mortgagee shall not be required to demonstrate any actual impairment of its
security or any increased risk of default hereunder in order to declare the
Obligations immediately due and payable upon
16
<PAGE> 21
Mortgagor's sale, conveyance, alienation, mortgage, encumbrance, pledge or
transfer of the Mortgaged Property without Mortgagee's consent. Except as
provided in the Loan Agreement, this provision shall apply to every sale,
conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Mortgaged Property regardless of whether voluntary or not, or whether or not
Mortgagee has consented to any previous sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Mortgaged Property.
(d) Mortgagee's consent to one sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of the Mortgaged Property shall not
be deemed to be a waiver of Mortgagee's right to require such consent to any
future occurrence of same. Except as provided in the Loan Agreement, any sale,
conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Mortgaged Property made in contravention of this paragraph shall be null and
void and of no force and effect.
(e) Mortgagor agrees to bear and shall pay or reimburse Mortgagee
on demand for all reasonable expenses (including, without limitation,
reasonable attorney's fees and disbursements, title search costs and title
insurance endorsement premiums) incurred by Mortgagee in connection with the
review, approval and documentation of any such sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer.
(f) Notwithstanding anything in this Section 8 to the contrary,
Mortgagor shall have the right to secure releases of portions of the Mortgaged
Property from the Liens and security interests of this Mortgage and the other
Loan Documents upon payment of the Release Prices specified, and otherwise in
accordance with the terms and conditions set forth, in Section 2.11 of the Loan
Agreement.
9. Changes in the Laws Regarding Taxation. If any law is enacted
or adopted or amended after the date of this Mortgage which deducts the
Obligations from the value of the Mortgaged Property for the purpose of
taxation or which imposes a tax, either directly or indirectly, on the
Obligations or Mortgagee's interest in the Mortgaged Property, Mortgagor will
pay such tax, with interest and penalties thereon, if any. In the event
Mortgagee is advised by counsel chosen by it that the payment of such tax or
interest and penalties by Mortgagor would be unlawful or taxable to Mortgagee
or unenforceable or provide the basis for a defense of usury, then in any such
event, Mortgagee shall have the option, by written notice of not less than
ninety (90) days, to declare the Obligations immediately due and payable.
10. No Credits on Account of the Obligations. Mortgagor will not
claim or demand or be entitled to any credit or credits on account of the
Obligations for any part of the Impositions or Other Charges assessed against
the Mortgaged Property, or any part thereof.
11. Documentary Stamps. If at any time the United States of
America, any State thereof or any subdivision of any such State shall require
revenue or other stamps to be affixed to the Note or this Mortgage, or impose
any other tax or charge on the same, Mortgagor will pay for the same, with
interest and penalties thereon, if any.
17
<PAGE> 22
12. Controlling Agreement. It is expressly stipulated and agreed
to be the intent of Mortgagor and, Mortgagee at all times to comply with
applicable state law or applicable United States federal law (to the extent
that it permits Mortgagee to contract for, charge, take, reserve, or receive a
greater amount of interest than under state law) and that this section shall
control every other covenant and agreement in this Mortgage and the other Loan
Documents. If the applicable law (state or federal) is ever judicially
interpreted so as to render usurious any amount called for under the Note or
under any of the other Loan Documents, or contracted for, charged, taken,
reserved, or received with respect to the Obligations, or if Mortgagee's
exercise of the option to accelerate the maturity of the Note, or if any
prepayment by Mortgagor results in Mortgagor having paid any interest in excess
of that permitted by applicable law, then it is Mortgagor's and Mortgagee's
express intent that all excess amounts theretofore collected by Mortgagee shall
be credited on the principal balance of the Note and all other Obligations (or,
if the Note and all other Obligations have been or would thereby be paid in
full, refunded to Mortgagor), and the provisions of the Note and the other Loan
Documents immediately be deemed reformed and the amounts thereafter collectible
hereunder and thereunder reduced, without the necessity of the execution of any
new documents, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder or thereunder.
All sums paid or agreed to be paid to Mortgagee for the use, forbearance, or
detention of the Obligations shall, to the extent permitted by applicable law,
be amortized, prorated, allocated, and spread throughout the full stated term
of the Obligations until payment in full so that the rate or amount of interest
on account of the Obligations does not exceed the maximum rate of interest
permitted by law from time to time in effect and applicable to the Obligations
for so long as the Obligations are outstanding.
13. Books and Records. Mortgagor will maintain full and accurate
books of accounts and other records reflecting the results of the operations of
the Mortgaged Property and will furnish, or cause to be furnished, to Mortgagee
such information with respect to the operation of the Mortgaged Property as the
Mortgagee from time to time reasonably may request, all in accordance with the
provisions of the Loan Agreement.
14. Performance of Other Agreements. Mortgagor shall observe and
perform in all material respects the terms to be observed or performed by
Mortgagor under any agreement or recorded instrument affecting or pertaining to
the Mortgaged Property the failure to perform which would have a material
adverse effect. Mortgagor shall defend, at its own cost and expense, and hold
Mortgagee harmless from, any proceeding, liability or claim by any third party
in any way relating to the Mortgaged Property except for any claim, proceeding
or liability caused by the gross negligence or intentional misconduct of
Mortgagee. All reasonable costs and expenses incurred by Mortgagee in
protecting the security and lien interests created hereunder, including all
court costs and reasonable attorneys' fees disbursements and expenses, shall be
borne by Mortgagor (except for costs and expenses incurred as a result of the
gross negligence or intentional misconduct of Mortgagee). The provisions of
this Section 14 shall survive the payment in full of the Obligations and the
release of this Mortgage as to events occurring and causes of action arising
before such payment and release.
15. Further Acts, etc. Mortgagor will, at the cost of Mortgagor,
and without expense to Mortgagee, do, execute, acknowledge and deliver all and
every such further acts, deeds, conveyances, mortgages, deeds of trust,
assignments, notices of assignment, Uniform Commercial
18
<PAGE> 23
Code financing statements or continuation statements, transfers and assurances
as Mortgagee shall, from time to time, require, for the better assuring,
conveying, assigning, transferring, and confirming unto Mortgagee and the
property and rights hereby mortgaged, given, granted, bargained, sold,
alienated, enfeoffed, conveyed, confirmed, warranted, pledged, assigned and
hypothecated or intended now or hereafter so to be, or which Mortgagor may be
or may hereafter become bound to convey or assign to Mortgagee, or for carrying
out the intention or facilitating the performance of the terms of this Mortgage
or for filing, registering or recording this Mortgage. Mortgagor, on demand,
will execute and deliver and, Mortgagor hereby authorizes Mortgagee to execute
in the name of Mortgagor or without the signature of Mortgagor to the extent
Mortgagee may lawfully do so, one or more financing statements, chattel
mortgages or other instruments, to evidence more effectively the security
interest of Mortgagee in the Mortgaged Property. Mortgagor grants to Mortgagee
an irrevocable power of attorney coupled with an interest for the purpose of
exercising the rights provided for in this Section 15. Mortgagor shall defend,
at its own cost and expense, and hold Mortgagee harmless from, any proceeding,
liability or claim by any third party in any way relating to the Mortgaged
Property except for any claim, proceeding or liability caused by the gross
negligence or intentional misconduct of Mortgagee. All reasonable costs and
expenses incurred by Mortgagee in protecting the security and lien interests
created hereunder, including all court costs and reasonable attorneys' fees,
disbursements and expenses, shall be borne by Mortgagor (except for costs and
expenses incurred as a result of the gross negligence or intentional misconduct
of Mortgagee). The provisions of this Section 15 shall survive the payment in
full of the Obligations and the release of this Mortgage as to events occurring
and causes of action arising before such payment and release.
16. Recording of Mortgage, etc. Mortgagor forthwith upon the
execution and delivery of this Mortgage and thereafter, from time to time, will
cause this Mortgage, and any security instrument creating a lien or security
interest or evidencing the lien hereof upon the Mortgaged Property and each
instrument of further assurance to be filed, registered or recorded in such
manner and in such places as may be required by any present or future law in
order to publish notice of and fully to protect the lien or security interest
hereof upon, and the interest of Mortgagee in, the Mortgaged Property.
Mortgagor will pay all filing, registration or recording fees, and all expenses
incident to the preparation, execution and acknowledgment of this Mortgage, any
mortgage supplemental hereto, any security instrument with respect to the
Mortgaged Property and any instrument of further assurance, and all federal,
state, county and municipal, taxes, duties, imposts, assessments and charges
arising out of or in connection with the execution and delivery of this
Mortgage, any mortgage supplemental hereto, any security instrument with
respect to the Mortgaged Property or any instrument of further assurance (other
than income or franchise taxes imposed on Mortgagee), except where prohibited
by law so to do. Mortgagor shall hold harmless and indemnify Mortgagee and its
respective successors and assigns, against any liability incurred by reason of
the imposition of any tax on the making and recording of this Mortgage.
17. Reporting Requirements. Mortgagor agrees to give prompt notice
to Mortgagee of the insolvency or bankruptcy filing of Mortgagor.
18. Events of Default. The term "Event of Default" as used herein
shall mean the occurrence or happening, at any time and from time to time, of
an Event of Default under the Loan
19
<PAGE> 24
Agreement as a result of which Mortgagee may, pursuant to the Loan Agreement,
exercise its rights and remedies against Mortgagor and/or the Mortgaged
Property.
19. Late Payment Charge. If any portion of the Obligations is not
paid within ten (10) days after the date on which it is due, Mortgagor shall
pay to Mortgagee upon demand an amount equal to the lesser of five percent (5%)
of such unpaid portion of the Obligations or the maximum amount permitted by
applicable law, to defray the expense incurred by Mortgagee in handling and
processing such delinquent payment and to compensate Mortgagee for the loss of
the use of such delinquent payment, and such amount shall be secured by this
Mortgage.
20. Right to Cure Defaults. Upon the occurrence of any Event of
Default, Mortgagee may, but without any obligation to do so and without notice
to or demand on Mortgagor and without releasing Mortgagor from any obligation
hereunder, cure the default giving rise to the Event of Default in such manner
and to such extent as Mortgagee may deem necessary to protect the security
hereof. Mortgagee is authorized to enter upon the Mortgaged Property for such
purposes or appear in, defend, or bring any action or proceeding to protect its
interest in the Mortgaged Property or to foreclose this Mortgage or collect the
Obligations, and the cost and expense thereof (including reasonable attorneys'
fees to the extent permitted by law), with interest at the Default Rate for the
period after notice from Mortgagee that such cost or expense was incurred to
the date of payment to Mortgagee, shall constitute a portion of the
Obligations, shall be secured by this Mortgage and shall be due and payable to
Mortgagee upon demand therefor.
21. Remedies. (a) Upon the occurrence of any Event of Default,
Mortgagee may take such action, without notice or demand, as it deems advisable
to protect and enforce its rights against Mortgagor and in and to the Mortgaged
Property, by Mortgagee itself or otherwise, including, but not limited to, the
following actions, each of which may be pursued concurrently or otherwise, at
such time and in such order as Mortgagee may determine, in its sole discretion,
subject to the provisions of Section 49, without impairing or otherwise
affecting the other rights and remedies of Mortgagee:
(i) declare the entire principal amount of the indebtedness
secured hereby with interest accrued thereon to be immediately due and
payable;
(ii) institute a proceeding or proceedings, judicial or
nonjudicial, by advertisement or otherwise, for the complete
foreclosure of this Mortgage in which case the Mortgaged Property or
any interest therein may be sold for cash or upon credit in one or
more parcels or in several interests or portions and in any order or
manner in accordance with the laws of the jurisdiction in which such
Mortgaged Property is located;
(iii) with or without entry, to the extent permitted, and pursuant
to the procedures provided by, applicable law, institute proceedings
for the foreclosure of this Mortgage for the Obligations then due and
payable subject to the continuing lien of this Mortgage, in accordance
with the laws of the jurisdiction in which such Mortgaged Property is
located, for the balance of the Obligations not then due;
20
<PAGE> 25
(iv) sell for cash or upon credit the Mortgaged Property or any
part thereof and all estate, claim, demand, right, title and interest
of Mortgagor therein and rights of redemption thereof, pursuant to the
power of sale contained herein or otherwise, at one or more sales, as
an entity or in parcels, at such time and place, upon such terms and
after such notice thereof as may be required or permitted by the laws
of the jurisdiction in which such Mortgaged Property is located;
(v) institute an action, suit or proceeding in equity for the
specific performance of any covenant, condition or agreement contained
herein or in the other Loan Documents;
(vi) subject to Section 49 hereof, recover judgment on the Note
either before, during or after any proceedings for the enforcement of
this Mortgage;
(vii) apply for the appointment of a receiver, liquidator or
conservator of the Mortgaged Property, without notice and without
regard for the adequacy of the security for the Obligations and
without regard for the solvency of Mortgagor or of any person, firm or
other entity liable for the payment of the Obligations;
(viii) enforce Mortgagee's interest in the Leases and Rents and enter
into or upon the Mortgaged Property, either personally or by its
agents, nominees or attorneys and dispossess Mortgagor and its agents
and servants therefrom, and thereupon Mortgagee may (A) use, operate,
manage, control, insure, maintain, repair, restore and otherwise deal
with all and every part of the Mortgaged Property and conduct the
business thereat; (B) complete any construction on the Mortgaged
Property in such manner and form as Mortgagee deems advisable; (C)
make alterations, additions, renewals, replacements and improvements
to or on the Mortgaged Property; (D) exercise all rights and powers of
Mortgagor with respect to the Mortgaged Property, whether in the name
of Mortgagor or otherwise (including, without limitation, the right to
make, cancel, enforce or modify Leases, obtain and evict tenants, and
demand, sue for, collect and receive all earnings, revenues, rents,
issues profits and other income of the Mortgaged Property and every
part thereof); and (E) apply the receipts from the Mortgaged Property
to the payment of the Obligations, after deducting therefrom all
expenses (including, without limitation, reasonable attorneys' fees)
incurred in connection with the aforesaid operations and all amounts
necessary to pay the taxes, assessments, insurance and other charges
in connection with the Mortgaged Property, as well as just and
reasonable compensation for the services of Mortgagee and its
respective counsel, agents and employees;
(ix) require Mortgagor to pay monthly in advance to Mortgagee, or
any receiver appointed to collect the Rents, the fair and reasonable
rental value for the use and occupation of any portion of the
Mortgaged Property occupied by Mortgagor and require Mortgagor to
vacate and surrender possession to Mortgagee of the Mortgaged Property
or to such receiver and, in default thereof, evict Mortgagor by
summary proceedings or otherwise; or
21
<PAGE> 26
(x) pursue such other rights and remedies as may be available at
law or in equity or under the Uniform Commercial Code including the
right to establish a lock box for all Rents and other receivables of
Mortgagor relating to the Mortgaged Property.
In the event of a sale, by foreclosure or otherwise, of less than all of the
Mortgaged Property, this Mortgage shall continue as a lien on the remaining
portion of the Mortgaged Property.
(b) The proceeds of any sale made under or by virtue of this
Section 21, together with any other sums which then may be held by Mortgagee
under this Mortgage, whether under the provisions of this section or otherwise,
shall be applied by Mortgagee in accordance with the provisions of the Loan
Agreement.
(c) Upon any sale made under or by virtue of this Section 21,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale, (i) it
shall not be necessary for Mortgagee to be physically present at or to have
constructive possession of the Mortgaged Property (Mortgagor shall deliver to
Mortgagee any portion of the Mortgaged Property not actually or constructively
possessed by Mortgagee immediately upon demand by Mortgagee), and the title to
and right of possession of any such property shall pass to the purchaser
thereof as completely as if Mortgagee had been actually present and delivered
to purchaser at such sale, (ii) Mortgagee is hereby irrevocably appointed the
true and lawful attorney of Mortgagor, in Mortgagor's name and stead, to make
all necessary conveyances, assignments, transfers and deliveries of the
Mortgaged Property and rights so sold and for that purpose Mortgagee may
execute all necessary instruments of conveyance, assignment and transfer, and
may substitute one or more persons with like power, Mortgagor hereby ratifying
and confirming all that its said attorney or such substitute or substitutes
shall lawfully do by virtue hereby, it being agreed that such power of attorney
shall be coupled with an interest, (iii) each instrument of conveyance executed
by Mortgagee shall contain a general warranty of title, binding upon Mortgagor,
(iv) each recital contained in any instrument of conveyance made by Mortgagee
shall conclusively establish the truth and accuracy of the matters recited
therein, including, without limitation, nonpayment of the Obligations,
advertisement and conduct of such sale in the manner provided herein and
otherwise by law, (v) any prerequisites to the validity of such sale shall be
conclusively presumed to have been performed, (vi) the receipt of Mortgagee or
other party making the sale shall be a sufficient discharge to the purchaser or
purchasers for his or their purchase money and no such purchaser or purchasers,
or his or their assigns or personal representatives, shall thereafter be
obligated to see to the application of such purchase money or be in any way
answerable for any loss, misapplication or nonapplication thereof, and (vii) to
the fullest extent permitted by law, Mortgagor shall be completely and
irrevocably divested of all of its right, title, interest, claim, equity,
equity of redemption, and demand whatsoever, either at law or in equity, in and
to the property sold and such sale shall be a perpetual bar both at law and in
equity against Mortgagor, and against all other persons claiming or to claim
the property sold or any part thereof, by, through or under Mortgagor.
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof
and in lieu of paying cash therefor may make settlement for the purchase price
by crediting upon the Obligations the net sales price after deducting therefrom
the expenses of the sale and costs of the action and any other sums which
Mortgagee is authorized to deduct under this Mortgage.
22
<PAGE> 27
(d) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect in any manner or to any extent the lien of
this Mortgage upon the Mortgaged Property or any part thereof, or any liens,
rights, powers or remedies of Mortgagee hereunder, but such liens, rights,
powers and remedies of Mortgagee shall continue unimpaired as before.
(e) Mortgagee may terminate or rescind any proceeding or other
action brought in connection with its exercise of the remedies provided in this
Section 21 at any time before the conclusion thereof, as determined in
Mortgagee's sole discretion and without prejudice to Mortgagee.
(f) Mortgagee may resort to any remedies and the security given by
this Mortgage or the other Loan Documents in whole or in part, and in such
portions and in such order as determined by Mortgagee's sole discretion. No
such action shall in any way be considered a waiver of any rights, benefits or
remedies evidenced or provided by this Mortgage or the other Loan Documents.
The failure of Mortgagee to exercise any right, remedy or option provided in
this Mortgage or the other Loan Documents shall not be deemed a waiver of such
right, remedy or option or of any covenant or obligation secured by this
Mortgage or the other Loan Documents. No acceptance by Mortgagee of any payment
after the occurrence of any Event of Default and no payment by Mortgagee of any
obligation for which Mortgagor is liable hereunder shall be deemed to waive or
cure any Event of Default with respect to Mortgagor, or Mortgagor's liability
to pay such obligation. No sale of all or any portion of the Mortgaged
Property, no forbearance on the part of Mortgagee, and no extension of time for
the payment of the whole or any portion of the Obligations or any other
indulgence given by Mortgagee to Mortgagor, shall operate to release or in any
manner affect the interest of Mortgagee in the remaining Mortgaged Property or,
subject to the provisions of Section 49, the liability of Mortgagor to pay the
Obligations. No waiver by Mortgagee shall be effective, unless it is in writing
and then only to the extent specifically stated. No right, power or remedy,
including, without limitation, remedies with respect to any security for the
Note, conferred upon or reserved to Mortgagee by this Mortgage or any other
Loan Document is exclusive of any other right, power or remedy, but each and
every such right, power and remedy shall be cumulative and concurrent and shall
be in addition to any other right, power and remedy given hereunder or under
any other Loan Document, now or hereafter existing at law, in equity or by
statute, and Mortgagee shall be entitled to resort to such rights, powers,
remedies or security as Mortgagee shall in its sole and absolute discretion
deem advisable.
(g) The interests and rights of Mortgagee under this Mortgage or
the other Loan Documents shall not be impaired by any indulgence, including (i)
any renewal, extension or modification which Mortgagee may grant with respect
to any of the Obligations, (ii) any surrender, compromise, release, renewal,
extension, exchange or substitution which Mortgagee may grant with respect to
the Mortgaged Property or any portion thereof; or (iii) any release or
indulgence granted to any maker, endorser, guarantor or surety of any of the
Obligations.
(h) Mortgagor agrees to the full extent permitted by law that if
an Event of Default occurs, neither Mortgagor nor anyone claiming through or
under it shall or will set up, claim or seek to take advantage of any
appraisement, valuation, stay, extension or redemption laws now or hereafter in
force, in order to prevent or hinder the enforcement or foreclosure of this
Mortgage or the absolute
23
<PAGE> 28
sale of the Mortgaged Property or any portion thereof or the final and absolute
putting into possession thereof, immediately after such sale, of the purchasers
thereof, and Mortgagor for itself and all who may at any time claim through or
under it, hereby waives, to the full extent that it may lawfully do so, (i) the
benefit of all such laws, (ii) all notices of any Event of Default or of
Mortgagee's election to exercise or actual exercise of any right, remedy or
recourse provided for under the Loan Documents, and (iii) any and all right to
have the assets comprising the Mortgaged Property marshaled upon any
foreclosure of the lien hereof, and Mortgagor agrees that Mortgagee or any
court having jurisdiction to foreclose such lien may sell the Mortgaged
Property in part or as an entirety.
22. Right of Access. Mortgagee and its agents shall have the right
to enter and inspect the Mortgaged Property as provided in Section 5.1(K) of
the Loan Agreement.
23. Reasonable Use and Occupancy. In addition to the rights which
Mortgagee may have herein, upon the occurrence of any Event of Default which
shall remain uncured, Mortgagee, at its option, may require Mortgagor to pay
monthly in advance to Mortgagee, or any receiver appointed to collect the
Rents, the fair and reasonable rental value for the use and occupation of such
part of the Mortgaged Property as may be occupied by Mortgagor or may require
Mortgagor to vacate and surrender possession of the Mortgaged Property to
Mortgagee or to such receiver and, in default thereof, Mortgagor may be evicted
by summary proceedings or otherwise.
24. Security Agreement. This Mortgage is both a real property
mortgage/deed of trust and a "security agreement" within the meaning of the
Uniform Commercial Code. The Mortgaged Property includes both real and personal
property and all other rights and interests, whether tangible or intangible in
nature, of Mortgagor in the Mortgaged Property. Mortgagor by executing and
delivering this Mortgage has granted and hereby grants to Mortgagee, as
security for the Obligations, a security interest in the Mortgaged Property to
the full extent that the Mortgaged Property may be subject to the Uniform
Commercial Code (said portion of the Mortgaged Property so subject to the
Uniform Commercial Code being called in this paragraph the "Collateral").
Mortgagor hereby agrees with Mortgagee to execute and deliver to Mortgagee, in
form and substance satisfactory to Mortgagee, such financing statements and
such further assurances as Mortgagee may from time to time, reasonably consider
necessary to create, perfect, and preserve Mortgagee's security interest herein
granted. Mortgagor shall keep all of its Equipment now held or subsequently
acquired by it at the location specified on Exhibit A hereto, unless Mortgagor
shall have given to Mortgagee prior written notice thereof and shall have in
advance of such establishment of a new location executed and caused to be filed
and/or delivered to Mortgagee any additional financing statements or other
documents required by Mortgagee in order to perfect, protect and preserve
Mortgagee's security interest with respect to any Equipment described or
referred to herein, all in form and substance satisfactory to Mortgagee. This
Mortgage shall also constitute a "fixture filing" for the purposes of the
Uniform Commercial Code. All or part of the Mortgaged Property is or is to
become fixtures. Information concerning the security interest herein granted
may be obtained from the parties at the addresses of the parties set forth in
the first paragraph of this Mortgage. If an Event of Default shall occur which
shall remain uncured, Mortgagee, in addition to any other rights and remedies
which it may have, shall have and may exercise, immediately and without demand,
any and all rights and remedies granted to a secured party upon default under
the Uniform Commercial Code, (including,
24
<PAGE> 29
without limitation, the right to take possession of the Collateral or any part
thereof, and to take such other measures as Mortgagee may deem necessary for
the care, protection and preservation of the Collateral). Upon request or
demand of Mortgagee, Mortgagor shall at its expense assemble the Collateral and
make it available to Mortgagee, at a convenient place acceptable to Mortgagee.
Mortgagor shall pay to Mortgagee on demand therefor any and all expenses
(including, without limitation, reasonable legal expenses and attorneys' fees)
incurred or paid by Mortgagee, in protecting the interest in the Collateral and
in enforcing the rights hereunder with respect to the Collateral. Any notice of
sale, disposition or other intended action by Mortgagee with respect to the
Collateral sent to Mortgagor in accordance with the provisions of the Loan
Agreement at least ten (10) Business Days prior to such action or such notice
as is otherwise required by law or the Loan Agreement, shall constitute
commercially reasonable notice to Mortgagor. The proceeds of any disposition of
the Collateral, or any part thereof, may be applied by Mortgagee to the payment
of the Obligations in such priority and proportions as required by the Loan
Agreement. In the event of any change in name, identity or structure of
Mortgagor, Mortgagor shall notify Mortgagee thereof and, promptly after
request, shall execute, file and record such Uniform Commercial Code forms as
are necessary to maintain the priority of Mortgagee's and lien upon and
security interest in the Collateral, and shall pay all expenses and fees in
connection with the filing and recording thereof. If Mortgagee shall require
the filing or recording of additional Uniform Commercial Code forms or
continuation statements, Mortgagor shall, promptly after request, execute, file
and record such Uniform Commercial Code forms or continuation statements as
Mortgagee shall deem necessary, and shall pay all expenses and fees in
connection with the filing and recording thereof, it being understood and
agreed, however, that no such additional documents shall increase Mortgagor's
obligations under this Mortgage or the other Loan Documents. Mortgagor hereby
irrevocably appoints Mortgagee as its attorney-in-fact, coupled with an
interest, to file with the appropriate public office on its behalf any
financial or other statements signed only by Mortgagee, as secured party, in
connection with the Collateral covered by this Mortgage.
25. Actions and Proceedings. Mortgagee has the right to appear in
and defend any action or proceeding brought with respect to the Mortgaged
Property and to bring any action or proceeding, in the name and on behalf of
Mortgagor, which Mortgagee, in its reasonable discretion, decides should be
brought to (a) protect its interest under this Mortgage in the Mortgaged
Property, (b) prevent any impairment of the Mortgaged Property by any acts
which may be unlawful or any violation of this Mortgage or (c) restrain the
enforcement of or compliance with any legislation or other legal requirement
that may be unconstitutional or otherwise invalid, if the enforcement of or
compliance with such enactment, rule or order might impair the security
hereunder or be prejudicial to Mortgagee's interest. Mortgagee shall, at its
option, be subrogated to the lien of any mortgage or other security instrument
discharged in whole or in part by the Obligations, and any such subrogation
rights shall constitute additional security for the payment of the Obligations.
26. Waiver of Setoff and Counterclaim. Except as may be permitted
under the Loan Agreement, all amounts due under this Mortgage, the Note and the
other Loan Documents shall be payable without setoff, counterclaim or any
deduction whatsoever. Except as may be permitted under the Loan Agreement,
Mortgagor hereby waives the right to assert a counterclaim in any action or
proceeding brought against it by Mortgagee, or arising out of or in any way
connected with this Mortgage and the other Loan Documents, or the Obligations.
25
<PAGE> 30
27. Contest of Certain Claims. Notwithstanding the provisions of
Section 4 and Section 7, Mortgagor shall not be in default for failure to pay
or discharge Impositions, Other Charges or mechanic's or materialman's lien
asserted against the Mortgaged Property or for failure to comply with any Legal
Requirement if, and so long as, (a) Mortgagor shall have notified Mortgagee of
same within ten (10) business days of obtaining knowledge thereof; (b)
Mortgagor shall diligently and in good faith contest the same by appropriate
legal proceedings which shall operate to prevent the enforcement or collection
of the same and the sale of the Mortgaged Property or any part thereof, to
satisfy the same; (c) unless funds are otherwise reserved, Mortgagor shall
furnish to Mortgagee a cash deposit, or an indemnity bond satisfactory to
Mortgagee with a surety reasonably satisfactory to Mortgagee, in the amount of
the Impositions, Other Charges, or mechanic's or materialman's lien claim or
penalties or fines relating to the failure to comply with any Legal
Requirement, plus a reasonable additional sum to pay all costs, interest and
penalties that may be imposed or incurred in connection therewith, to assure
payment of the matters under contest and to prevent any sale or forfeiture of
the Mortgaged Property or any part thereof; (d) Mortgagor shall timely upon
final determination thereof pay the amount of any such Impositions, Other
Charges, claim, fine or penalty so determined, together with all costs,
interest and penalties which may be payable in connection therewith; (e) the
failure to pay the Impositions, Other Charges or mechanic's or materialman's
lien claim does not constitute a default under any other deed of trust,
mortgage or security interest covering or affecting any part of the Mortgaged
Property; and (f) notwithstanding the foregoing, Mortgagor shall immediately
upon request of Mortgagee pay (and if Mortgagor shall fail so to do, Mortgagee
may, but shall not be required to, pay or cause to be discharged or bonded
against) any such Impositions, Other Charges or claim notwithstanding such
contest, if in the reasonable opinion of Mortgagee, the Mortgaged Property or
any part thereof or interest therein may be in danger of being sold, forfeited,
foreclosed, terminated, cancelled or lost. Mortgagee may pay over any such cash
deposit or part thereof to the claimant entitled thereto at any time when, in
the reasonable judgment of Mortgagee, the entitlement of such claimant is
conclusively established.
28. Recovery of Sums Required to Be Paid. Mortgagee shall have the
right from time to time to take action to recover any sum or sums which
constitute a part of the Obligations as the same become due and owing, without
regard to whether or not the balance of the Obligations shall be due, and
without prejudice to the right of Mortgagee thereafter to bring an action of
foreclosure, or any other action, for a default or defaults by Mortgagor
existing at the time such earlier action was commenced.
29. Marshalling, Waiver of Redemption and Other Matters. Mortgagor
hereby waives, to the extent permitted by law, the benefit of all appraisement,
valuation, stay, extension, reinstatement and redemption laws now or hereafter
in force and all rights of marshalling in the event of any sale hereunder of
the Mortgaged Property or any part thereof or any interest therein. Further,
Mortgagor hereby expressly waives any and all rights of redemption from sale
under any order or decree of foreclosure of this Mortgage on behalf of
Mortgagor, and on behalf of each and every person acquiring any interest in or
title to the Mortgaged Property subsequent to the date of this Mortgage and on
behalf of all persons to the extent permitted by applicable law.
30. Hazardous Substances. Mortgagor shall comply with all
provisions of the Loan Documents relating to Environmental Laws, Environmental
Claims and Hazardous Substances.
26
<PAGE> 31
31. Handicapped Access. (a) Mortgagor agrees that the Mortgaged
Property shall at all times comply to the extent applicable with the
requirements of the Americans with Disabilities Act of 1990, all state and
local laws and ordinances related to handicapped access and all rules,
regulations, and orders issued pursuant thereto (including, without limitation,
the Americans with Disabilities Act Accessibility Guidelines for Buildings and
Facilities) (collectively, the "Access Laws"), except for violations that are
not reasonably like to result in a Material Adverse Effect.
(b) Notwithstanding any provisions set forth herein (including the
provisions of Section 7) or in any other document regarding Mortgagee's
approval of alterations of the Mortgaged Property, Mortgagor shall not alter
the Mortgaged Property in any manner which would materially increase
Mortgagor's responsibilities for compliance with the applicable Access Laws
without the prior written approval of Mortgagee which approval shall not
unreasonably be withheld provided that Mortgagor can demonstrate the
availability of funding sources adequate to comply with such requirements. The
foregoing shall apply to tenant improvements constructed by Mortgagor or by any
of its tenants. Mortgagee may condition any such approval upon receipt from
Mortgagor of a certificate of Access Law compliance from an architect,
engineer, or other person acceptable to Mortgagee or other reasonably
satisfactory evidence of compliance.
(c) Mortgagor agrees to give prompt notice to Mortgagee of the
receipt by Mortgagor of any complaints related to violations of any Access Laws
received from governmental authorities or involving a threat of litigation and
of the commencement of any proceedings or investigations which relate to
compliance with applicable Access Laws.
(d) Mortgagor shall protect, defend, indemnify and save harmless
Mortgagee from and against all liabilities, obligations, claims, demands,
damages, penalties, causes of action, losses, fines, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses),
imposed upon or incurred by or asserted against Mortgagee by reason of any
failure of the Mortgaged Property to comply with any Access Laws.
32. Notice. All notices, demands, statements, requests or consents
(collectively, "notices") made hereunder shall be in writing and given in the
manner specified in the Loan Agreement.
33. Waiver of Notice. Mortgagor shall not be entitled to any
notices of any nature whatsoever from Mortgagee except with respect to matters
for which this Mortgage or any other Loan Document specifically and expressly
provides for the giving of notice by Mortgagee to Mortgagor and except with
respect to matters for which Mortgagee is required by applicable law to give
notice, and Mortgagor hereby expressly waives the right to receive any notice
from Mortgagee with respect to any matter for which this Mortgage or any other
Loan Document does not specifically and expressly provide for the giving of
notice by Mortgagee to Mortgagor.
34. Remedies of Mortgagor. In the event that a claim or
adjudication is made that Mortgagee or its agents have unreasonably delayed
acting in any case where by law or under this Mortgage or the other Loan
Documents, Mortgagee or such agent, as the case may be, has an obligation to
act promptly, Mortgagor agrees that none of Mortgagee or its agents shall be
liable for
27
<PAGE> 32
any monetary damages, and Mortgagor's sole remedies shall be limited to
commencing an action seeking injunctive relief or declaratory judgment.
35. Sole Discretion of Mortgagee. Wherever pursuant to this
Mortgage, Mortgagee exercises any right given to it to approve or disapprove,
or any arrangement or term is to be satisfactory to Mortgagee, the decision of
Mortgagee to approve or disapprove or to decide that arrangements or terms are
satisfactory or not satisfactory shall be in the sole discretion of Mortgagee
and shall be final and conclusive, except as may be otherwise expressly and
specifically provided herein.
36. Non-Waiver. The failure of Mortgagee to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term
of this Mortgage. Mortgagor shall not be relieved of Mortgagor's Obligations
hereunder by reason of (a) the failure of Mortgagee to comply with any request
of Mortgagor to take any action to foreclose this Mortgage or otherwise enforce
any of the provisions hereof or of the other Loan Documents, (b) the release,
regardless of consideration, of the whole or any part of the Mortgaged
Property, or of any person liable for the Obligations or any portion thereof,
or (c) any agreement or stipulation by Mortgagee extending the time of payment
or otherwise modifying or supplementing the terms of this Mortgage or the other
Loan Documents. Mortgagee may resort for the payment of the Obligations to any
other security held by Mortgagee in such order and manner as Mortgagee, in its
discretion, may elect. Mortgagee may take action to recover the Obligations,
or any portion thereof, or to enforce any covenant hereof without prejudice to
the right of Mortgagee thereafter to foreclosure this Mortgage. The rights and
remedies of Mortgagee under this Mortgage shall be separate, distinct and
cumulative and none shall be given effect to the exclusion of the others. No
act of Mortgagee shall be construed as an election to proceed under any one
provision herein to the exclusion of any other provision. Mortgagee shall not
be limited exclusively to the rights and remedies herein stated but shall be
entitled to every right and remedy now or hereafter afforded at law or in
equity.
37. No Oral Change. This Mortgage, and any provisions hereof, may
not be modified, amended, waived, extended, changed, discharged or terminated
orally or by any act or failure to act on the part of Mortgagor or Mortgagee,
but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change,
discharge or termination is sought.
38. Successors and Assigns. Subject to the provisions hereof
requiring Mortgagee's consent to any transfer of the Mortgaged Property, this
Mortgage shall be binding upon and inure to the benefit of Mortgagor and
Mortgagee and their respective successors and assigns forever.
39. Severability. If any term, covenant or condition of this
Mortgage or the Loan Documents is held to be invalid, illegal or unenforceable
in any respect, this Mortgage and any such other Loan Document shall be
construed without such provision.
40. Headings, etc. The headings and captions of various paragraphs
of this Mortgage are for convenience of reference only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
28
<PAGE> 33
41. Duplicate Originals. This Mortgage may be executed in any
number of duplicate originals and each such duplicate original shall be deemed
to be an original.
42. Definitions; Interpretation. Unless the context clearly
indicates a contrary intent or unless otherwise specifically provided herein,
words used in this Mortgage may be used interchangeably in singular or plural
form and the word "Mortgagor" shall mean "each Mortgagor and any subsequent
owner or owners of the Mortgaged Property or any part thereof or any interest
therein," the word "Mortgagee" shall mean "Mortgagee and any subsequent holder
of the Note," the word "person" shall include an individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, and any other entity, and the words "Mortgaged Property" shall
include any portion of the Mortgaged Property and any interest therein and the
words "attorneys' fees" shall include any and all attorneys' fees, paralegal
and law clerk fees (including, without limitation, fees at the pre-trial, trial
and appellate levels incurred or paid by Mortgagee in protecting its interest
in the Mortgaged Property and Collateral and enforcing its rights hereunder).
Whenever the context may require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural and vice versa. If, and to the
extent that, any provision of this Mortgage shall conflict or be inconsistent
with a provision contained in the Loan Agreement, then, unless this Mortgage
shall expressly provide that this Mortgage shall control notwithstanding any
other Loan Document to the contrary, the Loan Agreement provision shall
control.
43. Homestead. Mortgagor hereby waives and renounces all homestead
and exemption rights provided by the constitution and the laws of the United
States and of any state, in and to the Land as against the collection of the
Obligations, or any part hereof.
44. Assignments. Consistent with the applicable provisions of the
Loan Agreement, Mortgagee shall have the right to assign or transfer its rights
under this Mortgage without limitation. Any assignee or transferee shall be
entitled to all the benefits afforded Mortgagee under this Mortgage.
45. Waiver of Jury Trial. MORTGAGOR HEREBY AGREES NOT TO ELECT A
TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO
TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST WITH REGARD TO THE NOTE, THIS MORTGAGE, OR THE OTHER LOAN DOCUMENTS, OR
ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS
WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY
MORTGAGOR, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH
ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.
MORTGAGEE IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY
PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY MORTGAGOR.
46. Governing Law. The Loan Agreement and the Note provide that
they are governed by, and construed and enforced in accordance with, the laws
of the State of New York. This Mortgage shall also be construed under and
governed by the laws of the State of New York.
29
<PAGE> 34
Notwithstanding the parties' choice of New York law, however, (i) the terms and
provisions of this Mortgage pertaining to the priority, enforcement or
realization by Mortgagee of its respective rights and remedies under this
Mortgage with respect to the Mortgaged Property shall be governed and construed
and enforced in accordance with the internal law of the state in which the Land
is located (the "State") without giving effect to the conflicts-of-law rules
and principles of the State; (ii) Mortgagor agrees that to the extent
deficiency judgments are available under the laws of the State after a
foreclosure (judicial or nonjudicial) of the Mortgaged Property, or any portion
thereof, or any other realization thereon by Mortgagee, Mortgagee shall have
the right to seek such a deficiency judgment against Mortgagor in the State;
and (iii) Mortgagor agrees that if Mortgagee obtains a deficiency judgment in
another state, then Mortgagee shall have the right to enforce such judgment in
the State to the extent permitted under the laws of the State, as well as in
other states. Any reference to "days" in this Mortgage shall mean "calendar
days."
47. Time of Essence. Time is of the essence of this Mortgage and
of every part hereof of which time is an element.
48. Statute of Limitations. To the fullest extent allowed by law,
the right to plead, use or assert any statute of limitations as a plea or
defense or bar of any kind, or for any purpose, to any debt, demand or
obligation secured or to be secured hereby, or to any complaint or other
pleading or proceeding filed, instituted or maintained for the purpose of
enforcing this Mortgage or any rights hereunder, is hereby waived by Mortgagor.
49. Non-Recourse. The provisions of this Mortgage are subject to
the provisions of Section 8.24 of the Loan Agreement which are incorporated
herein in reference as if herein set forth in full.
50. Future Advances. This Mortgage shall also secure any
additional sum or sums advanced by the then holder of the Note to the then
owner of the Mortgaged Property at any time within twenty (20) years from the
date of this Mortgage, with interest thereon at the rate agreed upon at the
time of each additional loan or advance. Any such future advances shall be
added to and constitute a part of the Obligations secured by this Mortgage to
the same extent as if made contemporaneously with the execution of this
Mortgage, and will be subject to all of the terms and provisions of this
Mortgage, whether or not such additional loan or advance is evidenced by a
promissory note of the borrower and whether or not identified by a recital that
is secured by this Mortgage, provided however, that the aggregate amount of
principal indebtedness outstanding at any one time and secured by this Mortgage
shall not exceed the sum of $150,000,000. The provisions of this Section 50
shall apply regardless of whether any such advance is characterized as
obligatory or discretionary, but nothing contained in this Section is intended
or shall be construed to obligate the Mortgagee to make any additional loans or
advances.
30
<PAGE> 35
Mortgagor has executed this instrument the day and year first above written.
MORTGAGOR:
WITNESSES: ECHELON INTERNATIONAL CORPORATION,
a Florida corporation
- --------------------------------- By:
Name: ---------------------------------
Name: Larry J. Newsome
Title: Senior Vice President
Address: One Progress Plaza
St. Petersburg, Florida 35701
- ---------------------------------
Name:
31
<PAGE> 36
ACKNOWLEDGMENT
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before me this ___ day of
November, 1996, by _____________________, as _______________________ of Echelon
International Corporation, a Florida corporation, on behalf of such
corporation. He/She either [please check as applicable] ____ is personally
known to me, or ____ has presented ____________________ as identification.
___________________________________
Notary Public
Print Name:
_______________________
(NOTARIAL SEAL)
My Commission Expires:
Commission No.:
_________
32
<PAGE> 37
EXHIBIT A-1
LEGAL DESCRIPTION
[100 CARILLON]
ALL that certain tract, piece or parcel of land, situate, lying and being in
Pinellas County, State of Florida, being more particularly described as
follows:
PARCEL 1:
Lot One (1), Block Eight (8), Replat of Carillon, according to the map or Plat
thereof recorded in Plat Book 96, pages 29 through 36, inclusive, Public
Records of Pinellas County, Florida.
PARCEL 2:
All of the right, title and interest which run with the aforesaid land
described as Parcel I, under that certain Declaration of Protective Covenants,
Building Standards and Easements of Carillon recorded in O.R. Book 6340, page
266, and First Supplement thereto recorded in O.R. Book 6340, page 366 and
further supplemented by the following: O.R. Book 6485, page 762; O.R. 9283,
page 202; O.R. Book 9283, page 206; O.R. Book 9329, page 11; O.R. Book 9334,
page 386; O.R. Book 9336, page 433; O.R. Book 9350, page 1691; O.R. Book 9452,
page 822; and O.R. Book 9457, page 876.
1
<PAGE> 38
EXHIBIT A-2
[BARNETT TOWER]
ALL that certain tract, piece or parcel of land, situate, lying and being in
Pinellas County, State of Florida, being more particularly described as
follows:
Lot 1, Block 1, Progress Center Replat, according to the map or plat thereof
recorded in Plat Book 100, Page 65, Public Records of Pinellas County, Florida.
2
<PAGE> 39
EXHIBIT A-3
[HIGHPOINT CENTER]
ALL that certain tract, piece or parcel of land, situate, lying and being in
Leon County, State of Florida, being more particularly bounded and described as
follows:
Begin at the Southeast corner of Lot Number 177 in the Original Plan of the
City of Tallahassee, according to the map or Plat thereof recorded in Plat Book
1, page 10, Public Records of Leon County, Florida, where it corners with Lot
Number 178, on College Avenue, formerly Clinton Street, and thence run West
along the North side of College Avenue 10 feet to a point which is the Point of
Beginning, and which is approximately 150 feet East of the corner of Adams
Street and College Avenue, thence run North 153 feet and 4 inches, thence West
52 feet and 2 inches, thence South 36 feet and 8 inches, thence East 6 inches,
thence South 36 feet and 8 inches, thence East 14 inches, thence South 80 feet
to the North side of College Avenue, thence East along the North side of
College Avenue 50 feet and 6 inches to the Point of Beginning;
AND ALSO
Begin at the Southeast corner of Lot Number 177 in the Original Plan of the
City of Tallahassee, according to the map or Plat thereof recorded in Plat Book
1, Page 10, Public Records of Leon County, Florida, thence run North 153 feet
and 4 inches, thence West 10 feet, thence South 153 feet and 4 inches, thence
East 10 feet, to the Point of Beginning.
3
<PAGE> 40
EXHIBIT A-4
[McNULTY STATION]
ALL that certain tract, piece or parcel of land, situate, lying and being in
Pinellas County, State of Florida, being more particularly described as
follows:
Lots 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, and 20,
Block 36, Revised Map of the City of St. Petersburg, according to the map or
plat thereof recorded in Plat Book 1, Page 49, of the Public Records of
Hillsborough County, Florida, of which Pinellas County, Florida was formerly a
part.
4
<PAGE> 41
EXHIBIT A-5
[PROGRESS CENTER]
ALL that certain tract, piece or parcel of land, situate, lying and being in
Alachua County, State of Florida, being more particularly described as follows:
PARCEL 1:
Parcels A and C of REPLAT OF PROGRESS CENTER, according to the map or plat
thereof recorded in Plat Book P, pages 48 and 49, of the public records of
Alachua County, Florida.
PARCEL 2:
TOGETHER WITH a perpetual, non-exclusive, alienable easement for the flow of
storm water, surface water, groundwater and any other diffused water, including
ingress, egress, access, use and maintenance on, over, across, under and
through the real property described in Exhibit "A" to that certain Drainage
Easement Agreement recorded October 8, 1991 in O.R. Book 1830, Page 345, Public
Records of Alachua County, Florida.
5
<PAGE> 42
EXHIBIT A-6
[MARINA]
ALL that certain tract, piece or parcel of land, situate, lying and being in
Pinellas County, State of Florida, being more particularly described as
follows:
PARCEL 1:
Lots 9 through 14 inclusive in Block 4; Lots 7 and 8 in Block 14; The South 40
feet of Lot 8 in Block 15; and Lots 15 and 16, inclusive, in Block 16; Lots 1
and 2 and the North 10 feet of Lot 3 in Block 17; Lots 9 through 13 inclusive
in Block 25 of W. J. OVERMAN'S REARRANGEMENT of J.P. TITCOMB'S PLAN OF BAYBORO,
according to the map or plat thereof recorded in Plat Book 1, Page 19, of the
public records of Pinellas County, Florida.
PARCEL 2:
Lot 1 in Block 1 of BAYTOWN MARINA SUBDIVISION, according to the map or plat
thereof recorded in Plat Book 89, Page 93, of the public records of Pinellas
County, Florida.
PARCEL 3:
Lot 3 less the North 10 feet and all of Lots 4, 5, and 6 in Block 17 of W.J.
OVERMAN'S REARRANGEMENT OF J.P. TITCOMB'S PLAN OF BAYBORO, according to the map
or plat thereof recorded in Plat Book 1, Page 19, of the public records of
Pinellas County, Florida.
6
<PAGE> 43
EXHIBIT A-7
[WAREHOUSE]
ALL that certain tract, piece or parcel of land, situate, lying and being in
Hillsborough County, State of Florida, being more particularly described as
follows:
PARCEL 1:
Beginning at a point fifty feet North (50 ft. N.) of the center of the main
line track of the Atlantic Coast Line Railroad Company and 196.74 feet East of
the West boundary of Lot Eight (8) of Knight's Subdivision of a portion of
Section 16, Twp. 29 South, Range 19 East, which point of beginning is
twenty-five (25) feet North of the South line of said Knight's Subdivision,
running thence North 436.2 feet to the South boundary of the right-of-way of
State Road No. 23 (East Broadway), thence in a Southwesterly direction along
the Southerly boundary of State Road No. 23 for 155.6 feet; thence South 234.6
ft; thence West 75.0 ft; thence South 160.0 ft. to a point 50.0 feet North of
the center of the main line track of the Atlantic Coast Line Railroad Company,
which point is 25.0 ft. North of the South line of said Knight's Subdivision,
thence East 225.0 feet to the point of beginning; being portions of Lots seven
(7) and Eight (8) of Knight's Subdivision, as recorded in Plat Book 1, Page 84
of the public records of Hillsborough County, Florida.
PARCEL 2:
Beginning at the intersection of the East Boundary of Lot 7 of Knight's
Subdivision, as recorded in Plat Book 1, Page 84, of the public records of
Hillsborough County, Florida, with the Southerly boundary of East Broadway (Old
State Road #23), as now exists, and run thence Westerly along said Southerly
boundary of East Broadway a distance of 278.5 feet, thence South, parallel to
the East boundary of said Lot 7, to a point 50.0 feet North of the center line
of the ACL Railroad main line track; thence run East, parallel to and 50.0 feet
North of said center line of ACL main line track a distance of 240.0 feet, more
or less, to a point 28.26 feet West of the East boundary of said Lot 7; thence
North, parallel to said East boundary of Lot 7 a distance of 160.0 feet; thence
East, parallel to the South boundary of said Lot 7 a distance of 75.0 feet to a
point 46.74 feet East of the West boundary of Lot 8 of said Knight's
Subdivision; thence North, parallel to the said West boundary of Lot 8, a
distance of 234.6 feet to the Southerly boundary of East Broadway, as now
exists; thence run Westerly along said Southerly boundary of East Broadway 48.4
to the point of beginning.
PARCEL 3:
That part of Lot 8 of Knight's Subdivision, as per map or plat thereof in Plat
Book 1, on Page 84 of the public records of Hillsborough County, Florida, being
more particularly described as follows: Beginning at a point on the North
boundary of said Lot 8, 225 ft. Southwesterly of the Northeast corner of said
Lot 8, thence run Southwesterly along said North boundary, 80 ft., thence run
South parallel with the East boundary of said Lot 8 to the South boundary of
said Lot 8, thence run East 101.22 ft. to a point 192.8 ft. West of the
Southeast corner of said Lot 8, said point being on the
7
<PAGE> 44
West boundary line of County Road deeded to Hillsborough County by deed
recorded in Deed Book 929 on Page 31, thence Northwesterly along said Right of
Way to the point of beginning, LESS that part of said tract lying within 33 ft.
of the center line of Old State Road Number 23.
PARCEL 4:
Beginning at the Southwest corner of Lot 7 of Knight's Subdivision, as per map
or plat thereof recorded in Plat Book 1 on Page 84 of the public records of
Hillsborough County, Florida, run thence East along the South boundary of said
Lot 7, 212.52 feet for a point of beginning, run thence North 0 degrees 10'
West 292.22 feet, more or less, to an intersection with the South boundary of
the present right of way of East Broadway, thence in a Southwesterly direction
along the South boundary of the right of way of the said East Broadway a
distance of 15.95 feet, thence South to an intersection with the South boundary
of the said Lot 7 at a point 18 feet West measured on the said South boundary
from the point of beginning, thence East 18 feet to the point of beginning.
PARCEL 5:
Begin at a point 3 chains and 22 links East of the Southwest corner of Lot 7 of
Knight's Subdivision, of the South half of the NE 1/4 of Section 16, Township
29 South, Range 19 East, running thence East 2 chains and 20 links, thence
North 4 chains and 66 links to a brick road, thence Westerly along said brick
road to a point North of point of beginning, thence South 4.10 chains to point
of beginning, lying and being in Hillsborough County, Florida.
TOGETHER WITH the real property as set forth in Ordinance No. 5827-A adopted on
January 3, 1974 by the City Council of City of Tampa, vacating, closing and
abandoning 48th Street between East Broadway (State Road 574) on the North and
the Seaboard Coast Line Railway right-of-way on the South.
PARCEL 6:
Beginning at the Southeast corner of Lot 8 of Knight's Subdivision according to
map or plat thereof as recorded in Plat Book 1, Page 84, public records of
Hillsborough County, Florida; running thence North along the East boundary line
of said Lot 8 to the Northeast corner of said Lot 8; running thence in a
Southwesterly direction along the North boundary line of said Lot 8, 200 feet;
running thence South parallel with the East boundary line of said Lot 8 to the
South boundary line of said lot 8 running thence East along the South boundary
line of said Lot 8 to the point of beginning, being a part of the South 1/2,
Northeast 1/4, Section 16, Township 29 South, Range 19 East, and being the East
192.8 feet of said Lot 8, Hillsborough County, Florida.
All of the foregoing Parcels 1 through 6, inclusive, TRACT "A" being also
described as follows:
A parcel of land lying in and being a part of Lot 7 and Lot 8, KNIGHT'S
SUBDIVISION, as recorded in Plat Book 1, Page 84, of the Public Records of
Hillsborough County, Florida; said parcel being more particularly described as
follows:
8
<PAGE> 45
Beginning at the intersection of the Southerly right-of-way line of West
Seventh Street (formerly East Broadway), a 66-foot right-of-way as now
established, with the East line of said Lot 8, also being the West line of W.
G. Bryan's Subdivision, as recorded in Plat Book 2, Page 41, of said Public
Records; thence, on the East line of said Lot 8, South 00 degrees 03 minutes 47
seconds West, 571.35 feet to the North line of the CSX (formerly Atlantic Coast
Line) Railroad, a 100-foot right-of-way as now established; thence, on said
North right-of-way line, North 89 degrees 56 minutes 13 seconds West, 1120.00
feet; thence, parallel with the East line of said Lot 8, North 00 degrees 03
minutes 47 seconds East, 258.27 feet to the Southerly right-of-way line of said
West Seventh Street; thence, on said Southerly right-of-way line, North 74
degrees 26 minutes 44 seconds East, 1162.94 feet to the Point of Beginning.
9
<PAGE> 46
Schedule 1
1. As to the property described on Exhibit A-2 (Barnett Tower), Mortgagor
is the successor by merger to TALQUIN DEVELOPMENT COMPANY, a Florida
corporation ("TDC").
2. Exhibit A-4 (McNulty Station), Mortgagor is the successor by merger to
TDC, formerly known as HUNNICUTT EQUITIES, INC. ("HUNNICUTT"), a
Florida corporation.
3. As to the property described on Exhibit A-5 (Progress Center),
Mortgagor is the successor by merger to TDC, formerly known as
HUNNICUTT, successor by merger to APALACHEE DEVELOPMENT COMPANY, a
Florida corporation.
4. As to the property described on Exhibit A-6 (Marina), Mortgagor is the
successor by merger to TDC, as to Parcels 1 and 2, and to PROGRESS
CREDIT CORPORATION, a Florida corporation, as to Parcel 3.
5. As to the property described on Exhibit A-7 (7th Avenue/Warehouse),
Mortgagor is the successor by merger to TDC, successor by merger CROWN
WINDOW COMPANY, a Florida corporation.
10
<PAGE> 1
Exhibit 4.8
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (the "Security Agreement") is made and
entered into as of November ____, 1996 (the "Effective Date"), by ECHELON
INTERNATIONAL CORPORATION, a Florida corporation ("Obligor"), having an address
at One Progress Plaza, St. Petersburg, Florida 33701, in favor of SALOMON
BROTHERS REALTY CORP., a New York corporation, having an address at Seven World
Trade Center, New York, New York 10048, as secured party ("Secured Party").
This Security Agreement is entered into based upon the following facts:
Obligor is a "Venturer" (as that term is defined in the Joint Venture
Agreement (hereinafter defined)) in the joint venture conducted under the name
of Progress-Potomac Capital Ventures (the "Joint Venture") and formed under
that certain Joint Venture Agreement (the "Joint Venture Agreement"), dated as
of January 27, 1988, between Progress Financial Services, Incorporated, and
Potomac Capital Investment Corporation ("Potomac"), and the owner of all of the
Collateral (as hereinafter defined), as more fully described in EXHIBIT A.
The collateral described in EXHIBIT A is referred to herein as the
"Collateral."
Simultaneously with execution of this Security Agreement, Secured Party
will make a One Hundred Five Million Dollar ($105,000,000) loan (the "Loan") to
Obligor, which Loan will be evidenced by a note, dated of even date herewith,
in the original principal amount of One Hundred Five Million Dollars
($105,000,000), executed and delivered by Obligor to Secured Party (the
"Note").
The Note is intended to be secured by this Security Agreement.
Secured Party would not have made the Loan to the Obligor if Obligor did
not execute and deliver this Security Agreement to Secured Party.
NOW, THEREFORE, to secure the full and punctual payment and performance of
Obligor's obligations and covenants under the Note and hereunder (collectively,
the "Obligations"), Obligor hereby assigns and pledges all of its right, title
and interest in the Collateral to Secured Party, and Obligor hereby grants to
Secured Party a security interest in the Collateral. By granting this security
interest in the Collateral, Obligor intends to provide Secured Party with
security for payment and performance of all of the Obligations. Obligor
further covenants, represents, warrants, and agrees (as applicable) as follows:
1. Representations and Warranties.
Obligor represents and warrants to Secured Party as follows:
1.1 Joint Venture Agreement. The Joint Venture Agreement is in full
force and effect and Obligor is not in default thereunder.
<PAGE> 2
1.2 No Violation. The execution and delivery of, and performance by
Obligor under, this Security Agreement will not (i) violate any provision of
any mortgage, indenture, security agreement, contract, undertaking or other
agreement to which Obligor is a party or that purports to bind Obligor or any
of its property or assets, or (ii) conflict with any law, order, rule or
regulation applicable to Obligor of any court or any federal or state
government, regulatory body or administrative agency, or any other governmental
body having jurisdiction over Obligor or any of its properties.
1.3 No Filings or Consents. Except for the filing of financing
statements (pertaining to the security interest granted herein) and obtaining
the consent of Potomac to this Security Agreement, no authorization, consent,
approval, exemption, registration with any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
of any other party is or will be necessary to the valid execution, delivery or
performance by Obligor of this Security Agreement, or Obligor's grant to
Secured Party of the security interest established hereunder.
1.4 Title and Priority. Obligor has good title to the Collateral, free
and clear of all liens, security interests and encumbrances thereon or adverse
claims of title or any other interest whatsoever therein. No financing
statement, mortgage or deed of trust covering the Collateral or any portion
thereof or any proceeds thereof is on file in any public office. The security
interest granted to Secured Party under this Security Agreement is valid and
constitutes a first and prior perfected security interest in the Collateral.
1.5 Authority to Act; Enforceability. Obligor has full right, power and
authority to (i) grant the security interest in the Collateral; and (ii) assign
the Collateral to Secured Party pursuant to this Security Agreement. This
Security Agreement is a valid and binding obligation of Obligor enforceable in
accordance with its terms.
1.6 Effect of Transfer. Upon foreclosure on the Collateral or other
exercise of remedies with respect to the Collateral, Secured Party, its
designee or any purchaser of the Collateral shall be entitled to any and all
rights of the Obligor with respect to the Collateral.
2. Covenants.
2.1 Joint Venture-Related. Obligor shall preserve all its rights under
the Joint Venture Agreement. Obligor shall perform all its obligations as a
member of the Joint Venture when and as required pursuant to the Joint Venture
Agreement. Obligor shall not modify the Joint Venture Agreement without
Secured Party's consent. Obligor shall immediately provide Secured Party with
a copy of any notice received under the Joint Venture Agreement.
2.2 Transfers. Obligor shall not sell, assign, transfer, convey, pledge,
hypothecate, or grant or permit to exist any lien on or security interest in,
or otherwise encumber or dispose of, the Collateral, or any portion thereof
(any of the foregoing, a "Disposition"). In the event of any Disposition in
violation of these provisions, the security interest of Secured Party shall
continue
2
<PAGE> 3
in the affected Collateral notwithstanding such Disposition, and Obligor shall
hold the proceeds thereof in a separate account for Secured Party's benefit and
shall not commingle such funds with any other funds of Obligor. Obligor shall
notify Secured Party immediately of such Disposition and shall, in the event of
a Disposition in violation of these provisions, without request, transfer the
proceeds to Secured Party immediately upon receipt.
2.3 Protection of Collateral. Obligor shall not do or fail to do
anything that would or could permit or enable any creditor of Obligor,
including, without limitation, the Internal Revenue Service and the taxing
authorities of any state or city, to obtain or assert a lien upon or be legally
entitled to compel a sale of any of the Collateral in order to obtain payment
of any money Obligor might owe to any of them. In addition, Obligor represents
and warrants that it has not previously given any lien, security interest or
other interest in any of the Collateral which has not been released, and agrees
that it shall not hereafter give, grant or allow to exist, any lien, security
interest or other interest in any of the Collateral to secure the repayment of
any money or other obligation owed to anyone else, whether owed by Obligor or
any other person.
3. Events of Default; Acceleration.
3.1 Definition: "Event of Default". The occurrence of any of the
following shall be an "Event of Default":
3.1.1. Security Agreement. If Obligor fails to perform any covenant or
agreement under, or violates any provision of, this Security Agreement.
3.1.2. Cross-Default. If any default occurs under the Note.
3.1.3. Disposition. In the event of any Disposition of the Collateral or
any portion thereof without the prior written consent of Secured Party.
3.1.4. Untrue Facts. If any representation or warranty in this Security
Agreement is or becomes materially incorrect.
3.1.5. Liquidation, Etc. If the Joint Venture or Obligor is liquidated,
terminated or dissolved for any reason whatsoever, or if a new member is
admitted or substituted in the Joint Venture; provided, however, that is shall
not be an Event of Default if the Joint Venture is liquidated, terminated or
dissolved solely as the act of Potomac and without the consent or fault of
Obligor, which event shall be deemed a Transfer, and (a) the Capital Event
Proceeds of such Transfer shall be subject to, and deposited by Obligor in
accordance with, Section 2.7 of the Loan Agreement, and (b) if Obligor receives
a distribution of any Joint Venture Euipment as a result of such Transfer,
Obligor immediately shall execute, acknowledge, deliver and, as necessary,
record and/or file such documents and instruments as are requested by Secured
Party to create a first priority lien in such Joint Venture Equipment in favor
of Secured Party as security for the Note.
3
<PAGE> 4
3.1.6. Joint Venture Cross-Default. If any default by Obligor occurs
under the Joint Venture Agreement.
3.1.7. Bankruptcy Event Affecting Obligor. If Obligor becomes bankrupt
or insolvent, or makes an assignment for the benefit of creditors, ceases to do
business as a going concern, ceases to pay its debts as they become due or
admits in writing that it is unable to pay its debts as they become due, or
becomes a "debtor," whether voluntarily or involuntarily, under the United
States Bankruptcy Code (Title 11 United States Code), or is otherwise the
subject of any similar proceeding under state or federal law (unless, in the
case of an involuntary petition, the same is contested with diligence and
continuity and dismissed within sixty days); or a custodian or trustee is
appointed to take possession of, or an attachment, execution or other judicial
seizure is made with respect to, substantially all of Obligor's assets or in
the Joint Venture (unless such appointment, attachment, execution or other
seizure was involuntary and is contested with diligence and continuity and is
vacated and discharged within sixty days). (The occurrence of any event
described in this paragraph is referred to as a "Bankruptcy Event.")
3.1.8. Bankruptcy Event Affecting the Joint Venture. The occurrence of
any Bankruptcy Event affecting the Joint Venture; provided, however, that it
shall not be an Event of Default if the Bankruptcy Event affecting the Joint
Venture is not caused by the act or fault of, and is not consented to by,
Obligor; and if such Bankruptcy Event shall result in the liquidation,
termination or dissolution of the Joint Venture, such liquidation, termination
or dissolution shall be deemed a Transfer, and (a) the Capital Event Proceeds
of such Transfer shall be subject to, and deposited by Obligor in accordance
with, Section 2.7 of the Loan Agreement, and (b) if Obligor receives a
distribution of any Joint Venture Euipment as a result of such Transfer,
Obligor immediately shall execute, acknowledge, deliver and, as necessary,
record and/or file such documents and instruments as are requested by Secured
Party to create a first priority lien in such Joint Venture Equipment in favor
of Secured Party as security for the Note.
4. Secured Party's Rights Upon Event of Default.
Upon and after the occurrence of an Event of Default and the acceleration
of the Indebtedness, Secured Party shall have the following rights and
remedies, which shall be cumulative and shall not limit any other rights or
remedies available to Secured Party:
4.1. Sale of Collateral. Secured Party may sell the Collateral (in whole
or in part, at Secured Party's option) at one or more public or private
sale(s), with or without advertisement of the time, place or terms of sale,
except that if it is a private sale, it shall occur no less than thirty (30)
days after written notice to Obligor at the address first above set forth.
Such notice, given by certified mail, return receipt requested, shall be deemed
reasonable notice. Any such sale may be conducted by an employee or agent of
Secured Party. Any person, including both Secured Party and Obligor, shall be
eligible to purchase any part or all of the Collateral at any such sale.
Obligor acknowledges that private sales, and in particular private sales of
securities made pursuant to applicable law, may be at prices and on other terms
less favorable to the seller than if such Collateral were sold at public sales.
Obligor agrees that any private sales that Secured Party
4
<PAGE> 5
elects to conduct or to have conducted shall not be deemed to have been made in
a commercially unreasonable manner by virtue of their being private sales. In
the event of any sale, Secured Party shall apply the proceeds of such sale in
accordance with the Distribution Priorities described in Section 5 of this
Security Agreement. Secured Party shall determine the terms of such sale in
its sole discretion.
4.2. Option to Hold Collateral. Secured Party may elect to continue to
hold the Collateral if it determines that a better price can be obtained at a
later date or for any other reason. Secured Party shall not be liable to
Obligor for such delay nor for any loss in value in the Collateral. Secured
Party shall apply any cash distribution made or payable on account of the
Collateral as set forth in Section 5 of this Security Agreement.
4.3. Implementation of Sale. Secured Party shall have the right, in
connection with a sale pursuant to Section 4.1 of this Security Agreement, to
complete one or more assignment(s) of the Collateral in order to perfect the
transfer of the Collateral.
4.4. Effect of Purchase. Secured Party or anyone designated by Secured
Party may purchase the Collateral as stated above, free of any right of Obligor
to redeem the Collateral, which right of redemption Obligor waives.
4.5. Appointment of Receiver. Secured Party may obtain the appointment
of a receiver, without notice to Obligor and without regard to the adequacy of
the Collateral.
4.6. Other Remedies. Secured Party may, at Obligor's sole cost and
expense, take any and all additional steps as Secured Party may, in its sole
discretion, determine to (i) protect its rights in the Collateral; (ii) aid in
the execution of any power herein granted or (iii) enforce any and all other
legal or equitable remedies.
4.7. UCC. Secured Party shall have with respect to the Collateral, in
addition to all rights and remedies herein set forth, all of the rights and
remedies available to a secured party under the Uniform Commercial Code as in
effect in the State of New York as if such rights and remedies were fully set
forth in this Security Agreement.
4.8. Partial Exercise. Without limiting any rights or remedies of
Secured Party, Secured Party shall have the right and option, in its sole and
absolute discretion, to exercise any rights or remedies with respect to only a
portion of the Collateral and/or on account of only certain but not all
defaults of Obligor with respect to the Note or this Security Agreement. If
Secured Party partially exercises its remedies as described in the preceding
sentence, then subject to applicable law Secured Party shall continue to be
entitled to exercise Secured Party's remedies as to any other Collateral and
any other default, present or future. For example, without limiting the
general application of this paragraph, Secured Party may realize upon the right
to receive distributions from the Joint Venture without realizing upon any
other element(s) of the Collateral, all in Secured Party's sole and absolute
discretion, and Secured Party's security interest shall continue in the
remaining element(s) or Collateral.
5
<PAGE> 6
5. Application of Sale Proceeds.
If Secured Party sells the Collateral or any part thereof, the proceeds
shall be applied as follows (the "Distribution Priorities"):
5.1. Secured Party's Expenses. First, to the expenses of retaking,
collecting, preparing for sale, selling and delivering the Collateral,
including (but not limited to) fees and other charges of attorneys and
paralegals, costs, and taxes ("Legal Costs");
5.2 Performance Under the Note. Second, to be applied against payments
then due under the Note; and
5.3 Residue. The balance, if any, to the person(s) legally entitled
thereto.
6. Distributions.
So long as no Event of Default has occurred and is continuing, Obligor may
retain any cash distribution made or payable on account of the Collateral so
long as such cash distributions do not represent the proceeds of any sale or
refinancing of properties owned by the Joint Venture, or the proceeds of any
hazard insurance received by the Joint Venture as a result of any casualty
affecting any Equipment (as defined in the Joint Venture Agreement) owned by
the Joint Venture (all such transactions being referred to herein as "Capital
Transactions"). If, however, Obligor receives distributions on account of any
Capital Transaction, then such proceeds shall be subject to and deposited in
accordance with Section 2.7 of the Loan Agreement.
7. Legal Costs.
Obligor shall reimburse Secured Party for all Legal Costs incurred by
Secured Party in enforcing or preparing to enforce this Security Agreement or
the Note, whether such Legal Costs are incurred before or after commencement of
litigation, and whether incurred under this Security Agreement or the Note.
8. Additional Documents.
Upon Secured Party's request, Obligor shall sign any financing statements
and other documents that Secured Party may require to establish and/or protect
its rights in the Collateral. Without intending to relieve Obligor from the
foregoing obligations, Secured Party may sign any such documents in the name of
Obligor and may file and/or record them as Secured Party shall deem
appropriate. For such purpose, Obligor hereby irrevocably appoints Secured
Party as Obligor's attorney-in-fact, coupled with an interest, which
appointment shall be irrevocable so long as the Obligations have not been paid
and performed in full. Such appointment and power of attorney shall survive
the death, adjudication of incompetency or insanity, retirement, removal,
bankruptcy or insolvency of Obligor or any of its partners.
9. Certain Payments.
6
<PAGE> 7
Obligor shall pay: (i) all filing, registration or recording fees with
respect to, and all other expenses incident to, the execution, acknowledgment
and filing, registration or recording of this Security Agreement, any extension
or modification hereof, any security agreement or other document supplemental
hereto or relating to the Collateral, any Uniform Commercial Code financing
statements evidencing this Security Agreement or pertaining to Secured Party's
rights in the Collateral and any instrument of further assurance, and (ii) all
federal, state, county and municipal stamp taxes and other taxes, duties,
imposts, assessments and charges arising out of or in connection with the
execution, delivery, filing, registration, or recording of any of the foregoing
or arising out of or in connection with, or assessed with respect to, any
commercial sale or other exercise of Secured Party's remedies under this
Security Agreement.
10. No Subrogation.
No payment by or on behalf of Obligor on account of the Note shall create
any right of subrogation, contribution, indemnification or reimbursement (such
rights, "Subrogation") against the Joint Venture, Secured Party or any other
party unless and until: (a) such right of Subrogation does not violate (or
otherwise produce any result adverse to Secured Party under) any applicable
law, including any bankruptcy or insolvency law; and (b) all amounts due under
the Note and hereunder have been paid in full and all other performance
required under the Note and hereunder has been rendered in full to Secured
Party and all Obligations have been paid and performed and Secured Party has
released, transferred or disposed of all of its right, title and interest in
all Collateral. In exchange for good and valuable consideration, the receipt
and sufficiency of which are acknowledged, Obligor waives and releases any and
all such rights of Subrogation to the extent described in the immediately
preceding sentence.
11. Additional Provisions.
11.1. Further Assurances. Obligor agrees to execute, acknowledge and
deliver to Secured Party such additional documentation as Secured Party shall
reasonably require to further evidence and confirm Obligor's obligations with
respect to the Note and this Security Agreement, and to further perfect the
security intended to be created by this Security Agreement.
11.2. Successors and Assigns. This Security Agreement shall bind and
benefit the parties and their successors and assigns, and the term Obligor
shall apply to all successors and assigns of Obligor. The foregoing shall not
be deemed to limit the prohibition on any Disposition contained in this
Security Agreement.
11.3. Notices. Any notices relating to this Security Agreement, the Note
or any related matter, shall be in writing and shall be delivered by Federal
Express or other nationally recognized overnight courier service. Notices
shall be effective upon receipt or affirmative refusal to accept delivery. The
parties' addresses are as set forth in the preamble of this Agreement. Any
party may change its address by notice in compliance with this Agreement.
7
<PAGE> 8
11.4. Consent to Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York. Obligor agrees
that any proceeding to enforce, or otherwise relating to or arising from, this
instrument may be brought in any state or federal court located in the State of
New York, as Secured Party may elect. By executing this Security Agreement,
Obligor irrevocably accepts and submits to the nonexclusive personal
jurisdiction of each of the aforesaid courts, generally and unconditionally
with respect to any such proceeding. Obligor agrees not to assert any basis
for transferring jurisdiction of any such proceeding to another court. Obligor
further agrees that a final judgment against Obligor in any proceeding shall be
conclusive evidence of Obligor's liability for the full amount of such
judgment.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
8
<PAGE> 9
IN WITNESS WHEREOF, Obligor has executed this Security Agreement as of the
Effective Date.
"Obligor"
ECHELON INTERNATIONAL CORPORATION,
a Florida corporation
By:
----------------------------------
Name: Larry J. Newsome
Title: Senior Vice President
Attachments:
Exhibit "A" - Description of Collateral
9
<PAGE> 10
Description of Collateral
EXHIBIT A
TO UCC-1 FINANCING STATEMENT
AND TO PLEDGE AND SECURITY AGREEMENT
Debtor (Obligor): ECHELON INTERNATIONAL CORPORATION, a Florida corporation
Secured Party: SALOMON BROTHERS REALTY CORP., a New York corporation
Date: November 5, 1996
The Collateral covered by the UCC-1 financing statement to which this
Exhibit is attached consists of the following (the "Profits and Distributions",
all of which shall be deemed to be included in Item 9 of the UCC-1 financing
statement to which this Exhibit is attached):
A. All of Debtor's right, title and interest, now owned or hereafter
acquired, in and to any and all distributions, net profits, income, gain,
credit and similar items, whether cash or otherwise, from the Joint Venture (as
hereinafter defined), whether of capital or income or otherwise, pursuant to
the Joint Venture Agreement (as hereinafter defined) or otherwise from the
Joint Venture, including distributions upon liquidation;
B. All of Debtor's right, if any, to receive any payments from the Joint
Venture, regardless of how such payments are characterized, including
management fees, disposition fees, administrative fees, reimbursements,
partners' fees, and any and all other payments from the Joint Venture of any
kind whatsoever;
C. All replacements, additions, modifications, accessions, substitutions,
proceeds (whether cash or otherwise) and products relating to or arising from
any of the foregoing, and all documents, ledger sheets and files of Debtor
relating thereto (proceeds hereunder include (i) whatever is now or hereafter
received by Debtor upon the sale, exchange, collection or other disposition of
any item of collateral, whether such proceeds constitute inventory, accounts,
accounts receivable, general intangibles, instruments, securities, credits,
documents, letters of credit, chattel paper, documents of title, warehouse
receipts, leases, deposit accounts, money, contract rights, goods or equipment;
(ii) any such items which are now or hereafter acquired by Debtor with any
proceeds of any collateral hereunder; and (iii) any insurance now or hereafter
payable by reason of loss or damage to any item of collateral or any proceeds
thereof); and
D. The proceeds and products of all of the foregoing.
A-1
<PAGE> 11
The "Joint Venture" means Progress Potomac Capital Ventures, a joint
venture formed under the laws of the State of Delaware, and specifically the
Delaware Uniform Partnership Law, under that certain Joint Venture Agreement,
dated as of January 27, 1988, between Progress Financial Services,
Incorporated, a predecessor of Debtor, and Potomac Capital Investment
Corporation (the "Joint Venture Agreement").
A-2
<PAGE> 1
Exhibit 4.9
ASSIGNMENT OF CONTRACTS, LICENSES, PERMITS,
AGREEMENTS, WARRANTIES AND APPROVALS
THIS ASSIGNMENT OF CONTRACTS, LICENSES, PERMITS, AGREEMENTS,
WARRANTIES AND APPROVALS (this "Assignment"), dated as of the 5th day of
November, 1996, is made by ECHELON INTERNATIONAL CORPORATION, a Florida
corporation having its principal place of business at One Progress Plaza, St.
Petersburg, Florida 33701 ("Borrower"), to SALOMON BROTHERS REALTY CORP., a New
York corporation having an office at Seven World Trade Center, New York, New
York 10048 ("Lender").
R E C I T A L S :
Borrower is the owner of the fee simple or leasehold interest
in the improved real properties described on Annex A attached hereto
(collectively, the "Facilities");
Borrower, Lender, and LaSalle National Bank, as collateral
agent, are parties to a Loan Agreement dated as of even date herewith (said
Loan Agreement, as modified and supplemented and in effect from time to time,
the "Loan Agreement"; capitalized terms used but not defined herein having the
meanings set forth in the Loan Agreement). The Loan Agreement provides for a
loan (the "Loan") to be made by Lender to Borrower in an aggregate principal
amount of $105,000,000. The Loan is to be evidenced by, and repayable with
interest thereon in accordance with the promissory note dated the date hereof,
executed and delivered by Borrower to the order of Lender (as modified,
supplemented or substituted and in effect from time to time, collectively, the
"Note").
Borrower has executed and delivered a Mortgage, Assignment of
Leases and Rents, Security Agreement and Fixture Filing dated as of the date
hereof (in its original form and as hereafter amended, the "Mortgage"),
establishing a first priority lien on the Facilities to secure the payment and
performance of the Note (the Note, Loan Agreement, the Mortgage, this
Assignment and all other documents executed in connection with the Loan being,
collectively, the "Loan Documents").
The execution and delivery of this Assignment by Borrower to
Lender is a condition precedent to the obligation of Lender to make the Loan.
NOW, THEREFORE, for good and valuable consideration, receipt
of which by the parties hereto is hereby acknowledged, the parties hereto
hereby agree as follows:
Section 1. Secured Obligations. This Assignment is made for
the purpose of securing the following (collectively, the "Secured
Obligations"):
(a) the prompt and punctual payment when due of all
amounts now outstanding or hereafter becoming due and payable under
the Note and the other Loan Documents and all modifications thereof;
and
(b) the performance and observance of all other
covenants, agreements and obligations of Borrower under the Loan
Documents.
<PAGE> 2
Section 2. Assignment. As security for the payment and
performance when due (whether at stated maturity, by acceleration or otherwise)
of the Secured Obligations, now existing or hereafter arising, Borrower hereby
assigns, transfers and pledges to Lender, and hereby grants to Lender a
security interest in, in each case to the extent assignable, all of Borrower's
right, title and interest, whether now owned or hereafter acquired, in, to and
under all agreements to which Borrower is a party executed in connection with
the construction, operation and management of the Facilities or any one of them
(including, without limitation, agreements for the sale, lease or exchange of
goods or other property, and/or the performance of services), and all licenses,
permits, variances and certificates used in connection with the operation of
the Facilities or any one of them (including, without limitation, business
licenses, state health department licenses, food service licenses, liquor
licenses, licenses to conduct business, certificates of need and all such other
permits, licenses and rights, obtained from any Governmental Authority or
private Person concerning ownership, operation, use or occupancy of the
Facilities or any one of them) (each a "Contract"; collectively, the
"Contracts"). Without limiting the foregoing, the term "Contracts" shall
include:
(i) those certain franchise agreements, management agreements, and
other contracts, licenses, permits and other matters listed on Annex B
attached hereto;
(ii) all rights of Borrower to receive monies due and to become due
under or pursuant to the Contracts;
(iii) all claims of Borrower for damages arising out of or for breach
of or default under the Contracts;
(iv) all rights of Borrower to terminate, amend, supplement, modify
or waive performance under the Contracts, to compel performance and
otherwise to exercise all remedies thereunder; and
(v) to the extent not included in the foregoing, all cash and
non-cash proceeds, products, offspring, rents, revenues, issues,
profits, royalties, income, benefits, additions, substitutions,
replacements and accessions of and to any and all of the foregoing.
Section 3. Exercise of Assigned Rights.
(a) Borrower hereby irrevocably directs the grantor or
licensor of or the contracting party to any Contract, to the extent permitted
by such Contract and under any recognition or other agreement executed by such
grantor, licensor or contracting party, upon demand from Lender, to recognize
and accept Lender as the holder of such Contract for any and all purposes as
fully as it would recognize and accept Borrower and the performance of Borrower
thereunder.
(b) Notwithstanding anything to the contrary contained herein,
subject to the other provisions of this Assignment and the Loan Documents, for
so long as no Event of Default (as defined in the Mortgage) shall have occurred
and be continuing and the Indebtedness shall not have been accelerated,
Borrower may exercise all of its rights and privileges under the Contracts.
Borrower's foregoing right shall immediately cease and terminate upon and
during the continuance of any such Event of Default and the acceleration of the
Indebtedness.
2
<PAGE> 3
Section 4. Representations and Warranties. Borrower hereby
represents and warrants to Lender as follows:
(a) Borrower has the full power, right and authority to
execute and deliver this Assignment.
(b) Borrower lawfully holds the rights and interests of
Borrower in the Contracts, has the authority to assign its interest
under each said Contract to the extent to not prohibited by such
Contract, and has not sold, assigned, transferred, mortgaged or
pledged any such right or interest under the Contracts to any person
other than Lender and has not executed any other document or
instrument that might prevent or limit Lender from operating under or
realizing the benefits of the terms, conditions and provisions of this
Assignment.
(c) No authorizations, consents, approvals, licenses, permits,
filings or registrations with any governmental authority or agency are
necessary for the execution, delivery or performance by Borrower of
this Assignment or for the validity or enforceability thereof.
Section 5. Covenants of Borrower. Borrower covenants and
agrees as follows:
(a) Borrower shall perform and observe, in a timely manner,
all of the covenants, conditions, obligations and agreements of
Borrower under the Contracts and shall suffer or permit no delinquency
on its part to exist thereunder that could reasonably be expected to
result in a Material Adverse Effect.
(b) Without the prior written consent of Lender, the Borrower
shall not, other than in the ordinary course of business, (i) sell,
assign, transfer, mortgage or pledge any Contract or any such right or
interest under any Contract or (ii) cancel, terminate, amend,
supplement or modify any of the Contracts.
(c) Borrower shall exercise all reasonable efforts to enforce
or secure the performance of each and every material obligation,
covenant, condition and agreement to be performed by the franchisor,
manager, licensor, grantor or other contracting party under the
Contracts.
Section 6. No Obligation of Lender; Borrower Remains Liable.
Nothing contained herein shall operate or be construed to obligate Lender to
perform any of the terms, covenants or conditions contained in the Contracts or
otherwise to impose any obligation upon Lender with respect to the Contracts.
Notwithstanding anything to the contrary, (i) Borrower shall remain liable in
respect of the Contracts to the extent set forth therein to perform and satisfy
all of its duties and obligations thereunder to the same extent as if this
Assignment had not been executed and (ii) the exercise by Lender of any of the
rights and remedies hereunder shall not release Borrower from any of its duties
or obligations under the Contracts.
Section 7. Further Assurances. Borrower shall, from time to
time upon the written request of Lender, promptly execute and deliver such
further documents and take such further action as Lender may reasonably request
in order create, preserve, perfect and protect the assignment and security
interest granted hereby or to enable Lender to exercise and enforce its rights
and remedies hereunder. All of the foregoing shall be at Borrower's expense
(including, without limitation, (i) all
3
<PAGE> 4
filing, registration and recording fees and (ii) all stamp taxes and other
taxes and charges in connection therewith).
Section 8. Attorney-in-Fact. Lender is hereby appointed the
attorney-in-fact of Borrower for the purpose of carrying out the provisions of
this Assignment and taking any action and executing any instruments which
Lender may deem necessary or advisable to accomplish the purposes hereof,
including, without limitation, the right to sign and file any financing
statement (or amendment or extension thereof) deemed necessary by Lender in
connection herewith although the same has been signed only by Lender, which
appointment as attorney-in-fact is irrevocable and coupled with an interest,
provided that Lender may not exercise such power of attorney unless and Event
of Default has occurred and is continuing and the Indebtedness has been
accelerated.
Section 9. Security Agreement.
(a) This Assignment shall also constitute a security agreement
as that term is used in the Uniform Commercial Code in effect from time to time
in Florida (the "UCC"). Lender shall have, in addition to all other rights and
remedies provided herein or in any other Loan Document, in law, at equity or
otherwise, all rights and remedies of a secured party under the UCC. Lender
shall give Borrower ten (10) days' written notice of the time and place of any
public sale of any Contract or the time after which any private sale or any
other intended disposition is to be made. After deducting all expenses
incurred in connection with the enforcement of its rights hereunder, Lender
shall cause the proceeds of the Contracts to be applied to the payment of the
Secured Obligations in such order as Lender may determine, and Borrower,
subject to the terms of the other Loan Documents, shall remain liable for any
deficiency.
(b) Prior to or concurrently with the execution and delivery
of this Assignment, Borrower shall file such financing statements and other
documents in such offices as Lender may request to perfect the security
interests granted by this Assignment.
Section 10. Indemnity. Borrower shall indemnify, defend and
hold Lender harmless against and from all liability, loss, damage and expense
(including reasonable attorney's fees and disbursements), which Lender may or
shall incur or be subject to by reason of this Assignment, or by reason of any
action taken in good faith by Lender hereunder, and against and from any and
all claims and demands whatsoever which may be asserted against Lender by
reason of any alleged obligation or undertaking on its part to perform or
discharge any of the terms, covenants and conditions contained in the
Contracts, provided, however, that Lender shall have no right to be indemnified
hereunder for its own fraud, bad faith, gross negligence or willful misconduct.
Should Lender incur any such liability, loss, damage or expense, the amount
thereof, together with interest thereon at the rate of interest applicable from
time to time under the Note, shall be payable by Borrower to Lender immediately
upon demand.
Section 11. Termination. Lender, by the acceptance of this
Agreement, agrees that when all Secured Obligations shall have been paid in
full and fully performed, this Assignment shall terminate, and Lender shall
execute and deliver to Borrower, upon such termination, such instruments of
re-assignment, all without recourse and without any representation or warranty
whatsoever, as shall be reasonably requested by Borrower.
Section 12. Expenses. If any suit or other proceeding is
instituted by Lender to enforce this Assignment (or any portion hereof),
Borrower shall pay, upon demand, all of the
4
<PAGE> 5
reasonable out-of-pocket costs and expenses (including, without limitation,
reasonable attorneys' fees and disbursements) incurred by Lender in connection
therewith. The obligations of Borrower under this Section 11 shall survive the
expiration or termination of this Assignment.
Section 13. Reinstatement. This Assignment and the security
interest created hereunder shall automatically be reinstated if and to the
extent that for any reason any payment by or on behalf of Borrower in respect
of the Secured Obligations is rescinded or must otherwise be restored by any
holder of the Secured Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise and Borrower shall indemnify Lender
on demand for all reasonable costs and expenses (including, without limitation,
reasonable attorney's fees and disbursements) incurred by Lender in connection
with such rescission or restoration.
Section 14. Miscellaneous.
(a) No Waiver. No failure on the part of Lender or any of
its agents to exercise, and no course of dealing with respect to, and no delay
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by Lender or any of its
agents of any right, power or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies herein are cumulative and are not exclusive of any remedies provided
by law.
(b) Governing Law. (i) This Assignment shall be governed
by the law of the State of New York.
(c) Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in favor of Lender in order
to carry out the intentions of the parties hereto as nearly as may be possible
and (ii) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction. In any such event, the parties hereto shall
negotiate in good faith to agree upon a substitute provision that has the same
economic effect.
(d) Cumulative Remedies. All rights and remedies set forth in
this Assignment are cumulative, and Lender may recover judgment thereon, issue
execution therefor, and resort to every other right or remedy available at law
or in equity, without first exhausting and without affecting or impairing the
security of any right or remedy afforded hereby; and no such right or remedy
set forth in this Assignment shall be deemed exclusive of any of the remedies
or rights granted to Lender in the Note, the Mortgage, the Loan Agreement or
any other document. Nothing contained in this Assignment shall be deemed to
limit or restrict the rights and remedies of Lender under any other document
related to the Secured Obligations.
(e) Waivers, Etc. This Assignment may not be amended,
waived or discharged except by an instrument in writing duly executed by
Borrower and Lender, except Lender may elect to waive any of its rights
hereunder from time to time without permanently waiving any such right by
virtue of any single such waiver or being obligated so to waive such right (or
any other right) in any future similar or dissimilar circumstances.
(f) Successors and Assigns. This Assignment shall be
binding upon, and shall inure to the benefit of the respective successors and
assigns of Borrower, Lender and each holder of any of
5
<PAGE> 6
the Secured Obligations; provided, however, that Borrower shall not assign or
transfer its rights or obligations hereunder without the prior written consent
of Lender.
(g) Notices. All notices, requests and other communications
provided for herein shall be given or made in writing in the manner specified
in the Mortgage.
(h) Headings. Headings used in this Assignment are for
convenience of reference only and do not constitute part of this Assignment for
any purpose.
(j) WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
LAW, BORROWER HEREBY IRREVOCABLY WAIVES TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING BROUGHT BY BORROWER OR LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR IN CONNECTION WITH THIS
ASSIGNMENT.
(k) Interpretation. If, and to the extent that, any provision
of this Assignment shall conflict or be inconsistent with a provision contained
in the Loan Agreement, then, unless this Assignment shall expressly provide
that this Assignment shall control notwithstanding any other Loan Document to
the contrary, the Loan Agreement provision shall control.
(l) Counterparts. This Assignment may be executed in
any number of counterparts, all of which taken together shall constitute one
and the same instrument and either of the parties hereto may execute this
Assignment by signing any such counterpart.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Assignment
as of the day and year first written above.
BORROWER:
ECHELON INTERNATIONAL CORPORATION,
a Florida corporation
By:
---------------------------------
Name: Larry J. Newsome
Title: Senior Vice President
LENDER:
SALOMON BROTHERS REALTY CORP.,
a New York corporation
By:
---------------------------------
Name: Peter Levine
Title: Vice President
7
<PAGE> 8
Annex A-1
[100 CARILLON]
ALL that certain tract, piece or parcel of land, situate, lying and being in
Pinellas County, State of Florida, being more particularly described as
follows:
Parcel I:
Lot One (1), Block Eight (8), Replat of Carillon, according to the map or Plat
thereof recorded in Plat Book 96, pages 29 through 36, inclusive, Public
Records of Pinellas County, Florida.
Parcel II:
All of the right, title and interest which run with the aforesaid land
described as Parcel I, under that certain Declaration of Protective Covenants,
Building Standards and Easements of Carillon recorded in O.R. Book 6340, page
266, and First Supplement thereto recorded in O.R. Book 6340, page 366 and
further supplemented by the following: O.R. Book 6485, page 762; O.R. 9283,
page 202; O.R. Book 9283, page 206; O.R. Book 9329, page 11; O.R. Book 9334,
page 386; O.R. Book 9336, page 433; O.R. Book 9350, page 1691; O.R. Book 9452,
page 822; and O.R. Book 9457, page 876.
8
<PAGE> 9
Annex A-2
[BARNETT TOWER]
ALL that certain tract, piece or parcel of land, situate, lying and being in
Pinellas County, State of Florida, being more particularly described as
follows:
Lot 1, Block 1, Progress Center Replat, according to the map or plat thereof
recorded in Plat Book 100, Page 65, Public Records of Pinellas County, Florida.
9
<PAGE> 10
Annex A-3
[HIGHPOINT CENTER]
ALL that certain tract, piece or parcel of land, situate, lying and being in
Leon County, State of Florida, being more particularly bounded and described as
follows:
Begin at the Southeast corner of Lot Number 177 in the Original Plan of the
City of Tallahassee, according to the map or Plat thereof recorded in Plat Book
1, page 10, Public Records of Leon County, Florida, where it corners with Lot
Number 178, on College Avenue, formerly Clinton Street, and thence run West
along the North side of College Avenue 10 feet to a point which is the Point of
Beginning, and which is approximately 150 feet East of the corner of Adams
Street and College Avenue, thence run North 153 feet and 4 inches, thence West
52 feet and 2 inches, thence South 36 feet and 8 inches, thence East 6 inches,
thence South 36 feet and 8 inches, thence East 14 inches, thence South 80 feet
to the North side of College Avenue, thence East along the North side of
College Avenue 50 feet and 6 inches to the Point of Beginning;
AND ALSO
Begin at the Southeast corner of Lot Number 177 in the Original Plan of the
City of Tallahassee, according to the map of Plat thereof recorded in Plat Book
1, Page 10, Public Records of Leon County, Florida, thence run North 153 feet
and 4 inches, thence West 10 feet, thence South 153 feet and 4 inches, thence
East 10 feet, to the Point of Beginning.
10
<PAGE> 11
Annex A-4
[McNULTY STATION]
ALL that certain tract, piece or parcel of land, situate, lying and being in
Pinellas County, State of Florida, being more particularly described as
follows:
Lots 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, and 20,
Block 36, Revised Map of the City of St. Petersburg, according to the map or
plat thereof recorded in Plat Book 1, Page 49, of the Public Records of
Hillsborough County, Florida, of which Pinellas County, Florida was formerly a
part.
11
<PAGE> 12
Annex A-5
[PROGRESS CENTER]
ALL that certain tract, piece or parcel of land, situate, lying and being in
Alachua County, State of Florida, being more particularly described as follows:
Parcels A and C of REPLAT OF PROGRESS CENTER, according to the map or plat
thereof recorded in Plat Book P, pages 48 and 49, of the public records of
Alachua County, Florida.
12
<PAGE> 13
Annex A-6
[MARINA]
ALL that certain tract, piece or parcel of land, situate, lying and being in
Pinellas County, State of Florida, being more particularly described as
follows:
PARCEL 1:
Lots 9 through 14 inclusive in Block 4; Lots 7 and 8 in Block 14; The South 40
feet of Lot 8 in Block 15; and Lots 15 and 16, inclusive, in Block 16; Lots 1
and 2 and the North 10 feet of Lot 3 in Block 17; Lots 9 through 13 inclusive
in Block 25 of W. J. OVERMAN'S REARRANGEMENT of J.P. TITCOMB'S PLAN OF BAYBORO,
according to the map or plat thereof recorded in Plat Book 1, Page 19, of the
public records of Pinellas County, Florida.
PARCEL 2:
Lot 1 in Block 1 of BAYTOWN MARINA SUBDIVISION, according to the map or plat
thereof recorded in Plat Book 89, Page 93, of the public records of Pinellas
County, Florida.
PARCEL 3:
Lot 3 less the North 10 feet and all of Lots 4, 5, and 6 in Block 17 of W.J.
OVERMAN'S REARRANGEMENT OF J.P. TITCOMB'S PLAN OF BAYBORO, according to the map
or plat thereof recorded in Plat Book 1, Page 19, of the public records of
Pinellas County, Florida.
PARCEL 4:
A parcel of submerged lands lying in Bayboro Harbor, as shown on the plat of
MAP OF BAYBORO ADDITION TO ST. PETERSBURG, FLORIDA, as recorded in Plat Book 3,
page 51 of the public records of Pinellas County Florida, being more
particularly described as follows:
Commence at the Northwest corner of Lot 1, Block 17, of said plat of Map of
Bayboro Addition to St. Petersburg, Florida; thence North 89 degrees 23'08"
East for 149.92 feet more or less to a point on the waters face of seawall, and
said point being the POINT OF BEGINNING; thence North 89 degrees 24'05" East
for 74.92 feet; thence North 1122'37" East for 412.33 feet; thence South 79
degrees 10'44" East for 348.20 feet; thence South 40 degrees 49'41" East for
80.63 feet; thence East for 143.03 feet; thence South 40 degrees 59'59" East for
105.61 feet; thence South for 565.07 feet to a point being the prolongation of
the waters face of seawall; thence along said waters face of seawall, and its
prolongation, the following ten (10) courses: 1) South 88 degrees 41'23" West
for 507.18 feet more or less;2) thence North 00 degrees 12'32" West for 22.97
feet more or less; 3) thence South 89 degrees 48'59" West for 63.63 feet more
or less; 4) thence North 89 degrees 48'08" West for 119.91 feet more or less; 5)
thence South 89 degrees 56'52" West for 38.02 feet more or less; 6) thence
South 89 degrees 35'47" West for 27.36 feet more or less; 7) thence South 89
degrees 59'48" West for 14.86 feet more or less; 8) thence North 01 degree
54'08" East for 59.30 feet more or less; 9) thence 06 degrees 49'57" East for
4.09 feet more or less; 10) thence North 00 degrees 02'58" West for 286.46 feet
more or less to the POINT OF BEGINNING.
13
<PAGE> 14
Terms and Conditions of that certain Lease executed by and between The City Of
St. Petersburg, a municipal corporation of the State of Florida and Hunnicutt
Equities, Inc., a Florida corporation recorded in O.R. Book 6414, page 285. (As
to Parcel 4).
14
<PAGE> 15
Annex A-7
[WAREHOUSE]
ALL that certain tract, piece or parcel of land, situate, lying and being in
Hillsborough County, State of Florida, being more particularly described as
follows:
PARCEL 1:
Beginning at a point fifty feet North (50 ft. N.) of the center of the main
line track of the Atlantic Coast Line Railroad Company and 196.74 East of the
West boundary of Lot Eight (8) of Knights' Subdivision of a portion of Section
16, Twp. 29 South, Range 19 East, which point of beginning is twenty-five (25)
feet North of the South line of said Knight's Subdivision, running thence North
436.2 feet to the South boundary of the right-of-way of State Road No. 23 (East
Broadway), thence in a Southwesterly direction along the Southerly boundary of
State Road No. 23 for 155.6 feet; thence South 234.6 ft; thence West 75.0 ft;
thence South 160.0 ft. to a point 50.0 feet North of the center of the main
line track of the Atlantic Coast Line Railroad Company, which point is 25.0 ft.
North of the South line of said Knight's Subdivision, thence East 225.0 feet to
the point of beginning; being portions of Lots seven (7) and Eight (8) of
Knights' Subdivision, as recorded in Plat Book 1, Page 84 of the public records
of Hillsborough County, Florida.
Parcel 2:
Beginning at the intersection of the East Boundary of Lot 7 of Knight's
Subdivision, as recorded in Plat Book 1, Page 84, of the public records of
Hillsborough County, Florida, with the Southerly boundary of East Broadway (Old
State Road #23), as now exists, and run thence Westerly along said Southerly
boundary of East Broadway a distance of 278.5 feet, thence South, parallel to
the East boundary of said Lot 7, to a point 50.0 feet North of the center line
of the ACL Railroad main line track; thence run East, parallel to and 50.0 feet
North of said center line of ACL main line track a distance of 240.0 feet, more
or less, to a point 28.26 feet West of the East boundary of said Lot 7; thence
North, parallel to said East boundary of Lot 7 a distance of 160.0 feet; thence
East, parallel to the South boundary of said Lot 7 a distance of 75.0 feet to a
point 46.74 feet East of the West boundary of Lot 8 of said Knight's
Subdivision; thence North, parallel to the said West boundary of Lot 8, a
distance of 234.6 feet to the Southerly boundary of East Broadway, as now
exists; thence run Westerly along said Southerly boundary of East Broadway 48.4
to the point of beginning.
Parcel 3:
That part of Lot 8 of Knight's Subdivision, as per map or plat thereof in Plat
Book 1, on Page 84 of the public records of Hillsborough County, Florida, being
more particularly described as follows: Beginning at a point on the North
boundary of said Lot 8, 225 ft. Southwesterly of the Northeast corner of said
Lot 8, thence run Southwesterly along said North boundary, 80 ft., thence run
South parallel with the East boundary of said Lot 8 to the South boundary of
said Lot 8, thence run East 101.22 ft. to a point 192.8 ft. West of the
Southeast corner of said Lot 8, said point being on the West boundary line of
County Road deeded to Hillsborough County by deed recorded in Deed Book 929 on
Page 31, thence Northwesterly along said Right of Way to the point of
beginning, LESS that part of said tract lying within 33 ft. of the center line
of Old State Road Number 23.
15
<PAGE> 16
Parcel 4:
Beginning at the Southwest corner of Lot 7 of Knight's Subdivision, as per map
or plat thereof recorded in Plat Book 1 on Page 84 of the public records of
Hillsborough County, Florida, run thence East along the South boundary of said
Lot 7, 212.52 feet for a point of beginning, run thence North 0 degrees 10'
West 292.22 feet, more or less, to an intersection with the South boundary of
the present right of way of East Broadway, thence in a Southwesterly direction
along the South boundary of the right of way of the said East Broadway a
distance of 15.95 feet, thence South to an intersection with the South boundary
of the said Lot 7 at a point 18 feet West measured on the said South boundary
from the point of beginning, thence East 18 feet to the point of beginning.
Parcel 5:
Begin at a point 3 chains and 22 links East of the Southwest corner of Lot 7 of
Knight's Subdivision, of the South half of the NE 1/4 of Section 16, Township
29 South, Range 19 East, running thence East 2 chains and 20 links, thence
North 4 chains and 66 links to a brick road, thence Westerly along said brick
road to a point North of point of beginning, thence South 4.10 chains to point
of beginning, lying and being in Hillsborough County, Florida.
TOGETHER WITH the real property as set forth in Ordinance No. 5827-A adopted on
January 3, 1974 by the City Council of City of Tampa, vacating, closing and
abandoning 48th Street between East Broadway (State Road 574) on the North and
the Seaboard Coast Line Railway right-of-way on the South.
Parcel 6:
Beginning at the Southeast corner of Lot 8 of Knight's Subdivision according to
map or plat thereof as recorded in Plat Book 1, Page 84, public records of
Hillsborough County, Florida; running thence North along the East boundary line
of said Lot 8 to the Northeast corner of said Lot 8; running thence in a
Southwesterly direction along the North boundary line of said Lot 8, 200 feet;
running thence South parallel with the East boundary line of said Lot 8 to the
South boundary line of said lot 8 running thence East along the South boundary
line of said Lot 8 to the point of beginning, being a part of the South 1/2,
Northeast 1/4, Section 16, Township 29 South, Range 19 East, and being the East
192.8 feet of said Lot 8, Hillsborough County, Florida.
16
<PAGE> 17
Annex B
[See attached]
17
<PAGE> 1
Exhibit 4.10
PREPARED BY AND
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Latham & Watkins
885 Third Avenue
New York, New York 10022
Attention: Kim N.A. Boras, Esq.
For recording purposes only
ASSIGNMENT OF RENTS AND LEASES
This Assignment of Rents and Leases (this "Agreement") is
executed as of November 5, 1996 by ECHELON INTERNATIONAL CORPORATION, a Florida
corporation, with an address at One Progress Plaza, St. Petersburg, Florida
33701 ("Borrower"), as successor to the entities, and by operation of the
transactions, described in Schedule 1 hereto, as applicable, to SALOMON
BROTHERS REALTY CORP., a New York corporation, with an address at Seven World
Trade Center, New York, New York 10048 ("Lender").
AGREEMENT:
For valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Borrower and Lender agree as follows:
1. Absolute Assignment. Borrower unconditionally and
absolutely assigns to Lender, to the extent not prohibited by the terms
thereof, all of Borrower's right, title and interest in and to: (a) all leases,
subleases, occupancy agreements, licenses, usufructs, rental contracts and
other agreements now or hereafter existing relating to the use or occupancy of
the project located on the real property described in Exhibit A hereto (the
"Property"), together with all guarantees, modifications, extensions and
renewals thereof (collectively, the "Leases"); and (b) all rents, issues,
profits, income and proceeds due or to become due from tenants of the Property,
including rentals and all other payments of any kind under the Leases, together
with all deposits (including security deposits) of tenants thereunder
(collectively, the "Rents"). This Agreement is an absolute assignment to Lender
and not an assignment as security for the performance of the obligations (the
"Obligations") under the Loan Documents (defined below), or any other
indebtedness.
2. Rights of Lender. Subject to the provisions of
Section 6 below, Lender shall have the right, power and authority to: (a)
notify any person that the Leases have been assigned to Lender and that all
Rents are to be paid directly to Lender, whether or not Lender has commenced or
completed foreclosure or taken possession of the Property; (b) settle,
compromise, release, extend the
<PAGE> 2
time of payment of, and make allowances, adjustments and discounts of any Rents
or other obligations under the Leases; (c) enforce payment of Rents and other
rights under the Leases, prosecute any action or proceeding, and defend against
any claim with respect to Rents and Leases; (d) enter upon, take possession of
and operate the Property; (e) lease all or any part of the Property; and/or (f)
perform any and all obligations of Borrower under the Leases and exercise any
and all rights of Borrower therein contained to the full extent of Borrower's
rights and obligations thereunder, with or without the bringing of any action
or the appointment of a receiver. At Lender's request, Borrower shall deliver a
copy of this Agreement to each tenant under a Lease and to each manager and
managing agent or operator of the Property. Borrower irrevocably directs any
tenant, manager, managing agent, or operator of the Property, without any
requirement for notice to or consent by Borrower, to comply with all demands of
Lender under this Agreement and to turn over to Lender on demand all Rents
which it receives.
3. No Obligation. Notwithstanding Lender's rights
hereunder, Lender shall not be obligated to perform, and Lender does not
undertake to perform, any obligation, duty or liability with respect to the
Leases, Rents or Property on account of this Agreement. Lender shall have no
responsibility on account of this Agreement for the control, care, maintenance
or repair of the Property, for any waste committed on the Property, for any
dangerous or defective condition of the Property, or for any negligence in the
management, upkeep, repair or control of the Property.
4. Right to Apply Rents. Lender shall have the right,
but not the obligation, to use and apply any Rents received hereunder in such
order and such manner as Lender may determine for:
(a) Enforcement or Defense. The payment of costs and
expenses of enforcing or defending the terms of this
Agreement or the rights of Lender hereunder, and
collecting any Rents;
(b) Loan Payments. Interest, principal or other amounts
payable pursuant to (1) the Loan Agreement of even
date among Lender, Borrower and LaSalle National
Bank, as collateral agent (the "Loan Agreement"); (2)
the Promissory Note of even date herewith in the
stated principal amount of $105,000,000, executed by
Borrower, bearing interest and being payable to the
order of Lender (the "Note"); (3) the Mortgage,
Assignment of Leases and Rents, Security Agreement
and Fixture Filing, of even date, executed by
Borrower for the benefit of Lender and relating to
the Property (the "Mortgage"); and all other
documents and instruments evidencing, governing and
securing the loan evidenced by the Note (the "Loan")
and any and all modifications, amendments or
extensions thereof or replacements or substitutions
therefor (the Loan Agreement, the Note, the Mortgage,
such other documents and instruments, and such
modifications, amendments, extensions, replacements,
and substitutions thereof being herein collectively
called the "Loan Documents"); and
2
<PAGE> 3
(c) Operating Expenses. Payment of costs and expenses of
the operation and maintenance of the Property,
including (1) rentals and other charges payable by
Borrower under any ground lease or other agreement
affecting the Property; (2) electricity, telephone,
water and other utility costs, taxes, assessments,
water charges and sewer rents and other utility and
governmental charges levied, assessed or imposed
against the Property; (3) insurance premiums; (4)
costs and expenses with respect to any litigation
affecting the Property, the Leases or the Rents; (5)
wages and salaries of employees, commissions of
agents and reasonable attorneys' fees and expenses;
and (6) all other carrying costs, fees, charges,
reserves, and expenses whatsoever relating to the
Property.
After the payment of all such costs and expenses and after Lender has
established such reserves as it, in its sole discretion, deems necessary for
the proper management of the Property, Lender shall apply all remaining Rents
received by it to the reduction of the Obligations.
5. No Waiver. The exercise or nonexercise by Lender of
the rights granted in this Agreement or the collection and application of Rents
by Lender or its agent shall not be a waiver of any default by Borrower under
this Agreement or any other Loan Document. No action or failure to act by
Lender with respect to any obligations of Borrower under the Loan Documents, or
any security or guaranty given for the payment or performance thereof, shall in
any manner affect, impair or prejudice any of Lender's rights and privileges
under this Agreement, or discharge, release or modify any of Borrower's duties
or obligations hereunder.
6. Revocable License. Notwithstanding that this
Agreement is an absolute assignment of the Rents and Leases and not merely the
collateral assignment of, or the grant of a lien or security interest in the
Rents and Leases, Lender grants to Borrower a revocable license to collect and
receive the Rents and to retain, use and enjoy such Rents and to otherwise have
the rights and obligations with respect to the Leases as granted Lender in
Section 2 above. Such license may only be revoked by Lender upon the
occurrence of any Event of Default and the acceleration of the Indebtedness
(each as defined in the Loan Agreement). Borrower shall apply any Rents which
it receives to the payment of debt service on the Note and other payments due
under the Loan Agreement, taxes, assessments, water charges, sewer rents and
other governmental charges levied, assessed or imposed against the Property,
insurance premiums, operation and maintenance charges relating to the Property,
and other obligations of lessor under the Leases before using such proceeds for
any other purpose.
7. Term. This Agreement shall continue in full force and
effect until (a) all amounts due under the Loan Documents are paid in full, and
(b) all other obligations of Borrower under the Loan Documents are fully
satisfied. This Agreement shall be released and terminated as, when and to the
extent the Mortgage is released and discharged without the need to execute and
deliver further instruments; provided, however, that Lender shall, upon
Borrower's written request and at Borrower's sole cost and expense, execute and
deliver (in recordable form, if necessary), such documents as shall be
necessary to release, cancel and terminate this Agreement.
3
<PAGE> 4
8. Appointment. Borrower irrevocably appoints Lender its
true and lawful attorney in fact, which appointment is coupled with an
interest, to execute any or all of the rights or powers described herein with
the same force and effect as if executed by Borrower, and Borrower ratifies and
confirms any and all acts done or omitted to be done by Lender, its agents,
servants, employees or attorneys in, to or about the Property.
9. Liability of Lender. Lender shall not in any way be
liable to Borrower for any action or inaction of Lender, its employees or
agents under this Agreement.
10. Indemnification. Borrower shall indemnify, defend and
hold harmless Lender from and against all liability, loss, damage, cost or
expense which it may incur under this Agreement or under any of the Leases,
including any claim against Lender by reason of any alleged obligation,
undertaking, action, or inaction on its part to perform or discharge any terms,
covenants or conditions of the Leases or with respect to Rents, and including
attorneys' fees and expenses, but excluding any claim to the extent caused by
Lender's fraud, bad faith, gross negligence or willful misconduct. Any amount
covered by this indemnity shall be payable on demand, and shall bear interest
from the date of demand until the same is paid by Borrower to Lender at a rate
equal to the Default Rate (as defined in the Loan Agreement).
11. Modification. This Agreement may not be changed
orally, but only by an agreement in writing signed by the party against whom
enforcement of such change is sought.
12. Successors and Assigns. This Agreement shall inure to
the benefit of Lender and its successors and assigns and shall be binding on
Borrower and its successors and assigns.
13. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New York.
14. Conflict. If any conflict or inconsistency exists
between the absolute assignment of the Rents and the Leases in this Agreement
and the assignment of the Rents and Leases as security in the Mortgage, the
terms of this Agreement shall control. If, and to the extent that, any
provision of this Agreement shall conflict or be inconsistent with a provision
contained in the Loan Agreement, then, unless this Agreement shall expressly
provide that this Agreement shall control notwithstanding any other Loan
Document to the contrary, the Loan Agreement provision shall control.
4
<PAGE> 5
15. Limitation on Liability. Borrower's liability
hereunder is subject to the limitation on liability provisions of Section 8.24
of the Loan Agreement.
[REST OF PAGE INTENTIONALLY DELETED]
5
<PAGE> 6
Executed as of the date first written above.
ECHELON INTERNATIONAL CORPORATION
a Florida corporation
WITNESSES: By:
-----------------------------
Name: Larry J. Newsome
- ------------------------- Title: Senior Vice President
Name: Address: One Progress Plaza
St. Petersburg, FL 33701
- -------------------------
Name:
6
<PAGE> 7
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before me this ____ day of
November, 1996, by _______________, as _________________ of Echelon
International Corporation, a Florida corporation, on behalf of such
corporation. He/She either [please check as applicable] ___ is personally known
to me, or ____ has presented _____________________ as identification.
----------------------------
Notary Public
Print Name:
----------------
(NOTARIAL SEAL)
My Commission Expires:
Commission No.:
------------
7
<PAGE> 8
EXHIBIT A-1
LEGAL DESCRIPTION
[100 CARILLON]
ALL that certain tract, piece or parcel of land, situate, lying and being in
Pinellas County, State of Florida, being more particularly described as
follows:
Parcel I:
Lot One (1), Block Eight (8), Replat of Carillon, according to the map or Plat
thereof recorded in Plat Book 96, pages 29 through 36, inclusive, Public
Records of Pinellas County, Florida.
Parcel II:
All of the right, title and interest which run with the aforesaid land
described as Parcel I, under that certain Declaration of Protective Covenants,
Building Standards and Easements of Carillon recorded in O.R. Book 6340, page
266, and First Supplement thereto recorded in O.R. Book 6340, page 366 and
further supplemented by the following: O.R. Book 6485, page 762; O.R. 9283,
page 202; O.R. Book 9283, page 206; O.R. Book 9329, page 11; O.R. Book 9334,
page 386; O.R. Book 9336, page 433; O.R. Book 9350, page 1691; O.R. Book 9452,
page 822; and O.R. Book 9457, page 876.
A-1
<PAGE> 9
EXHIBIT A-2
[BARNETT TOWER]
ALL that certain tract, piece or parcel of land, situate, lying and being in
Pinellas County, State of Florida, being more particularly described as
follows:
Lot 1, Block 1, Progress Center Replat, according to the map or plat thereof
recorded in Plat Book 100, Page 65, Public Records of Pinellas County, Florida.
A-2
<PAGE> 10
EXHIBIT A-3
[HIGHPOINT CENTER]
ALL that certain tract, piece or parcel of land, situate, lying and being in
Leon County, State of Florida, being more particularly bounded and described as
follows:
Begin at the Southeast corner of Lot Number 177 in the Original Plan of the
City of Tallahassee, according to the map or Plat thereof recorded in Plat Book
1, page 10, Public Records of Leon County, Florida, where it corners with Lot
Number 178, on College Avenue, formerly Clinton Street, and thence run West
along the North side of College Avenue 10 feet to a point which is the Point of
Beginning, and which is approximately 150 feet East of the corner of Adams
Street and College Avenue, thence run North 153 feet and 4 inches, thence West
52 feet and 2 inches, thence South 36 feet and 8 inches, thence East 6 inches,
thence South 36 feet and 8 inches, thence East 14 inches, thence South 80 feet
to the North side of College Avenue, thence East along the North side of
College Avenue 50 feet and 6 inches to the Point of Beginning;
AND ALSO
Begin at the Southeast corner of Lot Number 177 in the Original Plan of the
City of Tallahassee, according to the map or Plat thereof recorded in Plat Book
1, Page 10, Public Records of Leon County, Florida, thence run North 153 feet
and 4 inches, thence West 10 feet, thence South 153 feet and 4 inches, thence
East 10 feet, to the Point of Beginning.
A-3
<PAGE> 11
EXHIBIT A-4
[McNULTY STATION]
ALL that certain tract, piece or parcel of land, situate, lying and being in
Pinellas County, State of Florida, being more particularly described as
follows:
Lots 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, and 20,
Block 36, Revised Map of the City of St. Petersburg, according to the map or
plat thereof recorded in Plat Book 1, Page 49, of the Public Records of
Hillsborough County, Florida, of which Pinellas County, Florida was formerly a
part.
A-4
<PAGE> 12
EXHIBIT A-5
[PROGRESS CENTER]
ALL that certain tract, piece or parcel of land, situate, lying and being in
Alachua County, State of Florida, being more particularly described as follows:
PARCEL 1:
Parcels A and C of REPLAT OF PROGRESS CENTER, according to the map or plat
thereof recorded in Plat Book P, pages 48 and 49, of the public records of
Alachua County, Florida.
PARCEL 2:
TOGETHER WITH a perpetual, non-exclusive, alienable easement for the flow of
storm water, surface water, groundwater and any other diffused water, including
ingress, egress, access, use and maintenance on, over, across, under and
through the real property described in Exhibit "A" to that certain Drainage
Easement Agreement recorded October 8, 1991 in O.R. Book 1830, Page 345, Public
Records of Alachua County, Florida.
A-5
<PAGE> 13
EXHIBIT A-6
[MARINA]
ALL that certain tract, piece or parcel of land, situate, lying and being in
Pinellas County, State of Florida, being more particularly described as
follows:
PARCEL 1:
Lots 9 through 14 inclusive in Block 4; Lots 7 and 8 in Block 14; The South 40
feet of Lot 8 in Block 15; and Lots 15 and 16, inclusive, in Block 16; Lots 1
and 2 and the North 10 feet of Lot 3 in Block 17; Lots 9 through 13 inclusive
in Block 25 of W.J. OVERMAN'S REARRANGEMENT of J.P. TITCOMB'S PLAN OF BAYBORO,
according to the map or plat thereof recorded in Plat Book 1, Page 19, of the
public records of Pinellas County, Florida.
PARCEL 2:
Lot 1 in Block 1 of BAYTOWN MARINA SUBDIVISION, according to the map or plat
thereof recorded in Plat Book 89, Page 93, of the public records of Pinellas
County, Florida.
PARCEL 3:
Lot 3 less the North 10 feet and all of Lots 4, 5, and 6 in Block 17 of W.J.
OVERMAN'S REARRANGEMENT OF J.P. TITCOMB'S PLAN OF BAYBORO, according to the map
or plat thereof recorded in Plat Book 1, Page 19, of the public records of
Pinellas County, Florida.
PARCEL 4:
A parcel of submerged lands lying in Bayboro Harbor, as shown on the plat of
MAP OF BAYBORO ADDITION TO ST. PETERSBURG, FLORIDA, as recorded in Plat Book 3,
page 51 of the public records of Pinellas County Florida, being more
particularly described as follows:
Commence at the Northwest corner of Lot 1, Block 17, of said plat of Map of
Bayboro Addition to St. Petersburg, Florida; thence North 89 degrees 23'08"
East for 149.92 feet more or less to a point on the waters face of seawall, and
said point being the POINT OF BEGINNING; thence North 89 degrees 24'05" East
for 74.92 feet; thence North 1122'37" East for 412.33 feet; thence South 79
degrees 10'44" East for 348.20 feet; thence South 40 degrees 49'41" East for
80.63 feet; thence East for 143.03 feet; thence South 40 degrees 59'59" East
for 105.61 feet; thence South for 565.07 feet to a point being the
prolongation of the waters face of seawall; thence along said waters face of
seawall, and its prolongation, the following ten (10) courses: 1) South 88
degrees 41'23" West for 507.18 feet more or less; 2) thence North 00 degrees
12'32" West for 22.97 feet more or less; 3) thence South 89 degrees 48'59"
West for 63.63 feet more or less; 4) thence North 89 degrees 48'08" West for
119.91 feet more or less; 5) thence South 89 degrees 56'52" West for 38.02 feet
more or less; 6)
A-6
<PAGE> 14
thence South 89 degrees 35'47" West for 27.36 feet more or less; 7) thence South
89 degrees 59'48" West for 14.86 feet more or less; 8) thence North 01 degrees
54'08" East for 59.30 feet more or less; 9) thence 06 degrees 49'57" East for
4.09 feet more or less; 10) thence North 00 degrees 02'58" West for 286.46 feet
more or less to the POINT OF BEGINNING.
Terms and Conditions of that certain Lease executed by and between The City Of
St. Petersburg, a municipal corporation of the State of Florida and Hunnicutt
Equities, Inc., a Florida corporation recorded in O.R. Book 6414, page 285. (As
to Parcel 4).
A-7
<PAGE> 15
EXHIBIT A-7
[WAREHOUSE]
ALL that certain tract, piece or parcel of land, situate, lying and being in
Hillsborough County, State of Florida, being more particularly described as
follows:
PARCEL 1:
Beginning at a point fifty feet North (50 ft. N.) of the center of the main
line track of the Atlantic Coast Line Railroad Company and 196.74 feet East of
the West boundary of Lot Eight (8) of Knight's Subdivision of a portion of
Section 16, Twp. 29 South, Range 19 East, which point of beginning is
twenty-five (25) feet North of the South line of said Knight's Subdivision,
running thence North 436.2 feet to the South boundary of the right-of-way of
State Road No. 23 (East Broadway), thence in a Southwesterly direction along
the Southerly boundary of State Road No. 23 for 155.6 feet; thence South 234.6
ft; thence West 75.0 ft; thence South 160.0 ft. to a point 50.0 feet North of
the center of the main line track of the Atlantic Coast Line Railroad Company,
which point is 25.0 ft. North of the South line of said Knight's Subdivision,
thence East 225.0 feet to the point of beginning; being portions of Lots seven
(7) and Eight (8) of Knight's Subdivision, as recorded in Plat Book 1, Page 84
of the public records of Hillsborough County, Florida.
Parcel 2:
Beginning at the intersection of the East Boundary of Lot 7 of Knight's
Subdivision, as recorded in Plat Book 1, Page 84, of the public records of
Hillsborough County, Florida, with the Southerly boundary of East Broadway (Old
State Road #23), as now exists, and run thence Westerly along said Southerly
boundary of East Broadway a distance of 278.5 feet, thence South, parallel to
the East boundary of said Lot 7, to a point 50.0 feet North of the center line
of the ACL Railroad main line track; thence run East, parallel to and 50.0 feet
North of said center line of ACL main line track a distance of 240.0 feet, more
or less, to a point 28.26 feet West of the East boundary of said Lot 7; thence
North, parallel to said East boundary of Lot 7 a distance of 160.0 feet; thence
East, parallel to the South boundary of said Lot 7 a distance of 75.0 feet to a
point 46.74 feet East of the West boundary of Lot 8 of said Knight's
Subdivision; thence North, parallel to the said West boundary of Lot 8, a
distance of 234.6 feet to the Southerly boundary of East Broadway, as now
exists; thence run Westerly along said Southerly boundary of East Broadway 48.4
to the point of beginning.
Parcel 3:
That part of Lot 8 of Knight's Subdivision, as per map or plat thereof in Plat
Book 1, on Page 84 of the public records of Hillsborough County, Florida, being
more particularly described as follows: Beginning at a point on the North
boundary of said Lot 8, 225 ft. Southwesterly of the Northeast corner of said
Lot 8, thence run Southwesterly along said North boundary, 80 ft., thence run
South parallel with the East boundary of said Lot 8 to the South boundary of
said Lot 8, thence run East 101.22 ft. to a point 192.8 ft. West of the
Southeast corner of said Lot 8, said point being on the
A-8
<PAGE> 16
West boundary line of County Road deeded to Hillsborough County by deed
recorded in Deed Book 929 on Page 31, thence Northwesterly along said Right of
Way to the point of beginning, LESS that part of said tract lying within 33 ft.
of the center line of Old State Road Number 23.
Parcel 4:
Beginning at the Southwest corner of Lot 7 of Knight's Subdivision, as per map
or plat thereof recorded in Plat Book 1 on Page 84 of the public records of
Hillsborough County, Florida, run thence East along the South boundary of said
Lot 7, 212.52 feet for a point of beginning, run thence North 0 degrees 10'
West 292.22 feet, more or less, to an intersection with the South boundary of
the present right of way of East Broadway, thence in a Southwesterly direction
along the South boundary of the right of way of the said East Broadway a
distance of 15.95 feet, thence South to an intersection with the South boundary
of the said Lot 7 at a point 18 feet West measured on the said South boundary
from the point of beginning, thence East 18 feet to the point of beginning.
Parcel 5:
Begin at a point 3 chains and 22 links East of the Southwest corner of Lot 7 of
Knight's Subdivision, of the South half of the NE 1/4 of Section 16, Township
29 South, Range 19 East, running thence East 2 chains and 20 links, thence
North 4 chains and 66 links to a brick road, thence Westerly along said brick
road to a point North of point of beginning, thence South 4.10 chains to point
of beginning, lying and being in Hillsborough County, Florida.
TOGETHER WITH the real property as set forth in Ordinance No. 5827-A adopted on
January 3, 1974 by the City Council of City of Tampa, vacating, closing and
abandoning 48th Street between East Broadway (State Road 574) on the North and
the Seaboard Coast Line Railway right-of-way on the South.
Parcel 6:
Beginning at the Southeast corner of Lot 8 of Knight's Subdivision according to
map or plat thereof as recorded in Plat Book 1, Page 84, public records of
Hillsborough County, Florida; running thence North along the East boundary line
of said Lot 8 to the Northeast corner of said Lot 8; running thence in a
Southwesterly direction along the North boundary line of said Lot 8, 200 feet;
running thence South parallel with the East boundary line of said Lot 8 to the
South boundary line of said lot 8 running thence East along the South boundary
line of said Lot 8 to the point of beginning, being a part of the South 1/2,
Northeast 1/4, Section 16, Township 29 South, Range 19 East, and being the
East 192.8 feet of said Lot 8, Hillsborough County, Florida.
All of the foregoing Parcels 1 through 6, inclusive, TRACT "A" being also
described as follows:
A parcel of land lying in and being a part of Lot 7 and Lot 8, KNIGHT'S
SUBDIVISION, as recorded in Plat Book 1, Page 84, of the Public Records of
Hillsborough County, Florida; said parcel being more particularly described as
follows:
A-9
<PAGE> 17
Beginning at the intersection of the Southerly right-of-way line of West
Seventh Street (formerly East Broadway), a 66-foot right-of-way as now
established, with the East line of said Lot 8, also being the West line of W.
G. Bryan's Subdivision, as recorded in Plat Book 2, Page 41, of said Public
Records; thence, on the East line of said Lot 8, South 00 degrees 03 minutes 47
seconds West, 571.35 feet to the North line of the CSX (formerly Atlantic Coast
Line) Railroad, a 100-foot right-of-way as now established; thence, on said
North right-of-way line, North 89 degrees 56 minutes 13 seconds West, 1120.00
feet; thence, parallel with the East line of said Lot 8, North 00 degrees 03
minutes 47 seconds East, 258.27 feet to the Southerly right-of-way line of said
West Seventh Street; thence, on said Southerly right-of-way line, North 74
degrees 26 minutes 44 seconds East, 1162.94 feet to the Point of Beginning.
A-10
<PAGE> 18
SCHEDULE 1
1. As to the property described on Exhibit A-2 (Barnett Tower), Borrower
is the successor by merger to TALQUIN DEVELOPMENT COMPANY, a Florida
corporation ("TDC").
2. Exhibit A-4 (McNulty Station), Borrower is the successor by merger to
TDC, formerly known as HUNNICUTT EQUITIES, INC. ("HUNNICUTT"), a
Florida corporation.
3. As to the property described on Exhibit A-5 (Progress Center),
Borrower is the successor by merger to TDC, formerly known as
HUNNICUTT, successor by merger to APALACHEE DEVELOPMENT COMPANY, a
Florida corporation.
4. As to the property described on Exhibit A-6 (Marina), Borrower is the
successor by merger to TDC, as to Parcels 1 and 2, and to PROGRESS
CREDIT CORPORATION, a Florida corporation, as to Parcel 3.
5. As to the property described on Exhibit A-7 (7th Avenue/Warehouse),
Borrower is the successor by merger to TDC, successor by merger CROWN
WINDOW COMPANY, a Florida corporation.
A-11
<PAGE> 1
Exhibit 4.11
ASSIGNMENT OF PARTICIPATION INTEREST
THIS ASSIGNMENT OF PARTICIPATION INTEREST (this "Assignment"),
dated as of the 5th day of November, 1996, is made by ECHELON INTERNATIONAL
CORPORATION, a Florida corporation having its principal place of business at
One Progress Plaza, St. Petersburg, Florida 33701 ("Borrower"), to SALOMON
BROTHERS REALTY CORP., a New York corporation having an office at Seven World
Trade Center, New York, New York 10048 ("Lender").
R E C I T A L S :
Borrower is the owner of the participation or joint credit
interest described on Annex A attached hereto (the "Owned Interests") created
under the agreements described on Annex A attached hereto (collectively, the
"Participation Agreements");
Borrower, Lender, and LaSalle National Bank, as collateral
agent, are parties to a Loan Agreement dated as of even date herewith (said
Loan Agreement, as modified and supplemented and in effect from time to time,
the "Loan Agreement"; capitalized terms used but not defined herein having the
meanings set forth in the Loan Agreement). The Loan Agreement provides for a
loan (the "Loan") to be made by Lender to Borrower in an aggregate principal
amount of $105,000,000. The Loan is to be evidenced by, and repayable with
interest thereon in accordance with the promissory note dated the date hereof,
executed and delivered by Borrower to the order of Lender (as modified,
supplemented or substituted and in effect from time to time, collectively, the
"Note").
The execution and delivery of this Assignment by Borrower to
Lender is a condition precedent to the obligation of Lender to make the Loan.
NOW, THEREFORE, for good and valuable consideration, receipt
of which by the parties hereto is hereby acknowledged, the parties hereto
hereby agree as follows:
Section 1. Secured Obligations. This Assignment is made for
the purpose of securing the following (collectively, the "Secured
Obligations"):
(a) the prompt and punctual payment when due of all
amounts now outstanding or hereafter becoming due and payable under
the Note and the other Loan Documents and all modifications thereof;
and
(b) the performance and observance of all other
covenants, agreements and obligations of Borrower under the Loan
Documents.
Section 2. Assignment. As security for the payment and
performance when due (whether at stated maturity, by acceleration or otherwise)
of the Secured Obligations, now existing or hereafter arising, Borrower hereby
assigns, transfers and pledges to Lender, and hereby grants to
<PAGE> 2
Lender a security interest in, all of Borrower's right, title and interest,
whether now owned or hereafter acquired, in, to and under the Participation
Agreements (including, without limitation, the Owned Interests) and the loans
and documents related thereto (collectively, the "Participation Interests").
Section 3. Exercise of Assigned Rights.
(a) Borrower hereby irrevocably directs the other party(ies)
to any Participation Agreement, upon demand from Lender, to recognize and
accept Lender as the holder of the Owned Interests for any and all purposes as
fully as it would recognize and accept Borrower and the performance of Borrower
thereunder.
(b) Notwithstanding anything to the contrary contained herein,
subject to the other provisions of this Assignment and the Loan Documents, for
so long as no Event of Default (as defined in the Loan Agreement) shall have
occurred and be continuing and the Indebtedness has not been accelerated,
Borrower may exercise all of its rights and privileges under the Participation
Agreements. Borrower's foregoing right shall immediately cease and terminate
upon and during the continuance of any such Event of Default and acceleration
of the Indebtedness.
Section 4. Representations and Warranties. Borrower hereby
represents and warrants to Lender as follows:
(a) Borrower has the full power, right and authority to
execute and deliver this Assignment.
(b) Borrower lawfully holds the rights and interests of
Borrower in the Participation Interests, has the authority to assign
its interest under each Participation Agreement, and has not sold,
assigned, transferred, mortgaged or pledged any portion of the
Participation Interests to any person other than Lender and has not
executed any other document or instrument that might prevent or limit
Lender from operating under or realizing the benefits of the terms,
conditions and provisions of this Assignment.
(c) No authorizations, consents, approvals, licenses, permits,
filings or registrations with any governmental authority or agency are
necessary for the execution, delivery or performance by Borrower of
this Assignment or for the validity or enforceability thereof.
Section 5. Covenants of Borrower. Borrower covenants and
agrees as follows:
(a) Borrower shall perform and observe, in a timely manner,
all of the covenants, conditions, obligations and agreements of
Borrower under the Participation Agreements and shall suffer or permit
no delinquency on its part to exist thereunder.
(b) Without the prior written consent of Lender, the Borrower
shall not, other than in the ordinary course of business, (i) sell,
assign, transfer, mortgage or pledge any portion of the Participation
Interests or (ii) cancel, terminate, amend, supplement or modify any
of the Participation Agreements shown on Annex A.
2
<PAGE> 3
(c) Borrower shall exercise all reasonable efforts to enforce
or secure the performance of each and every obligation, covenant,
condition and agreement to be performed by the other party(ies) under
each of the Participation Agreements.
Section 6. No Obligation of Lender; Borrower Remains Liable.
Nothing contained herein shall operate or be construed to obligate Lender to
perform any of the terms, covenants or conditions contained in the
Participation Agreements or otherwise to impose any obligation upon Lender with
respect to the Participation Agreements. Notwithstanding anything to the
contrary, (i) Borrower shall remain liable in respect of the Participation
Agreements to the extent set forth therein to perform and satisfy all of its
duties and obligations thereunder to the same extent as if this Assignment had
not been executed and (ii) the exercise by Lender of any of the rights and
remedies hereunder shall not release Borrower from any of its duties or
obligations under the Participation Agreements.
Section 7. Further Assurances. Borrower shall, from time to
time upon the written request of Lender, promptly execute and deliver such
further documents and take such further action as Lender may reasonably request
in order create, preserve, perfect and protect the assignment and security
interest granted hereby or to enable Lender to exercise and enforce its rights
and remedies hereunder. All of the foregoing shall be at Borrower's expense
(including, without limitation, (i) all filing, registration and recording fees
and (ii) all stamp taxes and other taxes and charges in connection therewith).
Section 8. Attorney-in-Fact. Lender is hereby appointed the
attorney-in-fact of Borrower for the purpose of carrying out the provisions of
this Assignment and taking any action and executing any instruments which
Lender may deem necessary or advisable to accomplish the purposes hereof,
including, without limitation, the right to sign and file any financing
statement (or amendment or extension thereof) deemed necessary by Lender in
connection herewith although the same has been signed only by Lender, which
appointment as attorney-in-fact is irrevocable and coupled with an interest,
provided that the Lender may not exercise such power of attorney unless an
Event of Default has occurred and is continuing and the Indebtedness has been
accelerated.
Section 9. Security Agreement.
(a) This Assignment shall also constitute a security agreement
as that term is used in the Uniform Commercial Code in effect from time to time
in New York (the "UCC"). Lender shall have, in addition to all other rights and
remedies provided herein or in any other Loan Document, in law, at equity or
otherwise, all rights and remedies of a secured party under the UCC. Lender
shall give Borrower ten (10) days' written notice of the time and place of any
public sale of any Participation Agreement or portion of the Participation
Interests or the time after which any private sale or any other intended
disposition is to be made. After deducting all expenses incurred in connection
with the enforcement of its rights hereunder, Lender shall cause the proceeds
of the Participation Agreement or portion of the Participation Interests to be
applied to the payment of the Secured Obligations in such order as Lender may
determine, and Borrower, subject to the terms of the other Loan Documents,
shall remain liable for any deficiency.
(b) Prior to or concurrently with the execution and delivery
of this Assignment, Borrower shall file such financing statements and other
documents in such offices as Lender may request to perfect the security
interests granted by this Assignment.
3
<PAGE> 4
Section 10. Indemnity. Borrower shall indemnify, defend and
hold Lender harmless against and from all liability, loss, damage and expense
(including reasonable attorney's fees and disbursements), which Lender may or
shall incur or be subject to by reason of this Assignment, or by reason of any
action taken in good faith by Lender hereunder, and against and from any and
all claims and demands whatsoever which may be asserted against Lender by
reason of any alleged obligation or undertaking on its part to perform or
discharge any of the terms, covenants and conditions contained in the
Participation Agreements, provided, however, that Lender shall have no right to
be indemnified hereunder for its own fraud, bad faith, gross negligence or
willful misconduct. Should Lender incur any such liability, loss, damage or
expense, the amount thereof, together with interest thereon at the rate of
interest applicable from time to time under the Note, shall be payable by
Borrower to Lender immediately upon demand.
Section 11. Termination. Lender, by the acceptance of this
Agreement, agrees that when all Secured Obligations shall have been paid in
full and fully performed, this Assignment shall terminate, and Lender shall
execute and deliver to Borrower, upon such termination, such instruments of
re-assignment, all without recourse and without any representation or warranty
whatsoever, as shall be reasonably requested by Borrower.
Section 12. Expenses. If any suit or other proceeding is
instituted by Lender to enforce this Assignment (or any portion hereof),
Borrower shall pay, upon demand, all of the reasonable out-of-pocket costs and
expenses (including, without limitation, reasonable attorneys' fees and
disbursements) incurred by Lender in connection therewith. The obligations of
Borrower under this Section 11 shall survive the expiration or termination of
this Assignment.
Section 13. Reinstatement. This Assignment and the security
interest created hereunder shall automatically be reinstated if and to the
extent that for any reason any payment by or on behalf of Borrower in respect
of the Secured Obligations is rescinded or must otherwise be restored by any
holder of the Secured Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise and Borrower shall indemnify Lender
on demand for all reasonable costs and expenses (including, without limitation,
reasonable attorney's fees and disbursements) incurred by Lender in connection
with such rescission or restoration.
Section 14. Miscellaneous.
(a) No Waiver. No failure on the part of Lender or any of
its agents to exercise, and no course of dealing with respect to, and no delay
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by Lender or any of its
agents of any right, power or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies herein are cumulative and are not exclusive of any remedies provided
by law.
(b) Governing Law. This Assignment shall be governed by
the law of the State of New York.
(c) Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in favor of Lender in order
to carry out the intentions of the parties hereto as nearly as may be possible
and (ii) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or
4
<PAGE> 5
enforceability of such provision in any other jurisdiction. In any such event,
the parties hereto shall negotiate in good faith to agree upon a substitute
provisions that has the same economic effect.
(d) Cumulative Remedies. All rights and remedies set forth in
this Assignment are cumulative, and Lender may recover judgment thereon, issue
execution therefor, and resort to every other right or remedy available at law
or in equity, without first exhausting and without affecting or impairing the
security of any right or remedy afforded hereby; and no such right or remedy
set forth in this Assignment shall be deemed exclusive of any of the remedies
or rights granted to Lender in the Note, the Loan Agreement or any other
document. Nothing contained in this Assignment shall be deemed to limit or
restrict the rights and remedies of Lender under any other document related to
the Secured Obligations.
(e) Waivers, Etc. This Assignment may not be amended,
waived or discharged except by an instrument in writing duly executed by
Borrower and Lender, except Lender may elect to waive any of its rights
hereunder from time to time without permanently waiving any such right by
virtue of any single such waiver or being obligated so to waive such right (or
any other right) in any future similar or dissimilar circumstances.
(f) Successors and Assigns. This Assignment shall be binding
upon, and shall inure to the benefit of the respective successors and assigns
of Borrower, Lender and each holder of any of the Secured Obligations;
provided, however, that Borrower shall not assign or transfer its rights or
obligations hereunder without the prior written consent of Lender.
(g) Notices. All notices, requests and other communications
provided for herein shall be given or made in writing in the manner specified
in the Mortgage.
(h) Headings. Headings used in this Assignment are for
convenience of reference only and do not constitute part of this Assignment for
any purpose.
(j) WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
LAW, BORROWER HEREBY IRREVOCABLY WAIVES TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING BROUGHT BY BORROWER OR LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR IN CONNECTION WITH THIS
ASSIGNMENT.
(k) Interpretation. If, and to the extent that, any provision
of this Assignment shall conflict or be inconsistent with a provision contained
in the Loan Agreement, then, unless this Assignment shall expressly provide
that this Assignment shall control notwithstanding any other Loan Document to
the contrary, the Loan Agreement provision shall control.
(l) Counterparts. This Assignment may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument and either of the parties hereto may execute this
Assignment by signing any such counterpart.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed this Assignment
as of the day and year first written above.
BORROWER:
ECHELON INTERNATIONAL CORPORATION,
a Florida corporation
By:
-------------------------------
Name: Larry J. Newsome
Title: Senior Vice-President
LENDER:
SALOMON BROTHERS REALTY CORP.,
a New York corporation
By:
-------------------------------
Name: Peter Levine
Title: Vice President
6
<PAGE> 7
Annex A
1. An undivided 80% participation ownership interest in that certain
$4,500,000 loan from Madison Savings and Loan Association ("Madison")
to Madison Building, Inc., and the note and other loan documents and
title insurance policy executed and/or delivered in connection
therewith, which interest was created under and pursuant to the
Madison Savings and Loan Associates Participation Agreement, dated
October 12, 1988, between Madison and Progress Financial Services
Incorporated ("PFSI"). Borrower is the successor by merger to PROGRESS
LEASING CORPORATION, the successor by merger to PROGRESS CREDIT
CORPORATION, formerly known as PFSI.
2. Borrower's interest in, to and under the Lenders' Agreement, dated as
of December 28, 1988, between Xerox Credit Corporation ("Xerox") and
PFSI, setting forth the parties respective rights, obligations and
remedies in connection with that certain loan to
Continuum-Crow-Arboretum ("CCA") in the aggregate principal amount of
$22,000,000, which loan was jointly made by Xerox and PFSI and is
evidenced by two Promissory Notes from Borrower in the original
principal amount of $11,000,000, one made payable to Xerox and the
other made payable to PFSI, which notes are equally and ratably
secured by, among other things, a first priority deed of trust naming
both Xerox and PFSI as beneficiaries. Borrower is the successor by
merger to PROGRESS LEASING CORPORATION, the successor by merger to
PROGRESS CREDIT CORPORATION, formerly known as PFSI.
7
<PAGE> 1
Exhibit 4.12
PREPARED BY AND
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Latham & Watkins
885 Third Avenue
New York, New York 10022
Attention: Kim N.A. Boras, Esq.
For recording purposes only
COLLATERAL ASSIGNMENT OF
MORTGAGE AND OTHER DOCUMENTS
Effective November 5, 1996, and FOR VALUE RECEIVED, the
receipt and sufficiency of which are hereby acknowledged, ECHELON INTERNATIONAL
CORPORATION, a Florida corporation having an address at One Progress Plaza, St.
Petersburg, Florida 33701 ("Assignor"), hereby assigns, sells, delivers, sets
over, grants, conveys, pledges and transfers to SALOMON BROTHERS REALTY CORP.,
as lender ("Assignee"), whose address is Seven World Trade Center, New York,
New York 10048, as collateral security and grants to Assignee a first priority
security interest in all of Assignor's right, title and interest in, to and
under those certain mortgage(s) or deed(s) of trust (collectively, the
"Mortgage") described on Exhibit A hereto, as the same may have been amended,
modified or supplemented from time to time, as collateral security for and to
secure Assignor's obligations set forth in that certain Loan Agreement dated as
of November 5, 1996, between and among Assignor, Assignee, and LaSalle National
Bank, as collateral agent (the "Loan Agreement");
TOGETHER WITH all right, title and interest in, to and under
the note(s) and other obligations secured thereby, the money due and to become
due thereon, and all rights accrued or to accrue thereunder; and
TOGETHER WITH all rights, remedies, collateral instruments or
other documents made or granted in favor of Assignor or its predecessors in
interest in connection with the loan secured by such Mortgage (the "Mortgage
Loan"), including without limitation: (i) all right, title and
FLORIDA ONLY. THE OBLIGATIONS SECURED BY THIS COLLATERAL ASSIGNMENT ARE ALSO
SECURED BY A MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND
FIXTURE FILING (THE "MORTGAGE") THAT IS RECORDED, OR IS TO BE RECORDED, ON OR
ABOUT THE DATE OF RECORDATION OF THIS COLLATERAL ASSIGNMENT, IN THE PUBLIC
RECORDS OF HILLSBOROUGH COUNTY, FLORIDA. FLORIDA DOCUMENTARY STAMP TAXES IN
THE AMOUNT OF $367,500.00 AND FLORIDA INTANGIBLE TAXES IN THE AMOUNT OF
$210,000.00 HAVE BEEN PAID TO THE CLERK OF THE COURT OF HILLSBOROUGH COUNTY,
FLORIDA, AND EVIDENCE OF SUCH PAYMENT HAS BEEN NOTED ON THE MORTGAGE.
<PAGE> 2
interest in, to and under those documents described on Exhibit A hereto; (ii)
all other guaranties, pledges, security interests, mortgages, deeds of trust,
assignments of leases and rents, financing statements, loan agreements,
indemnities, consents, forbearance agreements, intercreditor agreements and
other rights, interests or collateral securing or guaranteeing payment of, or
in connection with, such Mortgage Loan and all modifications, amendments and
supplements to any of the foregoing; and (iii) all other rights and remedies of
the undersigned in connection with the Mortgage Loan, whether provided by
contract or otherwise available under applicable law or in equity, including,
without limitation, all rights and remedies provided under any loan agreements,
security agreements, indemnities, letters of credit, title insurance policies,
fire and casualty insurance policies, life insurance policies, escrows,
accounts, certificates of deposit, claims (including proofs of claim), demands,
causes of action and judgments in favor of Assignor or its predecessor in
interest relating to the Mortgage Loan, or other instruments or documents made,
issued or delivered to or in favor of the Assignor or its predecessors in
interest in connection with the Mortgage Loan, all as the same, may have been
amended from time to time.
Assignor hereby irrevocably directs the Mortgagor under the
Mortgage, upon demand from Assignee, to recognize and accept Assignee as the
holder of the Mortgage and the Mortgage Loan for any and all purposes as fully
as it would recognize and accept Assignor and the performance of Assignor
thereunder.
Notwithstanding anything to the contrary contained herein,
subject to the other provisions of this Collateral Assignment of Mortgage and
Other Documents (this "Assignment"), for so long as no Event of Default (as
defined in the Loan Agreement) shall have occurred and be continuing and the
Indebtedness (as defined in the Loan Agreement) shall not have been
accelerated, Assignor may exercise all of its rights, remedies and privileges
under the Mortgage and the Mortgage Loan, and Assignee shall cooperate with
Assignor as reasonably required to facilitate Assignor's exercise of such
rights, remedies and privileges. Assignor's foregoing right shall immediately
cease and terminate upon and during the continuance of any such Event of
Default and the acceleration of the Indebtedness.
If, and to the extent that, any provision of this Assignment
shall conflict or be inconsistent with a provision contained in the Loan
Agreement, then, unless this Agreement shall expressly provide that this
Assignment shall control notwithstanding any other Loan Document to the
contrary, the Loan Agreement provision shall control.
2
<PAGE> 3
IN WITNESS WHEREOF, Assignor has duly executed this Collateral
Assignment of Mortgage and Other Documents as of the day and year first above
written.
WITNESSES: ECHELON INTERNATIONAL
CORPORATION
By:
- ----------------------------- -------------------------------
Name: Name: Larry J. Newsome
Title: Senior Vice President
Address: One Progress Plaza
St. Petersburg, FL 33701
- -----------------------------
Name:
3
<PAGE> 4
FLORIDA
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before me this ___ day of
November, 1996, by ___________________, as ___________________ of Echelon
International Corporation, a Florida corporation, on behalf of such
corporation. He/She either [please check as applicable] ____ is personally
known to me, or ____ has presented ______________ as identification.
---------------------------
Notary Public
Print Name:
---------------
(NOTARIAL SEAL)
My Commission Expires:
Commission No.:
-----------
4
<PAGE> 5
CALIFORNIA
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
On November ____, 1996, before me, _________________________, Notary
Public, personally appeared __________________________, [ ] personally known
to me [ ]OR proved to me on the basis of satisfactory evidence to be the
person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
---------------------------------
Signature of Notary
5
<PAGE> 6
TEXAS
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
Before me, ________________________________________ (name and
character of officer), on this day personally appeared _________________________
________________________, known to me (or proved to me on the oath of
___________) to be the person who name is subscribed to the foregoing
instrument, and known to me to be the _______________________ of ECHELON
INTERNATIONAL CORPORATION, a Florida corporation, and acknowledged to me that
he executed said instrument for the purposes and consideration therein
expressed, and as the act of said corporation. Given under my hand and seal of
office, this _________ day of November, A.D. 1996.
--------------------------------
(NOTARIAL SEAL) Notary Public
Print Name
----------------------
6
<PAGE> 7
WASHINGTON
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
On this ____ day of November, 1996, before me personally appeared
______________________, to me known to be the _______________ of the
corporation that executed the within and foregoing instrument, and acknowledged
the said instrument to be the free and voluntary act and deed of said
corporation, for the uses and purposes therein mentioned, and on oath stated
that he was authorized to execute said instrument and that the seal affixed is
the corporate seal of said corporation.
In witness whereof, I have hereunto set my hand and affixed my official seal
the day and year first above written.
-------------------------------------
(NOTARIAL SEAL) Print Name
---------------------------
Notary Public in and for the State of
, residing at
-------------------------
-------------------------------------
-------------------------------------
My Commission Expires:
---------------
7
<PAGE> 8
Exhibit A
(See attached)
1
<PAGE> 1
Exhibit 10.6
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT is made and entered into as of the 30th day
of July, 1996, by and between TALQUIN DEVELOPMENT COMPANY, a Florida
corporation (the "Corporation"), and MISSION DEVELOPMENT COMPANY, a Texas
corporation (the "Consultant").
W I T N E S S E T H:
WHEREAS, the Consultant (through its employees and personnel) has
significant background and experience in the planning, designing and
preliminary development of real estate projects; and
WHEREAS, the Corporation would like to avail itself of the services of
the Consultant during the next several months, and the Consultant is willing to
provide services to the Corporation, all in accordance with the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained in this Agreement, the parties hereby agree
as follows:
1. Engagement. The Corporation hereby engages the Consultant to
provide certain real estate related consulting services as described in more
detail in Section 3, and the Consultant hereby accepts such engagement, upon
the terms and subject to the conditions set forth in this Agreement. Such
engagement shall be for the Term (as herein defined).
2. Term. The term of this Agreement (the "Term") shall begin as of
the date first above written (the "Effective Date"), and it shall terminate on
the date eight months from the Effective Date, unless sooner terminated as
provided in this Agreement.
3. Duties.
(a) The scope of the services to be provided by the
Consultant shall be subject to the mutual agreement of the parties, but in all
events shall include the following (but only to the extent that the Corporation
has not previously completed or arranged for the completion of the particular
service);
(i) identification, negotiation and other
assistance to the Corporation with respect to the selection and retention of
MPF Research or a comparable company to conduct a complete market study of the
St. Petersburg area, and coordination and supervision of such study;
<PAGE> 2
(ii) formulation of a conceptual development program for each of the
9th Street and Carillon sites, including the timing and phasing of development,
proposed unit mix and floor plan, proposed amenity package and projected rental
rates;
(iii) with respect to the 9th Street property, working with the
existing, permitted site plan to accommodate the desired unit plans and amenity
package; identification, negotiation and other assistance to the Corporation
with respect to the selection and retention of third party consultants to
provide environmental soils, sound, wetlands and other required reports;
identification, negotiation and other assistance to the Corporation with respect
to the selection and retention of architect, civil engineer, MEP, landscape
architect and interior designer for Phase I of the project; coordination and
supervision of the activities of all such professionals; assistance in
preparation of a Phase II Feasibility Package; and assistance in the
preliminary coordination of Phase III working drawings;
(iv) with respect to Phase II of the Carillon project, working with
the existing, permitted site plan to accommodate the desired unit plans and
amenity package; working with sound consultant, land planner and architect to
provide a preliminary site plan and a conceptual development plan;
identification, negotiation and other assistance to the Corporation with
respect to the selection and retention of third party consultants to provide
environmental, soils, sound, wetlands and other required reports; and
coordination and supervision of the activities of all such professionals;
(v) assisting the Corporation in identifying and developing offsite
amenities to the 9th Street and Carillon projects, including without limitation
a health and/or fitness center; and
(vi) assisting the Corporation in connection with the formulation of
the organizational structure of its development activities, the interviewing of
candidates for the position of Vice President of Development, the formulation of
proposed operating budgets, and the formulation of capital expenditures budgets
and project capitalization structure.
(b) In performing its duties, the Consultant shall have no authority to
enter into contracts on behalf of the Corporation, to establish the terms and
conditions by which a third party is to provide services to the Corporation,
or otherwise to bind the Corporation, in each instance without the prior
express consent and authorization of the Corporation.
(c) The Consultant is retained by the Corporation only for the purposes of
and to the extent set forth in this Agreement, and its relationship with the
Corporation shall, during the Term of this Agreement, be that of an independent
contractor.
(d) The Consultant's obligation under this Agreement shall be to use its
best judgments and efforts in furthering the interests of the Corporation. The
Consultant's responsibilities will be limited to the duties specifically
provided herein, and no additional duties or responsibilities will be implied.
The Consultant will have no obligation for failure or inadequacy of
performance, except in the case of the Consultant's gross negligence, fraud or
bad faith or the breach by the Consultant of an express undertaking contained
in this Agreement, even if the Consultant otherwise would be liable because of
negligence or strict liability. The Consultant will have no liability for
2
<PAGE> 3
performance by other persons, even if such other persons are recommended by the
Consultant, or for any recommendation made by the Consultant in good faith.
(e) The Corporation hereby agrees to indemnify, defend and hold harmless
the Consultant and its officers, directors, shareholders, employees and agents
from and against any and all claims or actions or proceedings against any one or
more of them arising out of or related to the performance by the Consultant of
its duties and responsibilities under this Agreement and all related losses,
liabilities, damages, judgments, settlements and costs and expenses ( including
court costs and fees and disbursements of attorneys and other professionals),
except to the extent such claims, actions or other proceedings result from the
gross negligence, fraud or bad faith of the Consultant or the breach by the
Consultant of an express undertaking contained in this Agreement. The Consultant
hereby agrees to indemnify, defend and hold harmless the Corporation and its
officers, directors, shareholders, employees and agents from and against any and
all claims or actions or proceedings against any one or more of them arising out
of or related to the performance by the Consultant of its duties and
responsibilities under this Agreement and all related losses, liabilities,
damages, judgments, settlements and costs and expenses (including court costs
and fees and disbursements of attorneys and other professionals), but only to
the extent such claims, actions or other proceedings result from the gross
negligence, fraud or bad faith of the Consultant or the breach by the Consultant
of an express undertaking contained in this Agreement.
4. EXTENT OF SERVICES. During the Term, the Consultant shall devote such of
its time, energy and attention to the benefit and business of the Corporation as
shall be necessary to fulfill its duties and responsibilities under this
Agreement. Subject to the limitations contained in Section 9, the Consultant may
undertake outside business activities so long as such business activities do not
in any manner violate any of the other provisions of this Agreement, or
otherwise materially impair the ability of the Consultant to fulfill its duties
and responsibilities under this Agreement.
5. COMPENSATION.
(a) The Corporation shall pay to the Consultant, as compensation for all
services rendered by the Consultant under this Agreement, an aggregate amount of
$400,000 payable as follows: $200,000 upon execution of this Agreement; $100,000
on September 1, 1996; and $100,000 on October 1, 1996.
(b) In addition to the compensation provided under paragraph (a) of this
Section 5, the Corporation shall reimburse the Consultant for its direct
out-of-pocket expenses for travel, long distance telephone, Federal Express and
similar services incurred in the performance by the Consultant of its duties and
responsibilities under this Agreement, provided in all instances that the
Consultant complies with the Corporation's expense accounting procedures as from
time to time in effect.
(c) Because the Consultant is being engaged as an independent
contractor, the Corporation shall not withhold from the compensation paid
hereunder to the Consultant any amount in respect of income taxes, employment
and self employment taxes, FICA, and similarities. The Consultant shall be
responsible for the payment of all such amounts for itself and its employees.
3
<PAGE> 4
(d) Neither the Consultant nor any of its employees shall not be
considered by reason of the provisions of this Agreement or otherwise as being
an employee of the Corporation or as being entitled to participate in the
plans, arrangements or distributions by the Corporation pertaining to or in
connection with any pension, stock, bonus, profit sharing or similar plans or
benefits for the Corporation's employees.
(e) The Corporation shall provide the Consultant with one furnished
office and/or conference room at the Corporation's principal place of business
in St. Petersburg for use by the Consultant's personnel. The Corporation shall
have no obligation to provide the Consultant with office personnel, equipment
or other items, or any other office space.
6. TERMINATION ON DEATH OR PERMANENT DISABILITY OF PRINCIPAL.
(a) The Term of this Agreement shall terminate upon the death of W.
Michael Doramus ("Doramus") or upon any other termination of the employment
arrangement between the Consultant and Doramus. In such event, the Consultant
shall be entitled to an equitable portion of the compensation provided under
Section 5(a) and reimbursement of previously incurred expenses as provided in
Section 5(b).
(b) (i) The Term of this Agreement shall terminate upon the permanent
disability of Doramus. In such event, the Consultant shall be entitled to an
equitable portion of the compensation provided under Section 5(a) and
reimbursement of previously incurred expenses as provided in Section 5(b).
(ii) The term "permanent disability" as used in this Agreement
shall mean the inability of Doramus, as determined by the Board of Directors of
the Corporation or as certified by Doramus' physician, by reason of physical or
mental disability to perform the duties required of the Consultant under this
Agreement during a period of at least thirty (30) consecutive days. Upon the
determination of permanent disability, the Board of Directors of the
Corporation or Doramas (or his guardian or other similar representative) may
terminate the Consultant's engagement under this Agreement upon ten (10) days'
prior written notice.
7. OTHER TERMINATIONS.
(a) The Corporation may terminate the engagement of the Consultant
hereunder and the Term of this Agreement, without notice, (i) upon the
Consultant's failure to exercise reasonable judgment and efforts in carrying
out its duties hereunder or (ii) upon the Consultant's breach of any material
provision of this Agreement.
(b) The Corporation also may terminate the engagement of the
Consultant hereunder and the Term of this Agreement, without notice, upon the
occurrence of any of the following events:
(i) the liquidation or dissolution of the Consultant; the
suspension of the business of the Consultant; the filing by the Consultant of a
voluntary petition or an answer seeking reorganization, arrangement,
readjustment of its debts or for any other relief under the United States
4
<PAGE> 5
Bankruptcy Code, as amended, or under any other insolvency act or law, state or
federal, now or hereafter existing, or any other action of the Consultant
indicating its consent to, approval of or acquiescence in, any such petition or
proceeding; the application by the Consultant for the appointment, or the
appointment by consent or acquiescence of the Consultant of, a receiver, a
trustee or a custodian of the Consultant for all or a substantial part of its
property; the making by the Consultant of any assignment for the benefit of
creditors; the admission by the Consultant in writing of its inability to pay
its debts as they mature; or the Consultant taking any corporate action to
authorize any of the foregoing;
(ii) the filing of an involuntary petition against
the Consultant in bankruptcy or seeking reorganization, arrangement,
readjustment of its debts or for any other relief under the United States
Bankruptcy Code, as amended, or under any other insolvency act or law, state or
federal, now or hereafter existing; the involuntary appointment of a receiver, a
trustee or a custodian of the Consultant for all or a substantial part of its
property; or the issuance of a warrant of attachment or execution or similar
process against any substantial part of the property of the Consultant, and the
continuance of any of such events for thirty (30) days undismissed or
undischarged;
(iii) the adjudication of the Consultant as bankrupt
or insolvent; or
(iv) the entering of any order in any proceedings
against the Consultant decreeing the dissolution, divestiture or split-up of the
Consultant.
(c) If the engagement of the Consultant is terminated
pursuant to this Section 7, the Consultant shall be entitled to an equitable
portion of the compensation provided under Section 5(a) and reimbursement of
previously incurred expenses as provided in Section 5(b); provided, however,
nothing contained in this Section 7 shall limit the Corporation's right to sue
for, or obtain damages caused by, the Consultant's breach, and the Corporation
shall be entitled to set off against any fee and other amounts owed to the
Consultant the amount of any such damages (whether or not suit has been
brought).
8. Confidentiality. The Consultant agrees to keep, and to cause
its employees and agents to keep, in strict secrecy and confidence any and all
information concerning the Corporation the Consultant assimilates or to which it
has access during its engagement by the Corporation and that is not a matter of
common knowledge in the fields of work of the Corporation. The Consultant agrees
that both during and after the Term, it will not, and it will not permit its
employees and agents to, without the prior written consent of the Corporation,
directly or indirectly use any such confidential information or disclose any
such confidential information to any person, except in each case in the direct
performance of services under this Agreement or as required by law or order of a
court or governmental authority.
9. Restrictive Covenants. For a period of two (2) years (with
respect to the provisions of paragraph (a) below) or one (1) year (with respect
to the provisions of paragraph (b) below), in each such case commencing on the
Effective Date of this Agreement, the Consultant:
5
<PAGE> 6
(a) shall not induce or attempt to induce any employee of
the Corporation to leave the employ of the Corporation; and
(b) within the State of Florida (or from outside of the
State of Florida with respect to any project located in the State of Florida)
shall not, directly or indirectly, own, operate, manage, have a proprietary
interest of any kind in, extend financial assistance to, solicit, encourage or
handle patronage for, be employed by or serve as a consultant, or serve in any
other capacity, for any person engaged in business the same as, or
substantially similar to, the business of the Corporation, except that the
Consultant may own stock in such a corporation so long as such stock is
publicly traded and the Consultant does not own more than five percent (5%) of
the outstanding stock of said corporation.
10. ENFORCEMENT
(a) It is understood by and between the parties hereto that
the covenants set forth in Sections 8 and 9 are essential elements of this
Agreement, and that, but for the agreement of the Consultant to comply with
such covenants, the Corporation would not have agreed to enter into this
Agreement. Such covenants by the Consultant shall be construed as agreements
independent of any other provision in this Agreement. The existence of any
claim or cause of action of the Consultant against the Corporation, whether
predicated on this Agreement or otherwise, shall not constitute a defense to
the enforcement by the Corporation of such covenants, or any of them.
(b) The Consultant agrees that damages at law will be an
insufficient remedy to the Corporation if the Consultant violates the terms of
Sections 8 and 9 and that the Corporation would suffer irreparable damage as a
result of any such violation. Accordingly, it is agreed that the Corporation
shall be entitled, upon application to a court of competent jurisdiction, to
obtain injunctive relief to enforce the provisions of Sections 8 and 9, which
injunctive relief shall be in addition to any other rights or remedies
available to the Corporation.
(c) The restrictions of Sections 8 and 9 shall extend to
all activities of Consultant, whether as a sole proprietor, an independent
contractor, partner or joint venturer, or as an officer, director, stockholder
(except as otherwise specified in Section 9(b) above with respect to the
provisions thereof), agent, employee or salesman for any individual firm,
partnership, corporation or other entity, or otherwise.
(d) It is agreed by the Corporation and the Consultant that
if any portion of the covenants set forth in Section 9 are held to be invalid,
unreasonable, arbitrary or against public policy, then such portion of such
covenants shall be considered divisible both as to time and geographical area.
The Corporation and the Consultant agree that, if any court of competent
jurisdiction determines the specified time period or the specified geographical
area applicable to this Section 9 to be invalid, unreasonable, arbitrary or
against public policy, a lesser time period or geographical area that is
determined to be reasonable, non-arbitrary and not against public policy may be
enforced against the Consultant. The Corporation and the Consultant agree that
the foregoing covenants are appropriate and reasonable when considered in light
of the nature and extent of the business conducted by the Corporation.
6.
<PAGE> 7
(e) The Consultant agrees that it will cause Doramus to comply with all
of the terms of Sections 8 and 9 and this Section 10 to the same extent as if
Doramus were a party to this Agreement and made the same agreements as those of
the Consultant contained in Sections 8 and 9 and this Section 10.
11. INSIDER TRADING RESTRICTIONS. The Consultant acknowledges and is
aware that applicable state and federal securities laws prohibit any person who
has material non-public information about a corporation from purchasing or
selling the securities of that corporation. The Consultant further acknowledges
that during the course the Consultant's engagement by the Corporation, the
Consultant may become privy to material non-public information regarding the
Corporation or other related companies. The Consultant agrees and acknowledges
that such material non-public information will be the property of the
Corporation and such other companies. The Consultant covenants and agrees that
it will not, and it will not permit its employees and agents to, disclose to
any third person or make use of any material non-public information about the
Corporation or any such related companies in connection with the purchase or
sale of any securities, including securities of the Corporation or any such
related companies. The foregoing covenants regarding material non-public
information shall not apply to the extent that such information is publicly
disclosed by the Corporation or any such related companies or otherwise
publicly disclosed by a person other than the Consultant, its employees and
agents, or disclosure is required by law or order of a court or governmental
authority. The Consultant agrees that it will cause Doramus to comply with all
of the terms of this Section 11 to the same extent as if Doramus were a party
to this Agreement and made the same agreements as those of the Consultant
contained in this Section 11.
12. COMPLIANCE WITH OTHER AGREEMENTS. The Consultant represents and
warrants that the execution of this Agreement by it and its performance of its
obligations hereunder will not conflict with, result in the breach of any
provision of or the termination of or constitute a default under any agreement
to which the Consultant or Doramus is a party or by which the Consultant or
Doramus is or may be bound. The Corporation represents and warrants that the
execution of this Agreement by it and its performance of its obligations
hereunder will not conflict with, result in the breach of any of the provisions
of or the termination of or constitute a default under any agreement to which
the Corporation is a party or by which the Corporation is or may be bound. Each
party represents and warrants to the other party that this Agreement has been
duly authorized, executed and delivered by such party and constitutes a valid,
binding and enforceable obligation of such party.
13. DISPUTES. The prevailing party in any action or arbitration between
the parties relating to this Agreement shall be entitled to recover all
reasonable costs and expenses (including fees and disbursements of counsel,
whether incurred before trial, at trial, in appellate proceedings, or
otherwise) incurred with respect to such action.
14. WAIVER OF BREACH. The waiver of a breach of any of the provisions
of this Agreement shall not be construed as a waiver of any subsequent breach
by such party.
15. NOTICE. All notices, requests, demands and other communications
that are required or that may be given under this Agreement shall be in writing
and shall be deemed to have been duly given when received, if personally
delivered; when transmitted, if transmitted by electronic fax, telecopy or
similar electronic transmission method (provided customary evidence of receipt
is
7.
<PAGE> 8
obtained); the day after it is sent, if sent by recognized overnight delivery
service; and three days after it is sent, if mailed, first class certified
mail, return receipt requested, postage prepaid. In each case notice shall be
sent to the parties at the following addresses:
To the Corporation at: One Progress Plaza, Suite 2400
St. Petersburg, Florida 33701
Fax: (813) 824-6536
To the Consultant at: 5950 Berkshire Lane, Suite 800
Dallas, Texas 75225
Fax: (214) 696-8422
Either party may change its address to which notice is to be sent pursuant
hereto by sending a notice of such change in conformity with the foregoing
requirements to the other party.
16. BINDING EFFECT: ASSIGNMENT. The rights and obligations of the
Corporation under this agreement shall inure to the benefit of and shall be
binding upon the successors and assigns of the Corporation. This Agreement is a
personal contract and the rights, obligations and interests of the Consultant
hereunder may not be sold, assigned, transferred, pledged or hypothecated.
17. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties relating to its subject matter and supersedes all prior
agreements and understandings, oral or written between the parties, with
respect to the subject matter hereof. This Agreement may be changed only by an
agreement in writing signed by the party against whom any waiver, change,
amendment, modification or discharge is sought.
18. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of Florida.
19. DEFINITION OF "PERSON". For all purposes of this Agreement; the
word "person" shall refer not only to a natural person but also to any
corporation, partnership, joint venture, trust or other entity or business
arrangement.
20. ARBITRATION. Any controversy or claim arising out of or relating
to this Agreement, or the breach hereof, or regarding the failure or refusal to
perform the whole or any part of this Agreement, except in each instance the
enforcement by the Corporation of any of the provisions contained in Sections 8
through 10, inclusive, shall be settled by arbitration in Pinellas County,
Florida, in accordance with the rules of the American Arbitration Association,
and judgment upon the award rendered may be entered in any court having
jurisdiction hereof. Any decision made by an arbitrator or by arbitrators under
this provision shall be enforceable as a final and binding decision as if it
were a final decision or decree of a court of competent jurisdiction.
8.
<PAGE> 9
21. HEADINGS. The headings of the various sections in this Agreement are
inserted for the convenience of the parties and shall not affect the meaning,
construction or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
TALQUIN DEVELOPMENT COMPANY
By: /s/ Darryl A. LeClair
-------------------------------
"Corporation"
MISSION DEVELOPMENT COMPANY
By: /s/ W. Richard Doramus
-------------------------------
"Consultant"
<PAGE> 1
Exhibit 10.7
ECHELON INTERNATIONAL CORPORATION
1996 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE 1
PURPOSE.
The purpose of the Echelon International Corporation 1996 Employee
Stock Purchase Plan (the "Plan") is to provide employees of Echelon
International Corporation (the "Company") and its subsidiaries with an
opportunity to acquire a proprietary interest in the Company through the
purchase of authorized but unissued shares of common stock of the Company (the
"Common Stock"). It is the intention of the Company to have the Plan qualify
as an "employee stock purchase plan" under Section 423 of the Internal Revenue
Code of 1986, as amended, and the regulations promulgated thereunder, or any
statute or regulation of similar import. The provisions of the Plan,
accordingly, shall be construed so as to extend and limit participation in a
manner consistent with the requirements of that section of the Code.
ARTICLE 2
DEFINITIONS.
The following words and terms as used herein shall have that meaning
set forth therefor in this Article 2 unless a different meaning is clearly
required by the context. Whenever appropriate, words used in the singular
shall be deemed to include the plural and vice versa, and the masculine gender
shall be deemed to include the feminine gender.
2.1 "ACCOUNT" shall mean the payroll deduction account maintained
for an electing Eligible Employee as provided in Article 7.
2.2 "BOARD" or "BOARD OF DIRECTORS" shall mean the Board of
Directors of the Company.
2.3 "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
2.4 "COMMITTEE" is defined in Section 3.1.
2.5 "COMMON STOCK" shall mean the common stock of the Company.
2.6 "COMPANY" shall mean Echelon International Corporation, a
Florida corporation, and any successor.
2.7 "COMPENSATION" shall mean an Eligible Employee's regular
salary and wages, overtime pay, bonuses and commissions (in all cases, before
any reduction for elective contributions to any Code Section 401(k) or Code
Section 125 Plan), but does not include credits or benefits under the Plan, or
any amount contributed by the Company to any pension, profit sharing or
employee stock
<PAGE> 2
ownership plan, or any employee welfare, life insurance or health insurance
plan or arrangement, or any deferred compensation plan or arrangement.
2.8 "EFFECTIVE DATE" is defined in Section 8.9.
2.9 "ELIGIBLE EMPLOYEE" shall mean any individual employed by the
Company or any Subsidiary who meets the eligibility requirements of Article 4.
2.10 "FAIR MARKET VALUE" of the shares of Common Stock shall mean
the closing price, on the date in question (or, if no shares are traded on such
day, on the next preceding day on which shares were traded), of the Common
Stock as reported on the Composite Tape, or if not reported thereon, then such
price as reported in the trading reports of the principal securities exchange
in the United States on which such stock is listed, or if such stock is not
listed on a securities exchange in the United States, the mean between the
dealer closing "bid" and "ask" prices on the over-the- counter market as
reported by the National Association of Security Dealers Automated Quotation
System (NASDAQ), or NASDAQ's successor, or if not reported on NASDAQ, the fair
market value of such stock as determined by the Committee in good faith and
based on all relevant factors.
2.11 "OFFERING PERIOD" is defined in Section 5.1.
2.12 "PURCHASE DOCUMENTS" is defined in Section 6.1.
2.13 "PLAN" shall mean the Echelon International Corporation 1996
Employee Stock Purchase Plan, as set forth herein and as amended from time to
time.
2.14 "SUBSIDIARY" shall mean any corporation that at the time
qualifies as a subsidiary of the Company under the definition of "subsidiary
corporation" contained in Section 424(f) of the Code.
ARTICLE 3
ADMINISTRATION
3.1 COMMITTEE. This Plan shall be administered by a committee
appointed by the Board of Directors (the "Committee"). The Committee shall
consist of not less than two (2) nor more than five (5) persons, each of whom
shall be a member of the Board, and none of whom shall be eligible to
participate under the Plan. The Board of Directors may from time to time
remove members from, or add members to, the Committee. Vacancies on the
Committee, howsoever caused, shall be filled by the Board of Directors.
3.2 ORGANIZATION. The Committee shall select one of its members
as chairman, and shall hold meetings at such time and places as it may
determine. The acts of a majority of the Committee at which a quorum is
present, or acts reduced to or approved in writing by a majority of the members
of the Committee, shall be valid acts of the Committee.
2
<PAGE> 3
3.3 POWER AND AUTHORITY. Subject to the provisions of the Plan,
the Committee shall have full authority, in its discretion: (a) to determine
the employees of the Company and its Subsidiaries who are eligible to
participate in the Plan; (b) to determine the purchase price of the shares of
Common Stock being offered; and (c) to interpret the Plan, and to prescribe,
amend and rescind rules and regulations with respect thereto. The
interpretation and construction by the Committee of any provision of the Plan
over which it has discretionary authority shall be final and conclusive. All
actions and policies of the Committee shall be consistent with the
qualification of the Plan at all times as an employee stock purchase plan under
Section 423 of the Code.
3.3.1 NO LIABILITY. No member of the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan.
ARTICLE 4
EMPLOYEES ELIGIBLE TO PARTICIPATE
4.1 GENERAL RULE. Any person, including any officer but not a
person who is solely a director, who is in the employment of the Company or any
Subsidiary on the first day of an Offering Period is eligible to participate in
the Plan with respect to that Offering Period, except: (a) a person who has
been employed less than one year; (b) a person whose customary employment is 20
hours or less per week; and (c) a person whose customary employment is for not
more than five months in any calendar year. The Committee shall have the sole
power to determine who is and who is not an Eligible Employee.
4.2 SPECIAL RULES. Notwithstanding any provision of the Plan to
the contrary, no employee shall be eligible to subscribe for any shares of
Common Stock under the Plan if:
4.2.1 immediately after the subscription, the employee
would own stock and/or hold outstanding options to purchase stock, possessing
5% or more of the total combined voting power or value of all classes of stock
of the Company or of any Subsidiary (as determined in accordance with the
provisions of Section 423(b)(3) of the Code);
4.2.2 the subscription would permit his rights to purchase
shares under all stock purchase plans of the Company and its parent and
subsidiary corporations to accrue at a rate that exceeds $25,000 of fair market
value of such shares (determined at the time such right to subscribe accrues)
for each calendar year in which such right to subscribe is outstanding at any
time;
4.2.3 the subscription is otherwise prohibited by law; or
4.2.4 his employment is terminated for any reason prior to
the time revocation or cancellation of participation in an offering is
prohibited under Section 6.2.
3
<PAGE> 4
ARTICLE 5
OFFERS
5.1 OFFERING PERIODS. There shall be twenty (20) offering periods
under the Plan. A separate offering period shall commence on the first day and
conclude on the last day of the months of March and September in each of the
years 1997 - 2006 (each an "Offering Period"). Except for the maximum number
of shares of Common Stock to be offered under the Plan, except for a lack of
available shares of Common Stock, and except for the limitation on the number
of shares of Common Stock for which each Eligible Employee may subscribe, there
shall be no limit on the aggregate number of shares of Common Stock for which
subscriptions may be made with respect to any particular Offering Period. The
right of an Eligible Employee to subscribe for shares of Common Stock in an
Offering Period shall not be deemed to accrue until the first day of that
Offering Period.
5.2 PRICE. The purchase price per share of Common Stock for an
Offering Period shall be 85% of the fair market value of the Shares on the last
day immediately preceding the first day of the Offering Period.
5.3 NUMBER OF SHARES TO BE OFFERED.
5.3.1 The maximum number of shares of Common Stock that may
be offered under the Plan is 75,000.
5.3.2 During each Offering Period, an Eligible Employee
shall be entitled to subscribe for a total number of shares of Common Stock
equal to 3% of Compensation divided by the Fair Market Value of the shares on
the first day of such Offering Period. For example, if the Fair Market Value
of the shares is $10 on the first day of an Offering Period, an employee who
receives Compensation of $30,000 would be able to subscribe for 90 shares
($30,000 x 3% = $900/$10 = 90). However, no Eligible Employee shall be
entitled to subscribe for fewer than ten (10) shares.
5.3.3 Subscriptions shall be allowed for full shares only.
Any rights to subscribe for fractional shares shall be void; and any
computation relating to fractional shares shall be rounded down to the next
lowest whole number of shares.
5.3.4 If with respect to the offering the available shares
are oversubscribed, the aggregate of the subscriptions allowable under Section
5.3(b) shall be reduced to such lower figure as may be necessary to eliminate
the oversubscription. Such reduction shall be effected on a proportionate
basis as equitably as possible; but in no event shall such reduction result in
a subscription for fractional shares. In the event of an oversubscription and
cutback as provided in this paragraph (c), the Company will refund to the
participating Eligible Employees any excess payment for subscribed Shares as
soon as practicable after the end of the Offering Period.
4
<PAGE> 5
ARTICLE 6
PARTICIPATION AND PAYMENT
6.1 ELECTION TO PARTICIPATE. An Eligible Employee may become a
participant in an offering: (a) by completing a subscription agreement,
indicating the number of shares of Common Stock to be purchased, and such other
documents as the Company may require (the "Purchase Documents"); and (b) by
tendering the Purchase Documents and cash or a check (payable in U.S. funds)
for the full subscription price (less the amount to be withdrawn from such
Eligible Employee's Account pursuant to Section 7.3) to the Secretary of the
Company (or such other person as may be designated by the Committee) at any
time during the offering. Purchase Documents and cash or check received by the
Secretary of the Company (or other designated person) before or after the
offering shall be void and shall be given no effect with respect to the
offering; and the Secretary shall return such documents and cash or check to
the involved employee as soon as practicable after receipt.
6.2 NO REVOCATION OF ELECTION. No election to participate in an
offering may be revoked or cancelled by an Eligible Employee once the Purchase
Documents and full payment have been tendered to the Company.
6.3 NO INTEREST. No interest shall be payable on the purchase
price of the shares of Common Stock subscribed for or on the funds returned to
employees as a result of an oversubscription or an overpayment, pursuant to
Section 6.1 for early or late delivery or pursuant to Section 6.2 after a
revocation.
6.4 DELIVERY OF CERTIFICATES REPRESENTING SHARES.
6.4.1 As soon as practicable after the completion of each
offering, the Company shall deliver or cause to be delivered to each
participating employee a certificate or certificates representing the shares of
Common Stock purchased in the offering.
6.4.2 Certificates representing shares of Common Stock to
be delivered to a participating employee under the Plan will be registered in
the name of the participating employee, or if the participating employee so
directs, by written notice to the Company prior to the termination date of the
pertinent offering, and to the extent permitted by applicable law, in the names
of the participating employee and one such other person as may be designated by
the participating employee, as joint tenants with rights of survivorship.
6.5 RIGHTS AS STOCKHOLDER. No participating employee shall have
any right as a stockholder until after the completion of the offering in which
the employee participated and the date on which he becomes a record owner of
the shares purchased under the Plan (the "record ownership date"). No
adjustment shall be made for dividends or other rights for which the record
date is prior to the record ownership date.
6.6 6.6.1 TERMINATION OF EMPLOYMENT. An employee whose
employment is terminated for any reason shall have no right to participate in
the Plan after termination. However, the termination
5
<PAGE> 6
shall not affect any election to participate in the Plan that is made prior to
termination in accordance with the provisions of Section 6.1.
6.7 RIGHTS NOT TRANSFERABLE. The right of an Eligible Employee to
participate in the Plan shall not be transferable by the employee, and no right
of an Eligible Employee under this Plan may be exercised after his death, by
his Personal Representative or anyone else, or during his lifetime by any
person other than the Eligible Employee.
ARTICLE 7
PAYROLL DEDUCTION
7.1 ELECTION OF PAYROLL DEDUCTION. As permitted in the discretion
of the Committee from time to time, each Eligible Employee may elect (on such
form as may be provided from time to time by the Company) to have a portion of
his Compensation deducted from each paycheck (or, if the Company so permits,
from only the first paycheck in each month), which amounts shall not exceed in
the aggregate such amount as determined by the Committee from time to time. An
Eligible Employee may change the amount to be withheld from time to time in
accordance with rules established by the Committee, which rules may include,
among other things, limitations on the number of times changes are permitted
and when changes are permitted. A change shall be effective no earlier than
the first full payroll period following receipt of the new form by the
Committee. The Committee may, however, on a uniform and non-discriminatory
basis delay the effective date of a change if it determines that such a delay
is either necessary or appropriate for the proper administration of the Plan.
7.2 MAINTENANCE OF ACCOUNTS. A separate Account shall be
maintained for each Eligible Employee who has amounts withheld from his
Compensation under this Article 7. The maintenance of separate Accounts shall
not require the segregation of any assets from any other assets held under this
Article 7. The Accounts shall not bear interest. Each Account shall be
adjusted from time to time to reflect the amounts withheld from the
Compensation of the Eligible Employee to whom the Account relates, the amounts
withdrawn by such Eligible Employee for purchases of Common Stock under the
Plan, and for other amounts withdrawn by such Eligible Employee from the
Account.
7.3 USE OF ACCOUNTS TO PURCHASE COMMON STOCK. At the time that an
Eligible Employee elects to participate in an offering under Section 6.1, the
Eligible Employee may elect to have a specified amount from his Account (up to
the whole amount thereof) used to pay all or a portion of the purchase price.
7.4 OTHER USE OF ACCOUNTS. At any time that a person is no longer
an employee (including by reason of death) or an Eligible Employee, the balance
in such person's Account shall be paid to such person or his legal
representative. In addition, the Committee may also permit the complete
withdrawal of the amounts in an Account under such uniform and
non-discriminatory conditions as it may impose from to time to time (including,
without limitation, not permitting the Eligible Employee making such withdrawal
from again electing payroll deductions for a specified
6
<PAGE> 7
period of time). Except as otherwise provided in Section 7.3 and this Section
7.4, an Eligible Employee shall not withdraw any amount from his Account, in
whole or in part.
ARTICLE 8
MISCELLANEOUS
8.1 STOCK ADJUSTMENTS.
8.1.1 In the event of any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split or other
division or consolidation of shares or the payment of a stock dividend (but
only on the Common Stock) or any other increase or decrease in the number of
such shares effected without any receipt of consideration by the Company, then,
in any such event, the number of shares of Common Stock that remain available
under the Plan, and the number of shares of Common Stock and the purchase price
per share of Common Stock then subject to subscription by Eligible Employees,
shall be proportionately and appropriately adjusted for any such increase or
decrease.
8.1.2 Subject to any required action by the stockholders,
if any change occurs in the shares of Common Stock by reason of any
recapitalization, reorganization, merger, consolidation, split-up, combination
or exchange of shares, or of any similar change affecting the shares of Common
Stock, then, in any such event, the number and type of shares then subject to
subscription by Eligible Employees, and the purchase price thereof, shall be
proportionately and appropriately adjusted for any such change.
8.1.3 In the event of a change in the Common Stock as
presently constituted that is limited to a change of all of its authorized
shares with par value into the same number of shares with a different par value
or without par value, the shares resulting from any change shall be deemed to
be shares of Common Stock within the meaning of the Plan.
8.1.4 To the extent that the foregoing adjustments relate
to stock or securities of the Company, such adjustments shall be made by, and
in the discretion of, the Committee, whose determination in that respect shall
be final, binding and conclusive.
8.1.5 Except as hereinabove expressly provided in this
Section 8.1, an Eligible Employee shall have no rights by reason of any
division or consolidation of shares of stock of any class or the payment of any
stock dividend or any other increase or decrease in the number of shares of
stock of any class or by reason of any dissolution, liquidation, merger or
consolidation, or spin-off of assets or stock of another corporation; and any
issuance by the Company of shares of stock of any class, securities convertible
into shares of stock of any class, or warrants or options for shares of stock
of any class shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares of Common Stock subject to
any subscription.
8.1.6 The existence of the Plan, and any subscription for
shares of Common Stock hereunder, shall not affect in any way the right or
power of the Company to make adjustments,
7
<PAGE> 8
reclassifications, reorganizations or changes of its capital or business
structure or to merge or to consolidate, or to dissolve, to liquidate, to sell,
or to transfer all or any part of its business or assets.
8.2 NECESSITY FOR DELAY. If at any time the Committee shall
determine, in its discretion, that the listing, registration or qualification
of the shares of Common Stock covered by the Plan upon any securities exchange
or under any state or federal law or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or
in connection with, the Plan or the offering, issue or purchase of shares
thereunder, the Plan shall not be effective as to later offerings unless and
until such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the
Committee. Notwithstanding anything in the Plan to the contrary, if the
provisions of this Section 8.2 become operative and if, as a result thereof, an
offering is missed in whole or in part, then and in that event, the missed
portion of the offering shall be passed and the term of the Plan shall not be
affected. Notwithstanding the foregoing or any other provision in the Plan,
the Company shall have no obligation under the Plan to cause any shares of
Common Stock to be registered or qualified under any federal or state law or
listed on any stock exchange or admitted to any national marketing system.
8.3 TERM OF PLAN. The Plan, unless sooner terminated as provided
in Section 8.4, shall commence upon the satisfaction of the conditions of
Section 8.9 and shall terminate on the conclusion of the offering to be made in
September 2006.
8.4 AMENDMENT OF THE PLAN; TERMINATION. The Board shall have the
right to revise, amend or terminate the Plan at any time without notice,
provided that no Eligible Employee's existing rights are adversely affected
thereby without the consent of the Eligible Employee, and provided further
that, without approval of the stockholders of the Company, no such revision or
amendment shall: (a) increase the total number of shares of Common Stock to be
offered; (b) change the formula by which the price at which the shares shall be
sold is determined; (c) increase the maximum number of shares of Common Stock
that an employee can purchase; (d) materially modify the requirements as to
eligibility for participation in the Plan; (e) otherwise materially increase
the benefits under the Plan for Eligible Employees; or (f) remove the
administration of the Plan from the Committee. The foregoing prohibitions
shall not be affected by adjustments in shares and purchase price made in
accordance with the provisions of Section 8.1.
8.5 APPLICATION OF FUNDS. The proceeds received by the Company
from the sale of Common Stock pursuant to the Plan will be used for general
corporate purposes.
8.6 NO OBLIGATION TO PARTICIPATE. The offering of any Common
Stock under the Plan shall impose no obligation upon any Eligible Employee to
subscribe to purchase any such shares.
8.7 NO IMPLIED RIGHTS TO EMPLOYEES. The existence of the Plan,
and the offering of shares of Common Stock under the Plan, shall in no way give
any employee the right to continued employment, give any employee the right to
receive any Common Stock or any additional Common Stock under the Plan, or
otherwise provide any employee any rights not specifically set forth in the
Plan.
8
<PAGE> 9
8.8 WITHHOLDING. Whenever the Company proposes or is required to
issue or transfer shares of Common Stock under the Plan, the Company shall have
the right to require a participating employee to remit to the Company an amount
sufficient to satisfy any federal, state or local withholding tax liability
prior to the delivery of any certificate or certificates for such shares.
Whenever under the Plan payments are to be made in cash, such payments shall be
made net of an amount sufficient to satisfy any federal, state or local
withholding tax liability.
8.9 CONDITIONS PRECEDENT TO EFFECTIVENESS. Subject to the
approval of the Plan by the stockholders of the Company within 12 months after
its adoption by the Board of Directors, the Plan shall become effective upon
the satisfaction of all the following conditions, with the Effective Date of
the Plan being the date that the last of the following conditions is satisfied:
8.9.1 the adoption of the Plan by the Board of Directors;
and
8.9.2 the consummation of the distribution to holders of
common stock, without par value, of Florida Progress Corporation of all
outstanding shares of Common Stock.
9
<PAGE> 1
Exhibit 10.8
ECHELON INTERNATIONAL CORPORATION
LONG TERM INCENTIVE PLAN
ARTICLE 1
ESTABLISHMENT; PURPOSE
1.1 ESTABLISHMENT. Echelon International Corporation, a Florida
corporation, (the "Company") hereby establishes an incentive compensation plan
to be known as the "Echelon International Corporation Long Term Incentive Plan"
(the "Plan").
1.2 PURPOSE. The purpose of the Plan is to (a) attract, retain
and motivate participating employees of the Company and its subsidiaries
through awards of shares of the Common Stock of the Company (the "Shares"),
options to purchase Shares (the "Options") and Stock Appreciation Rights (the
"SARs"), (b) encourage employee ownership of Shares and (c) encourage
participating employees to think and act like owners of the Company.
1.3 MAXIMUM NUMBER OF SHARES. The maximum number of Shares that
may be offered under the Plan is 950,000, subject to adjustment as provided in
Section 9.1. If an Option is surrendered or for any other reason ceases to be
exercisable in whole or in part, the Shares that are subject to such Option,
but as to which the Option has not been exercised, shall again become available
for offering under the Plan. Any awards under the Plan made other than in
Shares or Options shall not reduce the maximum number of Shares covered by the
Plan.
1.4 STATUS. It is the intention of the Company that incentive
stock options granted under the Plan qualify as "incentive stock options" under
Section 422 of the Code, and the regulations promulgated thereunder. The
provisions of the Plan with respect to ISOs, accordingly, shall be construed in
a manner consistent with such requirements. Except with respect to ISOs, no
other Award under the Plan is intended to qualify for special treatment or
status under the Code.
ARTICLE 2
DEFINITIONS
2.1 DEFINITIONS. The following words and terms as used herein
shall have that meaning set forth therefor in this Article 2 unless a different
meaning is clearly required by the context.
2.1.1 "AWARD" shall mean any Option, Restricted Share, SAR or
any cash payment granted or awarded under the Plan.
2.1.2 "AWARD AGREEMENT(S)" shall mean any document, agreement
or certificate deemed by the Committee of Directors as necessary or advisable to
be entered into with or delivered to a Participant in connection with or as a
condition precedent to the valid completion of the grant of an Award under the
Plan.
2.1.3 "BOARD" or "BOARD OF DIRECTORS" shall mean the Board of
Directors of the Company.
2.1.4 "COMMITTEE" is defined in Article 3.1.
<PAGE> 2
2.1.5 "CHIEF EXECUTIVE OFFICER" shall mean the officer so
designated from time to time by the Committee, or if the Board shall fail to
so designate an officer to that position, the President of the Company.
2.1.6 "CODE" shall mean the Internal Revenue Code of 1986, as
amended. Reference to a specific section of the Code shall include a reference
to any successor provision.
2.1.7 "COMPANY" shall mean Echelon International Corporation,
a Florida corporation, and its successors.
2.1.8 "EFFECTIVE DATE" is defined in Section 9.7.
2.1.9 "ELIGIBLE EMPLOYEE" shall mean any individual employed
by the Company or any Subsidiary who meets the eligibility requirements of
Article 4.
2.1.10 "FAIR MARKET VALUE" of the Shares shall mean the
closing price, on the date in question (or, if no Shares are traded on such day,
on the next preceding day on which Shares were traded), of the Shares as
reported on the Composite Tape, or if not reported thereon, then such price as
reported in the trading reports of the principal securities exchange in the
United States on which such stock is listed, or if such stock is not listed on a
securities exchange in the United States, the mean between the dealer closing
"bid" and "ask" prices on the over-the- counter market as reported by the
National Association of Security Dealers Automated Quotation System (NASDAQ), or
NASDAQ's successor, or if not reported on NASDAQ, the fair market value of such
stock as determined by the Committee in good faith and based on all relevant
factors.
2.1.11 "ISO" shall mean an incentive stock option granted in
accordance with the provisions of Article 5 of the Plan.
2.1.12 "NSO" shall mean a nonqualified stock option granted in
accordance with the provisions of Article 6 of the Plan.
2.1.13 "OPTION" shall mean an ISO or an NSO.
2.1.14 "OPTIONEE" shall mean an Eligible Employee to whom an
Option is granted under the Plan.
2.1.15 "PARTICIPANT" shall mean an Eligible Employee, who in
accordance with the terms of the Plan, is first recommended by the Chief
Executive Officer and then approved by the Committee for participation in the
Plan as a recipient of an Award and who receives an Award.
2.1.16 "PLAN" shall mean the Echelon International Corporation
Long Term Incentive Plan, as set forth herein and as amended from time to time.
2.1.17 "RESTRICTED SHARE(S)" shall mean any Shares granted or
awarded to a Participant in accordance with the provisions of Article 8 of the
Plan.
2
<PAGE> 3
2.1.18 "SAR" shall mean a Stock Appreciation Right granted in
accordance with the provisions of Article 7 of the Plan, which as to each SAR
entitles the Participant to receive payment equal to the excess of (1) the Fair
Market Value of a Share at the time of payment or exercise over (2) a specified
price or value set or established at the time of grant of the SAR.
2.1.19 "SHARES" shall mean shares of the common
stock of the Company.
2.1.20 "SUBSIDIARY" shall mean any corporation that
at the time qualifies as a subsidiary of the Company under the definition of
"subsidiary corporation" contained in Section 424(f) of the Code.
2.1.21 "10% STOCKHOLDER" shall mean an individual
who owns more than 10% of the total combined voting power of all classes of
stock of the Company or of a parent or subsidiary corporation.
2.2 USAGE. Whenever appropriate, words used in the singular shall
be deemed to include the plural and vice versa, and the masculine gender shall
be deemed to include the feminine gender.
ARTICLE 3
ADMINISTRATION
3.1 COMMITTEE. This Plan shall be administered by a committee
appointed by the Board of Directors (the "Committee"). The Committee shall
consist of not less than two (2) nor more than five (5) persons, each of whom
shall be a member of the Board, and none of whom shall be eligible to
participate under the Plan. The Board of Directors may from time to time
remove members from, or add members to, the Committee. Vacancies on the
Committee, howsoever caused, shall be filled by the Board of Directors.
3.2 ORGANIZATION. The Committee shall select one of its members
as chairman, and shall hold meetings at such time and places as it may
determine. The acts of a majority of the Committee at which a quorum is
present, or acts reduced to or approved in writing by a majority of the members
of the Committee, shall be valid acts of the Committee.
3.3 POWER AND AUTHORITY. Subject to the provisions of the Plan,
the Committee shall have full authority, in its discretion: (a) to determine
from among Eligible Employees those persons who shall become Participants; (b)
to determine the nature, amount and terms and conditions of all Awards under
the Plan, in accordance with and subject to the specific limitations and
requirements set forth in the Plan; and (c) to interpret the Plan, the terms of
all Awards and Award Agreements and any other agreement or instrument awarded,
issued or entered into under the Plan, and to prescribe, amend and rescind
rules and regulations with respect to the administration of the Plan. The
interpretation and construction by the Committee of any provision of the Plan,
any Award or any other agreement or instrument awarded, issued or entered into
under the Plan, and all other determinations and decisions of the Committee
pursuant to the provisions of the Plan, shall be final, conclusive and binding
on all Participants and other affected persons. All actions and policies of the
3
<PAGE> 4
Committee, to the extent they deal with ISOs, shall be consistent with the
qualification of ISOs as incentive stock options under Section 422 of the Code.
3.4 DISCRETIONARY AUTHORITY. The Committee' decision to authorize
the grant of an Award to an Eligible Employee at any time shall not require the
Committee to authorize the grant of an Award to that employee at any other time
or to any other employee at any time; nor shall its determination with respect
to the size, type or terms and conditions of the Award to be granted to an
Eligible Employee at any time require it to authorize the grant of an Award of
the same type or size or with the same terms and conditions to that employee at
any other time or to any other employee at any time. The Committee shall not
be precluded from authorizing the grant of an Award to any Eligible Employee
solely because the employee previously may have been granted an Award of any
kind under the Plan.
3.5 NO LIABILITY. No member of the Committee shall be liable for
any action or determination made in good faith with respect to the Plan.
ARTICLE 4
EMPLOYEES ELIGIBLE TO PARTICIPATE
4.1 GENERALLY. Any person, including any officer but not a person
who is solely a director, who is in the employ of the Company or any Subsidiary
on the date of a grant of an Award shall be an Eligible Employee, able to
participate in the Plan in accordance with the terms of the Plan. The
Committee shall have the sole power to determine if the eligibility
requirements have been satisfied.
4.2 PARTICIPANT STATUS. Without limiting the provisions of
Section 3.3, the Chief Executive Officer, in his sole discretion, from time to
time may select from among Eligible Employees persons to recommend to the
Committee to become Participants in the Plan. Any Eligible Employee so
recommended to the Committee and who remains an Eligible Employee shall become
a Participant upon the approval of such status by the Committee, which approval
shall be conclusively evidenced by the award or grant of an Award to a
Participant.
4.3 ISO ELIGIBILITY REQUIREMENT. Notwithstanding any provision of
the Plan to the contrary, no person shall be eligible to receive any ISOs under
the Plan if such person would not be able qualify for the benefits of incentive
stock options under Section 422 of the Code.
ARTICLE 5
TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS
5.1 GRANT. Any ISO granted pursuant to the Plan shall be
authorized by the Committee and shall be evidenced by certificates or
agreements in such form as the Committee from time to time shall approve, which
certificates or agreements shall comply with and be subject to the terms and
conditions hereinafter specified. Upon the granting of any ISO, the Committee
shall promptly cause
4
<PAGE> 5
the Optionee to be notified of the fact that such Option has been granted. The
date on which the Committee approves the grant of an ISO shall be considered to
be the date on which such Option is granted.
5.2 NUMBER OF SHARES. Each ISO shall state the number of Shares
to which it pertains.
5.3 OPTION PRICE. Each ISO shall state the option price, which
option price shall be determined by the Committee in its discretion.
Notwithstanding the foregoing, the option price in no event shall be less than
100% of the Fair Market Value of the Shares on the date of grant of the Option;
or, in the case of an ISO being issued to an Eligible Employee who is a 10%
Stockholder at the time an ISO is granted, 110% of the Fair Market Value of the
Shares on the date of grant.
5.4 METHOD OF EXERCISE. An Optionee may exercise an ISO during
such time as may be permitted by the Option and the Plan by providing written
notice to the Committee, tendering the purchase price in accordance with the
provisions of Section 5.5, and complying with any other exercise requirements
contained in the Option or promulgated from time to time by the Committee.
5.5 METHOD OF PAYMENT. Payment of the option price upon the
exercise of the ISO shall be in: (a) United States dollars in cash or by check,
bank draft or money order payable to the order of the Company; (b) in the
discretion of and in the manner determined by the Committee, by the delivery of
Shares of Common Stock already owned by the Optionee; (c) by any other legally
permissible means acceptable to the Committee at the time of grant of the
Option (including cashless exercise as permitted under the Federal Reserve
Board's Regulation T, subject to applicable legal restrictions); or in the
discretion of the Committee, through a combination of (a), (b) and (c) of this
Section. If the option price is paid in whole or in part through the delivery
of Shares, the decision of the Committee with respect to the Fair Market Value
of such Shares shall be final and conclusive.
5.6 TERM AND EXERCISE OF OPTIONS.
5.6.1 Unless otherwise specified in writing by the Committee
at the time of grant or in the Award Agreement, each ISO shall be exercisable,
in whole or in part, only in accordance with the following chart:
<TABLE>
<CAPTION>
-------------------------------------------------
Percentage of
Number of Years from Shares
Date Option is Granted Exercisable
-------------------------------------------------
<S> <C>
Less than 1 year 0%
-------------------------------------------------
1 year but less than 2 years 20%
-------------------------------------------------
2 years but less than 3 years 40%
-------------------------------------------------
3 years but less than 4 years 60%
-------------------------------------------------
4 years but less than 5 years 80%
-------------------------------------------------
5 years or more 100%
-------------------------------------------------
</TABLE>
5
<PAGE> 6
5.6.2 To the extent not exercised, exercisable installments
of ISOs shall be exercisable, in whole or in part, in any subsequent period,
but not later than the expiration date of the Option. The Committee shall
determine the expiration date of the Option at the time of the grant of the
Option; provided, however, that no ISO shall be exercisable after the
expiration of ten (10) years from the date it is granted; or, in the case of a
10% Stockholder, no ISO shall be exercisable after the expiration of five (5)
years from the date it is granted. Not less than one hundred (100) Shares may
be exercised at any one time unless the number exercised is the total number at
the time exercisable under the Option.
5.6.3 Within the limits described above, the Committee may
impose additional requirements on the exercise of ISOs. When it deems special
circumstances to exist, the Committee in its discretion may accelerate the time
at which an ISO may be exercised if, under previously established exercise
terms, such Option was not immediately exercisable in full, even if the
acceleration would permit the Option to be exercised more rapidly than the
vesting set forth above in the chart, or as otherwise specified by the
Committee, would permit.
5.7 ADDITIONAL LIMITATIONS. The aggregate Fair Market Value
(determined as of the time an ISO is granted) of the Shares with respect to
which ISOs are exercisable for the first time by any Optionee in any calendar
year under the Plan and under all other incentive stock option plans of the
Company and any parent and subsidiary corporations of the Company (as those
terms are defined in Section 424 of the Code) shall not exceed $100,000.
5.8 DEATH OR OTHER TERMINATION OF EMPLOYMENT.
5.8.1 In the event that an Optionee shall cease to be
employed by the Company or a Subsidiary for any reason other than his or her
death, subject to the conditions that no ISO shall be exercisable after its
expiration date, such Optionee shall have the right to exercise the ISO at any
time within ninety (90) days after such termination of employment to the extent
his or her right to exercise such Option had accrued pursuant to this Article 5
at the date of such termination and had not previously been exercised; such
ninety (90) day period shall be increased to one (1) year for any Optionee who
ceases to be employed by the Company or a Subsidiary because he is disabled
(within the meaning of Section 22(e)( 3) of the Code) or who dies during the
ninety (90) day period and the Option may be exercised within such extended time
limit by the Optionee or, in the case of death, the personal representative of
the Optionee or by any person or persons who shall have acquired the Option
directly from the Optionee by bequest or inheritance. Whether an authorized
leave of absence or absence for military or governmental service shall
constitute termination of employment for purposes of the Plan shall be
determined by the Committee, whose determination shall be final and conclusive.
5.8.2 In the event that an Optionee shall die while
in the employ of the Company or a Subsidiary and shall not have fully exercised
any ISO, the ISO may be exercised, subject to the conditions that no ISO shall
be exercisable after its expiration date, to the extent that the Optionee's
right to exercise such Option had accrued pursuant to this Article 5 at the
time of his or her death and had not previously been exercised, at any time
within one (1) year after the Optionee's death, by the personal representative
of the Optionee or by any person or persons who shall have acquired the Option
directly from the Optionee by bequest or inheritance.
6
<PAGE> 7
5.8.3 No ISO shall be transferable by the Optionee otherwise
than by will or the laws of descent and distribution.
5.8.4 During the lifetime of the Optionee, an ISO shall be
exercisable only by him or her and shall not be assignable or transferable,
and no other person shall acquire any rights therein.
5.9 DELIVERY OF CERTIFICATES REPRESENTING SHARES.
5.9.1 As soon as practicable after the exercise
of an ISO, the Company shall deliver or cause to be delivered to the Optionee
exercising the ISO a certificate or certificates representing the Shares
purchased upon the exercise. Certificates representing Shares to be delivered
to an Optionee will be registered in the name of the Optionee.
5.9.2 Certificates representing Shares to be delivered to a
participating employee under the Plan will be registered in the name of the
participating employee, or if the participating employee so directs, by written
notice to the Company, and to the extent permitted by applicable law, in the
names of the participating employee and one such other person as may be
designated by the participating employee, as joint tenants with rights of
survivorship.
5.10 RIGHTS AS A STOCKHOLDER. An Optionee shall have no rights as a
stockholder with respect to any Shares covered by his or her ISO until the date
on which he or she becomes a record owner of the Shares purchased upon the
exercise of the Option (the "record ownership date"). No adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash, securities or
other property), distributions, or other rights for which the record date is
prior to the record ownership date, except as provided in Article 9.
5.11 MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the
terms and conditions and within the limitations of the Plan, the Committee may
modify outstanding ISOs granted under the Plan, or accept the surrender of
outstanding ISOs (to the extent not theretofore exercised) and authorize the
granting of new Options in substitution therefor (to the extent not theretofore
exercised). The Committee shall not, however, modify any outstanding ISO so as
to specify a lower option price or accept the surrender of outstanding ISOs and
authorize the granting of new Options in substitution therefor specifying a
lower option price. Notwithstanding the foregoing, however, no modification of
an ISO shall, without the consent of the Optionee, alter or impair any of the
rights or obligations under any ISO theretofore granted under the Plan.
5.12 LISTING AND REGISTRATION OF SHARES. Each ISO shall be subject
to the requirement that if at any time the Committee shall determine, in its
discretion, that the listing, registration or qualification of the Shares
covered thereby upon any securities exchange or under any state or federal laws,
or the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of such ISO or
the issuance or purchase of Shares thereunder, such ISO may not be exercised
unless and until such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Committee. Notwithstanding anything in the Plan to the contrary, if the
provisions of this Section
7
<PAGE> 8
become operative, and if, as a result thereof, the exercise of an ISO is
delayed, then and in that event, the term of the ISO shall not be affected.
5.13 OTHER PROVISIONS. The ISO certificates or agreements
authorized under the Plan shall contain such other provisions, including,
without limitation, restrictions upon the exercise of the Option, as the
Committee shall deem advisable. Any such certificate or agreement shall
contain such limitations and restrictions upon the exercise of the ISO as shall
be necessary in order that such Option will be an incentive stock option as
defined in Section 422 of the Code, or to conform to any change in the law.
ARTICLE 6
TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS
6.1 GRANT. Any NSO granted pursuant to the Plan shall be
authorized by the Committee and shall be evidenced by certificates or
agreements in such form as the Committee from time to time shall approve, which
certificates or agreements shall comply with and be subject to the terms and
conditions hereinafter specified. Upon the granting of any NSO, the Committee
shall promptly cause the Optionee to be notified of the fact that such Option
has been granted. The date on which the Committee approves the grant of a NSO
shall be considered to be the date on which such Option is granted.
6.2 NUMBER OF SHARES. Each NSO shall state the number of Shares
to which it pertains.
6.3 OPTION PRICE. Each NSO shall state the option price, which
option price shall be determined by the Committee in its discretion and may be
equal to, less than or greater than 100% of the Fair Market Value of the Shares
on the date of grant.
6.4 METHOD OF EXERCISE. An Optionee may exercise a NSO during
such time as may be permitted by the Option and the Plan by providing written
notice to the Committee, tendering the purchase price in accordance with the
provisions of Section 6.5, and complying with any other exercise requirements
contained in the Option or promulgated from time to time by the Committee.
6.5 METHOD OF PAYMENT. Payment of the option price upon the
exercise of the NSO shall be: (a) in United States dollars in cash or by check,
bank draft or money order payable to the order of the Company; (b) in the
discretion of and in the manner determined by the Committee, by the delivery of
Shares already owned by the Optionee; (c) by any other legally permissible
means acceptable to the Committee at the time of grant of the Option (including
cashless exercise as permitted under the Federal Reserve Board's Regulation T,
subject to applicable legal restrictions); or in the discretion of the
Committee, through a combination of (a), (b) and (c) of this Section. If the
option price is paid in whole or in part through the delivery of Shares, the
decision of the Committee with respect to the Fair Market Value of such Shares
shall be final and conclusive.
8
<PAGE> 9
6.6 TERM AND EXERCISE OF OPTIONS.
6.6.1 Unless otherwise specified in writing by the
Committee at the time of grant or in the Award Agreement, each NSO shall be
exercisable, in whole or in part, only in accordance with the following chart:
<TABLE>
<CAPTION>
-------------------------------------------------
Percentage of
Number of Years from Shares
Date Option is Granted Exercisable
-------------------------------------------------
<S> <C>
Less than 1 year 0%
-------------------------------------------------
1 year but less than 2 years 20%
-------------------------------------------------
2 years but less than 3 years 40%
-------------------------------------------------
3 years but less than 4 years 60%
-------------------------------------------------
4 years but less than 5 years 80%
-------------------------------------------------
5 years or more 100%
-------------------------------------------------
</TABLE>
6.6.2 To the extent not exercised, exercisable
installments of NSOs shall be exercisable, in whole or in part, in any
subsequent period, but not later than the expiration date of the Option. The
Committee shall determine the expiration date of the Option at the time of the
grant of the Option; provided, however, that no NSO shall be exercisable after
the expiration of ten (10) years from the date it is granted. Not less than
one hundred (100) Shares may be exercised at any one time unless the number
exercised is the total number at the time exercisable under the Option.
6.6.3 Within the limits described above, the
Committee may impose additional requirements on the exercise of NSOs. When it
deems special circumstances to exist, the Committee in its discretion may
accelerate the time at which a NSO may be exercised if, under previously
established exercise terms, such Option was not immediately exercisable in
full, even if the acceleration would permit the Option to be exercised more
rapidly than the vesting set forth above in the chart, or as otherwise
specified by the Committee, would permit.
6.7 DEATH OR OTHER TERMINATION OF EMPLOYMENT.
6.7.1 In the event that an Optionee shall cease to
be employed by the Company or a Subsidiary for any reason other than his or her
death, subject to the conditions that no NSO shall be exercisable after its
expiration date, such Optionee shall have the right to exercise the NSO at any
time within ninety (90) days after such termination of employment to the extent
his or her right to exercise such Option had accrued pursuant to this Article 6
at the date of such termination and had not previously been exercised; such
ninety (90) day period shall be increased to one (1) year for any Optionee who
ceases to be employed by the Company or a Subsidiary because he is disable
(within the meaning of Section 22(e)( 3) of the Code) or who dies during the
ninety (90) day period and the Option may be exercised within such extended
time limit by the Optionee or in the case of death, the personal
representative of the Optionee or by any person or persons who shall have
acquired the Option directly from the Optionee by bequest or inheritance.
Whether an authorized leave of absence or absence for military or governmental
service shall constitute termination of employment for
9
<PAGE> 10
purposes of the Plan shall be determined by the Committee, whose determination
shall be final and conclusive.
6.7.2 In the event that an Optionee shall die while
in the employ of the Company or a Subsidiary and shall not have fully exercised
any NSO, the NSO may be exercised, subject to the conditions that no NSO shall
be exercisable after its expiration date, to the extent that the Optionee's
right to exercise such Option had accrued pursuant to this Article 6 at the
time of his or her death and had not previously been exercised, at any time
within one (1) year after the Optionee's death, by the personal representative
of the Optionee or by any person or persons who shall have acquired the Option
directly from the Optionee by bequest or inheritance.
6.7.3 No NSO shall be transferable by the Optionee
otherwise than by will or the laws of descent and distribution.
6.7.4 During the lifetime of the Optionee, an NSO
shall be exercisable only by him or her and shall not be assignable or
transferable, and no other person shall acquire any rights therein.
6.8 DELIVERY OF CERTIFICATES REPRESENTING SHARES.
6.8.1 As soon as practicable after the exercise of
a NSO, the Company shall deliver or cause to be delivered to the Optionee
exercising the NSO a certificate or certificates representing the Shares
purchased upon the exercise. Certificates representing Shares to be delivered
to a Optionee will be registered in the name of the Optionee.
6.8.2 Certificates representing Shares to be
delivered to a participating employee under the Plan will be registered in the
name of the participating employee, or if the participating employee so
directs, by written notice to the Company, and to the extent permitted by
applicable law, in the names of the participating employee and one such other
person as may be designated by the participating employee, as joint tenants
with rights of survivorship.
6.9 RIGHTS AS A STOCKHOLDER. An Optionee shall have no rights as
a stockholder with respect to any Shares covered by his or her NSO until the
date on which he or she becomes a record owner of the Shares purchased upon the
exercise of the Option (the "record ownership date"). No adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash, securities or
other property), distributions, or other rights for which the record date is
prior to the record ownership date, except as provided in Article 9.
6.10 MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the
terms and conditions and within the limitations of the Plan, the Committee may
modify outstanding NSOs granted under the Plan, or accept the surrender of
outstanding NSOs (to the extent not theretofore exercised) and authorize the
granting of new Options in substitution therefor (to the extent not theretofore
exercised). The Committee shall not, however, modify any outstanding NSO so as
to specify a lower option price or accept the surrender of outstanding NSOs and
authorize the granting of new Options in substitution therefor specifying a
lower option price. Notwithstanding the foregoing, however, no modification of
an NSO shall, without the consent of the Optionee, alter or impair any of the
rights or obligations under any NSO theretofore granted under the Plan.
10
<PAGE> 11
6.11 LISTING AND REGISTRATION OF SHARES. Each NSO shall be subject
to the requirement that if at any time the Committee shall determine, in its
discretion, that the listing, registration or qualification of the Shares
covered thereby upon any securities exchange or under any state or federal
laws, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting
of such NSO or the issuance or purchase of shares thereunder, such NSO may not
be exercised unless and until such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Committee. Notwithstanding anything in the Plan to the
contrary, if the provisions of this Section become operative, and if, as a
result thereof, the exercise of a NSO is delayed, then and in that event, the
term of the NSO shall not be affected.
6.12 OTHER PROVISIONS. The NSO certificates or agreements
authorized under the Plan shall contain such other provisions, including,
without limitation, restrictions upon the exercise of the Option, as the
Committee shall deem advisable.
ARTICLE 7
STOCK APPRECIATION RIGHTS
7.1 GRANT. The Committee, in its sole discretion, from time to
time may authorize the grant of SARs to a Participant. An SAR may be granted
in connection with all or any portion of a previously or contemporaneously
granted Award (other than an SAR), or by itself and not in connection with any
other Award. An SAR may be granted at the time of grant of the related Option
and shall be subject to the same terms and conditions as the related Option,
except as this Article 7 may otherwise provide. The grant of SAR shall be
evidenced either by provisions in the Option to which it relates or by a
separate written agreement between the Company and the Participant, which shall
comply with and be subject to the terms and conditions of the Plan and shall be
in such form as the Committee from time to time shall approve (an "SAR
Agreement"). The SAR Agreement may contain such additional terms, conditions
or limitations, not inconsistent with the specific provisions of the Plan, as
may be approved by the Committee in it sole discretion.
7.2 TERMS AND CONDITIONS. Each SAR granted under the Plan shall
be exercisable or payable at such time or times, or upon the occurrence of such
event or events, and in such amounts or types of consideration (including cash
or Shares) as the Committee shall specify in the SAR Agreement. Subsequent to
the grant of an SAR, the Committee, at any time before complete termination of
such SAR, may accelerate the time or times at which such SAR may be exercised
or paid in whole or in part.
7.3 EXERCISE.
7.3.1 An SAR shall be exercised by surrendering the
SAR Agreement or, if the SAR was granted in connection with an Option, the
surrender of the related Option together with any SAR Agreement, or the
portion(s) thereof pertaining to the Shares with respect to which the SAR is
11
<PAGE> 12
exercised, and providing the Company with a written notice in such form and
containing such information (including the number of Shares with respect to
which the SAR is being exercised) as the SAR Agreement or the Committee may
specify. The date on which the Company receives such surrender and notice
shall be the date on which the related Option, or portion thereof, shall be
deemed surrendered and the SAR shall be deemed exercised.
7.3.2 An SAR granted in connection with an Option shall be
exercisable only at such time or times, to such extent and by such persons as
the Option to which it relates shall be exercisable, provided that an SAR
granted in connection with an ISO shall not be exercisable on any date on which
the Fair Market Value of a Share is less than or equal to the per share
exercise price of the ISO. An SAR shall be canceled when, and to the extent
that, any related Option is exercised, and an Option shall be canceled when,
and to the extent that, the Option is surrendered to the Company upon the
exercise of a related SAR.
7.4 PAYMENT. To effect payment or exercise of an SAR, the Company
shall make payment to the Participant in cash or Shares (valued at their Fair
Market Value on the date of payment or exercise) or in combination of cash and
Shares as provided in the SAR Agreement. If payment is to be made in Shares,
upon such exercise, the Participant shall be entitled to receive that number of
Shares which have an aggregate Fair Market Value on the exercise date equal to
the amount by which the Fair Market Value of one Share on the exercise date
exceeds the Option price per share of any related Option or the Fair Market
Value on the date of grant of the SAR, as the case may be, multiplied by the
number of Shares covered by the related Option or the SAR, as the case may be,
or portion thereof, surrendered in connection with the exercise of the SAR.
7.5 EXPIRATION. An SAR granted in connection with or related to
an Option, unless previously exercised or canceled, shall expire upon the
expiration of the Option to which it relates. Any other SAR, unless previously
exercised or canceled, shall expire upon the tenth anniversary of its grant.
The exercise of an SAR granted in connection with an Option shall result in a
pro rata surrender or cancellation of any related Option to the extent the SAR
has been exercised.
7.6 DEATH OR OTHER TERMINATION OF EMPLOYMENT.
7.6.1 In the event that a Participant shall cease to be
employed by the Company or a Subsidiary for any reason other than his or her
death, subject to the conditions that no SAR shall be exercisable after its
expiration date, such Participant shall have the right to exercise the SAR at
any time within ninety (90) days after such termination of employment to the
extent his or her right to exercise such SAR had accrued pursuant to this
Article 7 at the date of such termination and had not previously been
exercised; such ninety (90) day period shall be increased to one (1) year for
any Participant who ceases to be employed by the Company or a Subsidiary
because he is disabled (within the meaning of Section 22(e)(3) of the Code) or
who dies during the ninety (90) day and the SAR may be exercised within such
extended time limit by the Participant or, in the case of death, the personal
representative of the Participant or by any person or persons who shall have
acquired the SAR directly from the Participant by bequest or inheritance.
Whether an authorized leave of absence or absence for military or governmental
service shall constitute termination of employment for purposes of the Plan
shall be determined by the Committee, whose determination shall be final and
conclusive.
12
<PAGE> 13
7.6.2 In the event that a Participant shall die while in
the employ of the Company or a Subsidiary and shall not have fully exercised
any SAR, the SAR may be exercised, subject to the conditions that no SAR shall
be exercisable after its expiration date, to the extent that a Participant's
right to exercise such SAR had accrued in accordance with the provisions of
this Article 7 at the time of his or her death and had not previously been
exercised, at any time within one (1) year after a Participant's death, by the
personal representative of a Participant or by any person or persons who shall
have acquired the SAR directly from a Participant by bequest or inheritance.
7.6.3 No SAR shall be transferable by a Participant
otherwise than by will or the laws of descent and distribution.
7.6.4 During the lifetime of a Participant, an SAR shall be
exercisable only by him or her and shall not be assignable or transferable, and
no other person shall acquire any rights therein.
7.7 DELIVERY OF CERTIFICATES REPRESENTING SHARES. As soon as
practicable after the exercise or payment of an SAR payable in whole or in part
in Shares, the Company shall deliver or cause to be delivered to the
Participant exercising the SAR for Shares a certificate or certificates
representing the Shares issuable upon such purchase or exercise. Certificates
representing Shares to be delivered to a Participant will be registered in the
name of the Participant or if the Participant so directs, by written notice to
the Company, and to the extent permitted by applicable law, in the names of the
Participant and one such other person as may be designated by the Participant,
as joint tenants with rights of survivorship.
7.8 LISTING AND REGISTRATION OF SHARES. Each SAR shall be
subject to the requirement that if at any time the Committee shall determine,
in its discretion, that the listing, registration or qualification of any
Shares covered thereby upon any securities exchange or under any state or
federal laws, or the consent or approval of any governmental regulatory body,
is necessary or desirable as a condition of, or in connection with, the
granting of such Option or the issuance or purchase of shares thereunder, such
SAR may not be paid or exercised unless and until such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Committee. Notwithstanding anything in
the Plan to the contrary, if the provisions of this Section become operative,
and if, as a result thereof, the exercise of an SAR is delayed, then and in
that event, the term of the SAR shall not be affected.
7.9 RIGHTS AS A STOCKHOLDER. In general, the holder of an SAR
shall have no rights as a stockholder. The holder of an SAR under which Shares
are issuable upon payment or exercise shall have no rights as a stockholder of
the Company until the date on which he or she becomes a record owner of the
Shares issued upon the payment or exercise of the SAR (the "record ownership
date"). No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property), distributions, or other rights
for which the record date is prior to the record ownership date, except as
provided in Article 7.
13
<PAGE> 14
ARTICLE 8
RESTRICTED SHARES
8.1 GENERAL. The Committee, in its sole discretion, from time to
time may authorize the grant of Restricted Shares to a Participant. In making
any such grant of Restricted Shares, the Committee may grant Restricted Shares
without the requirement of any cash payment or may require a cash payment from
a Participant in an amount no greater than the aggregate Fair Market Value of
the Restricted Shares as of the date of grant in exchange for, or as a
condition precedent to, the completion of the grant and the issuance of the
Restricted Shares.
8.2 RESTRICTION PERIOD. All Restricted Shares issued under
Article 8 shall be subject to certain restrictions as set forth in Section 8.3,
which restrictions shall continue in effect for such period of time as is
specified in the Award Agreement (the "Restriction Period"). The Award
Agreement may contain such additional terms, conditions or limitations, not
inconsistent with the specific provisions of the Plan, as may be approved by
the Committee in it sole discretion.
8.3 CERTAIN RESTRICTIONS. Until the expiration of the
Restriction Period, Restricted Shares shall be subject to the following
restrictions: (a) the Participant shall not be entitled to take possession of
the certificate or certificates representing the Shares; (b) the Restricted
Shares may not be sold, transferred, assigned, pledged, conveyed, hypothecated
or otherwise disposed of (other than by operation of law); and (c) the Shares
may be forfeited immediately as provided in Section 8.4. In addition, the
Committee, as specified in writing at the time of grant or in the Award
Agreement, may condition the right to receive Restricted Shares upon the
satisfaction of such additional terms, conditions or limitations, including but
not limited to performance criteria, as may be approved by the Committee in
its sole discretion.
8.4 TERMINATION OF EMPLOYMENT. Unless otherwise specified by the
Committee in writing at the time of the Award or in the Award Agreement, if the
employment of a Participant is terminated for any reason other the death or
disability (within the meaning of Section 22(e)(3) of the Code) of a
Participant in service before the expiration of the Restriction Period, the
Restricted Shares shall be forfeited immediately and all rights of a
Participant to such Shares shall terminate immediately without further
obligation on the part of the Company. Unless otherwise specified by the
Committee in writing at the time of the Award or in the Award Agreement, if a
Participant's employment is terminated by reason of the death or disability
(within the meaning of Section 22(e)(3) of the Code) of a Participant in
service before the expiration of the Restriction Period, (a) the number of
Restricted Shares held by the Company for a Participant's account pursuant to
Section 8.6 shall be reduced by partial forfeiture in an amount of Restricted
Shares in proportion equal to the percentage of the total Restriction Period
remaining after a Participant's termination of employment, (b) the restrictions
on the unforfeited balance of such Restricted Shares shall lapse on the date a
Participant's employment terminated and (c) subject to the safekeeping
provisions of Section 8.6, the certificate or certificates representing the
Shares upon which the restrictions have lapsed shall be delivered to a
Participant (or, in the event of a Participant's death, to his or her legal
representative).
8.5 DISTRIBUTION OF RESTRICTED SHARES. If a Participant to whom
Restricted Shares have been issued pursuant to Article 8 remains in the
continuous employment of the Company or a Subsidiary until the expiration or
waiver by the Board of the Restriction Period and the satisfaction of any other
conditions imposed by the Award Agreement, all restrictions applicable to the
Restricted
14
<PAGE> 15
Shares at that time still outstanding and registered in the name of a
Participant shall lapse and, subject to the safekeeping provisions of Section
8.6, the certificate or certificates representing the Shares that were granted
to the Participant shall be delivered to the Participant.
8.6 DELIVERY OF CERTIFICATES REPRESENTING SHARES.
8.6.1 As soon as practicable after a grant of Restricted
Shares, unless the Award Agreement provides for a different issuance procedure,
the Company shall issue certificates representing the Restricted Shares
registered in the name of the holder of Restricted Shares.
8.6.2 To administer the restrictions imposed on Restricted
Shares under the Plan and the Award Agreement, certificates representing
Restricted Shares (to the extent they are issued under the Award Agreement
prior to satisfaction of such restrictions) shall not be delivered to
Participants but shall be delivered to the Company to be held by the Company as
safekeeping agent for the benefit of each Participant. A written safekeeping
receipt evidencing the Shares so held in safekeeping, bearing the name of the
Participant, indicating the number of the certificate or certificates and the
number of Shares so represented shall be delivered promptly to each
Participant. In its capacity as safekeeping agent for Participants, the
Company shall act in accordance with instructions received from such
Participants, which instructions are to be confirmed in writing if deemed
appropriate by the Company. The safekeeping agency shall not affect the rights
of Participants as owners of Restricted Shares, nor shall such agency affect
the restrictions imposed on Restricted Shares under the Plan or the Award
Agreement.
8.6.3 Upon the lapse, satisfaction or waiver of the
Restriction Period and any other restrictions imposed on Restricted Shares
under the Plan or the Award Agreement, any safekeeping agency arrangement
adopted pursuant to Section 8.6.2 shall terminate and the certificates
representing the Shares owned by Participants, registered in the name(s) of the
Participants, shall be delivered promptly to such Participants.
8.7 WAIVER OF RESTRICTIONS. The Committee, in its sole
discretion, may at any time waive or accelerate the expiration of any or all
restrictions with respect to Restricted Shares issued pursuant to this Article
8.
8.8 RIGHTS AS A STOCKHOLDER. A Participant receiving Restricted
Shares shall have no rights as a stockholder with respect to any Restricted
Shares grant to him or her under the Plan until the date on which he or she
becomes a record owner of the Restricted Shares (the "record ownership date").
No adjustment shall be made for dividends (ordinary or extraordinary, whether
in cash, securities or other property), distributions, or other rights for
which the record date is prior to the record ownership date, except as provided
in Article 9.
15
<PAGE> 16
ARTICLE 9
MISCELLANEOUS
9.1 STOCK ADJUSTMENTS.
9.1.1 In the event of any increase or decrease in the number
of issued Shares resulting from a stock split or other division or
consolidation of shares or the payment of a stock dividend (but only on Shares)
or any other increase or decrease in the number of Shares effected without any
receipt of consideration by the Company, then, in any such event, the number of
Shares that remain available under the Plan, the number of Shares covered by
each outstanding Option, the exercise price per Share covered by each
outstanding Option, the number of Shares covered by each outstanding SAR and
the price per Share and the number and any purchase price for any Restricted
Shares granted but not yet issued, in each case, shall be proportionately and
appropriately adjusted for any such increase or decrease.
9.1.2 Subject to any required action by the stockholders, if
any change occurs in the Shares by reason of any recapitalization,
reorganization, merger, consolidation, split-up, combination or exchange of
shares, or of any similar change affecting Shares, then, in any such event, the
number and type of Shares then covered by each outstanding Option, the purchase
price per Share covered by each outstanding Option, the number of Shares
covered by each outstanding SAR and the exercise price per Share and the number
and any purchase price for any Restricted Shares granted but not yet issued, in
each case, shall be proportionately and appropriately adjusted for any such
change.
9.1.3 In the event of a change in the Shares as presently
constituted that is limited to a change of all of its authorized shares with
par value into the same number of shares with a different par value or without
par value, the shares resulting from any change shall be deemed to be Shares
within the meaning of the Plan.
9.1.4 To the extent that the foregoing adjustments relate to
stock or securities of the Company, such adjustments shall be made by, and in
the discretion of, the Committee, whose determination in that respect shall be
final, binding and conclusive; provided, however, that any Option granted
pursuant to Article 5 shall not be adjusted in a manner that causes such Option
to fail to continue to qualify as an incentive stock option within the meaning
of Section 422 of the Code.
9.1.5 Except as hereinabove expressly provided in this
Section, an Eligible Employee or a Participant shall have no rights by reason
of any division or consolidation of shares of stock of any class or the payment
of any stock dividend or any other increase or decrease the number of shares of
stock of any class or by reason of any dissolution, liquidation, merger or
consolidation, or spin-off of assets or stock of another corporation; and any
issuance by the Company of shares of stock of any class, securities convertible
into shares of stock of any class, or warrants or options for shares of stock
of any class shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of Shares, any Option, any SAR or any
Restricted Shares granted but not yet issued.
16
<PAGE> 17
9.1.6 The existence of the Plan, or the grant of an Option,
SAR or Restricted Shares under the Plan, shall not affect in any way the right
or power of the Company to make adjustments, reclassifications, reorganizations
or changes of its capital or business structure or to merge or to consolidate,
or to dissolve, to liquidate, to sell, or to transfer all or any part of its
business or assets.
9.2 TAX ABSORPTION PAYMENTS. The Company may, but is not
required to, make a cash payment, either directly to any Participant or on a
Participant's behalf, in an amount that the Committee estimates to be equal
(after taking into account any federal and state taxes that the Committee
estimates to be applicable to such cash payment) to any additional federal and
state income taxes that are imposed upon a Participant as a result of the
granting of any Award under the Plan (a "Tax Absorption Payment"). In
determining the amount of any Tax Absorption Payment, the Committee may adopt
such methods and assumptions as it considers appropriate, and it shall not be
required to examine the individual tax liability of any Participant. The
decision to make any Tax Absorption Payment shall be made by the Committee at
the same time as the grant of the Award to which it relates.
9.3 AMENDMENT OF THE PLAN; TERMINATION. The Board shall have the
right to revise, amend or terminate the Plan at any time without notice,
provided that no Participant's existing rights are adversely affected thereby
without the consent of such person, and provided further that, without approval
of the stockholders of the Company, no such revision or amendment shall (a)
increase the total number of Shares subject to the Plan; (b) decrease the price
at which ISOs may be granted; (c) materially modify the requirements as to
eligibility for participation in the Plan; (d) otherwise materially increase
the benefits under the Plan; or (e) remove the administration of the Plan from
the Committee. The foregoing prohibitions in this Section shall not be
affected by adjustments in shares and purchase price made in accordance with
the provisions of Section 9.1.
9.4 APPLICATION OF FUNDS. The proceeds received by the Company
from the sale of Shares or the exercise of Awards pursuant to the Plan will be
used for general corporate purposes.
9.5 NO IMPLIED RIGHTS TO EMPLOYEES. The existence of the Plan and
the granting of Awards under the Plan shall in no way give any employee the
right to continued employment or the right to receive any additional Awards or
any additional compensation under the Plan, or otherwise provide any employee
any rights not specifically set forth in the Plan or in any Option, SAR or
Award Agreement.
9.6 WITHHOLDING. Whenever the Company proposes or is required to
issue or transfer Awards under the Plan, the Company shall have the right to
require a Participant to remit to the Company an amount sufficient to satisfy
any federal, state or local withholding tax liability prior to the delivery of
any certificate or certificates for such shares. Whenever under the Plan
payments are to be made in cash, such payments shall be made net of an amount
sufficient to satisfy any federal, state or local withholding tax liability.
9.7 CONDITIONS PRECEDENT TO EFFECTIVENESS. Subject to the
approval of the Plan by the stockholders of the Company within 12 months after
its adoption by the Board of Directors, the Plan shall become effective upon
the satisfaction of all the following conditions, with the Effective Date
17
<PAGE> 18
of the Plan after the completion of such adoption procedures being the date
that the last of the following conditions is satisfied:
9.7.1 the adoption of the Plan by the Board of Directors; and
9.7.2 the consummation of the distribution to holders of common
stock, without par value, of Florida Progress Corporation of all outstanding
Shares of the Company.
18
<PAGE> 1
Exhibit 10.9
ECHELON INTERNATIONAL CORPORATION
NON-EMPLOYEE DIRECTORS' STOCK
PLAN
ARTICLE 1
GENERAL
1.1 PURPOSE. The purpose of the Echelon International Corporation
Non-Employee Directors' Stock Plan is to secure for Echelon International
Corporation and its stockholders the benefits of the incentive inherent in
increased common stock ownership by the members of the Board of Directors of
the Company who are not employees of the Company or any of its subsidiaries.
1.2 MAXIMUM NUMBER OF SHARES. The maximum number of shares of
Common Stock that may be offered under the Plan is 25,000, subject to
adjustment as provided in Section 4.1 below. The Common Stock to be issued may
be either authorized and unissued shares or issued shares acquired by the
Company or its Subsidiaries. In the event that Options granted under the Plan
shall terminate or expire without being exercised in whole or in part, new
Options may be granted covering the shares not purchased under such lapsed
Options.
1.3 DEFINITIONS. The following words and terms as used herein
shall have that meaning set forth therefor in this Section 1.3 unless a
different meaning is clearly required by the context. Whenever appropriate,
words used in the singular shall be deemed to include the plural and vice
versa, and the masculine gender shall be deemed to include the feminine gender.
1.3.1 "ANNUAL RETAINER" shall mean the annual retainer paid
to a Non-Employee Director each year for service on the Board of Directors of
the Company or Subsidiary.
1.3.2 "BOARD" or "BOARD OF DIRECTORS" shall mean the Board
of Directors of the Company.
1.3.3 "COMMON STOCK" shall mean the common stock of the
Company.
1.3.4 "COMPANY" shall mean Echelon International
Corporation, a Florida corporation, and any successor.
1.3.5 "EFFECTIVE DATE" is defined in Section 4.9.
1.3.6 "FAIR MARKET VALUE" of the shares of Common Stock
shall mean the closing price on the date in question (or, if no shares are
traded on such day, on the next preceding day on
<PAGE> 2
which shares were traded), of the Common Stock as reported on the Composite
Tape, or if not reported thereon, then such price as reported in the trading
reports of the principal securities exchange in the United States on which such
stock is listed, or if such stock is not listed on a securities exchange in the
United States, the mean between the dealer closing "bid" and "ask" prices on the
over-the-counter market as reported by the National Association of Security
Dealers Automated Quotation System (NASDAQ), or NASDAQ's successor, or if not
reported on NASDAQ, the fair market value of such stock as determined by the
Board in good faith and based on all relevant factors.
1.3.7 "NSO" shall mean a nonqualified stock option granted
in accordance with the provisions of Article 3 of this Plan.
1.3.8 "NON-EMPLOYEE DIRECTOR" shall mean a member of the
Board of Directors of the Company who is not an employee of the Company or any
Subsidiary.
1.3.9 "OPTION" shall mean an NSO.
1.3.10 "OPTIONEE" shall mean a Non-Employee Director to whom
an Option is granted under the Plan.
1.3.11 "PLAN" shall mean the Echelon International
Corporation Non-Employee Directors' Stock Plan, as set forth herein and as
amended from time to time.
1.3.12 "SUBSIDIARY" shall mean any corporation that at the
time qualifies as a subsidiary of the Company under the definition of
"subsidiary corporation" contained in Section 424(f) of the Internal Revenue
Code of 1986, as amended.
1.4 ADMINISTRATION. The Plan shall be administered by the Board.
The Board shall have all the powers vested in it by the terms of the Plan, such
powers to include authority (within the limitations described herein) to
prescribe the form of the agreement embodying awards of nonqualified stock
options made under the Plan. The Board shall, subject to the provisions of the
Plan, issue shares of the Company's Common Stock in payment of the Annual
Retainer, grant Options under the Plan and shall have the power to construe the
Plan, to determine all questions arising thereunder and to adopt and amend such
rules and regulations for the administration of the Plan as it may deem
desirable. Any decision of the Board in the administration of the Plan, as
described herein, shall be final and conclusive. The Board may act only by a
majority of its members in office, except that the members thereof may
authorize any one or more of their number or the Secretary or any other officer
of the Company to execute and deliver documents on behalf of the Board. No
member of the Board shall be liable for anything done or omitted to be done by
such member or by any other member of the Board in connection with the Plan,
except for such member's own willful misconduct or as expressly provided by
statute.
1.5 ELIGIBILITY REQUIREMENTS. Each Non-Employee Director shall be
eligible to receive an Annual Retainer payable in shares of the Common Stock in
accordance with Article 2 below and shall be eligible to receive Options in
accordance with Article 3 below. The adoption of this Plan shall
2.
<PAGE> 3
not be deemed to give any director any right to receive shares of the Common
Stock or be granted options to purchase Common Stock of the Company, except to
the extent and upon such terms and conditions as set forth in this Plan.
ARTICLE 2
TERMS AND CONDITIONS OF ANNUAL RETAINER
2.1 PAYMENT OF ANNUAL RETAINER IN STOCK. Each Non-Employee
Director shall automatically receive his or her Annual Retainer in shares of
Common Stock in accordance with Section 2.2.
2.2 ISSUANCE OF STOCK. Shares of Common Stock due a Non-Employee
Director pursuant to this Article 2 shall be issued on a quarterly basis in
arrears on March 31, June 30, September 30 and December 31 of each year (each a
"Stock Issue Date"), and shall be paid in lieu of cash for services rendered
during the quarter ended on such Stock Issue Date. The total number of shares
of Common Stock to be issued on each Stock Issue Date shall be determined by
multiplying the Annual Retainer by twenty-five (25%) percent and then dividing
by the Fair Market Value of the Common Stock as of the first day of the
applicable quarter.
2.3 FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued, and Non-Employee Directors shall receive cash equal to the
Fair Market Value of any fractional shares on a Stock Issue Date.
2.4 NO ASSIGNMENT OF RIGHTS. Neither the Non-Employee Director
nor his or her legal representative shall have any right to sell, assign,
transfer or otherwise convey the right to receive any Common Stock due
hereunder or any interest under the Plan. Any attempt to assign or transfer
any right to payment or interest under the Plan shall be null and void and of
no effect.
2.5 RESTRICTIONS ON TRANSFER OF STOCK. Any shares of Common Stock
issued to any Non-Employee Director under the Plan may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of unless and until
either: (a) the shares of Common Stock have been held by the Non-Employee
Director for six months from the date of issuance, or (b) the shares of Common
Stock are otherwise transferred in a manner that complies with the requirements
of Rule 16b-3 so that the transaction is exempt from characterization as a
"sale" under Section 16(b) of the Exchange Act. The shares of Common Stock
issued to any Non-Employee Director shall bear an appropriate restrictive
legend, if issued in certificated form, and be subject to appropriate "stop
transfer" orders. Any additional stock or other securities or property that
may be issued with respect to shares of Common Stock issued under the Plan as a
result of any stock dividend, stock split, business combination or other event
shall be subject to the restrictions and other terms and conditions of the
Plan.
3.
<PAGE> 4
ARTICLE 3
TERMS AND CONDITIONS OF OPTIONS
3.1 GRANT. Options granted under the Plan shall be evidenced by
an agreement in such form as the Board shall prescribe from time to time in
accordance with the Plan and shall comply with the terms and conditions set
forth under this Article 3. The date of the Annual Meeting of Stockholders
shall be the date of grant of the Options.
3.2 NUMBER OF SHARES. Each year, as of the date of the Annual
Meeting of Stockholders of the Company, each Non-Employee Director who has been
elected or reelected or who is continuing as a member of the Board as of the
adjournment of the Annual Meeting shall automatically receive an Option for
1,000 shares of Common Stock.
3.3 OPTION PRICE. The Option exercise price shall be the Fair
Market Value of the Common Stock on the date of the Annual Meeting of
Stockholders.
3.4 METHOD OF EXERCISE. An Option may be exercised by a
Non-Employee Director during such time as may be permitted by the Option and
the Plan by providing written notice to the Board and tendering the purchase
price in accordance with the provisions of Section 3.5, and complying with any
other exercise requirements contained in the Option or promulgated from time to
time by the Board.
3.5 METHOD OF PAYMENT. Each Option shall state the method of
payment of the Option price upon the exercise of the Option. The method of
payment stated in the Option shall include payment (a) in United States dollars
in cash or by check, bank draft or money order payable to the order of the
Company, (b) in the discretion of and in the manner determined by the Board, by
the delivery of shares of Common Stock already owned by the Optionee, (c) by
any other legally permissible means acceptable to the Board at the time of the
grant of the Option (including cashless exercise as permitted under the Federal
Reserve Board's Regulation T, subject to applicable legal restrictions), or (d)
in the discretion of the Board, through a combination of (a), (b) and (c) of
this Section 3.5. If the option price is paid in whole or in part through the
delivery of shares of Common Stock, the decision of the Board with respect to
the fair market value of such shares shall be final and conclusive.
3.6 TERM AND EXERCISE OF OPTIONS.
3.6.1 One hundred percent (100%) of the total number of
shares of Common Stock covered by the Option shall become exercisable beginning
with the first anniversary date of the grant of the Option and shall be
exercisable by the Non-Employee Director for a period of five (5) years from
the date of grant. Not less than one hundred (100) shares may be exercised at
any one time unless the number exercised is the total number at the time
exercisable under the Option.
3.6.2 Notwithstanding the foregoing, no Option or any part
of an Option shall be exercisable (a) before the Non-Employee Director has
served one term-year as a member of the Board since the date such Option was
granted (as used herein, the term "term-year" means that period from one Annual
4.
<PAGE> 5
Meeting to the subsequent Annual Meeting), (b) after the expiration of five (5)
years from the date the Option was granted, and (c) unless written notice of the
exercise is delivered to the Company specifying the number of shares to be
purchased and payment in full is made for the shares of Common Stock being
acquired thereunder at the time of exercise.
3.7 DEATH OR OTHER TERMINATION OF POSITION AS A DIRECTOR. Subject
to the provisions of Section 3.6 above:
3.7.1 In the event that a Non-Employee Director (a) shall
be removed as a director for dishonesty or violation of his fiduciary duty to
the Company, (b) shall voluntarily resign under or followed by such
circumstances as would constitute a violation of his fiduciary duty to the
Company, or (c) shall have committed an act of dishonesty not discovered by the
Company prior to the cessation of his employment but that would have resulted
in his removal if discovered prior to such date, then forthwith from the
happening of any such event, any Option then held by him shall terminate and
become void to the extent that it them remains unexercised.
3.7.2 If a person shall cease to be a Non-Employee Director
for any reason other than one or more of the reasons set forth in section
3.7.1, such person, or in the case of death, the executors, administrators or
distributees, as the case may be, may, at any time prior to the date of the
expiration of the Option, exercise the Option with respect to any shares of
Common Stock as to which such person has not exercised the Option on the date
the person ceased to be such a Non-Employee Director.
3.7.3 In the event any Option is exercised by the
executors, administrators, legatees or distributees of the estate of a deceased
Optionee, the Company shall be under no obligation to issue Common Stock
thereunder unless and until the Company is satisfied that the person or persons
exercising the Option are the duly appointed legal representatives of the
deceased Optionee's estate or the proper legatees or distributees thereof.
3.8 TRANSFERABILITY OF OPTIONS. The Option shall not be
transferable by the Optionee otherwise than by will or the laws of descent and
distribution, and shall be exercisable during his lifetime only by him.
3.9 DELIVERY OF CERTIFICATES REPRESENTING SHARES. As soon as
practicable after the exercise of an Option, the Company shall deliver, or
cause to be delivered, to the Non-Employee Director exercising the Option, a
certificate or certificates representing the shares of Common Stock purchased
upon the exercise. Certificates representing shares of Common Stock to be
delivered to a Non-Employee Director shall be registered in the name of such
director.
3.10 RIGHTS AS A STOCKHOLDER. A Non-Employee Director shall have
no rights as a stockholder with respect to any shares of Common Stock covered
by his or her Option until the date on which he or she becomes a record owner
of the shares purchased upon the exercise of the Option (the "record ownership
date"). No adjustment shall be made for dividends (ordinary or extraordinary,
5.
<PAGE> 6
whether in cash, securities or other property), distributions, or other rights
for which the record date is prior to the record ownership date, except as
provided in Article 4.
ARTICLE 4
MISCELLANEOUS
4.1 STOCK ADJUSTMENTS.
4.1.1 In the event of any increase or decrease in the number of is
sued shares of Common Stock resulting from a stock split or other division or
consolidation of shares or the payment of a stock dividend (but only on the
Common Stock) or any other increase or decrease in the number of such shares
effected without any receipt of consideration by the Company, then, in any such
event, the number of shares of Common Stock that remain available under the
Plan, the number of shares of Common Stock covered by each outstanding Option,
and the purchase price per share of Common Stock covered by each outstanding
Option shall be proportionately and appropriately adjusted for any such
increase or decrease.
4.1.2 Subject to any required action by the stockholders, if any
change occurs in the shares of Common Stock by reason of any recapitalization,
reorganization, merger, consolidation, split-up, combination or exchange of
shares, or of any similar change affecting the shares of Common Stock, then, in
any such event, the number and type of shares covered by each outstanding
Option, and the purchase price per share of Common Stock covered by each
outstanding Option, shall be proportionately and appropriately adjusted for any
such change. A dissolution or liquidation of the Company shall cause each
outstanding Option to terminate.
4.1.3 In the event of a change in the Common Stock as presently
constituted that is limited to a change of all of its authorized shares with
par value into the same number of shares with a different par value or without
par value, the shares resulting from any change shall be deemed to be shares of
Common Stock within the meaning of the Plan.
4.1.4 Except as hereinabove expressly provided in this Section
4.1, a Non-Employee Director shall have no rights by reason of any division or
consolidation of shares of stock of any class or the payment of any stock
dividend or any other increase or decrease in the number of shares of stock of
any class or by reason of any dissolution, liquidation, merger or
consolidation, or spin-off of assets or stock of another corporation; and any
issuance by the Company of shares of stock of any class, securities convertible
into shares of stock of any class, or warrants or options for shares of stock
of any class shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares of Common Stock subject to
the Option.
4.1.5 The grant of any Option pursuant to the Plan shall not
affect in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of
6.
<PAGE> 7
its capital or business structure or to merge or to consolidate, or to dissolve,
to liquidate, to sell, or to transfer all or any part of its business or assets.
4.2 LISTING AND REGISTRATION OF SHARES. Each Option shall be
subject to the requirement that if at any time the Board shall determine, in
its discretion, that the listing, registration or qualification of the shares
of Common Stock covered thereby upon any securities exchange or under any state
or federal laws, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of, or in connection with, the
granting of such Option or the issuance or purchase of shares thereunder, such
Option may not be exercised unless and until such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Board. Notwithstanding anything in the
Plan to the contrary, if the provisions of this Section become operative, and
if, as a result thereof, the exercise of an Option is delayed, then and in that
event, the term of the Option shall not be affected.
4.3 NO IMPLIED RIGHTS TO DIRECTORS. Except as expressly provided
for in the Plan, no Non-Employee Director or other person shall have any claim
or right to be granted an Option under the Plan. Neither the Plan nor any
action taken hereunder shall be construed as giving any Non-Employee Director
any right to be retained in the service of the Company.
4.4 TERM OF THE PLAN. The Plan shall terminate upon the earlier
of the dates or events to occur: (a) upon the adoption of a resolution of the
Board terminating the Plan; or (b) ten years from the Effective Date.
4.5 AMENDMENT OF THE PLAN; TERMINATION. The Board may, insofar as
permitted by law, from time to time, with respect to any shares at the time not
subject to Options, suspend, discontinue or terminate the Plan or revise or
amend it in any respect whatsoever, except that, without approval of the
stockholders of the Company, no such revision or amendment shall change the
number of shares subject to the Plan, change the designation of the class of
employees eligible to receive Options, decrease the price at which Options may
be granted, otherwise materially increase the benefits accruing to Non-Employee
Directors under the Plan, or remove the administration of the Plan from the
Board. The foregoing prohibitions shall not be affected by adjustments in
shares and purchase price made in accordance with the provisions of Section
4.1.
4.6 APPLICATION OF FUNDS. The proceeds received by the Company
from the sale of Common Stock pursuant to Options will be used for general
corporate purposes.
4.7 NO OBLIGATION TO EXERCISE. The granting of any Option under
the Plan shall impose no obligation upon any Optionee to exercise such Option.
4.8 WITHHOLDING. Whenever the Company proposes or is required to
issue or transfer shares of Common Stock under the Plan, the Company shall have
the right to require the Optionee to remit to the Company an amount sufficient
to satisfy any federal, state or local withholding tax liability prior to the
delivery of any certificate or certificates for such shares. Whenever under
the Plan payments
7.
<PAGE> 8
are to be made in cash, such payments shall be made net of an amount sufficient
to satisfy any federal, state or local withholding tax liability.
4.9 CONDITIONS PRECEDENT TO EFFECTIVENESS. The Plan shall become
effective upon the satisfaction of all the following conditions, with the
Effective Date of the Plan being the date that the last such condition is
satisfied:
4.9.1 the adoption of the Plan by the Board of Directors;
and
4.9.2 the consummation of the distribution to holders of
common stock, without par value, of Florida Progress Corporation of all
outstanding shares of Common Stock.
8.
<PAGE> 1
Exhibit 10.10
ECHELON INTERNATIONAL CORPORATION
1996 STOCK OPTION PLAN
ARTICLE 1
GENERAL
1.1 PURPOSE. This incentive stock option and nonqualified stock
option plan (the "Plan") is established to promote the interests of Echelon
International Corporation (the "Company") and its stockholders by enabling the
Company, through the granting of stock options, to attract and retain executive
and other key team members of the Company and its subsidiaries, and to provide
additional incentive to such team members to increase their stock ownership in
the Company. It is intended that those Options issued pursuant to the
provisions of the Plan relating to incentive stock options shall constitute
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, and the regulations promulgated thereunder,
or any statute or regulation of similar import. The provisions of the Plan
with respect to incentive stock options, accordingly, shall be construed in a
manner consistent with the requirements of that section of the Code.
1.2 DEFINITIONS. The following words and terms as used herein
shall have that meaning set forth therefor in this Section 1.3 unless a
different meaning is clearly required by the context. Whenever appropriate,
words used in the singular shall be deemed to include the plural and vice
versa, and the masculine gender shall be deemed to include the feminine gender.
1.2.1 "BOARD" or "BOARD OF DIRECTORS" shall mean the Board
of Directors of the Company.
1.2.2 "CODE" shall mean the Internal Revenue Code of 1986,
as amended.
1.2.3 "COMMITTEE" is defined in Section 1.3
1.2.4 "COMMON STOCK" shall mean the common stock of the
Company.
1.2.5 "COMPANY" shall mean Echelon International
Corporation, a Florida corporation, and any successor.
1.2.6 "EFFECTIVE DATE" is defined in Section 4.8
1.2.7 "ELIGIBLE EMPLOYEE" shall mean any individual
employed by the Company or any Subsidiary who meets the eligibility
requirements of Section 1.4.
1.2.8 "FAIR MARKET VALUE" of the shares of Common Stock
shall mean the closing price, on the date in question (or, if no shares are
traded on such day, on the next preceding day on which shares were traded), of
the Common Stock as reported on the Composite Tape, or if not reported thereon,
then such price as reported in the trading reports of the principal securities
exchange in the United States on which such stock is listed, or if such stock is
not listed on a
<PAGE> 2
securities exchange in the United States, the mean between the dealer closing
"bid" and "ask" prices on the over-the-counter market as reported by the
National Association of Security Dealers Automated Quotation System (NASDAQ), or
NASDAQ's successor, or if not reported on NASDAQ, the fair market value of such
stock as determined by the Committee in good faith and based on all relevant
factors.
1.2.9 "ISO" shall mean an incentive stock option granted in
accordance with the provisions of Article 2 of this Plan.
1.2.10 "NSO" shall mean a nonqualified stock option granted
in accordance with the provisions of Article 3 of this Plan.
1.2.11 "OPTION" shall mean an ISO or a NSO.
1.2.12 "OPTIONEE" shall mean an Eligible Employee to whom an
Option is granted under the Plan.
1.2.13 "PLAN" shall mean the Echelon International
Corporation 1996 Stock Option Plan, as set forth herein and as amended from
time to time.
1.2.14 "SUBSIDIARY" shall mean any corporation that at the
time qualifies as a subsidiary of the Company under the definition of
"subsidiary corporation" contained in Section 424(f) of the Code.
1.2.15 "10% STOCKHOLDER" is defined in Section 2.2.
1.3 ADMINISTRATION
1.3.1 COMMITTEE. This Plan shall be administered by a
committee appointed by the Board of Directors (the "Committee"). The Committee
shall consist of not less than two (2) nor more than five (5) persons, each of
whom shall be a member of the Board, and none of whom shall be eligible to
participate under the Plan. The Board of Directors may from time to time
remove members from, or add members to, the Committee. Vacancies on the
Committee, howsoever caused, shall be filled by the Board of Directors. The
Committee shall have the sole power to determine who is and who is not an
Eligible Employee.
1.3.2 ORGANIZATION. The Committee shall select one of its
members as chairman, and shall hold meetings at such time and places as it may
determine. The acts of a majority of the Committee at which a quorum is
present, or acts reduced to or approved in writing by a majority of the members
of the Committee, shall be valid acts of the Committee.
1.3.3 POWER AND AUTHORITY. Subject to the provisions of
the Plan, the Committee shall have full authority, in its discretion: (1) to
determine the employees of the Company and its Subsidiaries to whom Options
shall be granted; (2) to determine the time or times at which Options shall be
granted; (3) to determine whether an Eligible Employee shall be granted an
incentive stock option, a nonqualified stock option or any combination thereof;
(4) to determine the option price of
2
<PAGE> 3
the shares subject to each Option; (5) to determine the time or times when each
Option becomes exercisable and the duration of any Option period; and (6) to
interpret the Plan and the Options granted hereunder, and to prescribe, amend
and rescind rules and regulations with respect thereto. The interpretation and
construction by the Committee of any provision of the Plan over which it has
discretionary authority or of any Option granted hereunder shall be final and
conclusive.
1.3.4 NO LIABILITY. No member of the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan or any Option granted hereunder.
1.4 ELIGIBLE EMPLOYEES. Any person, including any officer but not
a person who is solely a director, who is in the employ of the Company or any
Subsidiary on the date of a grant of an Option shall be an Eligible Employee,
able to participate in the Plan in accordance with the terms of the Plan, with
the exceptions only of (a) with respect to the incentive stock options granted
under the Plan, employees who cannot qualify for the benefits of incentive
stock options under Section 422 of the Code, and (b) with respect to all
provisions of the Plan, members of the Committee and any other members of the
Board who are not otherwise employees of the Company.
1.5 MAXIMUM NUMBER OF SHARES. The aggregate number of shares that
may be issued upon the exercise of Options granted under the Plan shall not
exceed 150,000 shares of Common Stock, which limitation shall be subject to
adjustment as provided in Section 4.1. If an Option is surrendered or for any
other reason ceases to be exercisable in whole or in part, the shares of Common
Stock that are subject to such Option, but as to which the Option has not been
exercised, shall again become available for offering under the Plan.
ARTICLE 2
TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS
2.1 GRANT. Any ISO granted pursuant to the Plan shall be
authorized by the Committee and shall be evidenced by certificates or
agreements in such form as the Committee from time to time shall approve, which
certificates or agreements shall comply with and be subject to the terms and
conditions hereinafter specified. The date on which the Committee approves the
grant of an ISO shall be considered to the date on which the ISO is granted.
2.2 NUMBER OF SHARES. Each ISO shall state the number of shares
to which it pertains.
2.3 OPTION PRICE. Each ISO shall state the option price, which
price shall be determined by the Committee in its discretion. In no event,
however, shall such price be less than 100% of the fair market value of the
shares of Common Stock on the date of the granting of the ISO; or, in the case
of an individual who owns (at the time the Option is granted) more than 10% of
the total combined voting power of all classes of stock of the Company or of a
parent or subsidiary corporation (a "10% Stockholder"), shall such price be less
than 110% of such fair market value.
2.4 METHOD OF EXERCISE. An Optionee may exercise an ISO during
such time as may be permitted by the Option and the Plan by providing written
notice to the Committee, tendering the
3
<PAGE> 4
purchase price in accordance with the provisions of Section 2.5, and complying
with any other exercise requirements contained in the Option or promulgated from
time to time by the Committee.
2.5 METHOD OF PAYMENT. Each ISO shall state the method of payment
of the ISO price upon the exercise of the ISO. The method of payment stated in
the ISO shall include payment (a) in United States dollars in cash or by check,
bank draft or money order payable to the order of the Company, (b) in the
discretion of and in the manner determined by the Committee, by the delivery of
shares of Common Stock already owned by the Optionee, (c) by any other legally
permissible means acceptable to the Committee at the time of grant of the ISO
(including cashless exercise as permitted under the Federal Reserve Board's
Regulation T, subject to applicable legal restrictions), or (d) in the
discretion of the Committee, through a combination of (a), (b) and (c) of this
Section. If the option price is paid in whole or in part through the delivery
of shares of Common Stock, the decision of the Committee with respect to the
fair market value of such shares shall be final and conclusive.
2.6 TERM AND EXERCISE OF OPTIONS.
2.6.1 No ISO shall be exercisable either in whole or in part
prior to twelve (12) months from the date it is granted. The Committee, in its
discretion exercised at the time that it grants an ISO, shall establish such
further restrictions on when an ISO shall become partially or fully
exercisable; provided, however, that such vesting provisions established by the
Committee at the time of grant shall not permit the ISO to be exercised more
rapidly than would be permitted by the following chart:
<TABLE>
<CAPTION>
-----------------------------------------------
Percentage of
Number of Years from Shares
Date Option is Granted Exercisable
-----------------------------------------------
<S> <C>
Less than 1 year 0%
-----------------------------------------------
1 year but less than 2 years 20%
-----------------------------------------------
2 years but less than 3 years 40%
-----------------------------------------------
3 years but less than 4 years 60%
-----------------------------------------------
4 years but less than 5 years 80%
-----------------------------------------------
5 years or more 100%
-----------------------------------------------
</TABLE>
2.6.2 To the extent not exercised, exercisable installments
of Options shall be exercisable, in whole or in part, in any subsequent period,
but not later than the expiration date of the Option. No ISO shall be
exercisable after the expiration of ten (10) years from the date it is granted;
or, in the case of a 10% Stockholder, no ISO shall be exercisable after the
expiration of five (5) years from the date it is granted. Not less than one
hundred (100) shares may be exercised at any one time unless the number
exercised is the total number at the time exercisable under the ISO.
2.6.3 Within the limits described above, the Committee may
impose additional requirements on the exercise of ISOs, including, but without
limitation, the expiration date of the
4
<PAGE> 5
Option. When it deems special circumstances to exist, the Committee in its
discretion also may accelerate the time at which an ISO may be exercised if,
under previously established exercise terms, such ISO was not immediately
exercisable in full, even if the acceleration would permit the ISO to be
exercised more rapidly than the minimum vesting period set forth above in the
chart would permit.
2.7 ADDITIONAL LIMITATIONS ON EXERCISE OF OPTIONS. An Optionee
may hold and exercise more than one ISO, but only on the terms and subject to
the restrictions hereafter set forth. The aggregate Fair Market Value
(determined as of the time an ISO is granted) of the Common Stock with respect
to which ISOs are exercisable for the first time by any Eligible Employee in
any calendar year under this Plan and under all other incentive stock option
plans of the Company and any parent and subsidiary corporations of the Company
(as those terms are defined in Section 424 of the Code) shall not exceed
$100,000.
2.8 DEATH OR OTHER TERMINATION OF EMPLOYMENT.
2.8.1 In the event that an Optionee shall cease to be
employed by the Company or a Subsidiary for any reason other than his or her
death, subject to the conditions that no ISO shall be exercisable after its
expiration date, such Optionee shall have the right to exercise the ISO at any
time within ninety (90) days after such termination of employment to the extent
his or her right to exercise such Option had accrued pursuant to this Article 4
at the date of such termination and had not previously been exercised; such
ninety (90) day period shall be increased to one (1) year for any Optionee who
ceases to be employed by the Company or a Subsidiary because he is disabled
(within the meaning of Section 22(e)( 3) of the Code) or who dies during the
ninety (90) day period and the Option may be exercised within such extended
time limit by the Optionee or, in the case of death, the personal
representative of the Optionee or by any person or persons who shall have
acquired the Option directly from the Optionee by bequest or inheritance.
Whether an authorized leave of absence or absence for military or governmental
service shall constitute termination of employment for purposes of the Plan
shall be determined by the Committee, whose determination shall be final and
conclusive.
2.8.2 In the event that an Optionee shall die while in the
employ of the Company or a Subsidiary and shall not have fully exercised any
ISO, the ISO may be exercised, subject to the conditions that no ISO shall be
exercisable after its expiration date, to the extent that the Optionee's right
to exercise such Option had accrued pursuant to this Article 3 at the time of
his or her death and had not previously been exercised, at any time within one
(1) year after the Optionee's death, by the personal representative of the
Optionee or by any person or persons who shall have acquired the Option
directly from the Optionee by bequest or inheritance.
2.8.3 No ISO shall be transferable by the Optionee otherwise
than by will or the laws of descent and distribution.
2.8.4 During the lifetime of the Optionee, an ISO shall be
exercisable only by him or her and shall not be assignable or transferable, and
no other person shall acquire any rights therein.
5
<PAGE> 6
2.9 RIGHTS AS A STOCKHOLDER. An Optionee shall have no rights as
a stockholder with respect to any shares covered by his ISO until the date on
which he or she becomes a record owner of the shares purchased upon the
exercise of the ISO (the "record ownership date"). No adjustment shall be made
for dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior
to the record ownership date, except as provided in Article 5.
2.10 MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to
the terms and conditions and within the limitations of the Plan, the Committee
may modify, extend or renew outstanding ISOs granted under the Plan, or accept
the surrender of outstanding ISOs (to the extent not theretofore exercised) and
authorize the granting of new Options in substitution therefor (to the extent
not theretofore exercised). The Committee shall not, however, modify any
outstanding ISO so as to specify a lower option price or accept the surrender
of outstanding ISOs and authorize the granting of new Options in substitution
therefor specifying a lower option price. Notwithstanding the foregoing,
however, no modification of an ISO shall, without the consent of the Optionee,
adversely alter or otherwise impair any of the right or obligations under any
ISO theretofore granted under the Plan.
2.11 LISTING AND REGISTRATION OF SHARES. Each ISO shall be subject
to the requirement that if at any time the Committee shall determine, in its
discretion, that the listing, registration or qualification of the shares
covered thereby upon any securities exchange or under any state or federal
laws, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting
of such ISO or the issuance or purchase of shares thereunder, such ISO may not
be exercised unless and until such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Committee. Notwithstanding anything in the Plan to the
contrary, if the provisions of this Section become operative, and if, as a
result thereof, the exercise of an ISO is delayed, then and in that event, the
term of the ISO shall not be affected.
2.12 OTHER PROVISIONS. The ISO certificates or agreements
authorized under the Plan shall contain such other provisions, including,
without limitation, restrictions upon the exercise of the ISO, as the Committee
shall deem advisable. Any such certificate or agreement shall contain such
limitations and restrictions upon the exercise of the ISO as shall be necessary
in order that such ISO will be an incentive stock option as defined in Section
422 of the Code, or to conform to any change in the law.
ARTICLE 3
TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS
3.1 GRANT. Any nonqualified stock option ("NSO") granted pursuant
to the Plan shall be authorized by the Committee and shall be evidenced by
certificates or agreements in such form as the Committee from time to time
shall approve, which certificates or agreements shall comply with and be
subject to the terms and conditions hereinafter specified. The date on which
the Committee approves the grant of an NSO shall be considered to the date on
which the NSO is granted.
6
<PAGE> 7
3.2 NUMBER OF SHARES. Each NSO shall state the number of shares
to which it pertains.
3.3 OPTION PRICE. Each NSO shall state the option price, which
price shall be determined by the Committee in its discretion. In no event,
however, shall such price be less than 100% of the fair market value of the
shares of Common Stock on the date of the granting of the NSO.
3.4 METHOD OF EXERCISE. An Optionee may exercise an NSO during
such time as may be permitted by the Option and the Plan by providing written
notice to the Committee, tendering the purchase price in accordance with the
provisions of Section 3.5, and complying with any other exercise requirements
contained in the Option or promulgated from time to time by the Committee.
3.5 METHOD OF PAYMENT. Each NSO shall state the method of payment
of the NSO price upon the exercise of the NSO. The method of payment stated in
the NSO shall include payment (a) in United States dollars in cash or by check,
bank draft or money order payable to the order of the Company, (b) in the
discretion of and in the manner determined by the Committee, by the delivery of
shares of Common Stock already owned by the Optionee, (c) by any other legally
permissible means acceptable to the Committee at the time of the grant of the
NSO (including cashless exercise as permitted under the Federal Reserve Board's
Regulation T, subject to applicable legal restrictions), or (d) in the
discretion of the Committee, through a combination of (a), (b) and (c) of this
Section. If the option price is paid in whole or in part through the delivery
of shares of Common Stock, the decision of the Committee with respect to the
fair market value of such shares shall be final and conclusive.
3.6 TERM AND EXERCISE OF OPTIONS.
3.6.1 No NSO shall be exercisable either in whole or in part
prior to twelve (12) months from the date it is granted. The Committee, in its
discretion exercised at the time that it grants a NSO, shall establish such
further restrictions on when a NSO shall become partially or fully exercisable;
provided, however, that such vesting provisions established by the Committee at
the time of grant shall not permit the NSO to be exercised more rapidly than
would be permitted by the following chart:
<TABLE>
<CAPTION>
----------------------------------------------------
Percentage of
Number of Years from Shares Exercisable
Date Option is Granted
----------------------------------------------------
<S> <C>
Less than 1 year 0%
----------------------------------------------------
1 year but less than 2 years 20%
----------------------------------------------------
2 years but less than 3 years 40%
----------------------------------------------------
3 years but less than 4 years 60%
----------------------------------------------------
4 years but less than 5 years 80%
----------------------------------------------------
5 years or more 100%
----------------------------------------------------
</TABLE>
7
<PAGE> 8
3.6.2 To the extent not exercised, exercisable installments
of Options shall be exercisable, in whole or in part, in any subsequent period,
but not later than the expiration date of the Option. No NSO shall be
exercisable after the expiration of ten (10) years from the date it is granted.
Not less than one hundred (100) shares may be exercised at any one time unless
the number exercised is the total number at the time exercisable under the NSO.
3.6.3 Within the limits described above, the Committee may
impose additional requirements on the exercise of NSOs, including, but without
limitation, the expiration date of the Option. When it deems special
circumstances to exist, the Committee in its discretion also may accelerate the
time at which a NSO may be exercised if, under previously established exercise
terms, such NSO was not immediately exercisable in full, even if the
acceleration would permit the NSO to be exercised more rapidly than the minimum
vesting period set forth above in the chart would permit.
3.7 DEATH OR OTHER TERMINATION OF EMPLOYMENT.
3.7.1 In the event that an Optionee shall cease to be
employed by the Company or a Subsidiary for any reason other than his or her
death, subject to the conditions that no NSO shall be exercisable after its
expiration date, such Optionee shall have the right to exercise the NSO at any
time within ninety (90) days after such termination of employment to the extent
his or her right to exercise such Option had accrued pursuant to this Article 4
at the date of such termination and had not previously been exercised; such
ninety (90) day period shall be increased to one (1) year for any Optionee who
ceases to be employed by the Company or a Subsidiary because he is disabled
(within the meaning of Section 22(e)( 3) of the Code) or who dies during the
ninety (90) day period and the Option may be exercised within such extended
time limit by the Optionee or, in the case of death, the personal
representative of the Optionee or by any person or persons who shall have
acquired the Option directly from the Optionee by bequest or inheritance.
Whether an authorized leave of absence or absence for military or governmental
service shall constitute termination of employment for purposes of the Plan
shall be determined by the Committee, whose determination shall be final and
conclusive.
3.7.2 In the event that an Optionee shall die while in the
employ of the Company or a Subsidiary and shall not have fully exercised any
NSO, the NSO may be exercised, subject to the condition that no NSO shall be
exercisable after the expiration of ten (10) years from the date it is granted,
to the extent that the Optionee's right to exercise such NSO had accrued
pursuant to this Article 3 at the time of his death and had not previously been
exercised, at any time within one (1) year after the Optionee's death, by the
personal representative of the Optionee or by any person or persons who shall
have acquired the NSO directly from the Optionee by bequest or inheritance.
3.7.3 No NSO shall be transferable by the Optionee otherwise
than by will or the laws of descent and distribution.
3.7.4 During the lifetime of the Optionee, the NSO shall be
exercisable only by him and shall not be assignable or transferable and no
other person shall acquire any rights therein.
3.8 RIGHTS AS A STOCKHOLDER. An Optionee shall have no rights as
a stockholder with respect to any shares covered by his NSO until the date of
the issuance of a stock certificate to him
8
<PAGE> 9
for such shares after exercise of the NSO. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as provided in Article 4.
3.9 MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to
the terms and conditions and within the limitations of the Plan, the Committee
may modify, extend or renew outstanding NSOs granted under the Plan, or accept
the surrender of outstanding NSOs, whether issued under this Plan or under any
other stock option plan of the Company (to the extent not theretofore
exercised) and authorize the granting of new Options in substitution therefor
(to the extent not theretofore exercised), including previously granted Options
having higher option prices. Notwithstanding the foregoing, however, no
modification of a NSO shall, without the consent of the Optionee, adversely
alter or otherwise impair any of the rights or obligations under any NSO
theretofore granted under the Plan.
3.10 LISTING AND REGISTRATION OF SHARES. Each NSO shall be subject
to the requirement that if at any time the Committee shall determine, in its
discretion, that the listing, registration or qualification of the shares
covered thereby upon any securities exchange or under any state or federal
laws, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting
of such NSO or the issuance or purchase of shares thereunder, such NSO may not
be exercised unless and until such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Committee. Notwithstanding anything in the Plan to the
contrary, if the provisions of this Section become operative, and if, as a
result thereof, the exercise of a NSO is delayed, then and in that event, the
term of the NSO shall not be affected.
3.11 OTHER PROVISIONS. The NSO certificates or agreements
authorized under the Plan shall contain such other provisions, including,
without limitation, restrictions upon the exercise of the NSO, as the Committee
shall deem advisable.
ARTICLE 4
MISCELLANEOUS
4.1 STOCK ADJUSTMENTS.
4.1.1 In the event of any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split or other
division or consolidation of shares or the payment of a stock dividend (but
only on the Common Stock) or any other increase or decrease in the number of
such shares effected without any receipt of consideration by the Company, then,
in any such event, the number of shares of Common Stock that remain available
under the Plan, the number of shares of Common Stock covered by each
outstanding Option, and the purchase price per share of Common Stock covered by
each outstanding Option shall be proportionately and appropriately adjusted for
any such increase or decrease.
9
<PAGE> 10
4.1.2 Subject to any required action by the stockholders,
if any change occurs in the shares of Common Stock by reason of any
recapitalization, reorganization, merger, consolidation, split-up, combination
or exchange of shares, or of any similar change affecting the shares of Common
Stock, then, in any such event, the number and type of shares covered by each
outstanding Option, and the purchase price per share of Common Stock covered by
each outstanding Option, shall be proportionately and appropriately adjusted
for any such change. A dissolution or liquidation of the Company shall cause
each outstanding Option to terminate.
4.1.3 In the event of a change in the Common Stock as
presently constituted that is limited to a change of all of its authorized
shares with par value into the same number of shares with a different par value
or without par value, the shares resulting from any change shall be deemed to
be shares of Common Stock within the meaning of the Plan.
4.1.4 To the extent that the foregoing adjustments relate
to stock or securities of the Company, such adjustments shall be made by, and
in the discretion of, the Committee, whose determination in that respect shall
be final, binding and conclusive; provided, however, that any ISO granted
pursuant to pursuant to this Plan shall not be adjusted in a manner that causes
such ISO to fail to continue to qualify as an incentive stock option within the
meaning of Section 422 of the Code.
4.1.5 Except as hereinabove expressly provided in this
Section 4.1, an Optionee shall have no rights by reason of any division or
consolidation of shares of stock of any class or the payment of any stock
dividend or any other increase or decrease the number of shares of stock of any
class or by reason of any dissolution, liquidation, merger or consolidation, or
spin-off of assets or stock of another corporation; and any issuance by the
Company of shares of stock of any class, securities convertible into shares of
stock of any class, or warrants or options for shares of stock of any class
shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to the
Option.
4.1.6 The grant of any Option pursuant to the Plan shall
not affect in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or to consolidate, or to dissolve, to liquidate, to sell,
or to transfer all or any part of its business or assets.
4.2 TERM OF THE PLAN. The ISOs and NSOs may be granted pursuant
to the provisions of the Plan from time to time within a period of ten (10)
years from the date the Plan is adopted by the Board, or the date the Plan is
approved by the stockholders of the Company, whichever is earlier.
4.3 AMENDMENT OF THE PLAN; TERMINATION. The Board may, insofar as
permitted by law, from time to time, with respect to any shares at the time not
subject to Options, suspend, discontinue or terminate the Plan or revise or
amend it in any respect whatsoever, except that, without approval of the
stockholders of the Company, no such revision or amendment shall change the
number of shares subject to the Plan, change the designation of the class of
employees eligible to receive Options, decrease the price at which Options may
be granted, otherwise materially increase the benefits accruing to Eligible
Employees under the Plan, or remove the administration of the Plan from the
Committee. The foregoing prohibitions shall not be affected by adjustments in
shares and purchase price made in accordance with the provisions of Section
4.1. Furthermore, the Plan may
10
<PAGE> 11
not, without the approval of the stockholders of the Company, be amended in any
manner that will cause Options issued under it to fail to meet (a) when
appropriate, the requirements of incentive stock options as defined in Section
422 of the Code.
4.4 APPLICATION OF FUNDS. The proceeds received by the Company
from the sale of Common Stock pursuant to Options will be used for general
corporate purposes.
4.5 NO OBLIGATION TO EXERCISE. The granting of any Option under
the Plan shall impose no obligation upon any Optionee to exercise such Option.
4.6 NO IMPLIED RIGHTS TO EMPLOYEES. The existence of the Plan,
and the granting of Options under the Plan, shall in no way give any employee
the right to continued employment, give any employee the right to receive any
Options or any additional Options under the Plan, or otherwise provide any
employee any rights not specifically set forth in the Plan or in any Options
granted under the Plan.
4.7 WITHHOLDING. Whenever the Company proposes or is required to
issue or transfer shares of Common Stock under the Plan, the Company shall have
the right to require the Optionee to remit to the Company an amount sufficient
to satisfy any federal, state or local withholding tax liability prior to the
delivery of any certificate or certificates for such shares. Whenever under
the Plan payments are to be made in cash, such payments shall be made net of an
amount sufficient to satisfy any federal, state or local withholding tax
liability.
4.8 CONDITIONS PRECEDENT TO EFFECTIVENESS. Subject to the
approval of the Plan by the stockholders of the Company within 12 months after
its adoption by the Board of Directors, the Plan shall become effective upon
the satisfaction of all the following conditions, with the Effective Date of
the Plan being the date that the last such condition is satisfied:
4.8.1 the adoption of the Plan by the Board of Directors;
and
4.8.2 the consummation of the distribution to holders of
common stock, without par value, of Florida Progress Corporation of all
outstanding shares of Common Stock of the Company.
11
<PAGE> 1
Exhibit 10.11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into this ___ day of
___________________, 1996, but is effective for all purposes as of the date
specified below in Section 2, by and between ECHELON INTERNATIONAL CORPORATION,
a Florida corporation (the "Company"), and DARRYL A. LECLAIR, residing at 431
Appian Way, St. Petersburg, Florida 33704 (the "Executive").
W I T N E S S E T H:
1. EMPLOYMENT
The Company hereby employs the Executive, and the Executive hereby
accepts such employment, upon the terms and subject to the conditions set forth
in this Agreement.
2. TERM
Subject to the provisions for termination as hereinafter provided, the
term of employment under this Agreement shall begin as of the completion of the
"Distribution" as that term is defined in the Company's Registration Statement
on Form 10, as amended (the "Distribution"), and shall continue through
December 31, 1999, provided, however, that beginning on January 1, 1998 and on
each January 1st thereafter (each such January 1, being referred to as a
"Renewal Date"), the term of this Agreement shall automatically be extended for
an additional one year so that on each Renewal Date the then remaining
unexpired term of this Agreement shall be three years, unless either party
gives the other written notice of termination at least ninety (90) days prior
to any such Renewal Date.
3. COMPENSATION
(a) Base Salary. The Company shall pay to the Executive as basic
compensation for all services rendered by the Executive during the term of this
Agreement a basic annualized salary of $280,000 per year, or such other sum in
excess of that amount as the parties may agree on from time to time or as
provided in the next sentence (as in effect from time to time, the "Base
Salary"), payable monthly or in other more frequent installments, as determined
by the Company. The Board of Directors shall have no authority to reduce the
Executive's Base Salary in effect from time to time. In addition, the Board of
Directors, in its discretion, may award a bonus or bonuses to the Executive in
addition to the bonuses provided for in Section 3(b).
(b) Bonuses. In addition to the Base Salary to be paid pursuant to
Section 3(a), for each of the Company's three fiscal years ending December 31,
1997, December 31, 1998 and December 31, 1999 during the term of this
Agreement, the Company shall pay as incentive compensation the annual bonuses,
to the extent earned, specified on Exhibit A to this Agreement. For each
fiscal year ending after December 31, 1999, the Company shall pay to the
Executive as incentive compensation annual bonuses in accordance with
comparable incentive bonus plan(s) adopted by the Board of Directors of the
Company.
<PAGE> 2
(c) Certain Plans and Initial Award. (i) It is anticipated that the
Company will adopt certain incentive compensation plans including a long term
incentive plan (the "LTIP"), providing for annual or other periodic awards to
key employees, among other things, of restricted stock and a stock option plan
(the "ISO/NSO Plan"), providing for the annual or other periodic issuance of
options to purchase the Company's common stock. The LTIP and ISO/NSO are
referred to collectively in this Agreement as the "Plans." The Executive will
be given an opportunity to participate in the Plans, in accordance with and
subject to the terms of the Plans as they may be adopted, amended and
administered from time to time.
(ii) In addition to the incentive compensation referred to in
Section 3(c)(i), the Company hereby agrees to issue to the Executive under the
LTIP, effective immediately following the completion of the Distribution, that
number of shares of the Company's common stock (the "Initial Restricted Stock")
as will equal three percent (3%) of the shares of the Company's common stock
distributed in the Distribution, which Initial Restricted Stock shall be
subject to risk of forfeiture, which risk will lapse as to one-fourth of the
shares of the Initial Restricted Stock on January 31, 1998, and as to an
additional one-fourth of the Initial Restricted Stock on each of January 31,
1999, January 31, 2000 and January 31, 2001. Accordingly, as of January 31,
2001, all risks of forfeiture shall have lapsed as to all the Initial
Restricted Stock.
(iii) In addition to the incentive compensation referred to
in Section 3(c)(i) and the Initial Restricted Stock, the Company hereby agrees
to grant to the Executive under the LTIP, effective immediately following the
completion of the Distribution, options to purchase that number of shares of
the Company's common stock (the "Initial Options") as will equal two percent
(2%) of the shares of the Company's common stock distributed in the
Distribution, which Initial Options shall be exercisable as to one-third of the
shares of common stock covered by the Initial Options on January 31, 1998, and
as to an additional one-third of such shares on each of January 31, 1999 and
January 31, 2000. The exercise price for the Initial Options shall be the
closing price on the New York Stock Exchange (or such other market on which the
Company's stock trades if it is not listed on the New York Stock Exchange) on
the trading day which is the eighth month anniversary of the day of the
completion of the Distribution (the "Option Pricing Date"), or if the Option
Pricing Date is not a trading day, the first trading day thereafter.
(iv) Any and all risks of forfeiture shall lapse as to all of
the Initial Restricted Stock and the Initial Options shall be fully vested and
shall be exercisable as to all of the shares of common stock covered by the
Initial Options upon (i) the death of the Executive or termination of
employment upon the "Permanent Disability" (as that term is defined in Section
7(b)(ii) of this Agreement) of the Executive, (ii) the termination of
employment of the Executive by the Company "Without Good Cause" (as that term
is defined in Section 8(b)(iii) of this Agreement) or (iii) the exercise by the
Executive of his rights to terminate his employment under Section 8(d)(ii)
following a "Change of Control" (as that term is defined in Section 8(d)(i) of
this Agreement).
(d) Reimbursement. The Company shall reimburse the Executive, in
accordance with the Company's policies and practices for senior management, for
all reasonable expenses incurred by the Executive in the performance of the
Executive's duties under this Agreement, provided, however, that the Executive
must furnish to the Company an itemized account, satisfactory to the Company,
in substantiation of such expenditures.
2.
<PAGE> 3
(e) Certain Benefits. The Executive shall be entitled to such fringe
benefits including, but not limited to, medical and other insurance benefits as
may be provided from time to time by the Company to other senior officers of
the Company. In addition, without restricting the foregoing, the Company shall
provide the Executive at the Company's sole cost and expense with (i) a policy
or policies of term life insurance (the "Basic Life Insurance") providing,
among other things, basic death benefits of not less than two times the Base
Salary in effect from time to time, (ii) directors and officers liability
insurance with coverage, terms and limits suitable for the chief executive
officer of a New York Stock Exchange listed company comparable in financial
size and wherewithal to that of the Company and (iii) a monthly allowance of
$500 cash to reimburse the Executive for the use and maintenance of his
automobile in furtherance of the business and affairs of the Company, provided
that the Executive shall at all times insure the Executive and the Company in
such amounts as may be reasonably requested by the Company against claims for
bodily injury, death and property damages occurring as a result of its use.
The Company shall use its reasonable best efforts to make available to the
Executive in providing and paying for the Basic Life Insurance the opportunity
to purchase at the Executive's sole cost and expense additional life insurance
with a basic death benefit (the "Optional Life Insurance") equal to two times
the Executive's Base Salary in effect from time to time (affording the
Executive the opportunity to have basic death benefit life insurance coverage
equal to four times such Base Salary). The Company will use its reasonable
best efforts to effect the transfer of the ownership to the Executive of the
policy or policies for the Basic Life Insurance and the Optional Life
Insurance, if any, upon the termination of the Executive's employment by the
Company. After the Executive's termination, payment of any premiums would be
the obligation of the Executive.
(f) Other Incentive and Benefit Plans. The Executive shall be
eligible to participate, in accordance with the terms of such plans as they may
be adopted, amended and administered from time to time, in incentive, bonus,
benefit or similar plans, including without limitation, any stock option, bonus
or other equity ownership plan, any short, mid or long term incentive plan and
any other bonus, pension or profit sharing plans established by the Company
from time to time.
4. DUTIES
(a) General. The Executive is engaged as the Chief Executive Officer
and President of the Company and initially shall be elected as a director of
the Company. In addition, at the request of the Board of Directors, the
Executive shall serve in the same positions in any wholly owned subsidiary of
the Company, without any additional compensation. The Executive's duties shall
be commensurate with those customarily associated with the chief executive of a
corporation comparable to the Company.
(b) Specific. In addition to his general duties, responsibilities
and authority as Chief Executive Officer and President, and without in any way
intending to diminish the Executive's duties, responsibilities and authority,
the Executive's duties, responsibilities and authority shall include but not be
limited to (i) suggesting to the Board of Directors persons who should serve as
executive officers for the Company and suggesting the duties, salaries, annual
raises and (except as may be limited by the specific provisions of bonus and
incentive plans adopted by the Company) the bonuses for such persons and the
Board shall give due and proper consideration to such suggestions, (ii)
determining who shall serve in all positions below the level of executive
officer, and determining the
3.
<PAGE> 4
duties, salaries, annual raises and (except as may be limited by the specific
provisions of bonus and incentive plans adopted by the Company) the bonuses for
such persons, with authority to delegate authority regarding such junior
personnel to other members of senior management, (iii) participating in
consultation with the Board of Directors in the development and implementation
of the Company's strategic business plans and (iv) retaining consultants,
professionals and other independent contractors for the Company's business;
provided, however, that the selection of the Company's independent certified
public accountants and general counsel shall be made with the concurrence of
the Board of Directors.
(c) Indemnification. To the fullest extent permitted by law, the
Company shall indemnify and hold harmless the Executive for all liabilities,
costs, expenses and damages arising out of or in connection with the
Executive's service to the Company under this Agreement. In furtherance of
this indemnity, the Company shall enter into an indemnification agreement, in
form and substance reasonably satisfactory to the Executive and the Company.
In addition, the indemnity provided hereunder shall extend to service by the
Executive as an officer or director, or service in a similar capacity, for any
civic, community or charitable organization, provided such service is
undertaken at the request of or with the knowledge and acquiescence of the
Company. The foregoing indemnification shall be in addition to any rights or
benefits the Executive may have under statute, the Bylaws or Articles of
Incorporation of the Company, under a policy of insurance, or otherwise.
5. EXTENT OF SERVICES; VACATIONS AND DAYS OFF
(a) Extent of Services. During the term of the Executive's
employment under this Agreement, except during customary vacation periods and
periods of illness, the Executive shall devote full-time energy and attention
during regular business hours to the benefit and business of the Company as may
be reasonably necessary in performing the Executive's duties pursuant to this
Agreement. Notwithstanding the foregoing, the Executive may (i) serve on
corporate, trade association, civic, religious or charitable boards or
committees, (ii) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (iii) manage personal investments, so long as such
activities do not materially interfere with the performance of the Executive's
duties and responsibilities and does not create a conflict of interest.
(b) Vacations. The Executive shall be entitled to vacations with pay
and to such personal and sick leave with pay in accordance with the policy of
the Company as may be established from time to time by the Company and applied
to other senior officers of the Company. In no event shall the Executive be
entitled to fewer than four weeks' annual vacation. Unused vacation days may
be carried over from one year to the next for a period of up to three years.
Any vacation days which remain unused on the third anniversary of the end of
the fiscal year to which they originally related shall expire and shall
thereafter no longer be useable by the Executive.
6. FACILITIES
The Company shall provide the Executive with a fully furnished office,
and the facilities of the Company shall be generally available to the Executive
in the performance of the Executive's duties pursuant to this Agreement, it
being understood and contemplated by the parties that all equipment,
4.
<PAGE> 5
supplies and office personnel required in the performance of the Executive's
duties under this Agreement shall be supplied by and at the sole expense of the
Company.
7. ILLNESS OR INCAPACITY, TERMINATION ON DEATH, ETC.
(a) Death. If the Executive dies during the term of the Executive's
employment, the Company shall pay to the estate of the Executive within 30 days
after the date of death such Base Salary and any cash bonus compensation earned
pursuant to the provisions of any incentive compensation plan then in effect
but not yet paid, as would otherwise have been payable to the Executive up to
the end of the month in which the Executive's death occurs. After receiving
the payments provided in this Section 7(a), the Executive and the Executive's
estate shall have no further rights under this Agreement (other than those
rights already accrued).
(b) Disability. (i) During any period of disability, illness or
incapacity during the term of this Agreement which renders the Executive at
least temporarily unable to perform the services required under this Agreement,
the Executive shall receive the Base Salary payable under Section 3(a) of this
Agreement plus any cash bonus compensation earned pursuant to the provisions of
any incentive compensation plan then in effect but not yet paid, less any cash
benefits received by him under any disability insurance carried by or provided
by the Company. Upon the Executive's "Permanent Disability" (as defined
below), which permanent disability continues during the payment periods
specified herein, the Company shall pay to the Executive for the period of time
specified below an amount (the "Disability Payment") equal to the (i) sum of
(A) the Base Salary in effect at the time of the Executive's permanent
disability plus (B) an amount equal to the target level of the annual cash
bonus payable to the Executive under the Company's Management Incentive
Compensation Plan as described on Exhibit A or any similar bonus or incentive
plans or programs then in effect (the "MICP Target Amount") in respect of the
fiscal year during which the Executive's permanent disability occurred, which
MICP Target Amount shall be paid in pro rata equal monthly installments over
the period of time specified below (ii) reduced by the amount of any monthly
payments under any policy of disability income insurance paid for by the
Company which payments are received during the time when any Disability Payment
is being made to the Executive following the Executive's Permanent Disability.
For so long as the Executive's permanent disability continues, the Disability
Payment shall be paid by the Company to the Executive in equivalent
installments at the same time or times as would have been the case for payment
of Base Salary over the unexpired term of this Agreement if the Executive had
not become permanently disabled and had remained employed by the Company
hereunder, but in no case shall such period exceed 36 months. The Executive
may be entitled to receive payments under any disability income insurance which
may be carried by or provided by the Company from time to time. Upon
"Permanent Disability" (as that term is defined in Section 7(b)(ii) below) of
the Executive, except as provided in this Section 7(b) all rights of the
Executive under this Agreement (other than rights already accrued) shall
terminate.
(ii) The term "Permanent Disability" as used in this
Agreement shall mean, in the event a disability insurance policy is maintained
by the Company covering the Executive at such time and is in full force and
effect, the definition of permanent disability set forth in such policy. In
the event no disability insurance policy is maintained at such time and in full
force and effect, "Permanent Disability" shall mean the inability of the
Executive, as determined by the Board of Directors of the Company, by reason of
physical or mental disability to perform the duties required of him under this
5.
<PAGE> 6
Agreement for a period of one hundred and eighty (180) days in any one-year
period. Successive periods of disability, illness or incapacity will be
considered separate periods unless the later period of disability, illness or
incapacity is due to the same or related cause and commences less than six
months from the ending of the previous period of disability. Upon such
determination, the Board of Directors may terminate the Executive's employment
under this Agreement upon ten (10) days' prior written notice. If any
determination of the Board of Directors with respect to permanent disability is
disputed by the Executive, the parties hereto agree to abide by the decision of
a panel of three physicians. The Executive and Company shall each appoint one
member, and the third member of the panel shall be appointed by the other two
members. The Executive agrees to make himself available for and submit to
examinations by such physicians as may be directed by the Company. Failure to
submit to any such examination shall constitute a breach of a material part of
this Agreement.
8. OTHER TERMINATIONS
(a) By the Executive. (i) The Executive may terminate the
Executive's employment hereunder upon giving at least ninety (90) days' prior
written notice. In addition, the Executive shall have the right to terminate
the Executive's employment hereunder on the conditions and at the times
provided for in Section 8(d) of this Agreement.
(ii) If the Executive gives notice pursuant to Section
8(a)(i) above, the Company shall have the right (but not the obligation) to
relieve the Executive, in whole or in part, of the Executive's duties under
this Agreement, or direct the Executive to no longer perform such duties, or
direct that the Executive should no longer report to work, or any combination
of the foregoing. In any such event, the Executive shall be entitled to
receive only the Base Salary not yet paid, as would otherwise have been payable
to the Executive up to the end of the month specified as the month of
termination in the termination notice. In the event the Executive gives notice
pursuant to Section 8(a)(i) above but specifies a termination date in excess of
ninety (90) days from the date of such notice, the Company shall have the right
(but not the obligation) to accelerate the termination date to any date prior
to the date specified in the notice that is in excess of ninety (90) days from
the date of the notice, and the Company shall have the right (but not the
obligation) to relieve the Executive, in whole or in part, of the Executive's
duties under this Agreement, or direct the Executive to no longer perform such
duties, or direct that the Executive should no longer report to work, or any
combination of the foregoing; provided, however, that in any such event the
Executive shall be entitled to receive the Base Salary, as would otherwise have
been payable to the Executive up to the end of the month of the termination
date properly selected by the Company. Upon receiving the payments provided
for under this Section 8(a), all rights of the Executive under this Agreement
(other than rights already accrued) shall terminate.
(b) Termination for "Good Cause". (i) Except as otherwise provided
in this Agreement, the Company may terminate the employment of the Executive
hereunder only for "good cause," which shall mean (a) the willful, substantial,
continued and unjustified refusal of the Executive substantially to perform his
duties with the Company to the extent of his ability to do so (other than any
failure due to physical or mental incapacity) or (b) willful misconduct
materially and demonstrably injurious to the Company, financially or otherwise,
in each case, as determined in the reasonable discretion of the Board of
Directors, but with respect to each of the foregoing bases for termination
specified in the
6.
<PAGE> 7
preceding clause, only if (1) the Executive has been provided with written
notice of any assertion that there is a basis for termination for good cause
which notice shall specify in reasonable detail specific facts regarding any
such assertion and the Executive has been given a reasonable period of time
within which to remedy or cure the problem or complaint, (2) such notice is
provided to the Executive a reasonable time before the Board of Directors meets
to consider any possible termination for cause, (3) at or prior to the meeting
of the Board of Directors to consider the matters described in the written
notice, an opportunity is provided to the Executive and his counsel to be heard
by the Board of Directors with respect to the matters described in the written
notice, before it acts with respect to such matter, (4) any resolution or other
action by the Board of Directors with respect to any deliberation regarding or
decision to terminate the Executive for good cause is duly adopted by a vote of
a majority of the entire Board of Directors of the Company at a meeting of the
Board duly called and held and (5) the Executive is promptly provided with a
copy of the resolution or other corporate action taken with respect to such
termination. No act or failure to act by the Executive shall be considered
willful unless done or omitted to be done by him not in good faith and without
reasonable belief that his action or omission was in the best interests of the
Company.
(ii) If the employment of the Executive is terminated for
good cause under Section 8(b)(i) of this Agreement, the Company shall pay to
the Executive any Base Salary earned prior to the effective date of termination
but not yet paid and any cash bonus compensation earned pursuant to the
provisions of any incentive compensation plan then in effect but not paid to
the Executive prior to the effective date of such termination. Under such
circumstances, such payments shall be in full and complete discharge of any and
all liabilities or obligations of the Company to the Executive hereunder, and
the Executive shall be entitled to no further benefits under this Agreement
(other than rights already accrued)..
(iii) Termination of the employment of the Executive other
than as expressly specified above in Section 8(b)(i) for good cause shall be
deemed to be a termination of employment "Without Good Cause."
(c) Termination Without Good Cause. (i) Notwithstanding any other
provision of this Agreement, the Company shall have the right to terminate the
Executive's employment Without Good Cause pursuant to the provisions of this
Section 8(c). If the Company shall terminate the employment of the Executive
Without Good Cause effective on a date earlier than the termination date
provided for in Section 2 (with the effective date of termination as so
identified by the Company being referred to herein as the "Accelerated
Termination Date"), the Executive, until the end of the term of this Agreement
then in effect as provided for in Section 2 or until the date which is 36
months after the Accelerated Termination Date, whichever is the first to occur,
shall continue to receive (1) the Base Salary, paid in the same monthly on
other periodic installments as in effect prior to the Accelerated Termination
Date (2) an equal monthly pro rata portion of an amount of cash equal to the
MICP Target Amount (as that term is defined in Section 7(b)(i)) in respect of
the year during which the Executive's employment terminates, multiplied times
the number of years (or fractions thereof) remaining in the then unexpired term
of this Agreement or multiplied times three if the 36 month payment period
under this Section 8(c)(i) is in effect, plus (3) an equal monthly pro rata
portion of an amount of cash equal to the cash value of any bonus paid or to be
paid to the Executive in the form of performance shares or restricted stock
under the LTIP as described on Exhibit A or any similar bonus or incentive
plans or programs then in effect (valued, if applicable under the terms of such
plans or programs, at the greater of the closing price on the New York Stock
Exchange ,or other such market on which the Company's stock trades if it
7.
<PAGE> 8
is not listed on the New York Stock Exchange, on the first trading day of the
plan or program cycle or the Accelerated Termination Date, or if the
Accelerated Termination Date is not a trading day, on the first trading day
thereafter) in respect of the then-current three year cycle of such plans or
programs or such other cycle as is then in effect, calculated as if the
then-current cycle were completed and the target levels attained (the "LTIP
Target Amount"), which cash payment shall be in lieu and in full satisfaction
any rights under the LTIP in respect of such stock or shares as described in
Exhibit A or any similar bonus or incentive plans or programs in effect at the
time of such payment (all of which stock or shares shall be cancelled upon
such payment and receipt), and (4) any other cash or other bonus compensation
earned prior to the date of such termination pursuant to the terms of all
incentive compensation plans then in effect other than the Company's Management
Incentive Compensation Plan as described on Exhibit A or any similar bonus or
incentive plans or programs then in effect; provided that, notwithstanding such
termination of employment, the Executive's covenants set forth in Section 10
and Section 11 are intended to and shall remain in full force and effect and
provided further that in the event of such termination, the Company shall have
the right (but not the obligation) to relieve the Executive, in whole or in
part, of the Executive's duties under this Agreement, or direct the Executive
to no longer perform such duties, or direct that the Executive no longer be
required to report to work, or any combination of the foregoing.
(ii) The parties agree that, because there can be no exact
measure of the damage that would occur to the Executive as a result of a
termination by the Company of the Executive's employment Without Good Cause,
the payments and benefits paid and provided pursuant to this Section 8(c) shall
be deemed to constitute liquidated damages and not a penalty for the Company's
termination of the Executive's employment Without Good Cause.
(d) Change of Control. (i) For purposes of this Agreement, a
"Change in Control" shall mean the first to occur of:
(1) a change in control of the Company of a nature that is
required, pursuant to the Securities Exchange Act of 1934
(the "1934 Act"), to be reported in response to Item 1(a)
of a Current Report on Form 8-K or Item 6(e) of Schedule
14A under the 1934 Act (in each case under this Agreement,
references to provisions of the 1934 Act and the rules and
regulations promulgated thereunder being understood to
refer to such law, rules and regulations as the same are in
effect on November 1, 1996); or
(2) the acquisition of "Beneficial Ownership" (as defined in
Rule 13d-3 under the 1934 Act) of the Company's securities
comprising 35% or more of the combined voting power of the
Company's outstanding securities by any "person" (as that
term is used in Sections 13(d) and 14(d)(2) of the 1934 Act
and the rules and regulations promulgated thereunder, but
not including any trustee or fiduciary acting in that
capacity for an employee benefit plan sponsored by the
Company) and such person's "affiliates" and "associates"
(as those terms are defined under the 1934 Act), but
excluding any ownership by the Executive and his affiliates
and associates; or
(3) the failure of the "Incumbent Directors" (as defined below)
to constitute at least a majority of all directors of the
Company (for these purposes,
8.
<PAGE> 9
"Incumbent Directors" means individuals who were the
directors of the Company on November 1, 1996, and, after
his or her election, any individual becoming a director
subsequent to November 1, 1996, whose election, or
nomination for election by the Company's stockholders, is
approved by a vote of at least two-thirds of the directors
then comprising the Incumbent Directors, except that no
individual shall be considered an Incumbent Director who is
not recommended by management and whose initial assumption
of office as a director is in connection with an actual or
threatened "election contest" relating to the "election of
directors" of the Company, as such terms are used in Rule
14a-11 of Regulation 14A under the 1934 Act); or
(4) the closing of a sale of all or substantially all of the
assets of the Company;
(5) the Company's adoption of a plan of dissolution or
liquidation; or
(6) the closing of a merger or consolidation involving the
Company in which the Company is not the surviving
corporation or if, immediately following such merger or
consolidation, less than seventy- five percent (75%) of the
surviving corporation's outstanding voting stock is held or
is anticipated to be held by persons who are stockholders
of the Company immediately prior to such merger or
consolidation.
(ii) If a Change in Control of the Company occurs, the Executive
shall have the right, exercisable for a period of one year thereafter by
delivering a written statement to that effect to the Company, to immediately
terminate this Agreement and upon such a determination the Executive shall have
the right to receive and the Company shall be obligated to pay to Executive in
cash a lump sum payment in an amount equal to the sum of (1) the "Control Cash
Payment" as that term is defined in Section 8(d)(iii) of this Agreement; (2)
three times the annual Base Salary then in effect, (3) three times the MICP
Target Amount (as that term is defined in Section 7(b)(i)) in the year in which
employment terminates, (4) the cash value of the LTIP Target Amount (as that
term is defined in Section 8(c)), which cash payment shall be in lieu and in
full satisfaction any rights under the LTIP in respect of such stock or shares
as described in Exhibit A or any similar bonus or incentive plans or programs
in effect at the time of such payment (all of which stock or shares shall be
cancelled upon such payment and receipt), and (5) the additional payments
necessary to discharge certain tax liabilities (the "Gross Up") as that term is
defined in Section 13 of this Agreement (the sum of the foregoing amounts other
than the Gross Up being referred to as the "Change in Control Payment"). If
the Executive fails to exercise his rights under this Section 8(d) within one
year following a Change in Control, such rights shall expire and be of no
further force or effect.
(iii) The "Control Cash Payment" shall be (A) $500,000 if the
first event to occur that constitutes a Change in Control occurs on or before
December 31, 1997; (B) $1,000,000, if the first event to occur that constitutes
a Change in Control occurs after December 31, 1997 but on or before December
31, 1998; (C) $1,500,000, if the first event to occur that constitutes a Change
in Control occurs after December 31, 1998 but on or before December 31, 1999;
or (D) $2,000,000, if the first event to occur that constitutes a Change in
Control occurs at any time after December 31, 1999.
9.
<PAGE> 10
(e) Intentions Regarding Certain Stock and Benefit Plans. Except as
otherwise provided herein, upon any termination of the Executive's employment
Without Good Cause or upon the exercise by the Executive of his rights to
terminate his employment following a Change of Control, it is the intention of
the parties that any and all vesting or performance requirements or conditions
affecting any outstanding restricted stock, performance stock, stock option,
stock appreciation right, bonus, award, right, grant or any other incentive
compensation under any of the Plans, under this Agreement, or otherwise
received, shall be deemed to be fully satisfied and any risk of forfeiture with
respect thereto shall be deemed to have lapsed.
(f) Certain Rights Mutually Exclusive. The provisions of Section
8(c) and Section 8(d) are mutually exclusive, provided, however, that if within
one year following commencement of an 8(c) payout there shall be a Change in
Control as defined in Section 8(d)(i), then the Executive shall be entitled to
the amount payable to the Executive under Section 8(d)(ii) and Section
8(d)(iii) reduced by the amount that the Executive has received under Section
8(c) up to the date of the change in control. The triggering of the lump sum
payment requirement of Section 8(d) shall cause the provisions of Section 8(c)
to become inoperative.
9. DISCLOSURE
The Executive agrees that during the term of the Executive's
employment by the Company, the Executive will disclose and disclose only to the
Company all ideas, methods, plans, developments or improvements known by him
which relate directly or indirectly to the business of the Company, whether
acquired by the Executive before or during the Executive's employment by the
Company. Nothing in this Section 9 shall be construed as requiring any such
communication where the idea, plan, method or development is lawfully protected
from disclosure as a trade secret of a third party or by any other lawful
prohibition against such communication. The covenants of this Section 9 shall
not be violated by ordinary and customary communications with reporters,
bankers and securities analysts and other members of the investment community.
10. CONFIDENTIALITY
The Executive agrees to keep in strict secrecy and confidence any and
all information the Executive assimilates or to which the Executive has access
during the Executive's employment by the Company and which has not been
publicly disclosed and is not a matter of common knowledge in the fields of
work of the Company. The Executive agrees that both during and after the term
of the Executive's employment by the Company, the Executive will not, without
the prior written consent of the Company, disclose any such confidential
information to any third person, partnership, joint venture, company,
corporation or other organization. The foregoing covenants shall not be
breached to the extent that any such confidential information becomes a matter
of general knowledge other than through a breach by the Executive of the
Executive's obligations under this Section 10.
10.
<PAGE> 11
11. NONCOMPETITION AND NONSOLICITATION
(a) General. The Executive hereby acknowledges that, during and
solely as a result of the Executive's employment by the Company, the Executive
has received and shall continue to receive: (1) special training and education
with respect to the operations of the Company's real estate development and
management businesses and its leasing, lending and financing activities, and
other related matters, and (2) access to confidential information and business
and professional contacts. In consideration of the special and unique
opportunities afforded to the Executive by the Company as a result of the
Executive's employment, as outlined in the previous sentence, the Executive
hereby agrees to the restrictive covenants in this Section 11.
(b) Noncompetition. During the term of the Executive's employment,
whether pursuant to this Agreement, any automatic or other renewal hereof or
otherwise, and, except as may be otherwise herein provided, for a period of two
(2) years after the termination of the Executive's employment with the Company,
regardless of the reason for such termination, the Executive shall not,
directly or indirectly, enter into, engage in, be employed by or consult with
any business which competes with the Company's real estate lending, leasing,
development or management businesses in Florida. The Executive shall not
engage in such prohibited activities, either as an individual, partner,
officer, director, stockholder, employee, advisor, independent contractor,
joint venturer, consultant, agent, or representative or salesman for any
person, firm, partnership, corporation or other entity so competing with the
Company. The restrictions of this Section 11 shall not be violated by (i) the
ownership of no more than 2% of the outstanding securities of any company whose
stock is traded on a national securities exchange or is quoted in the Automated
Quotation System of the National Association of Securities Dealers (NASDAQ), or
(ii) other outside business investments that do not in any manner conflict with
the services to be rendered by the Executive for the Company and that do not
diminish or detract from the Executive's ability to render the Executive's
required attention to the business of the Company.
(c) Nonsolicitation. During the Executive's employment with the
Company and, except as may be otherwise herein provided, for a period of two
(2) years following the termination of the Executive's employment with the
Company, regardless of the reason for such termination, the Executive agrees
the Executive will refrain from and will not, directly or indirectly, as an
individual, partner, officer, director, stockholder, employee, advisor,
independent contractor, joint venturer, consultant, agent, representative,
salesman or otherwise solicit any of the employees of the Company to terminate
their employment.
(d) Term Extended or Suspended. The period of time during which the
Executive is prohibited from engaging in certain business practices pursuant to
Sections 11(b) or (c) shall be extended by any length of time during which the
Executive is in breach of such covenants.
(e) Essential Element. It is understood by and between the parties
hereto that the foregoing restrictive covenants set forth in Sections 11(a)
through (c) are essential elements of this Agreement, and that, but for the
agreement of the Executive to comply with such covenants, the Company would not
have agreed to enter into this Agreement. Such covenants by the Executive
shall be construed as agreements independent of any other provision in this
Agreement. The existence of any claim or cause of action of the Executive
against the Company, whether predicated on this Agreement, or otherwise, shall
not constitute a defense to the enforcement by the Company of such covenants.
11.
<PAGE> 12
(f) Severability. It is agreed by the Company and Executive that if
any portion of the covenants set forth in this Section 11 are held to be
invalid, unreasonable, arbitrary or against public policy, then such portion of
such covenants shall be considered divisible both as to time and geographical
area. The Company and Executive agree that, if any court of competent
jurisdiction determines the specified time period or the specified geographical
area applicable to this Section 11 to be invalid, unreasonable, arbitrary or
against public policy, a lesser time period or geographical area which is
determined to be reasonable, non-arbitrary and not against public policy may be
enforced against the Executive. The Company and the Executive agree that the
foregoing covenants are appropriate and reasonable when considered in light of
the nature and extent of the business conducted by the Company.
12. SPECIFIC PERFORMANCE
The Executive agrees that damages at law will be an insufficient
remedy to the Company if the Executive violates the terms of Sections 9, 10 or
11 of this Agreement and that the Company would suffer irreparable damage as a
result of such violation. Accordingly, it is agreed that the Company shall be
entitled, upon application to a court of competent jurisdiction, to obtain
injunctive relief to enforce the provisions of such Sections, which injunctive
relief shall be in addition to any other rights or remedies available to the
Company. The Executive agrees to pay to the Company all reasonable costs and
expenses incurred by the Company relating to the enforcement of the terms of
Sections 9, 10 or 11 of this Agreement, including reasonable fees and
reasonable disbursements of counsel selected by the Company (during
investigation and before and at trial and in appellate proceedings).
13. PAYMENT OF EXCISE TAXES
(a) Payment of Excise Taxes. If the Executive is to receive any (1)
Change of Control Payment under Section 8(d), (2) any benefit or payment under
Section 7 as a result of or following the death or Permanent Disability of the
Executive, (3) any benefit or payment under Section 8(c) as a result of or
following any termination of employment hereunder Without Good Cause, (4) any
benefit or payment under the Plans as a result of a Change of Control,
following the death or Permanent Disability of the Executive or following the
termination of employment hereunder Without Good Cause (such sections being
referred to as the "Covered Sections" and the benefits and payments to be
received thereunder being referred to as the "Covered Payments"), the Executive
shall be entitled to receive the amount described below to the extent
applicable: If any Covered Payment(s) under any of the Covered Sections or by
the Company under another plan or agreement (collectively, the "Payments") are
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986 (as amended from time to time, the "Code"), or any successor or similar
provision of the Code (the "Excise Tax"), the Company shall pay the Executive
an additional amount (the "Gross Up") such that the net amount retained by the
Executive after deduction of any Excise Tax on the Payments and the federal
income tax on any amounts paid under this Section 13 shall be equal to the
Payments.
(b) Certain Adjustment Payments. For purposes of determining the
Gross Up, the Executive shall be deemed to pay the federal income tax at the
highest marginal rate of taxation (currently
12.
<PAGE> 13
39.5%) in the calendar year in which the payment to which the Gross Up applies
is to be made. The determination of whether such Excise Tax is payable and the
amount thereof shall be made upon the opinion of tax counsel selected by the
Company and reasonably acceptable to the Executive. The Gross Up, if any, that
is due as a result of such determination shall be paid to the Executive in cash
in a lump sum within thirty (30) days of such computation. If such opinion is
not finally accepted by the Internal Revenue Service upon audit or otherwise,
then appropriate adjustments shall be computed (without interest but with Gross
Up, if applicable) by such tax counsel based upon the final amount of the
Excise Tax so determined; any additional amount due the Executive as a result
of such adjustment shall be paid to the Executive by his or her Company in cash
in a lump sum within thirty (30) days of such computation, or any amount due
the Executive's Company as a result of such adjustment shall be paid to the
Company by the Executive in cash in a lump sum within thirty (30) days of such
computation.
14. MISCELLANEOUS
(a) Waiver of Breach. The waiver by either party to this Agreement
of a breach of any of the provisions of this Agreement by the other party shall
not be construed as a waiver of any subsequent breach by such other party.
(b) Compliance With Other Agreements. The Executive represents and
warrants that the execution of this Agreement by him and the Executive's
performance of the Executive's obligations hereunder will not conflict with,
result in the breach of any provision of or the termination of or constitute a
default under any Agreement to which the Executive is a party or by which the
Executive is or may be bound.
(c) Binding Effect; Assignment. The rights and obligations of the
Company under this Agreement shall inure to the benefit of and shall be binding
upon the successors and assigns of the Company. This Agreement is a personal
employment contract and the rights, obligations and interests of the Executive
hereunder may not be sold, assigned, transferred, pledged or hypothecated.
(d) Entire Agreement. This Agreement contains the entire agreement
and supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof. This Agreement may be changed only by an
agreement in writing signed by the party against whom any waiver, change,
amendment, modification or discharge is sought.
(e) Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
(f) No Duty to Mitigate. The Executive shall be under no duty to
mitigate any loss of income as result of the termination of his employment
hereunder and any payments due the Executive upon termination of employment
shall not be reduced in respect of any other employment compensation received
by the Executive following such termination.
(g) Florida Law. This Agreement shall be construed pursuant to and
governed by the substantive laws of the State of Florida (except that any
provision of Florida law shall not apply if the law of a state or jurisdiction
other than Florida would otherwise apply).
13.
<PAGE> 14
(h) Venue; Process. The parties to this Agreement agree that
jurisdiction and venue in any action brought pursuant to this Agreement to
enforce its terms or otherwise with respect to the relationships between the
parties shall properly lie in and only in the Circuit Court of the Sixth
Judicial Circuit of the State of Florida in and for Pinellas County (the
"Circuit Court") and the parties agree that jurisdiction shall not properly lie
in any other jurisdiction provided, however, if jurisdiction does not properly
lie with the Circuit Court, the parties agree that jurisdiction and venue shall
properly lie in and only in the United States District Court for the Middle
District of Florida, Tampa Division. The parties hereby waive any objections
which they may now or hereafter have based on venue and/or forum non conveniens
and irrevocably submit to the jurisdiction of any such court in any legal suit,
action or proceeding arising out of or relating to this Agreement. The parties
further agree that the mailing by certified or registered mail, return receipt
requested, of any process required by any such court shall constitute valid and
lawful service of process against them, without the necessity for service by
any other means provided by statute or rule of court.
(i) Severability. Any provision of this Agreement which is
determined by a court of competent jurisdiction to be 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 affecting the validity, enforceability or legality of such
provision in any other jurisdiction. In any such case, such determination
shall not affect any other provision of this Agreement, and the remaining
provisions of this Agreement shall remain in full force and effect. If any
provision or term of this Agreement is susceptible to two or more constructions
or interpretations, one or more of which would render the provision or term
void or unenforceable, the parties agree that a construction or interpretation
which renders the term or provision valid shall be favored.
(j) Deduction for Tax Purposes. The Company's obligations to make
payments under this Agreement are independent of whether any or all of such
payments are deductible expenses of the Company for federal income tax
purposes.
(k) Enforcement. If, within 10 days after demand to comply with the
obligations of one of the parties to this Agreement served in writing on the
other, compliance or reasonable assurance of compliance is not forthcoming, and
the party demanding compliance engages the services of an attorney to enforce
rights under this Agreement, the prevailing party in any action shall be
entitled to recover all reasonable costs and expenses of enforcement (including
reasonable attorneys' fees and reasonable expenses during investigation, before
and at trial and in appellate proceedings). In addition, each of the parties
agrees to indemnify the other in respect of any and all claims, losses, costs,
liabilities and expenses, including reasonable fees and reasonable
disbursements of counsel (during investigation prior to initiation of
litigation and at trial and in appellate proceedings if litigation ensues),
directly or indirectly resulting from or arising out of a breach by the other
party of their respective obligations hereunder. The parties' costs of
enforcing this Agreement shall include prejudgment interest. Additionally, if
any party incurs any out-of- pocket expenses in connection with the enforcement
of this Agreement, all such amounts shall accrue interest at 10% per annum (or
such lower rate as may be required to avoid any limit imposed by applicable
law) commencing 30 days after any such expenses are incurred.
14.
<PAGE> 15
(l) Notices. All notices which are required or may be given under
this Agreement shall be in writing and shall be deemed to have been duly given
when received if personally delivered; when transmitted if transmitted by
telecopy or similar electronic transmission method; one working day after it is
sent, if sent by recognized expedited delivery service; and three days after it
is sent, if mailed, first class mail, certified mail, return receipt requested,
with postage prepaid. In each case notice shall be sent to:
To the Company: Echelon International Corporation.
One Progress Plaza
St. Petersburg, FL 33701
Attn: Chairman of the Board
Telecopy: (813) 824-6536
To the Executive at the Executive's address herein first above
written, or to such other address as either party may specify by written notice
to the other.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
ATTEST: ECHELON INTERNATIONAL CORPORATION
(Corporate Seal)
________________________________ By:____________________________________
Secretary
Title:
EXECUTIVE
Witnesses:
________________________________ ______________________________________
DARRYL A. LECLAIR
________________________________
As to Executive
15.
<PAGE> 16
EXHIBIT A
TO
EMPLOYMENT AGREEMENT WITH DARRYL A. LECLAIR
DATED ________, 1996
The Company will establish a Management Incentive Compensation Plan
("MICP") and Long Term Incentive Plan ("LTIP") for its senior management in
which the Executive will participate. During the first three full fiscal years
of the Company's operation following the completion of the Spinoff ending on
December 31, 1997, 1998 and 1999, respectively (the "Covered Years"), the MICP
will provide for annual cash bonuses based upon the Company's net income for
each of the Covered Years. The LTIP will provide the opportunity to earn
restricted shares based upon the Company's cumulative results of operation for
three year cycles, beginning with the three year cycle comprising the Covered
Years. The Executive's participation in the MICP and the LTIP during the
Covered Years shall be based upon the criteria and shall include awards with
the values indicated in the tables set forth below and as more fully described
in this Exhibit A.
MICP
During each of the Covered Years, (i) all MICP bonuses shall be paid
in cash; (ii) if Threshold Net Income is not achieved, no MICP cash bonus will
be paid; (iii) if actual net income exceeds Threshold Net Income, but is less
than Target Net Income, or exceeds Target Net Income but is less than Maximum
Net Income, the percentage of the MICP bonus shall be proportionately increased
above the Threshold bonus amount or the Target Bonus amount, as the case may
be, and (iv) if actual net income equals or exceeds Maximum Net Income, the
Maximum MICP cash bonus will be paid, but no additional cash bonus will be
payable under the MICP regardless of the amount by which actual net income in
that Covered Year exceeds Maximum Net Income. The following table sets forth
information regarding the MICP Net Income Threshold, Target and Maximum and
cash bonuses.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
MICP 1997 1998 1999
-------------------------------------------------------------------------
<S> <C> <C> <C>
THRESHOLD
-------------------------------------------------------------------------
Net Income $1,584,274 $1,768,816 $2,132,640
-------------------------------------------------------------------------
MICP Cash Bonus $70,000 $70,000 $70,000
(% of Target Bonus) (50%) (50%) (50%)
-------------------------------------------------------------------------
TARGET
-------------------------------------------------------------------------
Net Income $2,112,366 $2,358,422 $2,843,521
-------------------------------------------------------------------------
MICP Cash Bonus $140,000 $140,000 $140,000
(% of Base Salary) (50%) (50%) (50%)
-------------------------------------------------------------------------
MAXIMUM
-------------------------------------------------------------------------
Net Income $2,640,457 $2,948,027 $3,554,401
-------------------------------------------------------------------------
</TABLE>
16.
<PAGE> 17
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
MICP 1997 1998 1999
-------------------------------------------------------------------------
<S> <C> <C> <C>
MICP Cash Bonus $210,000 $210,000 $210,000
(% of Target Bonus) (150%) 150% (150%)
-------------------------------------------------------------------------
</TABLE>
Notwithstanding the foregoing and the information contained in any of
the tables contained in this Exhibit, and regardless of the actual net income
achieved by the Company in the first Covered Year, the MICP cash bonus shall
not be less than the amount of the MICP cash bonus that would be payable if the
Target Net Income was achieved in the first Covered Year (50% of Base Salary).
LTIP
The sum of each year's Threshold Net Income for the three Covered
Years shall be referred to as the "Threshold LTIP Net Income"; the sum of each
year's Target Net Income for the three Covered Years shall be referred to as
"Target LTIP Net Income"; and the sum of each year's Maximum Net Income for the
three Covered Years shall be referred to as "Maximum LTIP Net Income," in each
case, as set forth in the following tables:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
LTIP 1997 1998 1999 LTIP NET INCOME
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
THRESHOLD THRESHOLD
-----------------------------------------------------------------------------------------------------
Net Income $1,584,274.00 $1,768,816.00 $2,132,640.00 $5,485,730.00
-----------------------------------------------------------------------------------------------------
TARGET TARGET
-----------------------------------------------------------------------------------------------------
Net Income $2,112,366.00 $2,358,422.00 $2,843,521.00 $7,314,309.00
-----------------------------------------------------------------------------------------------------
MAXIMUM MAXIMUM
-----------------------------------------------------------------------------------------------------
Net Income $2,640,457.00 $2,948,027.00 $3,554,401.00 $9,142,885.00
-----------------------------------------------------------------------------------------------------
</TABLE>
The following table sets for information regarding the Threshold,
Target and Maximum LTIP Net income and values associated with achieving such
levels of cumulative net income:
<TABLE>
<CAPTION>
-----------------------------------------------------------
LTIP Three Years Ending
December 31, 1999
-----------------------------------------------------------
<S> <C>
THRESHOLD
-----------------------------------------------------------
Cumulative Net Income $5,485,730.00
-----------------------------------------------------------
LTIP Value $315,000
(% of Target Bonus) (50%)
-----------------------------------------------------------
TARGET
-----------------------------------------------------------
Cumulative Net Income $7,314,309.00
-----------------------------------------------------------
LTIP Value $630,000
(% of Base Salary) (75%)
-----------------------------------------------------------
</TABLE>
17.
<PAGE> 18
<TABLE>
<CAPTION>
-----------------------------------------------------------
LTIP Three Years Ending
December 31, 1999
-----------------------------------------------------------
<S> <C>
MAXIMUM
-----------------------------------------------------------
Cumulative Net Income $9,142,885.00
-----------------------------------------------------------
LTIP Value $945,000
(% of Target Bonus) (150%)
-----------------------------------------------------------
</TABLE>
For purposes of administering the LTIP, during the first three-year
cycle, (i) all LTIP awards shall be paid in the form of restricted shares; (ii)
the number of restricted shares shall be determined by dividing the dollar
value of the Maximum LTIP Value $945,000 by the closing price on January 1,
1998, or the first trading day thereafter, on the New York Stock Exchange (or
such other market on which the Company's stock trades if it is not listed on
the New York Stock Exchange); (iii) the restricted shares, among other things,
shall be subject to a risk of forfeiture if and to the extent that the
performance criteria set forth in this Exhibit A are not met; (iv) if actual
cumulative net income for the three-year period ending December 31, 1999, does
not equal or exceed Threshold LTIP Net Income, all restricted shares shall be
forfeited, and no LTIP bonus will have been earned; (v) if actual cumulative
net income for the three year period ending December 31, 1999, exceeds
Threshold LTIP Net Income, but is less than Target LTIP Net Income, or exceeds
Target LTIP Net Income but is less than Maximum LTIP Net Income, the percentage
of the LTIP restricted shares as to which the risks on forfeiture shall lapse
shall be proportionately increased above the Threshold bonus amount or the
Target Bonus amount, as the case may be; and (vi) if cumulative net income for
the three-year period ending December 31, 1999 equals or exceeds Maximum LTIP
Net Income, the risks of forfeiture shall lapse as to all restricted shares,
but no additional shares will be issuable under the LTIP regardless of the
amount by which actual cumulative net income for the three years ending
December 31, 1999 exceeds Maximum LTIP Net Income.
18.
<PAGE> 1
Exhibit 10.12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into this ___ day of
___________________, 1996, but is effective for all purposes as of the date
specified below in Section 2, by and between ECHELON INTERNATIONAL CORPORATION,
a Florida corporation (the "Company"), and LARRY J. NEWSOME, residing at 3863
40th Way South, St. Petersburg, Florida 33711 (the "Executive").
W I T N E S S E T H:
1. EMPLOYMENT
The Company hereby employs the Executive, and the Executive hereby
accepts such employment, upon the terms and subject to the conditions set forth
in this Agreement.
2. TERM
Subject to the provisions for termination as hereinafter provided, the
term of employment under this Agreement shall begin as of the completion of the
"Distribution" as that term is defined in the Company's Registration Statement
on Form 10, as amended (the "Distribution"), and shall continue through
December 31, 1998, provided, however, that this Employment Agreement shall
automatically be renewed for successive one year terms unless either party
gives the other written notice of termination at least ninety (90) days prior
to the end of any such term.
3. COMPENSATION
(a) Base Salary. The Company shall pay to the Executive as basic
compensation for all services rendered by the Executive during the term of this
Agreement a basic annualized salary of $170,000 per year, or such other sum in
excess of that amount as the parties may agree on from time to time or as
provided in the next sentence (as in effect from time to time, the "Base
Salary"), payable monthly or in other more frequent installments, as determined
by the Company. The Board of Directors shall have no authority to reduce the
Executive's Base Salary in effect from time to time. In addition, the Board of
Directors, in its discretion, may award a bonus or bonuses to the Executive in
addition to the bonuses provided for in Section 3(b).
(b) Bonuses. In addition to the Base Salary to be paid pursuant to
Section 3(a), for each of the Company's two fiscal years ending December 31,
1997 and December 31, 1998 during the term of this Agreement, and for the
fiscal year ending December 31, 1999 provided the Executive continues to be
employed by the Company under this Agreement, the Executive shall be eligible
to earn as incentive compensation the annual bonuses specified, to the extent
earned, on Exhibit A to this Agreement. For each fiscal year ending after
December 31, 1999, so long as the Employee remains employed by the Company, the
Executive shall be eligible to participate in incentive compensation annual
bonus plan(s) adopted by the Board of Directors of the Company from time to
time in accordance with the terms of such plans.
<PAGE> 2
(c) Certain Plans and Initial Award. (i) It is anticipated that the
Company will adopt certain incentive compensation plans including a long term
incentive plan (the "LTIP"), providing for annual or other periodic awards to
key employees, among other things, of restricted stock and a stock option plan
(the "ISO/NSO Plan"), providing for the annual or other periodic issuance of
options to purchase the Company's common stock. The LTIP and ISO/NSO are
referred to collectively in this Agreement as the "Plans." The Executive will
be given an opportunity to participate in the Plans, in accordance with and
subject to the terms of the Plans as they may be adopted, amended and
administered from time to time.
(ii) In addition to the incentive compensation referred t6o
in Section 3(c)(i), the Company hereby agrees to issue to the Executive under
the LTIP, effective immediately following the completion of the Distribution,
that number of shares of the Company's common stock (the "Initial Restricted
Stock") as will equal five-tenths of one percent (0.5%) of the shares of the
Company's common stock distributed in the Distributed, which Initial Restricted
Stock shall be subject to risk of forfeiture, which risk will lapse as to
one-fourth of the shares of the Initial Restricted Stock on January 31, 1998,
and as to an additional one-fourth of the Initial Restricted Stock on each of
January 31, 1999, January 31, 2000 and January 31, 2001. Accordingly, as of
January 31, 2001, all risks of forfeiture shall have lapsed as to all the
Initial Restricted Stock.
(iii) In addition to the incentive compensation referred to
in Section 3(c)(i) and the Initial Restricted Stock, the Company hereby agrees
to grant to the the Executive under the LTIP, effective immediately following
the completion of the Distribution, options to purchase two thousand five
hundred (2,500) shares of the Company's common stock (the "Initial Options"),
which Initial Options shall be exerciseable as to one-fourth of the shares of
common stock covered by the Initial Options on January 31, 1998, and as to an
additional one-fourth of such shares on each of January 31, 1999, January 31,
2000 and January 31, 2001. The exercise price for the Initial Options shall be
the closing price on the New York Stock Exchange (or such other market on which
the Company's stock trades if it is not listed on the New York Stock Exchange)
on the trading day which is the eighth month anniversary of the day of the
completion of the Distribution (the "Option Pricing Date"), or if the Option
Pricing Date is not a trading day, the first trading day thereafter.
(iv) Any and all risks of forfeiture shall lapse as to all of
the Initial Restricted Stock and the Initial Options shall be fully vested and
shall be exerciseable as to all of the shares of common stock covered by the
Initial Options upon (i) the death of the Executive or termination of
employment upon the "Permanent Disability" (as that term is defined in Section
7(b)(ii) of this Agreement) of the Executive, (ii) the termination of
employment of the Executive by the Company"Without Good Cause" (as that term is
defined in Section 8(b)(ii) of this Agreement) or (iii) the exercise by the
Executive of his rights to terminate his employment under Section 8(d)(ii)
following a "Change of Control" (as that term is defined in Section 8(d)(i) of
this Agreement).
(d) Reimbursement. The Company shall reimburse the Executive, in
accordance with the Company's policies and practices for senior management, for
all reasonable expenses incurred by the Executive in the performance of the
Executive's duties under this Agreement, provided, however, that the Executive
must furnish to the Company an itemized account, satisfactory to the Company, in
substantiation of such expenditures.
2.
<PAGE> 3
(e) Certain Benefits. The Executive shall be entitled to such fringe
benefits including, but not limited to, medical and other insurance benefits as
may be provided from time to time by the Company to other senior officers of
the Company. In addition, without restricting the foregoing, the Company shall
provide the Executive at the Company's sole cost and expense with (i) a policy
or policies of term life insurance (the "Basic Life Insurance") providing,
among other things, basic death benefits of not less than two times the Base
Salary in effect from time to time, (ii) directors and officers liability
insurance with coverage, terms and limits suitable for a chief financial
officer of a New York Stock Exchange listed company comparable in financial
size and wherewithal to that of the Company and (iii) a monthly allowance of
$500 cash to reimburse the Executive for the use and maintenance of his
automobile in furtherance of the business and affairs of the Company, provided
that the Executive shall at all times insure the Executive and the Company in
such amounts as may be reasonably requested by the Company against claims for
bodily injury, death and property damages occurring as a result of its use.
The Company shall use its reasonable best efforts to make available to the
Executive in connection with providing and paying for the Basic Life Insurance
the opportunity to purchase at the Executive's sole cost and expense additional
life insurance with a basic death benefit (the "Optional Life Insurance") equal
to two times the Executive's Base Salary in effect from time to time (affording
the Executive the opportunity to have basic death benefit life insurance
coverage equal to four times such Base Salary). The Company shall use its
reasonable best efforts to effect the transfer of the ownership to the
Executive of the policy or policies for the Basic Life Insurance and the
Optional Life Insurance, if any, upon the termination of the Executive's
employment by the Company. After the Executive's termination, payment of any
premiums would be the obligation of the Executive.
(f) Other Incentive and Benefit Plans. The Executive shall be
eligible to participate, in accordance with the terms of such plans as they may
be adopted, amended and administered from time to time, in incentive, bonus,
benefit or similar plans, including without limitation, any stock option, bonus
or other equity ownership plan, any short, mid or long term incentive plan and
any other bonus, pension or profit sharing plans established by the Company
from time to time.
4. DUTIES
(a) General. The Executive is engaged as the Chief Financial Officer
and a Senior Vice President of the Company. In addition, at the request of the
Board of Directors, the Executive shall serve in the same positions in any
wholly owned subsidiary of the Company, without any additional compensation.
The Executive shall have such duties and hold such other offices as may from
time to time be reasonably assigned to him by the Board of Directors of the
Company.
(b) Indemnification. To the fullest extent permitted by law, the
Company shall indemnify and hold harmless the Executive for all liabilities,
costs, expenses and damages arising out of or in connection with the
Executive's service to the Company under this Agreement. In furtherance of
this indemnity, the Company shall enter into an indemnification agreement, in
form and substance reasonably satisfactory to the Executive and the Company.
In addition, the indemnity provided hereunder shall extend to service by the
Executive as an officer or director, or service in a similar capacity, for any
civic, community or charitable organization, provided such service is
undertaken at
3.
<PAGE> 4
the request of or with the knowledge and acquiescence of the Company. The
foregoing indemnification shall be in addition to any rights or benefits the
Executive may have under statute, the Bylaws or Articles of Incorporation of the
Company, under a policy of insurance, or otherwise.
5. EXTENT OF SERVICES; VACATIONS AND DAYS OFF
(a) Extent of Services. During the term of the Executive's
employment under this Agreement, except during customary vacation periods and
periods of illness, the Executive shall devote full-time energy and attention
during regular business hours to the benefit and business of the Company as may
be reasonably necessary in performing the Executive's duties pursuant to this
Agreement.
(b) Vacations. The Executive shall be entitled to vacations with pay
and to such personal and sick leave with pay in accordance with the policy of
the Company as may be established from time to time by the Company and applied
to other senior officers of the Company. In no event shall the Executive be
entitled to fewer than four weeks' annual vacation. Unused vacation days may
be carried over from one year to the next for a period of up to two years. Any
vacation days which remain unused on the second anniversary of the end of the
fiscal year to which they originally related shall expire and shall thereafter
no longer be useable by the Executive.
6. FACILITIES
The Company shall provide the Executive with a fully furnished office,
and the facilities of the Company shall be generally available to the Executive
in the performance of the Executive's duties pursuant to this Agreement, it
being understood and contemplated by the parties that all equipment, supplies
and office personnel required in the performance of the Executive's duties
under this Agreement shall be supplied by and at the sole expense of the
Company.
7. ILLNESS OR INCAPACITY, TERMINATION ON DEATH, ETC.
(a) Death. If the Executive dies during the term of the Executive's
employment, the Company shall pay to the estate of the Executive within 30 days
after the date of death such Base Salary and any cash bonus compensation earned
pursuant to the provisions of any incentive compensation plan then in effect
but not yet paid, as would otherwise have been payable to the Executive up to
the end of the month in which the Executive's death occurs. After receiving
the payments provided in this Section 7(a) the Executive and the Executive's
estate shall have no further rights under this Agreement (other than those
rights already accrued).
(b) Disability. (i) During any period of disability, illness or
incapacity during the term of this Agreement which renders the Executive at
least temporarily unable to perform the services required under this Agreement,
the Executive shall receive the Base Salary payable under Section 3(a) of this
Agreement plus any cash bonus compensation earned pursuant to the provisions of
any incentive
4.
<PAGE> 5
compensation plan then in effect but not yet paid, less any cash benefits
received by him under any disability insurance carried by or provided by the
Company. Upon the Executive's "Permanent Disability" (as defined below), which
permanent disability continues during the payment periods specified herein, the
Company shall pay to the Executive for the period of time specified below an
amount (the "Disability Payment") equal to the (i) sum of (A) the Base Salary in
effect at the time of the Executive's permanent disability plus (B) an amount
equal to the target level of the annual cash bonus payable to the Executive
under the Company's Management Incentive Compensation Plan as described on
Exhibit A or any similar bonus or incentive plans or programs then in effect
(the "MICP Target Amount") in respect of the fiscal year during which the
Executive's permanent disability occurred, which MICP Target Amount shall be
paid in pro rata equal monthly installments over the period of time specified
below (ii) reduced by the amount of any monthly payments under any policy of
disability income insurance paid for by the Company which payments are received
during the time when any Disability Payment is being made to the Executive
following the Executive's Permanent Disability. For so long as the Executive's
permanent disability continues, the Disability Payment shall be paid by the
Company to the Executive in equivalent installments at the same time or times as
would have been the case for payment of Base Salary over the unexpired term of
this Agreement if the Executive had not become permanently disabled and had
remained employed by the Company hereunder, but in no case shall such period
exceed 24 months. The Executive may be entitled to receive payments under any
disability income insurance which may be carried by or provided by the Company
from time to time. Upon "Permanent Disability" (as that term is defined in
Section 7(b)(ii) below) of the Executive, except as provided in this Section
7(b) all rights of the Executive under this Agreement (other than rights already
accrued) shall terminate.
(ii) The term "Permanent Disability" as used in this
Agreement shall mean, in the event a disability insurance policy is maintained
by the Company covering the Executive at such time and is in full force and
effect, the definition of permanent disability set forth in such policy. In
the event no disability insurance policy is maintained at such time and in full
force and effect, "Permanent Disability" shall mean the inability of the
Executive, as determined by the Board of Directors of the Company, by reason of
physical or mental disability to perform the duties required of him under this
Agreement for a period of one hundred and eighty (180) days in any one-year
period. Successive periods of disability, illness or incapacity will be
considered separate periods unless the later period of disability, illness or
incapacity is due to the same or related cause and commences less than six
months from the ending of the previous period of disability. Upon such
determination, the Board of Directors may terminate the Executive's employment
under this Agreement upon ten (10) days' prior written notice. If any
determination of the Board of Directors with respect to permanent disability is
disputed by the Executive, the parties hereto agree to abide by the decision of
a panel of three physicians. The Executive and Company shall each appoint one
member, and the third member of the panel shall be appointed by the other two
members. The Executive agrees to make himself available for and submit to
examinations by such physicians as may be directed by the Company. Failure to
submit to any such examination shall constitute a breach of a material part of
this Agreement.
5.
<PAGE> 6
8. OTHER TERMINATIONS
(a) By the Executive. (i) The Executive may terminate the
Executive's employment hereunder upon giving at least ninety (90) days' prior
written notice. In addition, the Executive shall have the right to terminate
the Executive's employment hereunder on the conditions and at the times
provided for in Section 8(d) of this Agreement.
(ii) If the Executive gives notice pursuant to Section
8(a)(i) above, the Company shall have the right (but not the obligation) to
relieve the Executive, in whole or in part, of the Executive's duties under
this Agreement, or direct the Executive to no longer perform such duties, or
direct that the Executive should no longer report to work, or any combination
of the foregoing. In any such event, the Executive shall be entitled to
receive only the Base Salary not yet paid, as would otherwise have been payable
to the Executive up to the end of the month specified as the month of
termination in the termination notice. In the event the Executive gives notice
pursuant to Section 8(a)(i) above but specifies a termination date in excess of
ninety (90) days from the date of such notice, the Company shall have the right
(but not the obligation) to accelerate the termination date to any date prior
to the date specified in the notice that is in excess of ninety (90) days from
the date of the notice, and the Company shall have the right (but not the
obligation) to relieve the Executive, in whole or in part, of the Executive's
duties under this Agreement, or direct the Executive to no longer perform such
duties, or direct that the Executive should no longer report to work, or any
combination of the foregoing; provided, however, that in any such event the
Executive shall be entitled to receive the Base Salary, as would otherwise have
been payable to the Executive up to the end of the month of the termination
date properly selected by the Company. Upon receiving the payments provided
for under this Section 8(a), all rights of the Executive under this Agreement
(other than rights already accrued) shall terminate.
(b) Termination for "Good Cause". (i) Except as otherwise provided
in this Agreement, the Company may terminate the employment of the Executive
hereunder only for "good cause," which shall mean: (A) the Executive's
conviction of either a felony involving moral turpitude or any crime in
connection with the Executive's employment by the Company which causes the
Company a substantial detriment, but specifically shall not include traffic
offenses; (B) actions by the Executive as an executive officer of the
Executive which clearly are contrary to the best interests of the Company; (C)
the Executive's willful failure to take actions permitted by law and necessary
to implement policies of the Company's Board of Directors which the Board of
Directors has communicated to him in writing, provided that minutes of a Board
of Directors meeting attended in its entirety by the Executive shall be deemed
communicated to the Executive; (D) the Executive's continued failure to
attend to the Executive's duties as an executive officer of the Executive; or
(E) any condition which either resulted from the Executive's substantial
dependence, as determined by the Board of Directors of the Company, on alcohol,
or any narcotic drug or other controlled or illegal substance. If any
determination of substantial dependence is disputed by the Executive, the
parties hereto agree to abide by the decision of a panel of three physicians
appointed in the manner and subject to the same penalties for noncompliance as
specified in Section 7(b)(ii) of this Agreement.
(ii) If the employment of the Executive is terminated for
good cause under Section 8(b)(i) of this Agreement, the Company shall pay to
the Executive any Base Salary earned prior to
6.
<PAGE> 7
the effective date of termination but not yet paid and any cash bonus
compensation earned pursuant to the provisions of any incentive compensation
plan then in effect but not paid to the Executive prior to the effective date of
such termination. Under such circumstances, such payments shall be in full and
complete discharge of any and all liabilities or obligations of the Company to
the Executive hereunder, and the Executive shall be entitled to no further
benefits under this Agreement (other than rights already accrued).
(iii) Notwithstanding the foregoing, each of the foregoing
bases for termination specified in (A) through (E) of Subsection 8(b)(i) shall
constitute "Good Cause" only if (1) the Executive has been provided with
written notice of any assertion that there is a basis for termination for good
cause which notice shall specify in reasonable detail specific facts regarding
any such assertion and the Executive has been given a reasonable period of time
within which to remedy or cure the problem or complaint, (2) such notice is
provided to the Executive a reasonable time before the Board of Directors meets
to consider any possible termination for cause, (3) at or prior to the meeting
of the Board of Directors to consider the matters described in the written
notice, an opportunity is provided to the Executive and his counsel to be heard
by the Board of Directors with respect to the matters described in the written
notice, before it acts with respect to such matter, (4) any resolution or other
action by the Board of Directors with respect to any deliberation regarding or
decision to terminate the Executive for good cause is duly adopted by a vote of
a majority of the entire Board of Directors of the Company at a meeting of the
Board duly called and held and (5) the Executive is promptly provided with a
copy of the resolution or other corporate action taken with respect to such
termination.
(iv) Termination of the employment of the Executive other
than as expressly specified above in this Section 8(b) for good cause shall be
deemed to be a termination of employment "Without Good Cause."
(c) Termination Without Good Cause. (i) Notwithstanding any other
provision of this Agreement, the Company shall have the right to terminate the
Executive's employment Without Good Cause pursuant to the provisions of this
Section 8(c). If the Company shall terminate the employment of the Executive
Without Good Cause effective on a date earlier than the termination date
provided for in Section 2 (with the effective date of termination as so
identified by the Company being referred to herein as the "Accelerated
Termination Date"), the Executive, until the end of the term of this Agreement
then in effect as provided for in Section 2 or until the date which is 24 months
after the Accelerated Termination Date, whichever is the first to occur, shall
continue to receive (1) the Base Salary, paid in the same monthly on other
periodic installments ad in effect prior to the Accellerated Termination Date
(2) an equal monthly pro rata portion of an amount of cash equal to the MICP
Target Amount (as that term is defined in Section 7(b)(i)) in respect of the
year during which the Executive's employment terminates, multiplied times the
number of years (or fractions thereof) remaining in the then unexpired term of
this Agreement or multiplied times two if the 24 month payment period under this
Section 8(c)(i) is in effect, plus (3)an equal monthly pro rata portion of an
amount of cash equal to the cash value of any bonus paid or to be paid to the
Executive in the form of performance shares or restricted stock under the LTIP
as described on Exhibit A or any similar bonus or incentive plans or programs
then in effect (valued, if applicable under the terms of such plans or programs,
at the greater of the closing price on the New York Stock Exchange ,or other
such
7.
<PAGE> 8
market on which the Company's stock trades if it is not listed on the New York
Stock Exchange, on the first trading day of the plan or program cycle or the
Accelerated Termination Date, or if the Accelerated Termination Date is not a
trading day, on the first trading day thereafter) in respect of the
then-current three year cycle of such plans or programs or such other cycle as
is then in effect, calculated as if the then-current cycle were completed and
the target levels attained (the "LTIP Target Amount"), which cash payment shall
be in lieu and in full satisfaction any rights under the LTIP in respect of
such stock or shares as described in Exhibit A or any similar bonus or
incentive plans or programs in effect at the time of such payment (all of
which stock or shares shall be cancelled upon such payment and receipt), and
(4) any other cash or other bonus compensation earned prior to the date of such
termination pursuant to the terms of all incentive compensation plans then in
effect other than the Company's Management Incentive Compensation Plan as
described on Exhibit A or any similar bonus on incentive plans or programs then
in effect; provided that, notwithstanding such termination of employment, the
Executive's covenants set forth in Section 10 and Section 11 are intended to
and shall remain in full force and effect and provided further that in the
event of such termination, the Company shall have the right (but not the
obligation) to relieve the Executive, in whole or in part, of the Executive's
duties under this Agreement, or direct the Executive to no longer perform such
duties, or direct that the Executive no longer be required to report to work,
or any combination of the foregoing.
(ii) The parties agree that, because there can be no exact
measure of the damage that would occur to the Executive as a result of a
termination by the Company of the Executive's employment Without Good Cause,
the payments and benefits paid and provided pursuant to this Section 8(c) shall
be deemed to constitute liquidated damages and not a penalty for the Company's
termination of the Executive's employment Without Good Cause.
(d) Change of Control. (i) For purposes of this Agreement, a
"Change in Control" shall mean the first to occur of:
(1) a change in control of the Company of a nature that
is required, pursuant to the Securities Exchange Act
of 1934 (the "1934 Act"), to be reported in response
to Item 1(a) of a Current Report on Form 8-K or Item
6(e) of Schedule 14A under the 1934 Act (in each case
under this Agreement, references to provisions of the
1934 Act and the rules and regulations promulgated
thereunder being understood to refer to such law,
rules and regulations as the same are in effect on
November 1, 1996); or
(2) the acquisition of "Beneficial Ownership" (as defined
in Rule 13d-3 under the 1934 Act) of the Company's
securities comprising 35% or more of the
combined voting power of the Company's
outstanding securities by any "person" (as that term
is used in Sections 13(d) and 14(d)(2) of the 1934 Act
and the rules and regulations promulgated thereunder,
but not including any trustee or fiduciary acting in
that capacity for an employee benefit plan sponsored
by the Company) and such person's "affiliates" and
"associates" (as those terms are defined under the
1934 Act), but excluding any ownership by the
Executive and his affiliates and associates; or
8.
<PAGE> 9
(3) the failure of the "Incumbent Directors" (as defined
below) to constitute at least a majority of all
directors of the Company (for these purposes,
"Incumbent Directors" means individuals who were the
directors of the Company on November 1, 1996, and,
after his or her election, any individual becoming a
director subsequent to November 1, 1996, whose
election, or nomination for election by the Company's
stockholders, is approved by a vote of at least
two-thirds of the directors then comprising the
Incumbent Directors, except that no individual shall
be considered an Incumbent Director who is not
recommended by management and whose initial
assumption of office as a director is in connection
with an actual or threatened "election contest"
relating to the "election of directors" of the
Company, as such terms are used in Rule 14a-11 of
Regulation 14A under the 1934 Act); or
(4) the closing of a sale of all or substantially all of
the assets of the Company;
(5) the Company's adoption of a plan of dissolution or
liquidation; or
(6) the closing of a merger or consolidation involving
the Company in which the Company is not the surviving
corporation or if, immediately following such merger
or consolidation, less than seventy-five percent
(75%) of the surviving corporation's outstanding
voting stock is held or is anticipated to be held by
persons who are stockholders of the Company
immediately prior to such merger or consolidation.
(ii) If a Change in Control of the Company occurs, the
Executive shall have the right, exercisable for a period of one year thereafter
by delivering a written statement to that effect to the Company, to immediately
terminate this Agreement and upon such a determination the Executive shall have
the right to receive and the Company shall be obligated to pay to Executive in
cash a lump sum payment in an amount equal to the sum of (1) two times the
annual Base Salary then in effect, (2) two times the MICP Target Amount (as that
term is defined in Section 7(b)(i)) in the year in which employment terminates,
(3) the cash value of the LTIP Target Amount (as that term is defined in Section
8(c)), which cash payment shall be in lieu and in full satisfaction any rights
under the LTIP in respect of such stock or shares as described in Exhibit A or
any similar bonus or incentive plans or programs in effect at the time of such
payment (all of which stock or shares shall be cancelled upon such payment and
receipt), and (4) the additional payments necessary to discharge certain tax
liabilities (the "Gross Up") as that term is defined in Section 13 of this
Agreement (the sum of the foregoing amounts other than the Gross Up being
referred to as the "Change in Control Payment"). If the Executive fails to
exercise his rights under this Section 8(d) within one year following a Change
in Control, such rights shall expire and be of no further force or effect.
(e) Intentions Regarding Certain Stock and Benefit Plans. Except as
otherwise provided herein, upon any termination of the Executive's employment
Without Good Cause or upon the exercise by the Executive of his rights to
terminate his employment following a Change of Control, it is the intention of
the parties that any and all vesting or performance requirements or conditions
affecting any outstanding restricted stock, performance stock, stock option,
stock appreciation right,
9.
<PAGE> 10
bonus, award, right, grant or any other incentive compensation under any of the
Plans, under this Agreement, or otherwise received, shall be deemed to be fully
satisfied and any risk of forfeiture with respect thereto shall be deemed to
have lapsed.
(f) Certain Rights Mutually Exclusive. The provisions of Section
8(c) and Section 8(d) are mutually exclusive, provided, however, that if within
one year following commencement of an 8(c) payout there shall be a Change in
Control as defined in Section 8(d)(i), then the Executive shall be entitled to
the amount payable to the Executive under Section 8(d)(ii) and Section
8(d)(iii) reduced by the amount that the Executive has received under Section
8(c) up to the date of the change in control. The triggering of the lump sum
payment requirement of Section 8(d) shall cause the provisions of Section 8(c)
to become inoperative.
9. DISCLOSURE
The Executive agrees that during the term of the Executive's
employment by the Company, the Executive will disclose and disclose only to the
Company all ideas, methods, plans, developments or improvements known by him
which relate directly or indirectly to the business of the Company, whether
acquired by the Executive before or during the Executive's employment by the
Company. Nothing in this Section 9 shall be construed as requiring any such
communication where the idea, plan, method or development is lawfully protected
from disclosure as a trade secret of a third party or by any other lawful
prohibition against such communication. The covenants of this Section 9 shall
not be violated by ordinary and customary communications with reporters,
bankers and securities analysts and other members of the investment community.
10. CONFIDENTIALITY
The Executive agrees to keep in strict secrecy and confidence any and
all information the Executive assimilates or to which the Executive has access
during the Executive's employment by the Company and which has not been publicly
disclosed and is not a matter of common knowledge in the fields of work of the
Company. The Executive agrees that both during and after the term of the
Executive's employment by the Company, the Executive will not, without the prior
written consent of the Company, disclose any such confidential information to
any third person, partnership, joint venture, company, corporation or other
organization. The foregoing covenants shall not be breached to the extent that
any such confidential information becomes a matter of general knowledge other
than through a breach by the Executive of the Executive's obligations under this
Section 10.
10.
<PAGE> 11
11. NONCOMPETITION AND NONSOLICITATION
(a) General. The Executive hereby acknowledges that, during and
solely as a result of the Executive's employment by the Company, the Executive
has received and shall continue to receive: (1) special training and education
with respect to the operations of the Company's real estate development and
management businesses and its leasing, lending and financing activities, and
other related matters, and (2) access to confidential information and business
and professional contacts. In consideration of the special and unique
opportunities afforded to the Executive by the Company as a result of the
Executive's employment, as outlined in the previous sentence, the Executive
hereby agrees to the restrictive covenants in this Section 11.
(b) Noncompetition. During the term of the Executive's employment,
whether pursuant to this Agreement, any automatic or other renewal hereof or
otherwise, and, except as may be otherwise herein provided, for a period of two
(2) years after the termination of the Executive's employment with the Company,
regardless of the reason for such termination, the Executive shall not,
directly or indirectly, enter into, engage in, be employed by or consult with
any business which competes with the Company's real estate lending, leasing,
development or management businesses in Florida. The Executive shall not
engage in such prohibited activities, either as an individual, partner,
officer, director, stockholder, employee, advisor, independent contractor,
joint venturer, consultant, agent, or representative or salesman for any
person, firm, partnership, corporation or other entity so competing with the
Company. The restrictions of this Section 11 shall not be violated by (i) the
ownership of no more than 2% of the outstanding securities of any company whose
stock is traded on a national securities exchange or is quoted in the Automated
Quotation System of the National Association of Securities Dealers (NASDAQ), or
(ii) other outside business investments that do not in any manner conflict with
the services to be rendered by the Executive for the Company and that do not
diminish or detract from the Executive's ability to render the Executive's
required attention to the business of the Company.
(c) Nonsolicitation. During the Executive's employment with the
Company and, except as may be otherwise herein provided, for a period of two
(2) years following the termination of the Executive's employment with the
Company, regardless of the reason for such termination, the Executive agrees
the Executive will refrain from and will not, directly or indirectly, as an
individual, partner, officer, director, stockholder, employee, advisor,
independent contractor, joint venturer, consultant, agent, representative,
salesman or otherwise solicit any of the employees of the Company to terminate
their employment.
(d) Term Extended or Suspended. The period of time during which the
Executive is prohibited from engaging in certain business practices pursuant to
Sections 11(b) or (c) shall be extended by any length of time during which the
Executive is in breach of such covenants.
(e) Essential Element. It is understood by and between the parties
hereto that the foregoing restrictive covenants set forth in Sections 11(a)
through (c) are essential elements of this Agreement, and that, but for the
agreement of the Executive to comply with such covenants, the Company would not
have agreed to enter into this Agreement. Such covenants by the Executive
shall be construed as agreements independent of any other provision in this
Agreement. The existence of any claim or
11.
<PAGE> 12
cause of action of the Executive against the Company, whether predicated on this
Agreement, or otherwise, shall not constitute a defense to the enforcement by
the Company of such covenants.
(f) Severability. It is agreed by the Company and Executive that if
any portion of the covenants set forth in this Section 11 are held to be
invalid, unreasonable, arbitrary or against public policy, then such portion of
such covenants shall be considered divisible both as to time and geographical
area. The Company and Executive agree that, if any court of competent
jurisdiction determines the specified time period or the specified geographical
area applicable to this Section 11 to be invalid, unreasonable, arbitrary or
against public policy, a lesser time period or geographical area which is
determined to be reasonable, non-arbitrary and not against public policy may be
enforced against the Executive. The Company and the Executive agree that the
foregoing covenants are appropriate and reasonable when considered in light of
the nature and extent of the business conducted by the Company.
12. SPECIFIC PERFORMANCE
The Executive agrees that damages at law will be an insufficient
remedy to the Company if the Executive violates the terms of Sections 9, 10 or
11 of this Agreement and that the Company would suffer irreparable damage as a
result of such violation. Accordingly, it is agreed that the Company shall be
entitled, upon application to a court of competent jurisdiction, to obtain
injunctive relief to enforce the provisions of such Sections, which injunctive
relief shall be in addition to any other rights or remedies available to the
Company. The Executive agrees to pay to the Company all reasonable costs and
expenses incurred by the Company relating to the enforcement of the terms of
Sections 9, 10 or 11 of this Agreement, including reasonable fees and
reasonable disbursements of counsel selected by the Company (during
investigation and before and at trial and in appellate proceedings).
13. PAYMENT OF EXCISE TAXES
(a) Payment of Excise Taxes. If the Executive is to receive any (1)
Change of Control Payment under Section 8(d), (2) any benefit or payment under
Section 7 as a result of or following the death or Permanent Disability of the
Executive, (3) any benefit or payment under Section 8(c) as a result of or
following any termination of employment hereunder Without Good Cause, (4) any
benefit or payment under the Plans as a result of a Change of Control,
following the death of Permanent Disability of the Executive or following the
termination of employment hereunder Without Good Cause (such sections being
referred to as the "Covered Sections" and the benefits and payments to be
received thereunder being referred to as the "Covered Payments"), the Executive
shall be entitled to receive the amount described below to the extent
applicable: If any Covered Payment(s) under any of the Covered Sections or by
the Company under another plan or agreement (collectively, the "Payments") are
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986 (as amended from time to time, the "Code"), or any successor or similar
provision of the Code (the "Excise Tax"), the Company shall pay the Executive
an additional amount (the "Gross Up")
12.
<PAGE> 13
such that the net amount retained by the Executive after deduction of any
Excise Tax on the Payments and the federal income tax on any amounts paid under
this Section 13 shall be equal to the Payments.
(b) Certain Adjustment Payments. For purposes of determining the
Gross Up, the Executive shall be deemed to pay the federal income tax at the
highest marginal rate of taxation (currently 39.5%) in the calendar year in
which the payment to which the Gross Up applies is to be made. The
determination of whether such Excise Tax is payable and the amount thereof
shall be made upon the opinion of tax counsel selected by the Company and
reasonably acceptable to the Executive. The Gross Up, if any, that is due as a
result of such determination shall be paid to the Executive in cash in a lump
sum within thirty (30) days of such computation. If such opinion is not
finally accepted by the Internal Revenue Service upon audit or otherwise, then
appropriate adjustments shall be computed (without interest but with Gross Up,
if applicable) by such tax counsel based upon the final amount of the Excise
Tax so determined; any additional amount due the Executive as a result of such
adjustment shall be paid to the Executive by his or her Company in cash in a
lump sum within thirty (30) days of such computation, or any amount due the
Executive's Company as a result of such adjustment shall be paid to the Company
by the Executive in cash in a lump sum within thirty (30) days of such
computation.
14. MISCELLANEOUS
(a) Waiver of Breach. The waiver by either party to this Agreement
of a breach of any of the provisions of this Agreement by the other party shall
not be construed as a waiver of any subsequent breach by such other party.
(b) No Right to Continued Employment. Notwithstanding the fact that
certain provisions of this Agreement and Exhibit A reference a three year cycle
or provide for benefits upon a third year of employment, this Agreement shall
have a two year term with annual one year renewal terms subject to the
termination provisions contained herein.
(c) Compliance With Other Agreements. The Executive represents and
warrants that the execution of this Agreement by him and the Executive's
performance of the Executive's obligations hereunder will not conflict with,
result in the breach of any provision of or the termination of or constitute a
default under any Agreement to which the Executive is a party or by which the
Executive is or may be bound.
(d) Binding Effect; Assignment. The rights and obligations of the
Company under this Agreement shall inure to the benefit of and shall be binding
upon the successors and assigns of the Company. This Agreement is a personal
employment contract and the rights, obligations and interests of the Executive
hereunder may not be sold, assigned, transferred, pledged or hypothecated.
(e) Entire Agreement. This Agreement contains the entire agreement
and supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof. This Agreement may be changed only by an
agreement in writing signed by the party against whom any waiver, change,
amendment, modification or discharge is sought.
13.
<PAGE> 14
(f) Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
(g) No Duty to Mitigate. The Executive shall be under no duty to
mitigate any loss of income as result of the termination of his employment
hereunder and any payments due the Executive upon termination of employment
shall not be reduced in respect of any other employment compensation received
by the Executive following such termination.
(h) Florida Law. This Agreement shall be construed pursuant to and
governed by the substantive laws of the State of Florida (except that any
provision of Florida law shall not apply if the law of a state or jurisdiction
other than Florida would otherwise apply).
(i) Venue; Process. The parties to this Agreement agree that
jurisdiction and venue in any action brought pursuant to this Agreement to
enforce its terms or otherwise with respect to the relationships between the
parties shall properly lie in and only in the Circuit Court of the Sixth
Judicial Circuit of the State of Florida in and for Pinellas County (the
"Circuit Court") and the parties agree that jurisdiction shall not properly lie
in any other jurisdiction provided, however, if jurisdiction does not properly
lie with the Circuit Court, the parties agree that jurisdiction and venue shall
properly lie in and only in the United States District Court for the Middle
District of Florida, Tampa Division. The parties hereby waive any objections
which they may now or hereafter have based on venue and/or forum non conveniens
and irrevocably submit to the jurisdiction of any such court in any legal suit,
action or proceeding arising out of or relating to this Agreement. The parties
further agree that the mailing by certified or registered mail, return receipt
requested, of any process required by any such court shall constitute valid and
lawful service of process against them, without the necessity for service by
any other means provided by statute or rule of court.
(j) Severability. Any provision of this Agreement which is
determined by a court of competent jurisdiction to be 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
affecting the validity, enforceability or legality of such provision in any
other jurisdiction. In any such case, such determination shall not affect any
other provision of this Agreement, and the remaining provisions of this
Agreement shall remain in full force and effect. If any provision or term of
this Agreement is susceptible to two or more constructions or interpretations,
one or more of which would render the provision or term void or unenforceable,
the parties agree that a construction or interpretation which renders the term
or provision valid shall be favored.
(k) Deduction for Tax Purposes. The Company's obligations to make
payments under this Agreement are independent of whether any or all of such
payments are deductible expenses of the Company for federal income tax
purposes.
(l) Enforcement. If, within 10 days after demand to comply with the
obligations of one of the parties to this Agreement served in writing on the
other, compliance or reasonable assurance of compliance is not forthcoming, and
the party demanding compliance engages the services of an
14.
<PAGE> 15
attorney to enforce rights under this Agreement, the prevailing party in any
action shall be entitled to recover all reasonable costs and expenses of
enforcement (including reasonable attorneys' fees and reasonable expenses during
investigation, before and at trial and in appellate proceedings). In addition,
each of the parties agrees to indemnify the other in respect of any and all
claims, losses, costs, liabilities and expenses, including reasonable fees and
reasonable disbursements of counsel (during investigation prior to initiation of
litigation and at trial and in appellate proceedings if litigation ensues),
directly or indirectly resulting from or arising out of a breach by the other
party of their respective obligations hereunder. The parties' costs of
enforcing this Agreement shall include prejudgment interest. Additionally, if
any party incurs any out-of- pocket expenses in connection with the enforcement
of this Agreement, all such amounts shall accrue interest at 18% per annum (or
such lower rate as may be required to avoid any limit imposed by applicable law)
commencing 30 days after any such expenses are incurred.
(m) Notices. All notices which are required or may be given under
this Agreement shall be in writing and shall be deemed to have been duly given
when received if personally delivered; when transmitted if transmitted by
telecopy or similar electronic transmission method; one working day after it is
sent, if sent by recognized expedited delivery service; and three days after it
is sent, if mailed, first class mail, certified mail, return receipt requested,
with postage prepaid. In each case notice shall be sent to:
To the Company: Echelon International Corporation
One Progress Plaza
St. Petersburg, FL 33701
Attn: Chairman of the Board
Telecopy: (813) 824-6536
To the Executive at the Executive's address herein first above
written, or to such other address as either party may specify by written notice
to the other.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
ATTEST: ECHELON INTERNATIONAL CORPORATION
(Corporate Seal)
________________________________ By:____________________________________
Secretary
Title:
EXECUTIVE
Witnesses:
________________________________ _______________________________________
Larry J. Newsome
________________________________
As to Executive
15
<PAGE> 16
EXHIBIT A
TO
EMPLOYMENT AGREEMENT WITH LARRY J. NEWSOME
DATED ________, 1996
The Company will establish a Management Incentive Compensation Plan
("MICP") and Long Term Incentive Plan ("LTIP") for its senior management in
which the Executive will participate. During the first two full fiscal years
of the Company's operation following the completion of the Spinoff ending on
December 31, 1997, and December 31, 1998, respectively (the "Covered Years"),
the MICP will provide for annual cash bonuses based upon the Company's net
income for each of the Covered Years. The LTIP will provide the opportunity to
earn restricted shares based upon the Company's cumulative results of operation
for three year cycles, beginning with the three year cycle including the
Covered Years and the year ending December 31, 1999 (the "Cycle Years")
provided that the Executive continues to be employed by the Company under this
Agreement. The Executive's participation in the MICP and the LTIP during the
Covered Years and the Cycle Years shall be based upon the criteria and shall
include awards with the values indicated in the tables set forth below and as
more fully described in this Exhibit A.
MICP
During each of the Covered Years, (i) all MICP bonuses shall be paid
in cash; (ii) if Threshold Net Income is not achieved, no MICP cash bonus will
be paid; (iii) if actual net income exceeds Threshold Net Income, but is less
than Target Net Income, or exceeds Target Net Income but is less than Maximum
Net Income, the percentage of the MICP bonus shall be proportionately increased
above the Threshold bonus amount or the Target Bonus amount, as the case may
be, and (iv) if actual net income equals or exceeds Maximum Net Income, the
Maximum MICP cash bonus will be paid, but no additional cash bonus will be
payable under the MICP regardless of the amount by which actual net income in
that Covered Year exceeds Maximum Net Income. The following table sets forth
information regarding the MICP Net Income Threshold, Target and Maximum and
cash bonuses.
<TABLE>
<CAPTION>
-------------------------------------------------------
MICP 1997 1998
-------------------------------------------------------
THRESHOLD
-------------------------------------------------------
<S> <C> <C>
Net Income $1,584,274 $1,768,816
-------------------------------------------------------
MICP Cash Bonus $29,750 $29,750
(% of Target Bonus) (50%) (50%)
-------------------------------------------------------
TARGET
-------------------------------------------------------
Net Income $2,112,366 $2,358,422
-------------------------------------------------------
MICP Cash Bonus $59,500 $59,500
(% of Base Salary) (35%) (35%)
-------------------------------------------------------
MAXIMUM
-------------------------------------------------------
Net Income $2,640,457 $2,948,027
-------------------------------------------------------
MICP Cash Bonus $89,250 $89,250
(% of Target Bonus) (150%) (150)%
-------------------------------------------------------
</TABLE>
16.
<PAGE> 17
LTIP
The sum of each year's Threshold Net Income for the three Cycle Years
shall be referred to as the "Threshold LTIP Net Income"; the sum of each year's
Target Net Income for the three Cycle Years shall be referred to as "Target
LTIP Net Income"; and the sum of each year's Maximum Net Income for the three
Cycle Years shall be referred to as "Maximum LTIP Net Income," in each case, as
set forth in the following tables:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
LTIP 1997 1998 1999 LTIP NET INCOME
-----------------------------------------------------------------------------------------------------
THRESHOLD THRESHOLD
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Income $1,584,274.00 $1,768,816.00 $2,132,640.00 $5,485,730.00
-----------------------------------------------------------------------------------------------------
TARGET TARGET
-----------------------------------------------------------------------------------------------------
Net Income $2,112,366.00 $2,358,422.00 $2,843,521.00 $7,314,309.00
-----------------------------------------------------------------------------------------------------
MAXIMUM MAXIMUM
-----------------------------------------------------------------------------------------------------
Net Income $2,640,457.00 $2,948,027.00 $3,554,401.00 $9,142,885.00
-----------------------------------------------------------------------------------------------------
</TABLE>
The following table sets for information regarding the Threshold,
Target and Maximum LTIP Net income and values associated with achieving such
levels of cumulative net income:
<TABLE>
<CAPTION>
-----------------------------------------------------------
LTIP Three Years Ending
December 31, 1999
---------------------------------------------------------
THRESHOLD
-----------------------------------------------------------
<S> <C>
Cumulative Net Income $5,485,730.00
-----------------------------------------------------------
LTIP Value $102,000
(% of Target Bonus) (50%)
-----------------------------------------------------------
TARGET
Cumulative Net Income $7,314,309.00
-----------------------------------------------------------
LTIP Value $204,000
(% of Base Salary) (40%)
-----------------------------------------------------------
MAXIMUM
-----------------------------------------------------------
Cumulative Net Income $9,142,885.00
-----------------------------------------------------------
LTIP Value $306,000
(% of Target Bonus) (150%)
-----------------------------------------------------------
</TABLE>
For purposes of administering the LTIP, during the first three-year
cycle, (i) all LTIP awards shall be paid in the form of restricted shares; (ii)
the number of restricted shares shall be determined by dividing the dollar
value of the Maximum LTIP Value $306,000 by the closing price on January 1,
1998, or the first trading day thereafter, on the New York Stock Exchange (or
such other market on which the Company's stock trades if it is not listed on
the New York Stock Exchange); (iii) the
17.
<PAGE> 18
restricted shares, among other things, shall be subject to a risk of forfeiture
if and to the extent that the performance criteria set forth in this Exhibit A
are not met; (iv) if actual cumulative net income for the three-year period
ending December 31, 1999, does not equal or exceed Threshold LTIP Net Income,
all restricted shares shall be forfeited, and no LTIP bonus will have been
earned; (v) if actual cumulative net income for the three year period ending
December 31, 1999, exceeds Threshold LTIP Net Income, but is less than Target
LTIP Net Income, or exceeds Target LTIP Net Income but is less than Maximum LTIP
Net Income, the percentage of the LTIP restricted shares as to which the risks
on forfeiture shall lapse shall be proportionately increased above the Threshold
bonus amount or the Target Bonus amount, as the case may be; and (vi) if
cumulative net income for the three-year period ending December 31, 1999 equals
or exceeds Maximum LTIP Net Income, the risks of forfeiture shall lapse as to
all restricted shares, but no additional restricted shares will be issuable
under the LTIP regardless of the amount by which actual cumulative net income
for the three years ending December 31, 1999 exceeds Maximum LTIP Net Income.
18.
<PAGE> 1
Exhibit 10.13
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into this ___ day of
__________, 1996, but is effective for all purposes as of the date specified
below in Section 2, by and between ECHELON INTERNATIONAL CORPORATION, a Florida
corporation (the "Company"), and THOMAS D. WILSON, residing at 1488 40th Avenue
NE, St. Petersburg, Florida 33703 (the "Executive").
W I T N E S S E T H:
1. EMPLOYMENT
The Company hereby employs the Executive, and the Executive hereby
accepts such employment, upon the terms and subject to the conditions set forth
in this Agreement.
2. TERM
Subject to the provisions for termination as hereinafter provided, the
term of employment under this Agreement shall begin as of the completion of the
"Distribution" as that term is defined in the Company's Registration Statement
on Form 10, as amended (the "Distribution"), and shall continue through December
31, 1998, provided, however, that this Employment Agreement shall automatically
be renewed for successive one year terms unless either party gives the other
written notice of termination at least ninety (90) days prior to the end of any
such term.
3. COMPENSATION
(a) Base Salary. The Company shall pay to the Executive as basic
compensation for all services rendered by the Executive during the term of this
Agreement a basic annualized salary of $106,860 per year, or such other sum in
excess of that amount as the parties may agree on from time to time or as
provided in the next sentence (as in effect from time to time, the "Base
Salary"), payable monthly or in other more frequent installments, as determined
by the Company. The Board of Directors shall have no authority to reduce the
Executive's Base Salary in effect from time to time. In addition, the Board of
Directors, in its discretion, may award a bonus or bonuses to the Executive in
addition to the bonuses provided for in Section 3(b).
(b) Bonuses. In addition to the Base Salary to be paid pursuant to
Section 3(a), for each of the Company's two fiscal years ending December 31,
1997 and December 31, 1998 during the term of this Agreement, the Company shall
pay as incentive compensation the annual bonuses, to the extent earned,
specified on Exhibit A to this Agreement. For each fiscal year ending after
December 31, 1998, provided the Executive continues to be employed by the
Company under this Agreement, the Executive shall be eligible for incentive
compensation annual bonus plan(s) adopted by the Board of Directors of the
Company from time to time in accordance with the terms of such plans.
<PAGE> 2
(c) Certain Plans and Initial Award. (i) It is anticipated that the
Company will adopt certain incentive compensation plans including a long term
incentive plan (the "LTIP"), providing for annual or other periodic awards to
key employees, among other things, of restricted stock and a stock option plan
(the "ISO/NSO Plan"), providing for the annual or other periodic issuance of
options to purchase the Company's common stock. The LTIP and ISO/NSO are
referred to collectively in this Agreement as the "Plans." The Executive will be
given an opportunity to participate in the Plans, in accordance with and subject
to the terms of the Plans as they may be adopted, amended and administered from
time to time.
(ii) In addition to the incentive compensation referred to n
Section 3(c)(i), the Company hereby agrees to issue to the Executive under the
LTIP, effective immediately following the completion of the Distribution, that
number of shares of the Company's common stock (the "Initial Restricted Stock")
as will equal two-tenths of one percent (0.20%) of the shares of the Company's
common stock distributed in the Distribution, which Initial Restricted Stock
shall be subject to risk of forfeiture, which risk will lapse as to one-fourth
of the shares of the Initial Restricted Stock on January 31, 1998, and as to an
additional one-fourth of the Initial Restricted Stock on each of January 31,
1999, January 31, 2000 and January 31, 2001.
(iii) In addition to the incentive compensation referred to in
Section 3(c)(i) and the Initial Restricted Stock, the Company hereby agrees to
grant to the the Executive under the LTIP, effective immediately following the
completion of the Distribution, options to purchase one thousand (1,000) shares
of the Company's common stock (the "Initial Options"), which Initial Options
shall be exerciseable as to one-fourth of the shares of common stock covered by
the Initial Options on January 31, 1998, and as to an additional one-fourth of
such shares on each of January 31, 1999, January 31, 2000 and January 31, 2001.
The exercise price for the Initial Options shall be the closing price on the New
York Stock Exchange (or such other market on which the Company's stock trades if
it is not listed on the New York Stock Exchange) on the trading day which is the
eighth month anniversary of the day of the completion of the Distribution (the
"Option Pricing Date"), or if the Option Pricing Date is not a trading day, the
first trading day thereafter.
(iv) Any and all risks of forfeiture shall lapse as to all of
the Initial Restricted Stock and the Initial Options shall be fully vested and
shall be exerciseable as to all of the shares of common stock covered by the
Initial Options upon (i) the death of the Executive or termination of employment
upon the "Permanent Disability" (as that term is defined in Section 7(b)(ii) of
this Agreement) of the Executive, (ii) the termination of employment of the
Executive by the Company "Without Good Cause" (as that term is defined in
Section 8(b)(ii) of this Agreement) or (iii) the exercise by the Executive of
his rights to terminate his employment under Section 8(d)(ii) following a
"Change of Control" (as that term is defined in Section 8(d)(i) of this
Agreement).
(d) Reimbursement. The Company shall reimburse the Executive, in
accordance with the Company's policies and practices for senior management, for
all reasonable expenses incurred by the Executive in the performance of the
Executive's duties under this Agreement, provided, however, that the Executive
must furnish to the Company an itemized account, satisfactory to the Company, in
substantiation of such expenditures.
2.
<PAGE> 3
(e) Certain Benefits. The Executive shall be entitled to such fringe
benefits including, but not limited to, medical and other insurance benefits as
may be provided from time to time by the Company to other senior officers of the
Company. In addition, without restricting the foregoing, the Company shall
provide the Executive at the Company's sole cost and expense with (i) a policy
or policies of term life insurance (the "Basic Life Insurance") providing, among
other things, basic death benefits of not less than two times the Base Salary in
effect from time to time, (ii) directors and officers liability insurance with
coverage, terms and limits suitable for a vice president of a New York Stock
Exchange listed company comparable in financial size and wherewithal to that of
the Company and (iii) a monthly allowance of $500 cash to reimburse the
Executive for the use and maintenance of his automobile in furtherance of the
business and affairs of the Company, provided that the Executive shall at all
times insure the Executive and the Company in such amounts as may be reasonably
requested by the Company against claims for bodily injury, death and property
damages occurring as a result of its use. The Company shall use its reasonable
best efforts to make available to the Executive in connection with providing and
paying for the Basic Life Insurance the opportunity to purchase at the
Executive's sole cost and expense additional life insurance with a basic death
benefit (the "Optional Life Insurance") equal to two times the Executive's Base
Salary in effect from time to time (affording the Executive the opportunity to
have basic death benefit life insurance coverage equal to four times such Base
Salary). The Company shall use its reasonable best efforts to effect the
transfer of the ownership to the Executive of the policy or policies for the
Basic Life Insurance and the Optional Life Insurance, if any, upon the
termination of the Executive's employment by the Company. After the Executive's
termination, payment of any premiums would be the obligation of the Executive.
(f) Other Incentive and Benefit Plans. The Executive shall be eligible
to participate, in accordance with the terms of such plans as they may be
adopted, amended and administered from time to time, in incentive, bonus,
benefit or similar plans, including without limitation, any stock option, bonus
or other equity ownership plan, any short, mid or long term incentive plan and
any other bonus, pension or profit sharing plans established by the Company from
time to time.
4. DUTIES
(a) General. The Executive is engaged as a Vice President of the
Company. In addition, at the request of the Board of Directors, the Executive
shall serve in the same positions in any wholly owned subsidiary of the Company,
without any additional compensation. The Executive shall have such duties and
hold such other offices as may from time to time be reasonably assigned to him
by the Board of Directors of the Company.
(b) Indemnification. To the fullest extent permitted by law, the
Company shall indemnify and hold harmless the Executive for all liabilities,
costs, expenses and damages arising out of or in connection with the Executive's
service to the Company under this Agreement. In furtherance of this indemnity,
the Company shall enter into an indemnification agreement, in form and substance
reasonably satisfactory to the Executive and the Company. In addition, the
indemnity provided hereunder shall extend to service by the Executive as an
officer or director, or service in a similar
3.
<PAGE> 4
capacity, for any civic, community or charitable organization, provided such
service is undertaken at the request of or with the knowledge and acquiescence
of the Company. The foregoing indemnification shall be in addition to any rights
or benefits the Executive may have under statute, the Bylaws or Articles of
Incorporation of the Company, under a policy of insurance, or otherwise.
5. EXTENT OF SERVICES; VACATIONS AND DAYS OFF
(a) Extent of Services. During the term of the Executive's employment
under this Agreement, except during customary vacation periods and periods of
illness, the Executive shall devote full-time energy and attention during
regular business hours to the benefit and business of the Company as may be
reasonably necessary in performing the Executive's duties pursuant to this
Agreement.
(b) Vacations. The Executive shall be entitled to vacations with pay
and to such personal and sick leave with pay in accordance with the policy of
the Company as may be established from time to time by the Company and applied
to other senior officers of the Company. In no event shall the Executive be
entitled to fewer than four weeks' annual vacation. Unused vacation days may be
carried over from one year to the next for a period of up to two years. Any
vacation days which remain unused on the second anniversary of the end of the
fiscal year to which they originally related shall expire and shall thereafter
no longer be useable by the Executive.
6. FACILITIES
The Company shall provide the Executive with a fully furnished office,
and the facilities of the Company shall be generally available to the Executive
in the performance of the Executive's duties pursuant to this Agreement, it
being understood and contemplated by the parties that all equipment, supplies
and office personnel required in the performance of the Executive's duties under
this Agreement shall be supplied by and at the sole expense of the Company.
7. ILLNESS OR INCAPACITY, TERMINATION ON DEATH, ETC.
(a) Death. If the Executive dies during the term of the Executive's
employment, the Company shall pay to the estate of the Executive within 30 days
after the date of death such Base Salary and any cash bonus compensation earned
pursuant to the provisions of any incentive compensation plan then in effect but
not yet paid, as would otherwise have been payable to the Executive up to the
end of the month in which the Executive's death occurs. After receiving the
payments provided in this Section 7(a) the Executive and the Executive's estate
shall have no further rights under this Agreement (other than those rights
already accrued).
(b) Disability. (i) During any period of disability, illness or
incapacity during the term of this Agreement which renders the Executive at
least temporarily unable to perform the services required
4.
<PAGE> 5
under this Agreement, the Executive shall receive the Base Salary payable under
Section 3(a) of this Agreement plus any cash bonus compensation earned pursuant
to the provisions of any incentive compensation plan then in effect but not yet
paid, less any cash benefits received by him under any disability insurance
carried by or provided by the Company. Upon the Executive's "Permanent
Disability" (as defined below), which permanent disability continues during the
payment periods specified herein, the Company shall pay to the Executive for the
period of time specified below an amount (the "Disability Payment") equal to the
(i) sum of (A) the Base Salary in effect at the time of the Executive's
permanent disability plus (B) an amount equal to the target level of the annual
cash bonus payable to the Executive under the Company's Management Incentive
Compensation Plan as described on Exhibit A or any similar bonus or incentive
plans or programs then in effect (the "MICP Target Amount"), in respect of the
fiscal during which the Executive's permanent disability occurred, which MICP
Target Amount shall be paid in pro rata equal monthly installments over the
period of time specified below (ii) reduced by the amount of any monthly
payments under any policy of disability income insurance paid for by the Company
which payments are received during the time when any Disability Payment is being
made to the Executive following the Executive's Permanent Disability. For so
long as the Executive's permanent disability continues, the Disability Payment
shall be paid by the Company to the Executive in equivalent installments at the
same time or times as would have been the case for payment of Base Salary over
the unexpired term of this Agreement if the Executive had not become permanently
disabled and had remained employed by the Company hereunder, but in no case
shall such period exceed 24 months. The Executive may be entitled to receive
payments under any disability income insurance which may be carried by or
provided by the Company from time to time. Upon "Permanent Disability" (as that
term is defined in Section 7(b)(ii) below) of the Executive, except as provided
in this Section 7(b) all rights of the Executive under this Agreement (other
than rights already accrued) shall terminate.
(ii) The term "Permanent Disability" as used in this Agreement
shall mean, in the event a disability insurance policy is maintained by the
Company covering the Executive at such time and is in full force and effect, the
definition of permanent disability set forth in such policy. In the event no
disability insurance policy is maintained at such time and in full force and
effect, "Permanent Disability" shall mean the inability of the Executive, as
determined by the Board of Directors of the Company, by reason of physical or
mental disability to perform the duties required of him under this Agreement for
a period of one hundred and eighty (180) days in any one-year period. Successive
periods of disability, illness or incapacity will be considered separate periods
unless the later period of disability, illness or incapacity is due to the same
or related cause and commences less than six months from the ending of the
previous period of disability. Upon such determination, the Board of Directors
may terminate the Executive's employment under this Agreement upon ten (10)
days' prior written notice. If any determination of the Board of Directors with
respect to permanent disability is disputed by the Executive, the parties hereto
agree to abide by the decision of a panel of three physicians. The Executive and
Company shall each appoint one member, and the third member of the panel shall
be appointed by the other two members. The Executive agrees to make himself
available for and submit to examinations by such physicians as may be directed
by the Company. Failure to submit to any such examination shall constitute a
breach of a material part of this Agreement.
5.
<PAGE> 6
8. OTHER TERMINATIONS
(a) By the Executive. (i) The Executive may terminate the Executive's
employment hereunder upon giving at least ninety (90) days' prior written
notice. In addition, the Executive shall have the right to terminate the
Executive's employment hereunder on the conditions and at the times provided for
in Section 8(d) of this Agreement.
(ii) If the Executive gives notice pursuant to Section 8(a)(i)
above, the Company shall have the right (but not the obligation) to relieve the
Executive, in whole or in part, of the Executive's duties under this Agreement,
or direct the Executive to no longer perform such duties, or direct that the
Executive should no longer report to work, or any combination of the foregoing.
In any such event, the Executive shall be entitled to receive only the Base
Salary not yet paid, as would otherwise have been payable to the Executive up to
the end of the month specified as the month of termination in the termination
notice. In the event the Executive gives notice pursuant to Section 8(a)(i)
above but specifies a termination date in excess of ninety (90) days from the
date of such notice, the Company shall have the right (but not the obligation)
to accelerate the termination date to any date prior to the date specified in
the notice that is in excess of ninety (90) days from the date of the notice,
and the Company shall have the right (but not the obligation) to relieve the
Executive, in whole or in part, of the Executive's duties under this Agreement,
or direct the Executive to no longer perform such duties, or direct that the
Executive should no longer report to work, or any combination of the foregoing;
provided, however, that in any such event the Executive shall be entitled to
receive the Base Salary, as would otherwise have been payable to the Executive
up to the end of the month of the termination date properly selected by the
Company. Upon receiving the payments provided for under this Section 8(a), all
rights of the Executive under this Agreement (other than rights already accrued)
shall terminate.
(b) Termination for "Good Cause". (i) Except as otherwise provided in
this Agreement, the Company may terminate the employment of the Executive
hereunder only for "good cause," which shall mean: (A) the Executive's
conviction of either a felony involving moral turpitude or any crime in
connection with the Executive's employment by the Company which causes the
Company a substantial detriment, but specifically shall not include traffic
offenses; (B) actions by the Executive as an executive officer of the Executive
which clearly are contrary to the best interests of the Company; (C) the
Executive's willful failure to take actions permitted by law and necessary to
implement policies of the Company's Board of Directors which the Board of
Directors has communicated to him in writing, provided that minutes of a Board
of Directors meeting attended in its entirety by the Executive shall be deemed
communicated to the Executive; (D) the Executive's continued failure to attend
to the Executive's duties as an executive officer of the Executive; or (E) any
condition which either resulted from the Executive's substantial dependence, as
determined by the Board of Directors of the Company, on alcohol, or any narcotic
drug or other controlled or illegal substance. If any determination of
substantial dependence is disputed by the Executive, the parties hereto agree to
abide by the decision of a panel of three physicians appointed in the manner and
subject to the same penalties for noncompliance as specified in Section 7(b)(ii)
of this Agreement.
6.
<PAGE> 7
(ii) If the employment of the Executive is terminated for good
cause under Section 8(b)(i) of this Agreement, the Company shall pay to the
Executive any Base Salary earned prior to the effective date of termination but
not yet paid and any cash bonus compensation earned pursuant to the provisions
of any incentive compensation plan then in effect but not paid to the Executive
prior to the effective date of such termination. Under such circumstances, such
payments shall be in full and complete discharge of any and all liabilities or
obligations of the Company to the Executive hereunder, and the Executive shall
be entitled to no further benefits under this Agreement (other than rights
already accrued).
(iii) Notwithstanding the foregoing, each of the foregoing
bases for termination specified in (A) through (E) of Subsection 8(b)(i) shall
constitute "Good Cause" only if (1) the Executive has been provided with written
notice of any assertion that there is a basis for termination for good cause
which notice shall specify in reasonable detail specific facts regarding any
such assertion and the Executive has been given a reasonable period of time
within which to remedy or cure the problem or complaint, (2) such notice is
provided to the Executive a reasonable time before the Board of Directors meets
to consider any possible termination for cause, (3) at or prior to the meeting
of the Board of Directors to consider the matters described in the written
notice, an opportunity is provided to the Executive and his counsel to be heard
by the Board of Directors with respect to the matters described in the written
notice, before it acts with respect to such matter, (4) any resolution or other
action by the Board of Directors with respect to any deliberation regarding or
decision to terminate the Executive for good cause is duly adopted by a vote of
a majority of the entire Board of Directors of the Company at a meeting of the
Board duly called and held and (5) the Executive is promptly provided with a
copy of the resolution or other corporate action taken with respect to such
termination.
(iv) Termination of the employment of the Executive other
than as expressly specified above in this Section 8(b) for good cause shall be
deemed to be a termination of employment "Without Good Cause."
(c) Termination Without Good Cause. (i) Notwithstanding any other
provision of this Agreement, the Company shall have the right to terminate the
Executive's employment Without Good Cause pursuant to the provisions of this
Section 8(c). If the Company shall terminate the employment of the Executive
Without Good Cause effective on a date earlier than the termination date
provided for in Section 2 (with the effective date of termination as so
identified by the Company being referred to herein as the "Accelerated
Termination Date"), the Executive, until the end of the term of this Agreement
then in effect as provided for in Section 2 or until the date which is 24 months
after the Accelerated Termination Date, whichever is the first to occur, shall
continue to receive (1) the Base Salary, paid in the same monthly on other
periodic installments ad in effect prior to the Accellerated Termination Date
(2) an equal monthly pro rata portion of an amount of cash equal to the sum of
the MICP Target Amount (as that term is defined in Section 7(b)(i)) in respect
of the year during which the Executive's employment terminates multiplied times
the number of years (or fractions thereof) remaining in the then unexpired term
of this Agreement or multiplied times two if the 24 month payment period under
this Section 8(c)(i) is in effect, and (3) any other cash or other bonus
compensation earned prior to the date of such termination pursuant to the terms
of all incentive
7.
<PAGE> 8
compensation plans then in effect other than the Company's Management Incentive
Compensation Plan as described on Exhibit A or any similar bonus or incentive
plans or programs then in effect; provided that, notwithstanding such
termination of employment, the Executive's covenants set forth in Section 10 and
Section 11 are intended to and shall remain in full force and effect and
provided further that in the event of such termination, the Company shall have
the right (but not the obligation) to relieve the Executive, in whole or in
part, of the Executive's duties under this Agreement, or direct the Executive to
no longer perform such duties, or direct that the Executive no longer be
required to report to work, or any combination of the foregoing.
(ii) The parties agree that, because there can be no exact
measure of the damage that would occur to the Executive as a result of a
termination by the Company of the Executive's employment Without Good Cause, the
payments and benefits paid and provided pursuant to this Section 8(c) shall be
deemed to constitute liquidated damages and not a penalty for the Company's
termination of the Executive's employment Without Good Cause.
(d) Change of Control. (i) For purposes of this Agreement, a "Change in
Control" shall mean the first to occur of:
(1) a change in control of the Company of a nature that is
required, pursuant to the Securities Exchange Act of
1934 (the "1934 Act"), to be reported in response to
Item 1(a) of a Current Report on Form 8-K or Item 6(e)
of Schedule 14A under the 1934 Act (in each case under
this Agreement, references to provisions of the 1934 Act
and the rules and regulations promulgated thereunder
being understood to refer to such law, rules and
regulations as the same are in effect on November 1,
1996); or
(2) the acquisition of "Beneficial Ownership" (as defined in
Rule 13d-3 under the 1934 Act) of the Company's
securities comprising 35% or more of the combined voting
power of the Company's outstanding securities by any
"person" (as that term is used in Sections 13(d) and
14(d)(2) of the 1934 Act and the rules and regulations
promulgated thereunder, but not including any trustee or
fiduciary acting in that capacity for an employee
benefit plan sponsored by the Company) and such person's
"affiliates" and "associates" (as those terms are
defined under the 1934 Act), but excluding any ownership
by the Executive and his affiliates and associates; or
(3) the failure of the "Incumbent Directors" (as defined
below) to constitute at least a majority of all
directors of the Company (for these purposes, "Incumbent
Directors" means individuals who were the directors of
the Company on November 1, 1996, and, after his or her
election, any individual becoming a director subsequent
to November 1, 1996, whose election, or nomination for
election by the Company's stockholders, is approved by a
vote of at least two-thirds of the directors then
comprising the Incumbent Directors, except that no
individual shall be considered an Incumbent Director
8.
<PAGE> 9
who is not recommended by management and whose initial
assumption of office as a director is in connection with
an actual or threatened "election contest" relating to
the "election of directors" of the Company, as such
terms are used in Rule 14a-11 of Regulation 14A under
the 1934 Act); or
(4) the closing of a sale of all or substantially all of the
assets of the Company;
(5) the Company's adoption of a plan of dissolution or
liquidation; or
(6) the closing of a merger or consolidation involving the
Company in which the Company is not the surviving
corporation or if, immediately following such merger or
consolidation, less than seventy-five percent (75%) of
the surviving corporation's outstanding voting stock is
held or is anticipated to be held by persons who are
stockholders of the Company immediately prior to such
merger or consolidation.
(ii) If a Change in Control of the Company occurs, the
Executive shall have the right, exercisable for a period of one year thereafter
by delivering a written statement to that effect to the Company, to immediately
terminate this Agreement and upon such a determination the Executive shall have
the right to receive and the Company shall be obligated to pay to Executive in
cash a lump sum payment in an amount equal to the sum of (1) two times the
annual Base Salary then in effect, (2) two times the MICP Target Amount (as that
term is defined in Section 7(b)(i)) in the year in which employment terminates
and (3) the additional payments necessary to discharge certain tax liabilities
(the "Gross Up") as that term is defined in Section 13 of this Agreement (the
sum of the foregoing amounts other than the Gross Up being referred to as the
"Change in Control Payment"). If the Executive fails to exercise his rights
under this Section 8(d) within one year following a Change in Control, such
rights shall expire and be of no further force or effect.
(e) Intentions Regarding Certain Stock and Benefit Plans. Except as
otherwise provided herein, upon any termination of the Executive's employment
Without Good Cause or upon the exercise by the Executive of his rights to
terminate his employment following a Change of Control, it is the intention of
the parties that any and all vesting or performance requirements or conditions
affecting any outstanding restricted stock, performance stock, stock option,
stock appreciation right, bonus, award, right, grant or any other incentive
compensation under any of the Plans, under this Agreement, or otherwise
received, shall be deemed to be fully satisfied and any risk of forfeiture with
respect thereto shall be deemed to have lapsed.
(f) Certain Rights Mutually Exclusive. The provisions of Section 8(c)
and Section 8(d) are mutually exclusive, provided, however, that if within one
year following commencement of an 8(c) payout there shall be a Change in Control
as defined in Section 8(d)(i), then the Executive shall be entitled to the
amount payable to the Executive under Section 8(d)(ii) and Section 8(d)(iii)
reduced by the amount that the Executive has received under Section 8(c) up to
the date of the change in control. The triggering of the lump sum payment
requirement of Section 8(d) shall cause the provisions of Section 8(c) to become
inoperative.
9.
<PAGE> 10
9. DISCLOSURE
The Executive agrees that during the term of the Executive's employment
by the Company, the Executive will disclose and disclose only to the Company all
ideas, methods, plans, developments or improvements known by him which relate
directly or indirectly to the business of the Company, whether acquired by the
Executive before or during the Executive's employment by the Company. Nothing in
this Section 9 shall be construed as requiring any such communication where the
idea, plan, method or development is lawfully protected from disclosure as a
trade secret of a third party or by any other lawful prohibition against such
communication. The covenants of this Section 9 shall not be violated by ordinary
and customary communications with reporters, bankers and securities analysts and
other members of the investment community.
10. CONFIDENTIALITY
The Executive agrees to keep in strict secrecy and confidence any and
all information the Executive assimilates or to which the Executive has access
during the Executive's employment by the Company and which has not been publicly
disclosed and is not a matter of common knowledge in the fields of work of the
Company. The Executive agrees that both during and after the term of the
Executive's employment by the Company, the Executive will not, without the prior
written consent of the Company, disclose any such confidential information to
any third person, partnership, joint venture, company, corporation or other
organization. The foregoing covenants shall not be breached to the extent that
any such confidential information becomes a matter of general knowledge other
than through a breach by the Executive of the Executive's obligations under this
Section 10.
11. NONCOMPETITION AND NONSOLICITATION
(a) General. The Executive hereby acknowledges that, during and solely
as a result of the Executive's employment by the Company, the Executive has
received and shall continue to receive: (1) special training and education with
respect to the operations of the Company's real estate development and
management businesses and its leasing, lending and financing activities, and
other related matters, and (2) access to confidential information and business
and professional contacts. In consideration of the special and unique
opportunities afforded to the Executive by the Company as a result of the
Executive's employment, as outlined in the previous sentence, the Executive
hereby agrees to the restrictive covenants in this Section 11.
(b) Noncompetition. During the term of the Executive's employment,
whether pursuant to this Agreement, any automatic or other renewal hereof or
otherwise, and, except as may be otherwise herein provided, for a period of two
(2) years after the termination of the Executive's employment with the Company,
regardless of the reason for such termination, the Executive shall not, directly
or indirectly, enter into, engage in, be employed by or consult with any
business which competes with the Company's real estate lending, leasing,
development or management businesses in Florida. The
10.
<PAGE> 11
Executive shall not engage in such prohibited activities, either as an
individual, partner, officer, director, stockholder, employee, advisor,
independent contractor, joint venturer, consultant, agent, or representative or
salesman for any person, firm, partnership, corporation or other entity so
competing with the Company. The restrictions of this Section 11 shall not be
violated by (i) the ownership of no more than 2% of the outstanding securities
of any company whose stock is traded on a national securities exchange or is
quoted in the Automated Quotation System of the National Association of
Securities Dealers (NASDAQ), or (ii) other outside business investments that do
not in any manner conflict with the services to be rendered by the Executive for
the Company and that do not diminish or detract from the Executive's ability to
render the Executive's required attention to the business of the Company.
(c) Nonsolicitation. During the Executive's employment with the Company
and, except as may be otherwise herein provided, for a period of two (2) years
following the termination of the Executive's employment with the Company,
regardless of the reason for such termination, the Executive agrees the
Executive will refrain from and will not, directly or indirectly, as an
individual, partner, officer, director, stockholder, employee, advisor,
independent contractor, joint venturer, consultant, agent, representative,
salesman or otherwise solicit any of the employees of the Company to terminate
their employment.
(d) Term Extended or Suspended. The period of time during which the
Executive is prohibited from engaging in certain business practices pursuant to
Sections 11(b) or (c) shall be extended by any length of time during which the
Executive is in breach of such covenants.
(e) Essential Element. It is understood by and between the parties
hereto that the foregoing restrictive covenants set forth in Sections 11(a)
through (c) are essential elements of this Agreement, and that, but for the
agreement of the Executive to comply with such covenants, the Company would not
have agreed to enter into this Agreement. Such covenants by the Executive shall
be construed as agreements independent of any other provision in this Agreement.
The existence of any claim or cause of action of the Executive against the
Company, whether predicated on this Agreement, or otherwise, shall not
constitute a defense to the enforcement by the Company of such covenants.
(f) Severability. It is agreed by the Company and Executive that if any
portion of the covenants set forth in this Section 11 are held to be invalid,
unreasonable, arbitrary or against public policy, then such portion of such
covenants shall be considered divisible both as to time and geographical area.
The Company and Executive agree that, if any court of competent jurisdiction
determines the specified time period or the specified geographical area
applicable to this Section 11 to be invalid, unreasonable, arbitrary or against
public policy, a lesser time period or geographical area which is determined to
be reasonable, non-arbitrary and not against public policy may be enforced
against the Executive. The Company and the Executive agree that the foregoing
covenants are appropriate and reasonable when considered in light of the nature
and extent of the business conducted by the Company.
11.
<PAGE> 12
12. SPECIFIC PERFORMANCE
The Executive agrees that damages at law will be an insufficient remedy
to the Company if the Executive violates the terms of Sections 9, 10 or 11 of
this Agreement and that the Company would suffer irreparable damage as a result
of such violation. Accordingly, it is agreed that the Company shall be entitled,
upon application to a court of competent jurisdiction, to obtain injunctive
relief to enforce the provisions of such Sections, which injunctive relief shall
be in addition to any other rights or remedies available to the Company. The
Executive agrees to pay to the Company all reasonable costs and expenses
incurred by the Company relating to the enforcement of the terms of Sections 9,
10 or 11 of this Agreement, including reasonable fees and reasonable
disbursements of counsel selected by the Company (during investigation and
before and at trial and in appellate proceedings).
13. PAYMENT OF EXCISE TAXES
(a) Payment of Excise Taxes. If the Executive is to receive any (1)
Change of Control Payment under Section 8(d), (2) any benefit or payment under
Section 7 as a result of or following the death or Permanent Disability of the
Executive, (3) any benefit or payment under Section 8(c) as a result of or
following any termination of employment hereunder Without Good Cause, (4) any
benefit or payment under the Plans as a result of a Change of Control, following
the death of Permanent Disability of the Executive or following the termination
of employment hereunder Without Good Cause (such sections being referred to as
the "Covered Sections" and the benefits and payments to be received thereunder
being referred to as the "Covered Payments"), the Executive shall be entitled to
receive the amount described below to the extent applicable: If any Covered
Payment(s) under any of the Covered Sections or by the Company under another
plan or agreement (collectively, the "Payments") are subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986 (as amended from
time to time, the "Code"), or any successor or similar provision of the Code
(the "Excise Tax"), the Company shall pay the Executive an additional amount
(the "Gross Up") such that the net amount retained by the Executive after
deduction of any Excise Tax on the Payments and the federal income tax on any
amounts paid under this Section 13 shall be equal to the Payments.
(b) Certain Adjustment Payments. For purposes of determining the Gross
Up, the Executive shall be deemed to pay the federal income tax at the highest
marginal rate of taxation (currently 39.5%) in the calendar year in which the
payment to which the Gross Up applies is to be made. The determination of
whether such Excise Tax is payable and the amount thereof shall be made upon the
opinion of tax counsel selected by the Company and reasonably acceptable to the
Executive. The Gross Up, if any, that is due as a result of such determination
shall be paid to the Executive in cash in a lump sum within thirty (30) days of
such computation. If such opinion is not finally accepted by the Internal
Revenue Service upon audit or otherwise, then appropriate adjustments shall be
computed (without interest but with Gross Up, if applicable) by such tax counsel
based upon the final amount of the Excise Tax so determined; any additional
amount due the Executive as a result of such adjustment shall be paid to the
Executive by his or her Company in cash in a lump sum within thirty (30) days of
such computation, or any amount due the Executive's Company as a result of such
12.
<PAGE> 13
adjustment shall be paid to the Company by the Executive in cash in a lump sum
within thirty (30) days of such computation.
14. MISCELLANEOUS
(a) Waiver of Breach. The waiver by either party to this Agreement of a
breach of any of the provisions of this Agreement by the other party shall not
be construed as a waiver of any subsequent breach by such other party.
(b) No Right to Continued Employment. Notwithstanding the fact that
certain provisions of this Agreement and/or Exhibit A reference a three year
cycle or provide for benefits upon a third year of employment, this Agreement
shall have a two year term with annual one year renewal terms subject to the
termination provisions contained herein.
(c) Compliance With Other Agreements. The Executive represents and
warrants that the execution of this Agreement by him and the Executive's
performance of the Executive's obligations hereunder will not conflict with,
result in the breach of any provision of or the termination of or constitute a
default under any Agreement to which the Executive is a party or by which the
Executive is or may be bound.
(d) Binding Effect; Assignment. The rights and obligations of the
Company under this Agreement shall inure to the benefit of and shall be binding
upon the successors and assigns of the Company. This Agreement is a personal
employment contract and the rights, obligations and interests of the Executive
hereunder may not be sold, assigned, transferred, pledged or hypothecated.
(e) Entire Agreement. This Agreement contains the entire agreement and
supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof. This Agreement may be changed only by an
agreement in writing signed by the party against whom any waiver, change,
amendment, modification or discharge is sought.
(f) No Duty to Mitigate. The Executive shall be under no duty to
mitigate any loss of income as result of the termination of his employment
hereunder and any payments due the Executive upon termination of employment
shall not be reduced in respect of any other employment compensation received by
the Executive following such termination.
(g) Florida Law. This Agreement shall be construed pursuant to and
governed by the substantive laws of the State of Florida (except that any
provision of Florida law shall not apply if the law of a state or jurisdiction
other than Florida would otherwise apply).
(h) Venue; Process. The parties to this Agreement agree that
jurisdiction and venue in any action brought pursuant to this Agreement to
enforce its terms or otherwise with respect to the relationships between the
parties shall properly lie in and only in the Circuit Court of the Sixth
Judicial Circuit of the State of Florida in and for Pinellas County (the
"Circuit Court") and the parties agree
13.
<PAGE> 14
that jurisdiction shall not properly lie in any other jurisdiction provided,
however, if jurisdiction does not properly lie with the Circuit Court, the
parties agree that jurisdiction and venue shall properly lie in and only in the
United States District Court for the Middle District of Florida, Tampa Division.
The parties hereby waive any objections which they may now or hereafter have
based on venue and/or forum non conveniens and irrevocably submit to the
jurisdiction of any such court in any legal suit, action or proceeding arising
out of or relating to this Agreement. The parties further agree that the mailing
by certified or registered mail, return receipt requested, of any process
required by any such court shall constitute valid and lawful service of process
against them, without the necessity for ser vice by any other means provided by
statute or rule of court.
(i) Headings. The headings of the various sections in this Agreement
are inserted for the convenience of the parties and shall not affect the
meaning, construction or interpretation of this Agreement.
(j) Severability. Any provision of this Agreement which is determined
by a court of competent jurisdiction to be prohibited, unenforceable or not
authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition, unenforceability or nonauthorization without
invalidating the remaining provisions hereof or affecting the validity,
enforceability or legality of such provision in any other jurisdiction. In any
such case, such determination shall not affect any other provision of this
Agreement, and the remaining provisions of this Agreement shall remain in full
force and effect. If any provision or term of this Agreement is susceptible to
two or more constructions or interpretations, one or more of which would render
the provision or term void or unenforceable, the parties agree that a
construction or interpretation which renders the term or provision valid shall
be favored.
(k) Deduction for Tax Purposes. The Company's obligations to make
payments under this Agreement are independent of whether any or all of such
payments are deductible expenses of the Company for federal income tax purposes.
(l) Enforcement. If, within 10 days after demand to comply with the
obligations of one of the parties to this Agreement served in writing on the
other, compliance or reasonable assurance of compliance is not forthcoming, and
the party demanding compliance engages the services of an attorney to enforce
rights under this Agreement, the prevailing party in any action shall be
entitled to recover all reasonable costs and expenses of enforcement (including
reasonable attorneys' fees and reasonable expenses during investigation, before
and at trial and in appellate proceedings). In addition, each of the parties
agrees to indemnify the other in respect of any and all claims, losses, costs,
liabilities and expenses, including reasonable fees and reasonable disbursements
of counsel (during investigation prior to initiation of litigation and at trial
and in appellate proceedings if litigation ensues), directly or indirectly
resulting from or arising out of a breach by the other party of their respective
obligations hereunder. The parties' costs of enforcing this Agreement shall
include prejudgment interest. Additionally, if any party incurs any
out-of-pocket expenses in connection with the enforcement of this Agreement, all
such amounts shall accrue interest at 18% per annum (or such lower rate as may
be required to avoid any limit imposed by applicable law) commencing 30 days
after any such expenses are incurred.
14.
<PAGE> 15
(m) Notices. All notices which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
received if personally delivered; when transmitted if transmitted by telecopy or
similar electronic transmission method; one working day after it is sent, if
sent by recognized expedited delivery service; and three days after it is sent,
if mailed, first class mail, certified mail, return receipt requested, with
postage prepaid. In each case notice shall be sent to:
To the Company: Echelon International Corporation
One Progress Plaza
St. Petersburg, FL 33701
Attn: Chairman of the Board
Telecopy: (813) 824-6536
To the Executive at the Executive's address herein first above written,
or to such other address as either party may specify by written notice to the
other.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
ATTEST: ECHELON INTERNATIONAL CORPORATION
(Corporate Seal)
By:
- ----------------------------- ---------------------------------
Secretary
Title:
EXECUTIVE
Witnesses:
- ----------------------------- ------------------------------------
Thomas D. Wilson
- -----------------------------
As to Executive
15.
<PAGE> 16
EXHIBIT A
TO
EMPLOYMENT AGREEMENT WITH THOMAS D. WILSON
DATED ________, 1996
The Company will establish a Management Incentive Compensation Plan
("MICP") for its senior management in which the Executive will participate.
During the first two full fiscal years of the Company's operation following the
completion of the Spinoff ending on December 31, 1997, and December 31, 1998,
respectively (the "Covered Years"), the MICP will provide for annual cash
bonuses based upon the Company's net income for each of the Covered Years. The
Executive's participation in the MICP during the Covered Years shall be based
upon the criteria and shall include awards with the values indicated in the
tables set forth below and as more fully described in this Exhibit A.
MICP
During each of the Covered Years, (i) all MICP bonuses shall be paid in
cash; (ii) if Threshold Net Income is not achieved, no MICP cash bonus will be
paid; (iii) if actual net income exceeds Threshold Net Income, but is less than
Target Net Income, or exceeds Target Net Income but is less than Maximum Net
Income, the percentage of the MICP bonus shall be proportionately increased
above the Threshold bonus amount or the Target Bonus amount, as the case may be,
and (iv) if actual net income equals or exceeds Maximum Net Income, the Maximum
MICP cash bonus will be paid, but no additional cash bonus will be payable under
the MICP regardless of the amount by which actual net income in that Covered
Year exceeds Maximum Net Income. The following table sets forth information
regarding the MICP Net Income Threshold, Target and Maximum and cash bonuses.
<TABLE>
<CAPTION>
-------------------------------------------------
MICP 1997 1998
-------------------------------------------------
<S> <C> <C>
THRESHOLD
-------------------------------------------------
Net Income $ 1,584,274 $ 1,768,816
-------------------------------------------------
MICP Cash Bonus $ 8,014.50 $ 8,014.50
(% of Target Bonus) (50%) (50%)
-------------------------------------------------
TARGET
-------------------------------------------------
Net Income $ 2,112,366 $ 2,358,422
-------------------------------------------------
MICP Cash Bonus $ 16,029 $ 16,029
(% of Base Salary) (15%) (15%)
-------------------------------------------------
MAXIMUM
-------------------------------------------------
Net Income $ 2,640,457 $ 2,948,027
-------------------------------------------------
MICP Cash Bonus $ 24,043.50 $ 24,043.50
(% of Target Bonus) (150%) (150)%
-------------------------------------------------
</TABLE>
16.
<PAGE> 1
Exhibit 10.14
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into this ___ day of
__________, 1996, but is effective for all purposes as of the date specified
below in Section 2, by and between ECHELON INTERNATIONAL CORPORATION, a Florida
corporation (the "Company"), and RAYMOND F. HIGGINS, residing at 16901 Filly
Lane, Odessa, Florida 33556 (the "Executive").
W I T N E S S E T H:
1. EMPLOYMENT
The Company hereby employs the Executive, and the Executive hereby
accepts such employment, upon the terms and subject to the conditions set forth
in this Agreement.
2. TERM
Subject to the provisions for termination as hereinafter provided, the
term of employment under this Agreement shall begin as of the completion of the
"Distribution" as that term is defined in the Company's Registration Statement
on Form 10, as amended (the "Distribution"), and shall continue through
December 31, 1998, provided, however, that this Employment Agreement shall
automatically be renewed for successive one year terms unless either party
gives the other written notice of termination at least ninety (90) days prior
to the end of any such term.
3. COMPENSATION
(a) Base Salary. The Company shall pay to the Executive as basic
compensation for all services rendered by the Executive during the term of this
Agreement a basic annualized salary of $100,000 per year, or such other sum in
excess of that amount as the parties may agree on from time to time or as
provided in the next sentence (as in effect from time to time, the "Base
Salary"), payable monthly or in other more frequent installments, as determined
by the Company. The Board of Directors shall have no authority to reduce the
Executive's Base Salary in effect from time to time. In addition, the Board of
Directors, in its discretion, may award a bonus or bonuses to the Executive in
addition to the bonuses provided for in Section 3(b).
(b) Bonuses. In addition to the Base Salary to be paid pursuant to
Section 3(a), for each of the Company's two fiscal years ending December 31,
1997 and December 31, 1998 during the term of this Agreement, the Company shall
pay as incentive compensation the annual bonuses, to the extent earned,
specified on Exhibit A to this Agreement. For each fiscal year ending after
December 31, 1998, provided the Executive continues to be employed by the
Company under this Agreement, the Executive shall be eligible for incentive
compensation annual bonus plan(s) adopted by the Board of Directors of the
Company from time to time in accordance with the terms of such plans.
(c) Certain Plans and Initial Award. (i) It is anticipated that the
Company will adopt certain incentive compensation plans including a long term
incentive plan (the "LTIP"), providing for annual or other periodic awards to
key employees, among other things, of restricted stock and a stock option
<PAGE> 2
plan (the "ISO/NSO Plan"), providing for the annual or other periodic issuance
of options to purchase the Company's common stock. The LTIP and ISO/NSO are
referred to collectively in this Agreement as the "Plans." The Executive will
be given an opportunity to participate in the Plans, in accordance with and
subject to the terms of the Plans as they may be adopted, amended and
administered from time to time.
(ii) In addition to the incentive compensation referred to n
Section 3(c)(i), the Company hereby agrees to issue to the Executive under the
LTIP, effective immediately following the completion of the Distribution, that
number of shares of the Company's common stock (the "Initial Restricted Stock")
as will equal two-tenths of one percent (0.20%) of the shares of the Company's
common stock distributed in the Distribution, which Initial Restricted Stock
shall be subject to risk of forfeiture, which risk will lapse as to one-fourth
of the shares of the Initial Restricted Stock on January 31, 1998, and as to an
additional one-fourth of the Initial Restricted Stock on each of January 31,
1999, January 31, 2000 and January 31, 2001. Accordingly, as of January 31,
2001, all risks of forfeiture shall have lapsed as to all the Initial
Restricted Stock.
(iii) In addition to the incentive compensation referred to
in Section 3(c)(i) and the Initial Restricted Stock, the Company hereby agrees
to grant to the the Executive under the LTIP, effective immediately following
the completion of the Distribution, options to purchase one thousand (1,000)
shares of the Company's common stock (the "Initial Options"), which Initial
Options shall be exerciseable as to one-fourth of the shares of common stock
covered by the Initial Options on January 31, 1998, and as to an additional
one-fourth of such shares on each of January 31, 1999, January 31, 2000 and
January 31, 2001. The exercise price for the Initial Options shall be the
closing price on the New York Stock Exchange (or such other market on which the
Company's stock trades if it is not listed on the New York Stock Exchange) on
the trading day which is the eighth month anniversary of the day of the
completion of the Distribution (the "Option Pricing Date"), or if the Option
Pricing Date is not a trading day, the first trading day thereafter.
(iv) Any and all risks of forfeiture shall lapse as to all of
the Initial Restricted Stock and the Initial Options shall be fully vested and
shall be exerciseable as to all of the shares of common stock covered by the
Initial Options upon (i) the death of the Executive or termination of
employment upon the "Permanent Disability" (as that term is defined in Section
7(b)(ii) of this Agreement) of the Executive, (ii) the termination of
employment of the Executive by the Company"Without Good Cause" (as that term is
defined in Section 8(b)(ii) of this Agreement) or (iii) the exercise by the
Executive of his rights to terminate his employment under Section 8(d)(ii)
following a "Change of Control" (as that term is defined in Section 8(d)(i) of
this Agreement).
(d) Reimbursement. The Company shall reimburse the Executive, in
accordance with the Company's policies and practices for senior management, for
all reasonable expenses incurred by the Executive in the performance of the
Executive's duties under this Agreement, provided, however, that the Executive
must furnish to the Company an itemized account, satisfactory to the Company,
in substantiation of such expenditures.
(e) Certain Benefits. The Executive shall be entitled to such fringe
benefits including, but not limited to, medical and other insurance benefits as
may be provided from time to time by the Company to other senior officers of
the Company. In addition, without restricting the foregoing, the Company shall
provide the Executive at the Company's sole cost and expense with (i) a policy
or policies of
2.
<PAGE> 3
term life insurance (the "Basic Life Insurance") providing, among other things,
basic death benefits of not less than two times the Base Salary in effect from
time to time, (ii) directors and officers liability insurance with coverage,
terms and limits suitable for a vice president of a New York Stock Exchange
listed company comparable in financial size and wherewithal to that of the
Company and (iii) a monthly allowance of $500 cash to reimburse the Executive
for the use and maintenance of his automobile in furtherance of the business
and affairs of the Company, provided that the Executive shall at all times
insure the Executive and the Company in such amounts as may be reasonably
requested by the Company against claims for bodily injury, death and property
damages occurring as a result of its use. The Company shall use its reasonable
best efforts to make available to the Executive in connection with providing
and paying for the Basic Life Insurance the opportunity to purchase at the
Executive's sole cost and expense additional life insurance with a basic death
benefit (the "Optional Life Insurance") equal to two times the Executive's Base
Salary in effect from time to time (affording the Executive the opportunity to
have basic death benefit life insurance coverage equal to four times such Base
Salary). The Company shall use its reasonable best efforts to effect the
transfer of the ownership to the Executive of the policy or policies for the
Basic Life Insurance and the Optional Life Insurance, if any, upon the
termination of the Executive's employment by the Company. After the
Executive's termination, payment of any premiums would be the obligation of the
Executive.
(f) Other Incentive and Benefit Plans. The Executive shall be
eligible to participate, in accordance with the terms of such plans as they may
be adopted, amended and administered from time to time, in incentive, bonus,
benefit or similar plans, including without limitation, any stock option, bonus
or other equity ownership plan, any short, mid or long term incentive plan and
any other bonus, pension or profit sharing plans established by the Company
from time to time.
4. DUTIES
(a) General. The Executive is engaged as a Vice President of the
Company. In addition, at the request of the Board of Directors, the Executive
shall serve in the same positions in any wholly owned subsidiary of the
Company, without any additional compensation. The Executive shall have such
duties and hold such other offices as may from time to time be reasonably
assigned to him by the Board of Directors of the Company.
(b) Indemnification. To the fullest extent permitted by law, the
Company shall indemnify and hold harmless the Executive for all liabilities,
costs, expenses and damages arising out of or in connection with the
Executive's service to the Company under this Agreement. In furtherance of
this indemnity, the Company shall enter into an indemnification agreement, in
form and substance reasonably satisfactory to the Executive and the Company.
In addition, the indemnity provided hereunder shall extend to service by the
Executive as an officer or director, or service in a similar capacity, for any
civic, community or charitable organization, provided such service is
undertaken at the request of or with the knowledge and acquiescence of the
Company. The foregoing indemnification shall be in addition to any rights or
benefits the Executive may have under statute, the Bylaws or Articles of
Incorporation of the Company, under a policy of insurance, or otherwise.
3.
<PAGE> 4
5. EXTENT OF SERVICES; VACATIONS AND DAYS OFF
(a) Extent of Services. During the term of the Executive's
employment under this Agreement, except during customary vacation periods and
periods of illness, the Executive shall devote full-time energy and attention
during regular business hours to the benefit and business of the Company as may
be reasonably necessary in performing the Executive's duties pursuant to this
Agreement.
(b) Vacations. The Executive shall be entitled to vacations with pay
and to such personal and sick leave with pay in accordance with the policy of
the Company as may be established from time to time by the Company and applied
to other senior officers of the Company. In no event shall the Executive be
entitled to fewer than four weeks' annual vacation. Unused vacation days may
be carried over from one year to the next for a period of up to two years. Any
vacation days which remain unused on the second anniversary of the end of the
fiscal year to which they originally related shall expire and shall thereafter
no longer be useable by the Executive.
6. FACILITIES
The Company shall provide the Executive with a fully furnished office,
and the facilities of the Company shall be generally available to the Executive
in the performance of the Executive's duties pursuant to this Agreement, it
being understood and contemplated by the parties that all equipment, supplies
and office personnel required in the performance of the Executive's duties
under this Agreement shall be supplied by and at the sole expense of the
Company.
7. ILLNESS OR INCAPACITY, TERMINATION ON DEATH, ETC.
(a) Death. If the Executive dies during the term of the Executive's
employment, the Company shall pay to the estate of the Executive within 30 days
after the date of death such Base Salary and any cash bonus compensation earned
pursuant to the provisions of any incentive compensation plan then in effect
but not yet paid, as would otherwise have been payable to the Executive up to
the end of the month in which the Executive's death occurs. After receiving
the payments provided in this Section 7(a) the Executive and the Executive's
estate shall have no further rights under this Agreement (other than those
rights already accrued).
(b) Disability. (i) During any period of disability, illness or
incapacity during the term of this Agreement which renders the Executive at
least temporarily unable to perform the services required under this Agreement,
the Executive shall receive the Base Salary payable under Section 3(a) of this
Agreement plus any cash bonus compensation earned pursuant to the provisions of
any incentive compensation plan then in effect but not yet paid, less any cash
benefits received by him under any disability insurance carried by or provided
by the Company. Upon the Executive's "Permanent Disability" (as defined
below), which permanent disability continues during the payment periods
specified herein, the Company shall pay to the Executive for the period of time
specified below an amount (the "Disability Payment") equal to the (i) sum of
(A) the Base Salary in effect at the time of the Executive's permanent
disability plus (B) an amount equal to the target level of the annual cash
bonus payable to the Executive under the Company's Management Incentive
Compensation Plan as
4.
<PAGE> 5
described on Exhibit A or any similar bonus or incentive plans or programs then
in effect (the "MICP Target Amount"), in respect of the fiscal during which the
Executive's permanent disability occurred, which MICP Target Amount shall be
paid in pro rata equal monthly installments over the period of time specified
below (ii) reduced by the amount of any monthly payments under any policy of
disability income insurance paid for by the Company which payments are received
during the time when any Disability Payment is being made to the Executive
following the Executive's Permanent Disability. For so long as the Executive's
permanent disability continues, the Disability Payment shall be paid by the
Company to the Executive in equivalent installments at the same time or times
as would have been the case for payment of Base Salary over the unexpired term
of this Agreement if the Executive had not become permanently disabled and had
remained employed by the Company hereunder, but in no case shall such period
exceed 24 months. The Executive may be entitled to receive payments under any
disability income insurance which may be carried by or provided by the Company
from time to time. Upon "Permanent Disability" (as that term is defined in
Section 7(b)(ii) below) of the Executive, except as provided in this Section
7(b) all rights of the Executive under this Agreement (other than rights
already accrued) shall terminate.
(ii) The term "Permanent Disability" as used in this
Agreement shall mean, in the event a disability insurance policy is maintained
by the Company covering the Executive at such time and is in full force and
effect, the definition of permanent disability set forth in such policy. In
the event no disability insurance policy is maintained at such time and in full
force and effect, "Permanent Disability" shall mean the inability of the
Executive, as determined by the Board of Directors of the Company, by reason of
physical or mental disability to perform the duties required of him under this
Agreement for a period of one hundred and eighty (180) days in any one-year
period. Successive periods of disability, illness or incapacity will be
considered separate periods unless the later period of disability, illness or
incapacity is due to the same or related cause and commences less than six
months from the ending of the previous period of disability. Upon such
determination, the Board of Directors may terminate the Executive's employment
under this Agreement upon ten (10) days' prior written notice. If any
determination of the Board of Directors with respect to permanent disability is
disputed by the Executive, the parties hereto agree to abide by the dec ision
of a panel of three physicians. The Executive and Company shall each appoint
one member, and the third member of the panel shall be appointed by the other
two members. The Executive agrees to make himself available for and submit to
examinations by such physicians as may be directed by the Company. Failure to
submit to any such examination shall constitute a breach of a material part of
this Agreement.
8. OTHER TERMINATIONS
(a) By the Executive. (i) The Executive may terminate the
Executive's employment hereunder upon giving at least ninety (90) days' prior
written notice. In addition, the Executive shall have the right to terminate
the Executive's employment hereunder on the conditions and at the times
provided for in Section 8(d) of this Agreement.
(ii) If the Executive gives notice pursuant to
Section 8(a)(i) above, the Company shall have the right (but not the
obligation) to relieve the Executive, in whole or in part, of the Executive's
duties under this Agreement, or direct the Executive to no longer perform such
duties, or direct that the Executive should no longer report to work, or any
combination of the foregoing. In any such
5.
<PAGE> 6
event, the Executive shall be entitled to receive only the Base Salary not yet
paid, as would otherwise have been payable to the Executive up to the end of
the month specified as the month of termination in the termination notice. In
the event the Executive gives notice pursuant to Section 8(a)(i) above but
specifies a termination date in excess of ninety (90) days from the date of
such notice, the Company shall have the right (but not the obligation) to
accelerate the termination date to any date prior to the date specified in the
notice that is in excess of ninety (90) days from the date of the notice, and
the Company shall have the right (but not the obligation) to relieve the
Executive, in whole or in part, of the Executive's duties under this Agreement,
or direct the Executive to no longer perform such duties, or direct that the
Executive should no longer report to work, or any combination of the foregoing;
provided, however, that in any such event the Executive shall be entitled to
receive the Base Salary, as would otherwise have been payable to the Executive
up to the end of the month of the termination date properly selected by the
Company. Upon receiving the payments provided for under this Section 8(a), all
rights of the Executive under this Agreement (other than rights already
accrued) shall terminate.
(b) Termination for "Good Cause". (i) Except as otherwise provided
in this Agreement, the Company may terminate the employment of the Executive
hereunder only for "good cause," which shall mean: (A) the Executive's
conviction of either a felony involving moral turpitude or any crime in
connection with the Executive's employment by the Company which causes the
Company a substantial detriment, but specifically shall not include traffic
offenses; (B) actions by the Executive as an executive officer of the
Executive which clearly are contrary to the best interests of the Company; (C)
the Executive's willful failure to take actions permitted by law and necessary
to implement policies of the Company's Board of Directors which the Board of
Directors has communicated to him in writing, provided that minutes of a Board
of Directors meeting attended in its entirety by the Executive shall be deemed
communicated to the Executive; (D) the Executive's continued failure to
attend to the Executive's duties as an executive officer of the Executive; or
(E) any condition which either resulted from the Executive's substantial
dependence, as determined by the Board of Directors of the Company, on alcohol,
or any narcotic drug or other controlled or illegal substance. If any
determination of substantial dependence is disputed by the Executive, the
parties hereto agree to abide by the decision of a panel of three physicians
appointed in the manner and subject to the same penalties for noncompliance as
specified in Section 7(b)(ii) of this Agreement.
(ii) Notwithstanding the foregoing, each of the foregoing
bases for termination specified in (A) through (E) of Subsection 8(b)(i) shall
constitute "Good Cause" only if (1) the Executive has been provided with
written notice of any assertion that there is a basis for termination for good
cause which notice shall specify in reasonable detail specific facts regarding
any such assertion and the Executive has been given a reasonable period of time
within which to remedy or cure the problem or complaint, (2) such notice is
provided to the Executive a reasonable time before the Board of Directors meets
to consider any possible termination for cause, (3) at or prior to the meeting
of the Board of Directors to consider the matters described in the written
notice, an opportunity is provided to the Executive and his counsel to be heard
by the Board of Directors with respect to the matters described in the written
notice, before it acts with respect to such matter, (4) any resolution or other
action by the Board of Directors with respect to any deliberation regarding or
decision to terminate the Executive for good cause is duly adopted by a vote of
a majority of the entire Board of Directors of the Company at a meeting of the
Board duly called and held and (5) the Executive is promptly provided with a
copy of the resolution or other corporate action taken with respect to such
termination.
6.
<PAGE> 7
(iii) If the employment of the Executive is terminated for
good cause under Section 8(b)(i) of this Agreement, the Company shall pay to
the Executive any Base Salary earned prior to the effective date of termination
but not yet paid and any cash bonus compensation earned pursuant to the
provisions of any incentive compensation plan then in effect but not paid to
the Executive prior to the effective date of such termination. Under such
circumstances, such payments shall be in full and complete discharge of any and
all liabilities or obligations of the Company to the Executive hereunder, and
the Executive shall be entitled to no further benefits under this Agreement
(other than rights already accrued).
(iv) Termination of the employment of the Executive other
than as expressly specified above in this Section 8(b) for good cause shall be
deemed to be a termination of employment "Without Good Cause."
(c) Termination Without Good Cause. (i) Notwithstanding any other
provision of this Agreement, the Company shall have the right to terminate the
Executive's employment Without Good Cause pursuant to the provisions of this
Section 8(c). If the Company shall terminate the employment of the Executive
Without Good Cause effective on a date earlier than the termination date
provided for in Section 2 (with the effective date of termination as so
identified by the Company being referred to herein as the "Accelerated
Termination Date"), the Executive, until the end of the term of this Agreement
then in effect as provided for in Section 2 or until the date which is 24
months after the Accelerated Termination Date, whichever is the first to occur,
shall continue to receive (1) the Base Salary, paid in the same monthly on
other periodic installments ad in effect prior to the Accellerated Termination
Date (2) an equal monthly pro rata portion of an amount of cash equal to the
sum of the MICP Target Amount (as that term is defined in Section 7(b)(i)) in
respect of the year during which the Executive's employment terminates
multiplied times the number of years (or fractions thereof) remaining in the
then unexpired term of this Agreement or multiplied times two if the 24 month
payment period under this Section 8(c)(i) is in effect, and (3) any other cash
or other bonus compensation earned prior to the date of such termination
pursuant to the terms of all incentive compensation plans then in effect other
than the Company's Management Incentive Compensation Plan as described on
Exhibit A or any similar bonus on incentive plans or programs then in effect;
provided that, notwithstanding such termination of employment, the Executive's
covenants set forth in Section 10 and Section 11 are intended to and shall
remain in full force and effect and provided further that in the event of such
termination, the Company shall have the right (but not the obligation) to
relieve the Executive, in whole or in part, of the Executive's duties under
this Agreement, or direct the Executive to no longer perform such duties, or
direct that the Executive no longer be required to report to work, or any
combination of the foregoing.
(ii) The parties agree that, because there can be no exact
measure of the damage that would occur to the Executive as a result of a
termination by the Company of the Executive's employment Without Good Cause,
the payments and benefits paid and provided pursuant to this Section 8(c) shall
be deemed to constitute liquidated damages and not a penalty for the Company's
termination of the Executive's employment Without Good Cause.
(d) Change of Control. (i) For purposes of this Agreement, a
"Change in Control" shall mean the first to occur of:
7.
<PAGE> 8
(1) a change in control of the Company of a nature that
is required, pursuant to the Securities Exchange Act
of 1934 (the "1934 Act"), to be reported in response
to Item 1(a) of a Current Report on Form 8-K or Item
6(e) of Schedule 14A under the 1934 Act (in each case
under this Agreement, references to provisions of the
1934 Act and the rules and regulations promulgated
thereunder being understood to refer to such law,
rules and regulations as the same are in effect on
November 1, 1996); or
(2) the acquisition of "Beneficial Ownership" (as defined
in Rule 13d-3 under the 1934 Act) of the Company's
securities comprising 35% or more of the combined
voting power of the Company's outstanding securities
by any "person" (as that term is used in Sections
13(d) and 14(d)(2) of the 1934 Act and the rules and
regulations promulgated thereunder, but not including
any trustee or fiduciary acting in that capacity for
an employee benefit plan sponsored by the Company)
and such person's "affiliates" and "associates" (as
those terms are defined under the 1934 Act), but
excluding any ownership by the Executive and his
affiliates and associates; or
(3) the failure of the "Incumbent Directors" (as defined
below) to constitute at least a majority of all
directors of the Company (for these purposes,
"Incumbent Directors" means individuals who were the
directors of the Company on November 1, 1996, and,
after his or her election, any individual becoming a
director subsequent to November 1, 1996, whose
election, or nomination for election by the Company's
stockholders, is approved by a vote of at least
two-thirds of the directors then comprising the
Incumbent Directors, except that no individual shall
be considered an Incumbent Director who is not
recommended by management and whose initial
assumption of office as a director is in connection
with an actual or threatened "election contest"
relating to the "election of directors" of the
Company, as such terms are used in Rule 14a-11 of
Regulation 14A under the 1934 Act); or
(4) the closing of a sale of all or substantially all of
the assets of the Company;
(5) the Company's adoption of a plan of dissolution or
liquidation; or
(6) the closing of a merger or consolidation involving
the Company in which the Company is not the surviving
corporation or if, immediately following such merger
or consolidation, less than seventy-five percent
(75%) of the surviving corporation's outstanding
voting stock is held or is anticipated to be held by
persons who are stockholders of the Company
immediately prior to such merger or consolidation.
(ii) If a Change in Control of the Company occurs, the
Executive shall have the right, exercisable for a period of one year thereafter
by delivering a written statement to that effect to the Company, to immediately
terminate this Agreement and upon such a determination the Executive shall have
the right to receive and the Company shall be obligated to pay to Executive in
cash a lump sum payment in an amount equal to the sum of (1) two times the
annual Base Salary then in effect, (2) two
8.
<PAGE> 9
times the MICP Target Amount (as that term is defined in Section 7(b)(i)) in
the year in which employment terminates and (3) the additional payments
necessary to discharge certain tax liabilities (the "Gross Up") as that term is
defined in Section 13 of this Agreement (the sum of the foregoing amounts other
than the Gross Up being referred to as the "Change in Control Payment"). If
the Executive fails to exercise his rights under this Section 8(d) within one
year following a Change in Control, such rights shall expire and be of no
further force or effect.
(e) Intentions Regarding Certain Stock and Benefit Plans. Except as
otherwise provided herein, upon any termination of the Executive's employment
Without Good Cause or upon the exercise by the Executive of his rights to
terminate his employment following a Change of Control, it is the intention of
the parties that any and all vesting or performance requirements or conditions
affecting any outstanding restricted stock, performance stock, stock option,
stock appreciation right, bonus, award, right, grant or any other incentive
compensation under any of the Plans, under this Agreement, or otherwise
received, shall be deemed to be fully satisfied and any risk of forfeiture with
respect thereto shall be deemed to have lapsed.
(f) Certain Rights Mutually Exclusive. The provisions of Section
8(c) and Section 8(d) are mutually exclusive, provided, however, that if within
one year following commencement of an 8(c) payout there shall be a Change in
Control as defined in Section 8(d)(i), then the Executive shall be entitled to
the amount payable to the Executive under Section 8(d)(ii) and Section
8(d)(iii) reduced by the amount that the Executive has received under Section
8(c) up to the date of the change in control. The triggering of the lump sum
payment requirement of Section 8(d) shall cause the provisions of Section 8(c)
to become inoperative.
9. DISCLOSURE
The Executive agrees that during the term of the Executive's
employment by the Company, the Executive will disclose and disclose only to the
Company all ideas, methods, plans, developments or improvements known by him
which relate directly or indirectly to the business of the Company, whether
acquired by the Executive before or during the Executive's employment by the
Company. Nothing in this Section 9 shall be construed as requiring any such
communication where the idea, plan, method or development is lawfully protected
from disclosure as a trade secret of a third party or by any other lawful
prohibition against such communication. The covenants of this Section 9 shall
not be violated by ordinary and customary communications with reporters,
bankers and securities analysts and other members of the investment community.
10. CONFIDENTIALITY
The Executive agrees to keep in strict secrecy and confidence any and
all information the Executive assimilates or to which the Executive has access
during the Executive's employment by the Company and which has not been
publicly disclosed and is not a matter of common knowledge in the fields of
work of the Company. The Executive agrees that both during and after the term
of the Executive's employment by the Company, the Executive will not, without
the prior written consent of the Company, disclose any such confidential
information to any third person, partnership, joint venture, company,
corporation or other organization. The foregoing covenants shall not be
9.
<PAGE> 10
breached to the extent that any such confidential information becomes a matter
of general knowledge other than through a breach by the Executive of the
Executive's obligations under this Section 10.
11. NONCOMPETITION AND NONSOLICITATION
(a) General. The Executive hereby acknowledges that, during and
solely as a result of the Executive's employment by the Company, the Executive
has received and shall continue to receive: (1) special training and education
with respect to the operations of the Company's real estate development and
management businesses and its leasing, lending and financing activities, and
other related matters, and (2) access to confidential information and business
and professional contacts. In consideration of the special and unique
opportunities afforded to the Executive by the Company as a result of the
Executive's employment, as outlined in the previous sentence, the Executive
hereby agrees to the restrictive covenants in this Section 11.
(b) Noncompetition. During the term of the Executive's employment,
whether pursuant to this Agreement, any automatic or other renewal hereof or
otherwise, and, except as may be otherwise herein provided, for a period of two
(2) years after the termination of the Executive's employment with the Company,
regardless of the reason for such termination, the Executive shall not,
directly or indirectly, enter into, engage in, be employed by or consult with
any business which competes with the Company's real estate lending, leasing,
development or management businesses in Florida. The Executive shall not
engage in such prohibited activities, either as an individual, partner,
officer, director, stockholder, employee, advisor, independent contractor,
joint venturer, consultant, agent, or representative or salesman for any
person, firm, partnership, corporation or other entity so competing with the
Company. The restrictions of this Section 11 shall not be violated by (i) the
ownership of no more than 2% of the outstanding securities of any company whose
stock is traded on a national securities exchange or is quoted in the Automated
Quotation System of the National Association of Securities Dealers (NASDAQ), or
(ii) other outside business investments that do not in any manner conflict with
the services to be rendered by the Executive for the Company and that do not
diminish or detract from the Executive's ability to render the Executive's
required attention to the business of the Company.
(c) Nonsolicitation. During the Executive's employment with the
Company and, except as may be otherwise herein provided, for a period of two
(2) years following the termination of the Executive's employment with the
Company, regardless of the reason for such termination, the Executive agrees
the Executive will refrain from and will not, directly or indirectly, as an
individual, partner, officer, director, stockholder, employee, advisor,
independent contractor, joint venturer, consultant, agent, representative,
salesman or otherwise solicit any of the employees of the Company to terminate
their employment.
(d) Term Extended or Suspended. The period of time during which the
Executive is prohibited from engaging in certain business practices pursuant to
Sections 11(b) or (c) shall be extended by any length of time during which the
Executive is in breach of such covenants.
(e) Essential Element. It is understood by and between the parties
hereto that the foregoing restrictive covenants set forth in Sections 11(a)
through (c) are essential elements of this Agreement, and that, but for the
agreement of the Executive to comply with such covenants, the Company would
10.
<PAGE> 11
not have agreed to enter into this Agreement. Such covenants by the Executive
shall be construed as agreements independent of any other provision in this
Agreement. The existence of any claim or cause of action of the Executive
against the Company, whether predicated on this Agreement, or otherwise, shall
not constitute a defense to the enforcement by the Company of such covenants.
(f) Severability. It is agreed by the Company and Executive that if
any portion of the covenants set forth in this Section 11 are held to be
invalid, unreasonable, arbitrary or against public policy, then such portion of
such covenants shall be considered divisible both as to time and geographical
area. The Company and Executive agree that, if any court of competent
jurisdiction determines the specified time period or the specified geographical
area applicable to this Section 11 to be invalid, unreasonable, arbitrary or
against public policy, a lesser time period or geographical area which is
determined to be reasonable, non-arbitrary and not against public policy may be
enforced against the Executive. The Company and the Executive agree that the
foregoing covenants are appropriate and reasonable when considered in light of
the nature and extent of the business conducted by the Company.
12. SPECIFIC PERFORMANCE
The Executive agrees that damages at law will be an insufficient
remedy to the Company if the Executive violates the terms of Sections 9, 10 or
11 of this Agreement and that the Company would suffer irreparable damage as a
result of such violation. Accordingly, it is agreed that the Company shall be
entitled, upon application to a court of competent jurisdiction, to obtain
injunctive relief to enforce the provisions of such Sections, which injunctive
relief shall be in addition to any other rights or remedies available to the
Company. The Executive agrees to pay to the Company all reasonable costs and
expenses incurred by the Company relating to the enforcement of the terms of
Sections 9, 10 or 11 of this Agreement, including reasonable fees and
reasonable disbursements of counsel selected by the Company (during
investigation and before and at trial and in appellate proceedings).
13. PAYMENT OF EXCISE TAXES
(a) Payment of Excise Taxes. If the Executive is to receive any (1)
Change of Control Payment under Section 8(d), (2) any benefit or payment under
Section 7 as a result of or following the death or Permanent Disability of the
Executive, (3) any benefit or payment under Section 8(c) as a result of or
following any termination of employment hereunder Without Good Cause, (4) any
benefit or payment under the Plans as a result of a Change of Control,
following the death of Permanent Disability of the Executive or following the
termination of employment hereunder Without Good Cause (such sections being
referred to as the "Covered Sections" and the benefits and payments to be
received thereunder being referred to as the "Covered Payments"), the Executive
shall be entitled to receive the amount described below to the extent
applicable: If any Covered Payment(s) under any of the Covered Sections or by
the Company under another plan or agreement (collectively, the "Payments") are
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986 (as amended from time to time, the "Code"), or any successor or similar
provision of the
11.
<PAGE> 12
Code (the "Excise Tax"), the Company shall pay the Executive an additional
amount (the "Gross Up") such that the net amount retained by the Executive
after deduction of any Excise Tax on the Payments and the federal income tax on
any amounts paid under this Section 13 shall be equal to the Payments.
(b) (i) Certain Adjustment Payments. For purposes of determining
the Gross Up, the Executive shall be deemed to pay the federal income tax at
the highest marginal rate of taxation (currently 39.5%) in the calendar year in
which the payment to which the Gross Up applies is to be made. The
determination of whether such Excise Tax is payable and the amount thereof
shall be made upon the opinion of tax counsel selected by the Company and
reasonably acceptable to the Executive. The Gross Up, if any, that is due as a
result of such determination shall be paid to the Executive in cash in a lump
sum within thirty (30) days of such computation. If such opinion is not
finally accepted by the Internal Revenue Service upon audit or otherwise, then
appropriate adjustments shall be computed (without interest but with Gross Up,
if applicable) by such tax counsel based upon the final amount of the Excise
Tax so determined; any additional amount due the Executive as a result of such
adjustment shall be paid to the Executive by his or her Company in cash in a
lump sum within thirty (30) days of such computation, or any amount due the
Executive's Company as a result of such adjustment shall be paid to the Company
by the Executive in cash in a lump sum within thirty (30) days of such
computation.
14. MISCELLANEOUS
(a) Waiver of Breach. The waiver by either party to this Agreement
of a breach of any of the provisions of this Agreement by the other party shall
not be construed as a waiver of any subsequent breach by such other party.
(b) No Right to Continued Employment. Notwithstanding the fact that
certain provisions of this Agreement and/or Exhibit A reference a three year
cycle or provide for benefits upon a third year of employment, this Agreement
shall have a two year term with annual one year renewal terms subject to the
termination provisions contained herein.
(c) Compliance With Other Agreements. The Executive represents and
warrants that the execution of this Agreement by him and the Executive's
performance of the Executive's obligations hereunder will not conflict with,
result in the breach of any provision of or the termination of or constitute a
default under any Agreement to which the Executive is a party or by which the
Executive is or may be bound.
(d) Binding Effect; Assignment. The rights and obligations of the
Company under this Agreement shall inure to the benefit of and shall be binding
upon the successors and assigns of the Company. This Agreement is a personal
employment contract and the rights, obligations and interests of the Executive
hereunder may not be sold, assigned, transferred, pledged or hypothecated.
(e) Entire Agreement. This Agreement contains the entire agreement
and supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof. This Agreement may be changed only by an
agreement in writing signed by the party against whom any waiver, change,
amendment, modification or discharge is sought.
12.
<PAGE> 13
(f) No Duty to Mitigate. The Executive shall be under no duty to
mitigate any loss of income as result of the termination of his employment
hereunder and any payments due the Executive upon termination of employment
shall not be reduced in respect of any other employment compensation received
by the Executive following such termination.
(g) Florida Law. This Agreement shall be construed pursuant to and
governed by the substantive laws of the State of Florida (except that any
provision of Florida law shall not apply if the law of a state or jurisdiction
other than Florida would otherwise apply).
(h) Venue; Process. The parties to this Agreement agree that
jurisdiction and venue in any action brought pursuant to this Agreement to
enforce its terms or otherwise with respect to the relationships between the
parties shall properly lie in and only in the Circuit Court of the Sixth
Judicial Circuit of the State of Florida in and for Pinellas County (the
"Circuit Court") and the parties agree that jurisdiction shall not properly lie
in any other jurisdiction provided, however, if jurisdiction does not properly
lie with the Circuit Court, the parties agree that jurisdiction and venue shall
properly lie in and only in the United States District Court for the Middle
District of Florida, Tampa Division. The parties hereby waive any objections
which they may now or hereafter have based on venue and/or forum non conveniens
and irrevocably submit to the jurisdiction of any such court in any legal suit,
action or proceeding arising out of or relating to this Agreement. The parties
further agree that the mailing by certified or registered mail, return receipt
requested, of any process required by any such court shall constitute valid and
lawful service of process against them, without the necessity for service by
any other means provided by statute or rule of court.
(i) Headings. The headings of the various sections in this Agreement
are inserted for the convenience of the parties and shall not affect the
meaning, construction or interpretation of this Agreement.
(j) Severability. Any provision of this Agreement which is
determined by a court of competent jurisdiction to be 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 affecting the validity, enforceability or legality of such
provision in any other jurisdiction. In any such case, such determination
shall not affect any other provision of this Agreement, and the remaining
provisions of this Agreement shall remain in full force and effect. If any
provision or term of this Agreement is susceptible to two or more constructions
or interpretations, one or more of which would render the provision or term
void or unenforceable, the parties agree that a construction or interpretation
which renders the term or provision valid shall be favored.
(k) Deduction for Tax Purposes. The Company's obligations to make
payments under this Agreement are independent of whether any or all of such
payments are deductible expenses of the Company for federal income tax
purposes.
(l) Enforcement. If, within 10 days after demand to comply with the
obligations of one of the parties to this Agreement served in writing on the
other, compliance or reasonable assurance of compliance is not forthcoming, and
the party demanding compliance engages the services of an attorney to enforce
rights under this Agreement, the prevailing party in any action shall be
entitled
13.
<PAGE> 14
to recover all reasonable costs and expenses of enforcement (including
reasonable attorneys' fees and reasonable expenses during investigation, before
and at trial and in appellate proceedings). In addition, each of the parties
agrees to indemnify the other in respect of any and all claims, losses, costs,
liabilities and expenses, including reasonable fees and reasonable
disbursements of counsel (during investigation prior to initiation of
litigation and at trial and in appellate proceedings if litigation ensues),
directly or indirectly resulting from or arising out of a breach by the other
party of their respective obligations hereunder. The parties' costs of
enforcing this Agreement shall include prejudgment interest. Additionally, if
any party incurs any out-of-pocket expenses in connection with the enforcement
of this Agreement, all such amounts shall accrue interest at 18% per annum (or
such lower rate as may be required to avoid any limit imposed by applicable
law) commencing 30 days after any such expenses are incurred.
(m) Notices. All notices which are required or may be given under
this Agreement shall be in writing and shall be deemed to have been duly given
when received if personally delivered; when transmitted if transmitted by
telecopy or similar electronic transmission method; one working day after it is
sent, if sent by recognized expedited delivery service; and three days after it
is sent, if mailed, first class mail, certified mail, return receipt requested,
with postage prepaid. In each case notice shall be sent to:
To the Company: Echelon International Corporation
One Progress Plaza
St. Petersburg, FL 33701
Attn: Chairman of the Board
Telecopy: (813) 824-6536
To the Executive at the Executive's address herein first above
written, or to such other address as either party may specify by written notice
to the other.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
ATTEST: ECHELON INTERNATIONAL CORPORATION
(Corporate Seal)
________________________________ By:____________________________________
Secretary
Title:
EXECUTIVE
Witnesses:
________________________________ _______________________________________
Raymond F. Higgins
________________________________
As to Executive
14.
<PAGE> 15
EXHIBIT A
TO
EMPLOYMENT AGREEMENT WITH RAYMOND F. HIGGINS
DATED ________, 1996
The Company will establish a Management Incentive Compensation Plan
("MICP") for its senior management in which the Executive will participate.
During the first two full fiscal years of the Company's operation following the
completion of the Spinoff ending on December 31, 1997, and December 31, 1998,
respectively (the "Covered Years"), the MICP will provide for annual cash
bonuses based upon the Company's net income for each of the Covered Years. The
Executive's participation in the MICP during the Covered Years shall be based
upon the criteria and shall include awards with the values indicated in the
tables set forth below and as more fully described in this Exhibit A.
MICP
During each of the Covered Years, (i) all MICP bonuses shall be paid
in cash; (ii) if Threshold Net Income is not achieved, no MICP cash bonus will
be paid; (iii) if actual net income exceeds Threshold Net Income, but is less
than Target Net Income, or exceeds Target Net Income but is less than Maximum
Net Income, the percentage of the MICP bonus shall be proportionately increased
above the Threshold bonus amount or the Target Bonus amount, as the case may
be, and (iv) if actual net income equals or exceeds Maximum Net Income, the
Maximum MICP cash bonus will be paid, but no additional cash bonus will be
payable under the MICP regardless of the amount by which actual net income in
that Covered Year exceeds Maximum Net Income. The following table sets forth
information regarding the MICP Net Income Threshold, Target and Maximum and
cash bonuses.
<TABLE>
<CAPTION>
-------------------------------------------------------
MICP 1997 1998
-------------------------------------------------------
THRESHOLD
-------------------------------------------------------
<S> <C> <C>
Net Income $1,584,274 $1,768,816
-------------------------------------------------------
MICP Cash Bonus $7,500 $7,500
(% of Target Bonus) (50%) (50%)
-------------------------------------------------------
TARGET
-------------------------------------------------------
Net Income $2,112,366 $2,358,422
-------------------------------------------------------
MICP Cash Bonus $15,000 $15,000
(% of Base Salary) (15%) (15%)
-------------------------------------------------------
MAXIMUM
-------------------------------------------------------
Net Income $2,640,457 $2,948,027
-------------------------------------------------------
MICP Cash Bonus $22,500 $22,500
(% of Target Bonus) (150%) (150)%
-------------------------------------------------------
</TABLE>
15.
<PAGE> 1
Exhibit 10.15
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into this ___ day of
__________, 1996, but is effective for all purposes as of the date specified
below in Section 2, by and between ECHELON INTERNATIONAL CORPORATION, a Florida
corporation (the "Company"), and JAMES R. HOBBS, residing at 2151 76th Street
N., St. Petersburg, Florida 33710 (the "Executive").
W I T N E S S E T H:
1. EMPLOYMENT
The Company hereby employs the Executive, and the Executive hereby
accepts such employment, upon the terms and subject to the conditions set forth
in this Agreement.
2. TERM
Subject to the provisions for termination as hereinafter provided, the
term of employment under this Agreement shall begin as of the completion of the
"Distribution" as that term is defined in the Company's Registration Statement
on Form 10, as amended (the "Distribution"), and shall continue through
December 31, 1998, provided, however, that this Employment Agreement shall
automatically be renewed for successive one year terms unless either party
gives the other written notice of termination at least ninety (90) days prior
to the end of any such term.
3. COMPENSATION
(a) Base Salary. The Company shall pay to the Executive as basic
compensation for all services rendered by the Executive during the term of this
Agreement a basic annualized salary of $100,000 per year, or such other sum in
excess of that amount as the parties may agree on from time to time or as
provided in the next sentence (as in effect from time to time, the "Base
Salary"), payable monthly or in other more frequent installments, as determined
by the Company. The Board of Directors shall have no authority to reduce the
Executive's Base Salary in effect from time to time. In addition, the Board of
Directors, in its discretion, may award a bonus or bonuses to the Executive in
addition to the bonuses provided for in Section 3(b).
(b) Bonuses. In addition to the Base Salary to be paid pursuant to
Section 3(a), for each of the Company's two fiscal years ending December 31,
1997 and December 31, 1998 during the term of this Agreement, the Company shall
pay as incentive compensation the annual bonuses, to the extent earned,
specified on Exhibit A to this Agreement. For each fiscal year ending after
December 31, 1998, provided the Executive continues to be employed by the
Company under this Agreement, the Executive shall be eligible for incentive
compensation annual bonus plan(s) adopted by the Board of Directors of the
Company from time to time in accordance with the terms of such plans.
(c) Certain Plans and Initial Award. (i) It is anticipated that the
Company will adopt certain incentive compensation plans including a long term
incentive plan (the "LTIP"), providing for annual or other periodic awards to
key employees, among other things, of restricted stock and a stock option
<PAGE> 2
plan (the "ISO/NSO Plan"), providing for the annual or other periodic issuance
of options to purchase the Company's common stock. The LTIP and ISO/NSO are
referred to collectively in this Agreement as the "Plans." The Executive will
be given an opportunity to participate in the Plans, in accordance with and
subject to the terms of the Plans as they may be adopted, amended and
administered from time to time.
(ii) In addition to the incentive compensation referred to n
Section 3(c)(i), the Company hereby agrees to issue to the Executive under the
LTIP, effective immediately following the completion of the Distribution, that
number of shares of the Company's common stock (the "Initial Restricted Stock")
as will equal two-tenths of one percent (0.20%) of the shares of the Company's
common stock distributed in the Distribution, which Initial Restricted Stock
shall be subject to risk of forfeiture, which risk will lapse as to one-fourth
of the shares of the Initial Restricted Stock on January 31, 1998, and as to an
additional one-fourth of the Initial Restricted Stock on each of January 31,
1999, January 31, 2000 and January 31, 2001.
(iii) In addition to the incentive compensation referred to
in Section 3(c)(i) and the Initial Restricted Stock, the Company hereby agrees
to grant to the the Executive under the LTIP, effective immediately following
the completion of the Distribution, options to purchase one thousand (1,000)
shares of the Company's common stock (the "Initial Options"), which Initial
Options shall be exerciseable as to one-fourth of the shares of common stock
covered by the Initial Options on January 31, 1998, and as to an additional
one-fourth of such shares on each of January 31, 1999, January 31, 2000 and
January 31, 2001. The exercise price for the Initial Options shall be the
closing price on the New York Stock Exchange (or such other market on which the
Company's stock trades if it is not listed on the New York Stock Exchange) on
the trading day which is the eighth month anniversary of the day of the
completion of the Distribution (the "Option Pricing Date"), or if the Option
Pricing Date is not a trading day, the first trading day thereafter.
(iv) Any and all risks of forfeiture shall lapse as to all of
the Initial Restricted Stock and the Initial Options shall be fully vested and
shall be exerciseable as to all of the shares of common stock covered by the
Initial Options upon (i) the death of the Executive or termination of
employment upon the "Permanent Disability" (as that term is defined in Section
7(b)(ii) of this Agreement) of the Executive, (ii) the termination of
employment of the Executive by the Company"Without Good Cause" (as that term is
defined in Section 8(b)(ii) of this Agreement) or (iii) the exercise by the
Executive of his rights to terminate his employment under Section 8(d)(ii)
following a "Change of Control" (as that term is defined in Section 8(d)(i) of
this Agreement).
(d) Reimbursement. The Company shall reimburse the Executive, in
accordance with the Company's policies and practices for senior management, for
all reasonable expenses incurred by the Executive in the performance of the
Executive's duties under this Agreement, provided, however, that the Executive
must furnish to the Company an itemized account, satisfactory to the Company,
in substantiation of such expenditures.
(e) Certain Benefits. The Executive shall be entitled to such fringe
benefits including, but not limited to, medical and other insurance benefits as
may be provided from time to time by the Company to other senior officers of
the Company. In addition, without restricting the foregoing, the Company shall
provide the Executive at the Company's sole cost and expense with (i) a policy
or policies of term life insurance (the "Basic Life Insurance") providing,
among other things, basic death benefits
2.
<PAGE> 3
of not less than two times the Base Salary in effect from time to time, (ii)
directors and officers liability insurance with coverage, terms and limits
suitable for a vice president of a New York Stock Exchange listed company
comparable in financial size and wherewithal to that of the Company and (iii)
a monthly allowance of $500 cash to reimburse the Executive for the use and
maintenance of his automobile in furtherance of the business and affairs of the
Company, provided that the Executive shall at all times insure the Executive
and the Company in such amounts as may be reasonably requested by the Company
against claims for bodily injury, death and property damages occurring as a
result of its use. The Company shall use its reasonable best efforts to make
available to the Executive in connection with providing and paying for the
Basic Life Insurance the opportunity to purchase at the Executive's sole cost
and expense additional life insurance with a basic death benefit (the "Optional
Life Insurance") equal to two times the Executive's Base Salary in effect from
time to time (affording the Executive the opportunity to have basic death
benefit life insurance coverage equal to four times such Base Salary). The
Company shall use its reasonable best efforts to effect the transfer of the
ownership to the Executive of the policy or policies for the Basic Life
Insurance and the Optional Life Insurance, if any, upon the termination of the
Executive's employment by the Company. After the Executive's termination,
payment of any premiums would be the obligation of the Executive.
(f) Other Incentive and Benefit Plans. The Executive shall be
eligible to participate, in accordance with the terms of such plans as they may
be adopted, amended and administered from time to time, in incentive, bonus,
benefit or similar plans, including without limitation, any stock option, bonus
or other equity ownership plan, any short, mid or long term incentive plan and
any other bonus, pension or profit sharing plans established by the Company
from time to time.
4. DUTIES
(a) General. The Executive is engaged as a Vice President of the
Company. In addition, at the request of the Board of Directors, the Executive
shall serve in the same positions in any wholly owned subsidiary of the
Company, without any additional compensation. The Executive shall have such
duties and hold such other offices as may from time to time be reasonably
assigned to him by the Board of Directors of the Company.
(b) Indemnification. To the fullest extent permitted by law, the
Company shall indemnify and hold harmless the Executive for all liabilities,
costs, expenses and damages arising out of or in connection with the
Executive's service to the Company under this Agreement. In furtherance of
this indemnity, the Company shall enter into an indemnification agreement, in
form and substance reasonably satisfactory to the Executive and the Company.
In addition, the indemnity provided hereunder shall extend to service by the
Executive as an officer or director, or service in a similar capacity, for any
civic, community or charitable organization, provided such service is
undertaken at the request of or with the knowledge and acquiescence of the
Company. The foregoing indemnification shall be in addition to any rights or
benefits the Executive may have under statute, the Bylaws or Articles of
Incorporation of the Company, under a policy of insurance, or otherwise.
3.
<PAGE> 4
5. EXTENT OF SERVICES; VACATIONS AND DAYS OFF
(a) Extent of Services. During the term of the Executive's
employment under this Agreement, except during customary vacation periods and
periods of illness, the Executive shall devote full-time energy and attention
during regular business hours to the benefit and business of the Company as may
be reasonably necessary in performing the Executive's duties pursuant to this
Agreement.
(b) Vacations. The Executive shall be entitled to vacations with pay
and to such personal and sick leave with pay in accordance with the policy of
the Company as may be established from time to time by the Company and applied
to other senior officers of the Company. In no event shall the Executive be
entitled to fewer than four weeks' annual vacation. Unused vacation days may
be carried over from one year to the next for a period of up to two years. Any
vacation days which remain unused on the second anniversary of the end of the
fiscal year to which they originally related shall expire and shall thereafter
no longer be useable by the Executive.
6. FACILITIES
The Company shall provide the Executive with a fully furnished office,
and the facilities of the Company shall be generally available to the Executive
in the performance of the Executive's duties pursuant to this Agreement, it
being understood and contemplated by the parties that all equipment, supplies
and office personnel required in the performance of the Executive's duties
under this Agreement shall be supplied by and at the sole expense of the
Company.
7. ILLNESS OR INCAPACITY, TERMINATION ON DEATH, ETC.
(a) Death. If the Executive dies during the term of the Executive's
employment, the Company shall pay to the estate of the Executive within 30 days
after the date of death such Base Salary and any cash bonus compensation earned
pursuant to the provisions of any incentive compensation plan then in effect
but not yet paid, as would otherwise have been payable to the Executive up to
the end of the month in which the Executive's death occurs. After receiving
the payments provided in this Section 7(a) and the benefits provided in Section
8(e) of this Agreement, the Executive and the Executive's estate shall have no
further rights under this Agreement (other than those rights already accrued).
(b) Disability. (i) During any period of disability, illness or
incapacity during the term of this Agreement which renders the Executive at
least temporarily unable to perform the services required under this Agreement,
the Executive shall receive the Base Salary payable under Section 3(a) of this
Agreement plus any cash bonus compensation earned pursuant to the provisions of
any incentive compensation plan then in effect but not yet paid, less any cash
benefits received by him under any disability insurance carried by or provided
by the Company. Upon the Executive's "Permanent Disability" (as defined
below), which permanent disability continues during the payment periods
specified herein, the Company shall pay to the Executive for the period of time
specified below an amount (the "Disability Payment") equal to the (i) sum of
(A) the Base Salary in effect at the time of the Executive's permanent
disability plus (B) an amount equal to the target level of the annual cash
4.
<PAGE> 5
bonus payable to the Executive under the Company's Management Incentive
Compensation Plan as described on Exhibit A or any similar bonus or incentive
plans or programs then in effect (the "MICP Target Amount"), in respect of the
fiscal during which the Executive's permanent disability occurred, which MICP
Target Amount shall be paid in pro rata equal monthly installments over the
period of time specified below (ii) reduced by the amount of any monthly
payments under any policy of disability income insurance paid for by the
Company which payments are received during the time when any Disability Payment
is being made to the Executive following the Executive's Permanent Disability.
For so long as the Executive's permanent disability continues, the Disability
Payment shall be paid by the Company to the Executive in equivalent
installments at the same time or times as would have been the case for payment
of Base Salary over the unexpired term of this Agreement if the Executive had
not become permanently disabled and had remained employed by the Company
hereunder, but in no case shall such period exceed 24 months. The Executive
may be entitled to receive payments under any disability income insurance which
may be carried by or provided by the Company from time to time. Upon
"Permanent Disability" (as that term is defined in Section 7(b)(ii) below) of
the Executive, except as provided in this Section 7(b) all rights of the
Executive under this Agreement (other than rights already accrued) shall
terminate.
(ii) The term "Permanent Disability" as used in this
Agreement shall mean, in the event a disability insurance policy is maintained
by the Company covering the Executive at such time and is in full force and
effect, the definition of permanent disability set forth in such policy. In
the event no disability insurance policy is maintained at such time and in full
force and effect, "Permanent Disability" shall mean the inability of the
Executive, as determined by the Board of Directors of the Company, by reason of
physical or mental disability to perform the duties required of him under this
Agreement for a period of one hundred and eighty (180) days in any one-year
period. Successive periods of disability, illness or incapacity will be
considered separate periods unless the later period of disability, illness or
incapacity is due to the same or related cause and commences less than six
months from the ending of the previous period of disability. Upon such
determination, the Board of Directors may terminate the Executive's employment
under this Agreement upon ten (10) days' prior written notice. If any
determination of the Board of Directors with respect to permanent disability is
disputed by the Executive, the parties hereto agree to abide by the decision of
a panel of three physicians. The Executive and Company shall each appoint one
member, and the third member of the panel shall be appointed by the other two
members. The Executive agrees to make himself available for and submit to
examinations by such physicians as may be directed by the Company. Failure to
submit to any such examination shall constitute a breach of a material part of
this Agreement.
8. OTHER TERMINATIONS
(a) By the Executive. (i) The Executive may terminate the
Executive's employment hereunder upon giving at least ninety (90) days' prior
written notice. In addition, the Executive shall have the right to terminate
the Executive's employment hereunder on the conditions and at the times
provided for in Section 8(d) of this Agreement.
(ii) If the Executive gives notice pursuant to Section
8(a)(i) above, the Company shall have the right (but not the obligation) to
relieve the Executive, in whole or in part, of the Executive's duties under
this Agreement, or direct the Executive to no longer perform such duties, or
direct that
5.
<PAGE> 6
the Executive should no longer report to work, or any combination of the
foregoing. In any such event, the Executive shall be entitled to receive only
the Base Salary not yet paid, as would otherwise have been payable to the
Executive up to the end of the month specified as the month of termination in
the termination notice. In the event the Executive gives notice pursuant to
Section 8(a)(i) above but specifies a termination date in excess of ninety (90)
days from the date of such notice, the Company shall have the right (but not
the obligation) to accelerate the termination date to any date prior to the
date specified in the notice that is in excess of ninety (90) days from the
date of the notice, and the Company shall have the right (but not the
obligation) to relieve the Executive, in whole or in part, of the Executive's
duties under this Agreement, or direct the Executive to no longer perform such
duties, or direct that the Executive should no longer report to work, or any
combination of the foregoing; provided, however, that in any such event the
Executive shall be entitled to receive the Base Salary, as would otherwise have
been payable to the Executive up to the end of the month of the termination
date properly selected by the Company. Upon receiving the payments provided
for under this Section 8(a), all rights of the Executive under this Agreement
(other than rights already accrued) shall terminate.
(b) Termination for "Good Cause". (i) Except as otherwise provided
in this Agreement, the Company may terminate the employment of the Executive
hereunder only for "good cause," which shall mean: (A) the Executive's
conviction of either a felony involving moral turpitude or any crime in
connection with the Executive's employment by the Company which causes the
Company a substantial detriment, but specifically shall not include traffic
offenses; (B) actions by the Executive as an executive officer of the
Executive which clearly are contrary to the best interests of the Company; (C)
the Executive's willful failure to take actions permitted by law and necessary
to implement policies of the Company's Board of Directors which the Board of
Directors has communicated to him in writing, provided that minutes of a Board
of Directors meeting attended in its entirety by the Executive shall be deemed
communicated to the Executive; (D) the Executive's continued failure to attend
to the Executive's duties as an executive officer of the Executive; or (E) any
condition which either resulted from the Executive's substantial dependence, as
determined by the Board of Directors of the Company, on alcohol, or any
narcotic drug or other controlled or illegal substance. If any determination
of substantial dependence is disputed by the Executive, the parties hereto
agree to abide by the decision of a panel of three physicians appointed in the
manner and subject to the same penalties for noncompliance as specified in
Section 7(b)(ii) of this Agreement.
(ii) Notwithstanding the foregoing, each of the foregoing
bases for termination specified in (A) through (E) of Subsection 8(b)(i) shall
constitute "Good Cause" only if (1) the Executive has been provided with
written notice of any assertion that there is a basis for termination for good
cause which notice shall specify in reasonable detail specific facts regarding
any such assertion and the Executive has been given a reasonable period of time
within which to remedy or cure the problem or complaint, (2) such notice is
provided to the Executive a reasonable time before the Board of Directors meets
to consider any possible termination for cause, (3) at or prior to the meeting
of the Board of Directors to consider the matters described in the written
notice, an opportunity is provided to the Executive and his counsel to be heard
by the Board of Directors with respect to the matters described in the written
notice, before it acts with respect to such matter, (4) any resolution or other
action by the Board of Directors with respect to any deliberation regarding or
decision to terminate the Executive for good cause is duly adopted by a vote of
a majority of the entire Board of Directors of the Company at a meeting of the
Board duly called and held and (5) the Executive is
6.
<PAGE> 7
promptly provided with a copy of the resolution or other corporate action taken
with respect to such termination.
(iii) If the employment of the Executive is terminated for
good cause under Section 8(b)(i) of this Agreement, the Company shall pay to
the Executive any Base Salary earned prior to the effective date of termination
but not yet paid and any cash bonus compensation earned pursuant to the
provisions of any incentive compensation plan then in effect but not paid to
the Executive prior to the effective date of such termination. Under such
circumstances, such payments shall be in full and complete discharge of any and
all liabilities or obligations of the Company to the Executive hereunder, and
the Executive shall be entitled to no further benefits under this Agreement
(other than rights already accrued).
(iv) Termination of the employment of the Executive other
than as expressly specified above in this Section 8(b) for good cause shall be
deemed to be a termination of employment "Without Good Cause."
(c) Termination Without Good Cause. (i) Notwithstanding any other
provision of this Agreement, the Company shall have the right to terminate the
Executive's employment Without Good Cause pursuant to the provisions of this
Section 8(c). If the Company shall terminate the employment of the Executive
Without Good Cause effective on a date earlier than the termination date
provided for in Section 2 (with the effective date of termination as so
identified by the Company being referred to herein as the "Accelerated
Termination Date"), the Executive, until the end of the term of this Agreement
then in effect as provided for in Section 2 or until the date which is 24
months after the Accelerated Termination Date, whichever is the first to occur,
shall continue to receive (1) the Base Salary, paid in the same monthly on
other periodic installments ad in effect prior to the Accellerated Termination
Date (2) an equal monthly pro rata portion of an amount of cash equal to the
sum of the MICP Target Amount (as that term is defined in Section 7(b)(i)) in
respect of the year during which the Executive's employment terminates
multiplied times the number of years (or fractions thereof) remaining in the
then unexpired term of this Agreement or multiplied times two if the 24 month
payment period under this Section 8(c)(i) is in effect, and (3) any other cash
or other bonus compensation earned prior to the date of such termination
pursuant to the terms of all incentive compensation plans then in effect other
than the Company's Management Incentive Plan as described on Exhibit A or any
similar bonus on incentive plans or programs then in effect; provided that,
notwithstanding such termination of employment, the Executive's covenants set
forth in Section 10 and Section 11 are intended to and shall remain in full
force and effect and provided further that in the event of such termination,
the Company shall have the right (but not the obligation) to relieve the
Executive, in whole or in part, of the Executive's duties under this Agreement,
or direct the Executive to no longer perform such duties, or direct that the
Executive no longer be required to report to work, or any combination of the
foregoing.
(ii) The parties agree that, because there can be no exact
measure of the damage that would occur to the Executive as a result of a
termination by the Company of the Executive's employment Without Good Cause,
the payments and benefits paid and provided pursuant to this Section 8(c) shall
be deemed to constitute liquidated damages and not a penalty for the Company's
termination of the Executive's employment Without Good Cause.
7.
<PAGE> 8
(d) Change of Control. (i) For purposes of this Agreement, a
"Change in Control" shall mean the first to occur of:
(1) a change in control of the Company of a nature that
is required, pursuant to the Securities Exchange Act
of 1934 (the "1934 Act"), to be reported in response
to Item 1(a) of a Current Report on Form 8-K or Item
6(e) of Schedule 14A under the 1934 Act (in each case
under this Agreement, references to provisions of the
1934 Act and the rules and regulations promulgated
thereunder being understood to refer to such law,
rules and regulations as the same are in effect on
November 1, 1996); or
(2) the acquisition of "Beneficial Ownership" (as defined
in Rule 13d-3 under the 1934 Act) of the Company's
securities comprising 35% or more of the combined
voting power of the Company's outstanding securities
by any "person" (as that term is used in Sections
13(d) and 14(d)(2) of the 1934 Act and the rules and
regulations promulgated thereunder, but not including
any trustee or fiduciary acting in that capacity for
an employee benefit plan sponsored by the Company)
and such person's "affiliates" and "associates" (as
those terms are defined under the 1934 Act), but
excluding any ownership by the Executive and his
affiliates and associates; or
(3) the failure of the "Incumbent Directors" (as defined
below) to constitute at least a majority of all
directors of the Company (for these purposes,
"Incumbent Directors" means individuals who were the
directors of the Company on November 1, 1996, and,
after his or her election, any individual becoming a
director subsequent to November 1, 1996, whose
election, or nomination for election by the Company's
stockholders, is approved by a vote of at least
two-thirds of the directors then comprising the
Incumbent Directors, except that no individual shall
be considered an Incumbent Director who is not
recommended by management and whose initial
assumption of office as a director is in connection
with an actual or threatened "election contest"
relating to the "election of directors" of the
Company, as such terms are used in Rule 14a-11 of
Regulation 14A under the 1934 Act); or
(4) the closing of a sale of all or substantially all of
the assets of the Company;
(5) the Company's adoption of a plan of dissolution or
liquidation; or
(6) the closing of a merger or consolidation involving
the Company in which the Company is not the surviving
corporation or if, immediately following such merger
or consolidation, less than seventy-five percent
(75%) of the surviving corporation's outstanding
voting stock is held or is anticipated to be held by
persons who are stockholders of the Company
immediately prior to such merger or consolidation.
(ii) If a Change in Control of the Company occurs, the
Executive shall have the right, exercisable for a period of one year thereafter
by delivering a written statement to that effect to the
8.
<PAGE> 9
Company, to immediately terminate this Agreement and upon such a determination
the Executive shall have the right to receive and the Company shall be
obligated to pay to Executive in cash a lump sum payment in an amount equal to
the sum of (1) two times the annual Base Salary then in effect, (2) two times
the MICP Target Amount (as that term is defined in Section 7(b)(i)) in the year
in which employment terminates and (3) the additional payments necessary to
discharge certain tax liabilities (the "Gross Up") as that term is defined in
Section 13 of this Agreement (the sum of the foregoing amounts other than the
Gross Up being referred to as the "Change in Control Payment"). If the
Executive fails to exercise his rights under this Section 8(d) within one year
following a Change in Control, such rights shall expire and be of no further
force or effect.
(e) Intentions Regarding Certain Stock and Benefit Plans. Except as
otherwise provided herein, upon any termination of the Executive's employment
Without Good Cause, or upon the exercise by the Executive of his rights to
terminate his employment following a Change of Control, it is the intention of
the parties that any and all vesting or performance requirements or conditions
affecting any outstanding restricted stock, performance stock, stock option,
stock appreciation right, bonus, award, right, grant or any other incentive
compensation under any of the Plans, under this Agreement, or otherwise
received, shall be deemed to be fully satisfied and any risk of forfeiture with
respect thereto shall be deemed to have lapsed.
(f) Certain Rights Mutually Exclusive. The provisions of Section
8(c) and Section 8(d) are mutually exclusive, provided, however, that if within
one year following commencement of an 8(c) payout there shall be a Change in
Control as defined in Section 8(d)(i), then the Executive shall be entitled to
the amount payable to the Executive under Section 8(d)(ii) and Section
8(d)(iii) reduced by the amount that the Executive has received under Section
8(c) up to the date of the change in control. The triggering of the lump sum
payment requirement of Section 8(d) shall cause the provisions of Section 8(c)
to become inoperative.
9. DISCLOSURE
The Executive agrees that during the term of the Executive's
employment by the Company, the Executive will disclose and disclose only to the
Company all ideas, methods, plans, developments or improvements known by him
which relate directly or indirectly to the business of the Company, whether
acquired by the Executive before or during the Executive's employment by the
Company. Nothing in this Section 9 shall be construed as requiring any such
communication where the idea, plan, method or development is lawfully protected
from disclosure as a trade secret of a third party or by any other lawful
prohibition against such communication. The covenants of this Section 9 shall
not be violated by ordinary and customary communications with reporters,
bankers and securities analysts and other members of the investment community.
10. CONFIDENTIALITY
The Executive agrees to keep in strict secrecy and confidence any and
all information the Executive assimilates or to which the Executive has access
during the Executive's employment by the Company and which has not been
publicly disclosed and is not a matter of common knowledge in the fields of
work of the Company. The Executive agrees that both during and after the term
of
9.
<PAGE> 10
the Executive's employment by the Company, the Executive will not, without the
prior written consent of the Company, disclose any such confidential
information to any third person, partnership, joint venture, company,
corporation or other organization. The foregoing covenants shall not be
breached to the extent that any such confidential information becomes a matter
of general knowledge other than through a breach by the Executive of the
Executive's obligations under this Section 10.
11. NONCOMPETITION AND NONSOLICITATION
(a) General. The Executive hereby acknowledges that, during and
solely as a result of the Executive's employment by the Company, the Executive
has received and shall continue to receive: (1) special training and education
with respect to the operations of the Company's real estate development and
management businesses and its leasing, lending and financing activities, and
other related matters, and (2) access to confidential information and business
and professional contacts. In consideration of the special and unique
opportunities afforded to the Executive by the Company as a result of the
Executive's employment, as outlined in the previous sentence, the Executive
hereby agrees to the restrictive covenants in this Section 11.
(b) Noncompetition. During the term of the Executive's employment,
whether pursuant to this Agreement, any automatic or other renewal hereof or
otherwise, and, except as may be otherwise herein provided, for a period of two
(2) years after the termination of the Executive's employment with the Company,
regardless of the reason for such termination, the Executive shall not,
directly or indirectly, enter into, engage in, be employed by or consult with
any business which competes with the Company's real estate lending, leasing,
development or management businesses in Florida. The Executive shall not
engage in such prohibited activities, either as an individual, partner,
officer, director, stockholder, employee, advisor, independent contractor,
joint venturer, consultant, agent, or representative or salesman for any
person, firm, partnership, corporation or other entity so competing with the
Company. The restrictions of this Section 11 shall not be violated by (i) the
ownership of no more than 2% of the outstanding securities of any company whose
stock is traded on a national securities exchange or is quoted in the Automated
Quotation System of the National Association of Securities Dealers (NASDAQ), or
(ii) other outside business investments that do not in any manner conflict with
the services to be rendered by the Executive for the Company and that do not
diminish or detract from the Executive's ability to render the Executive's
required attention to the business of the Company.
(c) Nonsolicitation. During the Executive's employment with the
Company and, except as may be otherwise herein provided, for a period of two
(2) years following the termination of the Executive's employment with the
Company, regardless of the reason for such termination, the Executive agrees
the Executive will refrain from and will not, directly or indirectly, as an
individual, partner, officer, director, stockholder, employee, advisor,
independent contractor, joint venturer, consultant, agent, representative,
salesman or otherwise solicit any of the employees of the Company to terminate
their employment.
(d) Term Extended or Suspended. The period of time during which the
Executive is prohibited from engaging in certain business practices pursuant to
Sections 11(b) or (c) shall be extended by any length of time during which the
Executive is in breach of such covenants.
10.
<PAGE> 11
(e) Essential Element. It is understood by and between the parties
hereto that the foregoing restrictive covenants set forth in Sections 11(a)
through (c) are essential elements of this Agreement, and that, but for the
agreement of the Executive to comply with such covenants, the Company would not
have agreed to enter into this Agreement. Such covenants by the Executive
shall be construed as agreements independent of any other provision in this
Agreement. The existence of any claim or cause of action of the Executive
against the Company, whether predicated on this Agreement, or otherwise, shall
not constitute a defense to the enforcement by the Company of such covenants.
(f) Severability. It is agreed by the Company and Executive that if
any portion of the covenants set forth in this Section 11 are held to be
invalid, unreasonable, arbitrary or against public policy, then such portion of
such covenants shall be considered divisible both as to time and geographical
area. The Company and Executive agree that, if any court of competent
jurisdiction determines the specified time period or the specified geographical
area applicable to this Section 11 to be invalid, unreasonable, arbitrary or
against public policy, a lesser time period or geographical area which is
determined to be reasonable, non-arbitrary and not against public policy may be
enforced against the Executive. The Company and the Executive agree that the
foregoing covenants are appropriate and reasonable when considered in light of
the nature and extent of the business conducted by the Company.
12. SPECIFIC PERFORMANCE
The Executive agrees that damages at law will be an insufficient
remedy to the Company if the Executive violates the terms of Sections 9, 10 or
11 of this Agreement and that the Company would suffer irreparable damage as a
result of such violation. Accordingly, it is agreed that the Company shall be
entitled, upon application to a court of competent jurisdiction, to obtain
injunctive relief to enforce the provisions of such Sections, which injunctive
relief shall be in addition to any other rights or remedies available to the
Company. The Executive agrees to pay to the Company all reasonable costs and
expenses incurred by the Company relating to the enforcement of the terms of
Sections 9, 10 or 11 of this Agreement, including reasonable fees and
reasonable disbursements of counsel selected by the Company (during
investigation and before and at trial and in appellate proceedings).
13. PAYMENT OF EXCISE TAXES
(a) Payment of Excise Taxes. If the Executive is to receive any (1)
Change of Control Payment under Section 8(d), (2) any benefit or payment under
Section 7 as a result of or following the death or Permanent Disability of the
Executive, (3) any benefit or payment under Section 8(c) as a result of or
following any termination of employment hereunder Without Good Cause, (4) any
benefit or payment under the Plans as a result of a Change of Control,
following the death of Permanent Disability of the Executive or following the
termination of employment hereunder Without Good Cause (such sections being
referred to as the "Covered Sections" and the benefits and payments to be
received thereunder being referred to as the "Covered Payments"), the Executive
shall be entitled to receive the amount described below to the extent
applicable: If any Covered Payment(s) under any of the Covered Sections or by
the Company under another plan or agreement (collectively,
11.
<PAGE> 12
the "Payments") are subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986 (as amended from time to time, the "Code"), or
any successor or similar provision of the Code (the "Excise Tax"), the Company
shall pay the Executive an additional amount (the "Gross Up") such that the net
amount retained by the Executive after deduction of any Excise Tax on the
Payments and the federal income tax on any amounts paid under this Section 13
shall be equal to the Payments.
(b) Certain Adjustment Payments. For purposes of determining the
Gross Up, the Executive shall be deemed to pay the federal income tax at the
highest marginal rate of taxation (currently 39.5%) in the calendar year in
which the payment to which the Gross Up applies is to be made. The
determination of whether such Excise Tax is payable and the amount thereof
shall be made upon the opinion of tax counsel selected by the Company and
reasonably acceptable to the Executive. The Gross Up, if any, that is due as a
result of such determination shall be paid to the Executive in cash in a lump
sum within thirty (30) days of such computation. If such opinion is not
finally accepted by the Internal Revenue Service upon audit or otherwise, then
appropriate adjustments shall be computed (without interest but with Gross Up,
if applicable) by such tax counsel based upon the final amount of the Excise
Tax so determined; any additional amount due the Executive as a result of such
adjustment shall be paid to the Executive by his or her Company in cash in a
lump sum within thirty (30) days of such computation, or any amount due the
Executive's Company as a result of such adjustment shall be paid to the Company
by the Executive in cash in a lump sum within thirty (30) days of such
computation.
14. MISCELLANEOUS
(a) Waiver of Breach. The waiver by either party to this Agreement
of a breach of any of the provisions of this Agreement by the other party shall
not be construed as a waiver of any subsequent breach by such other party.
(b) No Right to Continued Employment. Notwithstanding the fact that
certain provisions of this Agreement and/or Exhibit A reference a three year
cycle or provide for benefits upon a third year of employment, this Agreement
shall have a two year term with annual one year renewal terms subject to the
termination provisions contained herein.
(c) Compliance With Other Agreements. The Executive represents and
warrants that the execution of this Agreement by him and the Executive's
performance of the Executive's obligations hereunder will not conflict with,
result in the breach of any provision of or the termination of or constitute a
default under any Agreement to which the Executive is a party or by which the
Executive is or may be bound.
(d) Binding Effect; Assignment. The rights and obligations of the
Company under this Agreement shall inure to the benefit of and shall be binding
upon the successors and assigns of the Company. This Agreement is a personal
employment contract and the rights, obligations and interests of the Executive
hereunder may not be sold, assigned, transferred, pledged or hypothecated.
(e) Entire Agreement. This Agreement contains the entire agreement
and supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof. This
12.
<PAGE> 13
Agreement may be changed only by an agreement in writing signed by the party
against whom any waiver, change, amendment, modification or discharge is
sought.
(f) No Duty to Mitigate. The Executive shall be under no duty to
mitigate any loss of income as result of the termination of his employment
hereunder and any payments due the Executive upon termination of employment
shall not be reduced in respect of any other employment compensation received
by the Executive following such termination.
(g) Florida Law. This Agreement shall be construed pursuant to and
governed by the substantive laws of the State of Florida (except that any
provision of Florida law shall not apply if the law of a state or jurisdiction
other than Florida would otherwise apply).
(h) Venue; Process. The parties to this Agreement agree that
jurisdiction and venue in any action brought pursuant to this Agreement to
enforce its terms or otherwise with respect to the relationships between the
parties shall properly lie in and only in the Circuit Court of the Sixth
Judicial Circuit of the State of Florida in and for Pinellas County (the
"Circuit Court") and the parties agree that jurisdiction shall not properly lie
in any other jurisdiction provided, however, if jurisdiction does not properly
lie with the Circuit Court, the parties agree that jurisdiction and venue shall
properly lie in and only in the United States District Court for the Middle
District of Florida, Tampa Division. The parties hereby waive any objections
which they may now or hereafter have based on venue and/or forum non conveniens
and irrevocably submit to the jurisdiction of any such court in any legal suit,
action or proceeding arising out of or relating to this Agreement. The parties
further agree that the mailing by certified or registered mail, return receipt
requested, of any process required by any such court shall constitute valid and
lawful service of process against them, without the necessity for service by
any other means provided by statute or rule of court.
(i) Headings. The headings of the various sections in this Agreement
are inserted for the convenience of the parties and shall not affect the
meaning, construction or interpretation of this Agreement.
(j) Severability. Any provision of this Agreement which is
determined by a court of competent jurisdiction to be 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 affecting the validity, enforceability or legality of such
provision in any other jurisdiction. In any such case, such determination
shall not affect any other provision of this Agreement, and the remaining
provisions of this Agreement shall remain in full force and effect. If any
provision or term of this Agreement is susceptible to two or more constructions
or interpretations, one or more of which would render the provision or term
void or unenforceable, the parties agree that a construction or interpretation
which renders the term or provision valid shall be favored.
(k) Deduction for Tax Purposes. The Company's obligations to make
payments under this Agreement are independent of whether any or all of such
payments are deductible expenses of the Company for federal income tax
purposes.
(l) Enforcement. If, within 10 days after demand to comply with the
obligations of one of the parties to this Agreement served in writing on the
other, compliance or reasonable assurance of
13.
<PAGE> 14
compliance is not forthcoming, and the party demanding compliance engages the
services of an attorney to enforce rights under this Agreement, the prevailing
party in any action shall be entitled to recover all reasonable costs and
expenses of enforcement (including reasonable attorneys' fees and reasonable
expenses during investigation, before and at trial and in appellate
proceedings). In addition, each of the parties agrees to indemnify the other
in respect of any and all claims, losses, costs, liabilities and expenses,
including reasonable fees and reasonable disbursements of counsel (during
investigation prior to initiation of litigation and at trial and in appellate
proceedings if litigation ensues), directly or indirectly resulting from or
arising out of a breach by the other party of their respective obligations
hereunder. The parties' costs of enforcing this Agreement shall include
prejudgment interest. Additionally, if any party incurs any out-of-pocket
expenses in connection with the enforcement of this Agreement, all such amounts
shall accrue interest at 18% per annum (or such lower rate as may be required
to avoid any limit imposed by applicable law) commencing 30 days after any such
expenses are incurred.
(m) Notices. All notices which are required or may be given under
this Agreement shall be in writing and shall be deemed to have been duly given
when received if personally delivered; when transmitted if transmitted by
telecopy or similar electronic transmission method; one working day after it is
sent, if sent by recognized expedited delivery service; and three days after it
is sent, if mailed, first class mail, certified mail, return receipt requested,
with postage prepaid. In each case notice shall be sent to:
To the Company: Echelon International Corporation
One Progress Plaza
St. Petersburg, FL 33701
Attn: Chairman of the Board
Telecopy: (813) 824-6536
To the Executive at the Executive's address herein first above
written, or to such other address as either party may specify by written notice
to the other.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
ATTEST: ECHELON INTERNATIONAL CORPORATION
(Corporate Seal)
________________________________ By:____________________________________
Secretary
Title:
EXECUTIVE
Witnesses:
________________________________ _______________________________________
James R. Hobbs
________________________________
As to Executive
14.
<PAGE> 15
EXHIBIT A
TO
EMPLOYMENT AGREEMENT WITH JAMES R. HOBBS
DATED ________, 1996
The Company will establish a Management Incentive Compensation Plan
("MICP") for its senior management in which the Executive will participate.
During the first two full fiscal years of the Company's operation following the
completion of the Spinoff ending on December 31, 1997, and December 31, 1998,
respectively (the "Covered Years"), the MICP will provide for annual cash
bonuses based upon the Company's net income for each of the Covered Years. The
Executive's participation in the MICP during the Covered Years shall be based
upon the criteria and shall include awards with the values indicated in the
tables set forth below and as more fully described in this Exhibit A.
MICP
During each of the Covered Years, (i) all MICP bonuses shall be paid
in cash; (ii) if Threshold Net Income is not achieved, no MICP cash bonus will
be paid; (iii) if actual net income exceeds Threshold Net Income, but is less
than Target Net Income, or exceeds Target Net Income but is less than Maximum
Net Income, the percentage of the MICP bonus shall be proportionately increased
above the Threshold bonus amount or the Target Bonus amount, as the case may
be, and (iv) if actual net income equals or exceeds Maximum Net Income, the
Maximum MICP cash bonus will be paid, but no additional cash bonus will be
payable under the MICP regardless of the amount by which actual net income in
that Covered Year exceeds Maximum Net Income. The following table sets forth
information regarding the MICP Net Income Threshold, Target and Maximum and
cash bonuses.
<TABLE>
<CAPTION>
-------------------------------------------------------
MICP 1997 1998
-------------------------------------------------------
THRESHOLD
-------------------------------------------------------
<S> <C> <C>
Net Income $1,584,274 $1,768,816
-------------------------------------------------------
MICP Cash Bonus $7,500 $7,500
(% of Target Bonus) (50%) (50%)
-------------------------------------------------------
TARGET
-------------------------------------------------------
Net Income $2,112,366 $2,358,422
-------------------------------------------------------
MICP Cash Bonus $15,000 $15,000
(% of Base Salary) (15%) (15%)
-------------------------------------------------------
MAXIMUM
-------------------------------------------------------
Net Income $2,640,457 $2,948,027
-------------------------------------------------------
MICP Cash Bonus $22,500 $22,500
(% of Target Bonus) (150%) (150)%
-------------------------------------------------------
</TABLE>
15.
<PAGE> 1
EXHIBIT 10.16
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement") is made and entered
into this day of , 1996, by and among (the "Indemnified Party"), and ECHELON
INTERNATIONAL CORPORATION, a Florida corporation (the "Corporation").
WITNESSETH:
WHEREAS, it is essential to the Corporation to retain and attract as
Directors, officers and key employees the most capable persons available; and
WHEREAS, the substantial increase in corporate litigation subjects
directors and officers to expensive litigation risks at the same time that the
availability of directors' and officers' liability insurance is severely
limited; and
WHEREAS, in addition, the statutory indemnification provisions of the
Florida Business Corporation Act expressly provide that they are non-exclusive;
and
WHEREAS, the Indemnified Party does not regard the protection available
under the Articles of Incorporation and Bylaws of the Corporation and insurance,
if any, as adequate in the present circumstances, and considers it necessary and
desirable to his service as a Director, officer and key employee to have
adequate protection, and the Corporation desires the Indemnified Party to
continue to serve in such capacity and to have such protection.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained in this Agreement, it is hereby agreed as
follows:
1. INDEMNIFICATION GENERALLY.
(a) GRANT OF INDEMNITY.
(i) Subject to and upon the terms and conditions of
this Agreement, the Corporation shall indemnify and hold harmless the
Indemnified Party in respect of any and all costs, claims, losses, damages and
expenses that may be incurred or suffered by the Indemnified Party as a result
of or arising out of prosecuting, defending, settling or investigating:
(1) any threatened, pending or completed
claim, demand, inquiry, investigation, action, suit or
proceeding, whether formal or informal, or whether brought by
or in the right of the Corporation, and whether of a civil,
criminal, administrative or investigative nature, in which the
Indemnified Party may be or may
<PAGE> 2
Indemnification Agreement
Page 2
have been involved as a party or otherwise, arising out of the
fact that the Indemnified Party is or was a director, officer,
employee, independent contractor or stockholder of the
Corporation or any of its "affiliates" (as such term is
defined in the rules and regulations promulgated by the
Securities and Exchange Commission under the Securities Act of
1933), or served as a director, officer, employee, independent
contractor or stockholder in or for any person, firm,
partnership, corporation or other entity at the request of the
Corporation (including without limitation service as a trustee
or in any fiduciary or similar capacity for or in connection
with any employee benefit plan maintained by the Corporation
or for the Corporation's employees, or service on any trade
association, civic, religious, educational or charitable
boards or committees);
(2) any attempt (regardless of its success)
by any person to charge or cause the Indemnified Party to be
charged with wrongdoing or with financial responsibility for
damages arising out of or incurred in connection with the
matters indemnified against in this Agreement; or
(3) any expense, interest, assessment, fine,
tax (including any excise tax), judgment or settlement payment
arising out of or incident to any of the matters indemnified
against in this Agreement including reasonable fees and
disbursements of legal counsel, legal assistants, experts,
accountants, consultants and investigators, before and at
trial, in appellate proceedings and otherwise (collectively,
the "Expenses").
(ii) The obligation of the Corporation under this
Agreement is not conditioned in any way on any attempt by the Indemnified Party
to collect from an insurer any amount under a liability insurance policy.
(iii) In no case shall any indemnification be
provided under this Agreement to the Indemnified Party by the Corporation:
(1) in any action or proceeding brought by or in the name or
interest of the Indemnified Party against the Corporation;
(2) in any action or proceeding brought by the Corporation
against the Indemnified Party, which action is initiated at the
direction of the Board of Directors of the Corporation; or
(3) for any "Nonindemnifiable Conduct" (as such term is
defined in Section 1(g)(ii), but no limitation contained in this
Section 1(a)(iii)(3) shall prohibit or otherwise restrict, or provide
the Corporation with a basis to withhold payments with
<PAGE> 3
Indemnification Agreement
Page 3
respect to, the indemnification of the Indemnified Party, subject to
the repayment provisions of Section 1(g), unless and until it is
determined by a court of competent jurisdiction from which no appeal
may be taken that the Indemnified Party's actions or omissions
constitute such "Nonindemnifiable Conduct."
(b) CLAIMS FOR INDEMNIFICATION.
(i) Whenever any claims shall arise for
indemnification under this Agreement, the Indemnified Party shall notify the
Corporation promptly and in any event within 30 days after the Indemnified Party
has actual knowledge of the facts constituting the basis for such claim. The
notice shall specify all facts known to the Indemnified Party giving rise to
such indemnification right and the amount or an estimate of the amount of
liability (including estimated Expenses) arising therefrom. A delay by the
Indemnified Party in providing such notice shall not relieve the Corporation
from its obligations under this Agreement unless and only to the extent that the
Corporation is materially and adversely affected by the delay.
(ii) Any indemnification required under this
Agreement shall be made promptly after receipt by the Corporation of the written
notification specified in Section 1(b)(i) and a determination of the amount
required to be indemnified. The provisions of this Section 1(b)(ii) shall not
override or otherwise limit the right of the Indemnified Party to be indemnified
with respect to expenses incurred with respect to a Third Party Claim (as such
term is defined in Section 1(c)(i)) in accordance with the provisions contained
in the last two sentences of Section 1(c)(ii).
(c) RIGHTS TO DEFEND OR SETTLE; THIRD PARTY CLAIMS, ETC.
(i) If the facts giving rise to any indemnification
right under this Agreement shall involve any actual or threatened claim or
demand against the Indemnified Party, or any possible claim by the Indemnified
Party against any third party, such claim shall be referred to as a "Third Party
Claim." If the Corporation provides the Indemnified Party with an agreement in
writing in form and substance satisfactory to the Indemnified Party and his
counsel, agreeing to indemnify, defend or prosecute and hold the Indemnified
Party harmless from all costs, claims, losses, damages, expenses and liability
arising from any Third Party Claim (an "Agreement of Indemnity"), and
demonstrating to the satisfaction of the Indemnified Party the financial
wherewithal to accomplish such indemnification, the Corporation may at its own
expense undertake full responsibility for the defense or prosecution of such
Third Party Claim. The Corporation may contest or settle any such Third Party
Claim for money damages on such terms and conditions as it deems appropriate but
shall be obligated to consult in good faith with the Indemnified Party and not
to contest or settle any Third Party Claim involving injunctive or equitable
relief against or affecting the Indemnified Party or his properties or assets
without the prior written consent of the Indemnified Party, such consent not to
be withheld unreasonably. The Indemnified Party may participate at his own
expense and with his own counsel in defense or prosecution of a Third Party
Claim pursuant to this Section 1(c)(i), and
<PAGE> 4
Indemnification Agreement
Page 4
such participation shall not relieve the Corporation of its obligation to
indemnify the Indemnified Party under this Agreement.
(ii) If the Corporation fails to deliver a
satisfactory Agreement of Indemnity and evidence of financial wherewithal within
10 days after receipt of notice pursuant to Section 1(b), the Indemnified Party
may contest or settle the Third Party Claim on such terms as it sees fit but
shall not reach a settlement with respect to the payment of money damages
without consulting in good faith with the Corporation. The Corporation may
participate at its own expense and with its own counsel in defense or
prosecution of a Third Party Claim pursuant to this Section 1(c)(ii), but any
such participation shall not relieve the Corporation of its obligations to
indemnify the Indemnified Party under this Agreement. All Expenses incurred in
defending or prosecuting any Third Party Claim shall be paid promptly by the
Corporation as the suit or other matter is proceeding, upon the submission of
bills therefor or other satisfactory evidence of such expenditures during the
pendency of any matter as to which indemnification is available under this
Agreement. The failure to make such payments within 10 days after submission of
evidence of those expenses shall constitute a breach of a material obligation of
the Corporation under this Agreement.
(iii) If by reason of any Third Party Claim a lien,
attachment, garnishment or execution is placed upon any of the property or
assets of the Indemnified Party, the Corporation shall promptly furnish a
satisfactory indemnity bond to obtain the prompt release of such lien,
attachment, garnishment or execution.
(iv) The Indemnified Party shall cooperate in the
defense of any Third Party Claim that is controlled by the Corporation, but the
Indemnified Party shall continue to be entitled to indemnification and
reimbursement for all costs and expenses incurred by him in connection therewith
as provided in this Agreement.
(d) COOPERATION. The parties to this Agreement shall execute
such powers of attorney as may be necessary or appropriate to permit
participation of counsel selected by any party hereto and, as may be reasonably
related to any such claim or action, shall provide to the counsel, accountants
and other representatives of each party access during normal business hours to
all properties, personnel, books, records, contracts, commitments and all other
business records of such other party and will furnish to such other party copies
of all such documents as may be reasonably requested (certified, if requested).
(e) CHOICE OF COUNSEL. In all matters as to which
indemnification is or may be available to the Indemnified Party under this
Agreement, the Indemnified Party shall be free to choose and retain counsel,
provided that the Indemnified Party shall secure the prior written consent of
the Corporation as to such selection, which consent shall not be unreasonably
withheld.
<PAGE> 5
Indemnification Agreement
Page 5
(f) CONSULTATION. If the Indemnified Party desires to retain
the services of an attorney prior to the determination by the Corporation as to
whether it will undertake the defense or prosecution of the Third Party Claim as
provided in Section 1(c), the Indemnified Party shall notify the Corporation of
such desire in the notice delivered pursuant to Section 1(b)(i), and such notice
shall identify the counsel to be retained. The Corporation shall then have 10
days within which to advise the Indemnified Party whether it will assume the
defense or prosecution of the Third Party Claim in accordance with Section
1(c)(i). If the Indemnified Party does not receive an affirmative response
within such 10 day period, he shall be free to retain counsel of his choice, and
the indemnity provided in Section 1(a) shall apply to the reasonable Expenses of
such counsel incurred after the expiration of such 10 day period. Any Expenses
incurred prior to the expiration of such 10 day period shall not be covered by
the indemnity of Section 1(a).
(g) REPAYMENT.
(i) Notwithstanding the other provisions of this
Agreement to the contrary, if the Corporation has incurred any cost, damage or
expense under this Agreement paid to or for the benefit of the Indemnified Party
and it is determined by a court of competent jurisdiction from which no appeal
may be taken that the Indemnified Party's actions or omissions constitute
"Nonindemnifiable Conduct" as that term is defined in Section 1(g)(ii), the
Indemnified Party shall and does hereby undertake in such circumstances to
reimburse the Corporation for any and all such amounts previously paid to or for
the benefit of the Indemnified Party. Such reimbursement shall be without
interest, except that interest calculated as provided in Section 5(h)(ii) shall
begin to accrue 20 days after such a determination of Nonindemnifiable Conduct.
(ii) For these purposes, "Nonindemnifiable Conduct"
shall mean an action or omission of the Indemnified Party material to the cause
of action to which the indemnification under this Agreement relates, which
action or omission is determined to involve:
(1) a violation of the criminal law, unless
the Indemnified Party had reasonable cause to believe his
conduct was lawful or had no reasonable cause to believe his
conduct was unlawful;
(2) a transaction from which the Indemnified
Party derived an improper personal benefit;
(3) willful misconduct or a conscious
disregard for the best interests of the Corporation (when
indemnification is sought in a proceeding by or in the right
of the Corporation to procure a judgment in favor of the
Corporation or when indemnification is sought in a proceeding
by or in the right of a stockholder); or
<PAGE> 6
Indemnification Agreement
Page 6
(4) conduct pursuant to then applicable law
that prohibits such indemnification.
2. TERM.
This Agreement shall be effective upon its execution by all
parties and shall continue in full force and effect until seven years after the
date of this Agreement, or seven years after the termination of the Indemnified
Party's employment or term of office with the Corporation or any of its
affiliates, whichever is later, provided that such term shall be extended by any
period of time during which the Corporation is in breach of a material
obligation to the Indemnified Party, plus ninety days. Such term shall also be
extended with respect to each Third Party Claim then pending and as to which
notice under Section 1(b) has theretofore been given by the Indemnified Party to
the Corporation, and this Agreement shall continue to be applicable to each such
Third Party Claim.
3. REPRESENTATIONS AND AGREEMENTS OF THE CORPORATION.
(a) AUTHORITY. The Corporation represents, covenants and
agrees that it has the corporate power and authority to enter into this
Agreement and to carry out its obligations under this Agreement. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated by this Agreement have been duly authorized by the
Board of Directors of the Corporation. This Agreement is a valid and binding
obligation of the Corporation and is enforceable against the Corporation in
accordance with its terms.
(b) NONCONTESTABILITY. The Corporation represents, covenants
and agrees that it will not initiate, and will use its best efforts to cause
each of its affiliates not to initiate, any action, suit or proceeding
challenging the validity or enforceability of this Agreement.
(c) GOOD FAITH JUDGMENT. The Corporation represents, covenants
and agrees that it will exercise good faith judgment in determining the
entitlement of the Indemnified Party to indemnification under this Agreement.
4. RELATIONSHIP OF THIS AGREEMENT TO OTHER INDEMNITIES.
(a) NONEXCLUSIVITY.
(i) This Agreement and all rights granted to the
Indemnified Party under this Agreement are in addition to and are not deemed to
be exclusive with or of any other rights that
<PAGE> 7
Indemnification Agreement
Page 7
may be available to the Indemnified Party under any Articles of Incorporation,
bylaw, statute, agreement, or otherwise.
(ii) The rights, duties and obligations of the
Corporation and the Indemnified Party under this Agreement do not limit,
diminish or supersede the rights, duties and obligations of the Corporation and
the Indemnified Party with respect to the indemnification afforded to the
Indemnified Party under any liability insurance, the Florida Business
Corporation Act, or under the Bylaws or the Articles of Incorporation of the
Corporation. In addition, the Indemnified Party's rights under this Agreement
will not be limited or diminished in any respect by any amendment to the Bylaws
or the Articles of Incorporation of the Corporation.
(b) AVAILABILITY, CONTRIBUTION, ETC.
(i) The availability or nonavailability of
indemnification by way of insurance policy, Articles of Incorporation, bylaw,
vote of stockholders, or otherwise from the Corporation to the Indemnified Party
shall not affect the right of the Indemnified Party to indemnification under
this Agreement, provided that all rights under this Agreement shall be subject
to applicable statutory provisions in effect from time to time.
(ii) Any funds received by the Indemnified Party by
way of indemnification or payment from any source other than from the
Corporation under this Agreement shall reduce any amount otherwise payable to
the Indemnified Party under this Agreement.
(iii) If the Indemnified Party is entitled under any
provision of this Agreement to indemnification by the Corporation for some
claims, issues or matters, but not as to other claims, issues or matters, or for
some or a portion of the expenses, judgments, fines or penalties actually and
reasonably incurred by him or amounts actually and reasonably paid in settlement
by him in the investigation, defense, appeal or settlement of any matter for
which indemnification is sought under this Agreement, but not for the total
amount thereof, the Corporation shall indemnify the Indemnified Party for the
portion of such claims, issues or matters or expenses, judgments, fines,
penalties or amounts paid in settlement to which the Indemnified Party is
entitled.
(iv) If for any reason a court of competent
jurisdiction from which no appeal can be taken rules that the indemnity provided
under this Agreement is unavailable, or if for any reason the indemnity under
this Agreement is insufficient to hold the Indemnified Party harmless as
provided in this Agreement, then, in any such event, the Corporation shall
contribute to the amounts paid or payable by the Indemnified Party in such
proportion as equitably reflects the relative benefits received by, and fault
of, the Indemnified Party and the Corporation and its affiliates.
<PAGE> 8
Indemnification Agreement
Page 8
5. MISCELLANEOUS.
(a) NOTICES. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when received if
personally delivered; when transmitted if transmitted by telecopy, electronic
telephone line facsimile transmission or other similar electronic or digital
transmission method; the day after it is sent, if sent by recognized overnight
delivery service with all fees payable by the sender; and five days after it is
sent, if mailed, first class mail, postage prepaid. In each case notice shall be
sent to:
if to the Indemnified Party:
if to the Corporation:
With a copy to:
or to such other address as either party may have specified in writing to the
other using the procedures specified above in this Section 5(a).
(b) GOVERNING LAW. This Agreement shall be construed pursuant
to and governed by the substantive laws of the State of Florida (but any
provision of Florida law shall not apply if the application of such provision
would result in the application of the law of a state or jurisdiction other than
Florida).
(c) SEVERABILITY. Any provision of this Agreement that is
determined by a court of competent jurisdiction to be 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 affecting
the validity, enforceability or legality of such provision in any other
jurisdiction. In any such case, such determination shall not affect any other
provision of this Agreement, and the remaining provisions of this Agreement
shall remain in full force and effect. If any provision or term of this
Agreement is susceptible to two or more constructions or interpretations, one or
more of which would render the provision or term void or unenforceable, the
parties agree that a construction or interpretation which renders the term or
provision valid shall be favored.
<PAGE> 9
Indemnification Agreement
Page 9
(d) SPECIFIC ENFORCEMENT; PRESUMPTION.
(i) The parties agree and acknowledge that in the
event of a breach by the Corporation of its obligation promptly to indemnify the
Indemnified Party as provided in this Agreement, or breach of any other material
provision of this Agreement, damages at law will be an insufficient remedy to
the Indemnified Party. Accordingly, the parties agree that, in addition to any
other remedies or rights that may be available to the Indemnified Party, the
Indemnified Party shall also be entitled, upon application to a court of
competent jurisdiction, to obtain temporary or permanent injunctions to compel
specific performance of the obligations of the Corporation under this Agreement.
(ii) There shall exist in any action to enforce the
rights of the Indemnified Party under this Agreement a rebuttable presumption
that the Indemnified Party has met the applicable standard(s) of conduct and is
therefore entitled to indemnification pursuant to this Agreement, and the burden
of proving that the relevant standards have not been met by the Indemnified
Party shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors or independent legal counsel) prior to the
commencement of such action to have made a determination that indemnification is
proper in the circumstances because the Indemnified Party has met the applicable
standard of conduct, nor an actual determination by the Corporation (including
its Board of Directors or independent legal counsel) that the Indemnified Party
has not met such applicable standard of conduct, shall (X) constitute a defense
to the action, (Y) create a presumption that the Indemnified Party has not met
the applicable standard of conduct, or (Z) otherwise alter the presumption in
favor of the Indemnified Party referred to in the preceding sentence.
(e) COST OF ENFORCEMENT; INTEREST.
(i) If the Indemnified Party engages the services of
an attorney or any other third party or in any way initiates legal action to
enforce his rights under this Agreement, including but not limited to the
collection of monies due from the Corporation to the Indemnified Party, the
prevailing party shall be entitled to recover all reasonable costs and expenses
(including reasonable attorneys' fees before and at trial, in appellate
proceedings and otherwise). Should the Indemnified Party prevail, such costs and
expenses shall be in addition to monies otherwise due him under this Agreement.
(ii) If any monies shall be due the Indemnified Party
from the Corporation under this Agreement and shall not be paid within 30 days
from the date of written request for pay ment, interest shall accrue on such
unpaid amount at the rate of 2% per annum in excess of the prime rate published
from time to time in The Wall Street Journal in its "Money Rates" column or any
similar or successor column or feature, or such lower rate as may be required to
comply with applicable law from the date when due until it is paid in full.
<PAGE> 10
Indemnification Agreement
Page 10
(f) APPLICATION TO THIRD PARTIES, ETC. Nothing in this
Agreement, whether express or implied, is intended or should be construed to
confer upon, or to grant to, any person, except the Corporation, the Indemnified
Party and their respective heirs, assignees and successors, any claim, right or
remedy under or because of this Agreement or in any provision of it. This
Agreement shall be binding upon and inure to the benefit of the successors in
interest and assigns, heirs and personal representatives, as the case may be, of
the parties, including any successor corporation resulting from a merger,
consolidation, recapitalization, reorganization, sale of all or substantially
all of the assets of the Corporation, or any other transaction resulting in the
successor corporation assuming the liabilities of the Corporation under this
Agreement (by operation of law or otherwise).
(g) CONSTRUCTION. As used in this Agreement, (1) the word
"including" is always without limitation; (2) the words in the singular number
include words of the plural number and vice versa; and (3) the word "person"
includes a trust, corporation, association, partnership, joint venture, business
trust, unincorporated organization, limited liability company, government,
public body or authority, any governmental agency or department, and any other
entity, as well as a natural person.
(h) FURTHER ASSURANCES. The parties to this Agreement will
execute and deliver, or cause to be executed and delivered, such additional or
further documents, agreements or instruments and shall cooperate with one
another in all respects for the purpose of carrying out the transactions
contemplated by this Agreement.
(i) VENUE; PROCESS. The parties to this Agreement agree that
jurisdiction and venue in any action brought pursuant to this Agreement to
enforce its terms or otherwise with respect to the relationships between the
parties shall properly lie in the Circuit Court of the State of Florida in and
for Hillsborough County, or in the United States District Court for the Middle
District of Florida, Tampa Division. The parties agree that they will not object
that any action commenced in the foregoing jurisdictions is commenced in a forum
non conveniens. The parties further agree that the mailing by certified or
registered mail, return receipt requested, of any process required by any such
court shall constitute valid and lawful service of process against them, without
the necessity for service by any other means provided by statute or rule of
court.
(j) WAIVER AND DELAY. No waiver or delay in enforcing the
terms of this Agreement shall be construed as a waiver of any subsequent breach.
No action taken by the Indemnified Party shall constitute a waiver of his rights
under this Agreement.
(k) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be considered an original, but all of which
together shall constitute one and the same instrument.
<PAGE> 11
Indemnification Agreement
Page 11
(l) HEADINGS. The headings of the various sections in this
Agreement are inserted for the convenience of the parties and shall not affect
the meaning, construction or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
INDEMNIFIED PARTY:
_____________________________
ECHELON INTERNATIONAL
CORPORATION
By:__________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ECHELON
INTERNATIONAL CORPORATION CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1996 AND THE YEAR ENDED DECEMBER 31, 1995 INCORPORATED BY
REFERENCE IN THE REGISTRATION STATEMENT ON FORM 10 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH REGISTRATION STATEMENT FILED ON FORM 10.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> SEP-30-1996 DEC-31-1995
<CASH> 200 400
<SECURITIES> 0 0
<RECEIVABLES> 43,900 44,400
<ALLOWANCES> 0 0
<INVENTORY> 3,200 2,200
<CURRENT-ASSETS> 47,700 47,600
<PP&E> 168,200 186,200
<DEPRECIATION> 35,300 32,600
<TOTAL-ASSETS> 483,900 554,500
<CURRENT-LIABILITIES> 27,900 29,800
<BONDS> 120,900 279,200
0 0
0 0
<COMMON> 100 100
<OTHER-SE> 172,500 60,700
<TOTAL-LIABILITY-AND-EQUITY> 483,900 554,500
<SALES> 0 0
<TOTAL-REVENUES> 48,600 47,600
<CGS> 0 0
<TOTAL-COSTS> 31,400 17,700
<OTHER-EXPENSES> 44,800 17,800
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 15,600 22,000
<INCOME-PRETAX> (43,200) (9,900)
<INCOME-TAX> (15,000) (4,900)
<INCOME-CONTINUING> (28,200) (5,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (28,200) (5,000)
<EPS-PRIMARY> (4.34) (.77)
<EPS-DILUTED> 0 0
</TABLE>
<PAGE> 1
Exhibit 99.1
[FLORIDA PROGRESS CORPORATION LETTERHEAD]
JACK B. CRITCHFIELD
Chairman and Chief Executive Officer
November ______, 1996
Dear Shareholder:
In July, we announced our decision to spin-off the lending, leasing and real
estate unit to our shareholders through a tax-free stock dividend. The new
company is called Echelon International Corporation.
This Information Statement explains how Florida Progress will spin off Echelon
International to its shareholders and provides information about Echelon's
organization, business opportunities and properties and also contains financial
statements and other financial information. Due to the importance of the
information contained in this document, you are urged to retain it for future
reference.
Today your Board of Directors established the schedule for completing this
spin-off. Each holder of record of Florida Progress' common stock on the record
date for the distribution, which is December _____, 1996, will receive one
share of Echelon International common stock for each 15 shares of Florida
Progress common stock held as of that date. It is anticipated that the Echelon
International stock certificates will be mailed to shareholders commencing on
or about December _____, 1996.
This Information Statement is being sent as information to shareholders of
record of Florida Progress as of today's date. Shareholders of record on the
record date for the distribution will be entitled automatically to participate
in the distribution and are not required to do anything to become entitled to
participate. You should not turn in your Florida Progress stock certificates. We
are not soliciting your proxy, since shareholder approval of this distribution
is not needed.
I have great confidence in the future of Echelon International and Florida
Progress. On behalf of both companies, I thank you for your investment and
continued support.
Sincerely,
