UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X|Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 28, 1997, or
|_|Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to _______________
Commission File No. 1-9510
FFP PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 75-2147570
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
2801 Glenda Avenue; Fort Worth, Texas 76117-4391
(Address of principal executive office, including zip code)
817/838-4700
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act
Title of Each Class Name of Each Exchange on Which Registered
Class A Units of American Stock Exchange
Limited Partnership Interests
Unit Purchase Rights American Stock Exchange
Securities registered pursuant to
Section 12(g) of the Act
None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of Class A Units held by non-affiliates of the
registrant at March 31, 1998, was $3,208,000. For purposes of this computation,
all officers, directors, and beneficial owners of 10% or more of the Class A
Units of the registrant are deemed to be affiliates. Such determination should
not be deemed an admission that such officers, directors, and beneficial owners
are affiliates.
Class A Units 2,234,262
(Number of units outstanding as of March 31, 1998)
<PAGE>
Index
Page
Part I
Item 1. Business 1
Item 2. Properties 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 5
Part II
Item 5. Market for the Registrant's Units and Related
Security Holder Matters 6
Item 6. Selected Financial and Operating Data 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk 10
Item 8. Financial Statements and Supplementary Data 10
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 10
Part III
Item 10. Directors and Executive Officers of the Registrant 11
Item 11. Executive Compensation 13
Item 12. Security Ownership of Certain Beneficial Owners
and Management 16
Item 13. Certain Relationships and Related Transactions 17
Part IV
Item 14. Exhibits, Financial Statements, Schedules and
Reports on Form 8-K 21
Signatures 23
<PAGE>
PART I
Item 1. Business.
General Background
FFP Partners, L.P. ("FFPLP" or the "Company"), a Delaware limited
partnership, was formed in December 1986, pursuant to the Agreement of Limited
Partnership of FFP Partners, L.P. (the "Partnership Agreement"), with FFP
Partners Management Company, Inc. ("FFPMC") as its general partner. In May 1987,
FFPLP purchased convenience stores, truck stops, other retail motor fuel
outlets, and ancillary businesses from affiliates of its general partner. The
purchase of these outlets was completed in conjunction with the Company's
initial public offering of Class A Units of limited partnership interest. The
senior executives of the Company had owned and managed these operations prior to
their acquisition by FFPLP, and, through its subsidiaries, FFPLP owned and
operated them, and other businesses, until December 1997.
In December 1997, FFPLP completed a restructuring by which the real
estate used in the aforementioned retail operations was retained by FFPLP while
the convenience store, truck stop, other retail motor fuel outlets, and other
businesses it conducted were transferred to FFP Marketing Company, Inc. ("FFP
Marketing"), in exchange for all the common stock of FFP Marketing. The common
stock of FFP Marketing was then distributed to the general partner and limited
partners of FFPLP.
The real estate retained by FFPLP was contributed to FFP Properties,
L.P. ("FFP Properties"), a newly formed Texas limited partnership, in exchange
for the general partnership interest in FFP Properties. The limited partnership
interests in FFPLP held by John H. Harvison, the Chairman and Chief Executive
Officer of FFPMC, members of his family, and corporations, partnerships, trusts,
and other business entities affiliated with him or his family members
(collectively, the "Harvison Family") were exchanged for economically equivalent
limited partnership interests in FFP Properties, L.P. In addition, FFP Real
Estate Trust, a newly formed Texas real estate investment trust that is wholly
owned by FFPMC, became the general partner of FFPLP.
By virture of this restructuring, all of the non-real estate
operating activities of FFPLP were transferred to FFP Marketing and the future
business of FFPLP will consist of the ownership and rental of real estate.
Unless the context requires otherwise, references herein to FFPLP or
the Company include its subsidiary and its general partner. References to FFP
Marketing include its subsidiaries.
The Company maintains its principal executive offices at 2801 Glenda
Avenue, Fort Worth, Texas 76117-4391; its telephone number is 817.838.4700; its
Internet web site is at http://www.ffplp.com.
Business Strategy
FFPLP intends to expand its real estate holdings through the
acquisition of pad retail sites (including convenience stores, truck stops,
fast-food restaurants, and other retail outlets) and other real estate. Some of
the real estate acquired may be leased to FFP Marketing but it may also be
leased to other parties. Although FFPLP will consider investments in any type of
real estate, it is anticipated that most initial investments will be in
convenience store locations since most of the Company's contacts are in that
industry and it has an in-depth knowledge of the economics of those operations.
In addition, FFPLP expects that most real estate acquired will be in smaller
communities and towns. The Company believes that the larger providers of
financing for pad retail sites and other real estate concentrate on larger
metropolitan areas. Consequently, the Company believes it can obtain better
yields on investments in smaller towns since there is less competition from
other sources of financing.
FFPLP also intends to pursue conversion to a real estate investment
trust for federal income tax purposes. Such a conversion may occur through
either a "merger" or an "exchange" alternative. In either alternative, FFPLP
unitholders would receive shares of FFP Real Estate Trust in place of their
FFPLP units and the FFP Real Estate Trust shares would be listed on a securities
exchange.
If FFPLP is able to obtain a ruling from the Internal Revenue
Service ("IRS") that a merger of FFPLP and and its general partner, FFP Real
Estate Trust, would be tax-free to FFPLP unitholders, then the merger
alternative would be used. Under the merger alternative, FFPLP would be merged
into its general partner, FFP Real Estate Trust, with FFPLP unitholders
receiving shares of FFP Real Estate Trust in exchange for their units of FFPLP.
If FFPLP is not able to obtain a favorable ruling from the IRS on
the merger alternative, then it could convert to a real estate investment trust
under the exchange alternative. Under the exchange alternative, FFPLP
unitholders would be prohibited from transferring their units to a third party
but would be able to require FFPLP's general partner to redeem the units for
either shares of FFP Real Estate Trust or cash. FFP Real Estate Trust, not the
FFPLP unitholder, would determine whether to redeem the FFPLP units for shares
or cash and it is expected that the redemption would be made in exchange for FFP
Real Estate Trust shares.
FFPLP anticipates requesting a revenue ruling from the IRS on the
merger alternative within the first half of 1998. However, there can be no
assurance that the IRS will respond favorably to the request or about the
time-frame within which it will respond.
Competition
Numerous entities and individuals, many of which have greater
financial resources than does FFPLP, compete with it to acquire real estate for
use by convenience stores, truck stops, and other retail activities. These
entities may be able to accept more risk than FFPLP is willing to undertake.
Competition generally may increase the bargaining power of owners seeking to
sell their properties, may reduce the number of suitable investment
opportunities available to FFPLP, and may decrease the yield achievable on any
real estate purchases by FFPLP.
Employees
At March 31, 1998, FFP Real Estate Trust, general partner of FFPLP,
had two executive officers, both of whom hold similar positions with FFP
Marketing. FFP Real Estate Trust has entered into a reimbursement agreement with
FFP Marketing pursuant to which FFP Marketing will be reimbursed for all of its
direct and indirect costs allocable to the management of FFPLP. Neither FFP Real
Estate Trust nor FFPLP have any employees.
Government Regulation -- Environmental Regulation
Substantially all the properties leased by FFPLP to FFP Marketing
contain underground storage tanks used for the storage of motor fuel. The
underground storage tanks are owned and operated by FFP Marketing and FFP
Marketing is responsible for compliance with all enviornmental regulations
regarding such tanks. However, if for any reason FFP Marketing is unable or
unwilling to take all actions that may be required under current or future
environmental regulations regarding underground storage tanks or other
activities, FFPLP could be required to take such actions.
FFPLP anticipates that any additional properties that it acquires
will be subject to similar environmental regulations, either because they will
also contain underground storage tanks or for other reasons, and that the
lessees of such properties will be responsible for compliance with such
environmental regulations.
Federal Income Tax Law
As a publicly traded partnership, FFPLP pays no federal income tax.
Rather, the income or loss of FFPLP is allocated to its partners to be included
in their respective tax returns. In addition, (i) the passive loss rules of the
Internal Revenue Code are applied separately with respect to items attributable
to each publicly traded partnership and (ii) net income from publicly traded
partnerships is not treated as passive income.
At such time as FFPLP might become a real estate investment trust
for federal income tax purpose {see Business Strategy}, its earnings will no
longer be allocated to its partners but it will not, as an entity, generally be
subject to federal income tax. However, it will be required to comply with
various complex requirements which limit the nature of its assets and sources of
its income. In addition, it will be required to distribute annually to its
sharehlders at least 95% of its real estate investment trust taxable income.
Differences in timing between the actual receipt of income, the actual payment
of deductible expenses in arriving at taxable income, the creation of reserves,
and required debt amortization payments could require the Company to borrow
funds to meet the 95% distribution requirement even if management believed that
the then prevailing market conditions were not favoarable for such borrowings or
that the borrowings were not advisable in the absence of such tax
considerations.
Forward-Looking Statements
Certain of the statements made in this report are forward-looking
statements that involve a number of risks and uncertainties. Statements that
should generally be considered forward-looking include, but are not limited to,
those that contain the words "estimate," "anticipate," "in the opinion of
management," "believes," and similar phrases. Although the Company believes that
the expectations reflected in such forward-looking statements are based upon
reasonable assumptions, the Company's actual results could differ materially
from those set forth in the forward-looking statements. Among the factors that
could cause actual results to differ materially from the forward-looking
statements made include the following: changes in real estate conditions,
including rental rates and the construction or availability of competing
properties; changes in the industry in which FFPLP's sole tenant competes;
changes in general economic conditions; the ability of management to identify
acquisitions and investment opportunities meeting the FFPLP's investment
objectives; the timely leasing of unoccupied properties; timely releasing of
currently occupied properties upon expiration of the current leases or the
default of the current tenant; the Company's ability to generate funds
sufficient to meet its debt service payments and other operating expenses; the
inability of FFPLP to control the management and operation of its tenant and the
businesses conducted on the Company's properties; financing risks, including the
availability of funds to service or refinance existing debt and to finance
acquisitions of additional property, changes in interest rates associated with
its variable rate debt; the possibility that the Company's existing debt (which
requires a so-called "balloon" payment of principal) may be refinanced at a
higher interest rate or on other terms less favorable to FFPLP than at present;
the existence of complex tax regulations relating to the Company's status as a
publicly-traded real estate partnership and, if achieved, to its status as a
real estate investment trust and the adverse consequences of the failure to
qualify as such; and other risks detailed from time to time in FFPLP's filings
with the Securities and Exchange Commission. Given these uncertainties, readers
are cautioned not to place undue reliance on the forward-looking statements. The
Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances.
<PAGE>
Item 2. Properties.
The real estate owned by FFPLP is being leased to FFP Marketing.
This real estate is comprised of 78 parcels of land, together will the buildings
thereon, and 105 buildings on land leased by FFP Marketing from the Harvison
Family. The leases covering the real estate where FFPLP owns both the land and
building generally expire in December 2002 with two five-year renewal periods at
the sole option of FFP Marketing. If the leases are renewed, the rent will be
adjusted by the change in the consumer price index from January 1, 1998, to the
date of renewal. The leases covering the buildings that are located on land
leased from the Harvison Family terminate concurrently with the underlying land
lease (generally, May 2002) and contain renewal provisions consistent with the
underlying land lease.
The rental rates for all the real estate leased by FFPLP to FFP
Marketing were determined by FFPLP based on its knowledge of the properties and
the general experience of its management in acting as lessor and lessee for
similar properties. FFPLP believes that the rental rates paid by FFP Marketing
are a fair rental value. However, neither FFPLP nor FFP Marketing engaged any
third party advisors or referred to any third party surveys or analyses of
rental rates in making this determination.
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
On December 26, 1997, FFPLP held a special meeting of its
unitholders to consider approval of the restructuring of FFPLP discussed under
Business - General Background, above. At the meeting, 2,200,163 units (59.4%)
voted for the restructuring proposal, 37,578 units (1.0%) voted against the
restructuring proposal, 3,675 units (0.1%) abstained from voting, and 1,462,789
(39.5%) units did not vote. The restructuring proposal was covered by a proxy
statement dated December 11, 1997, filed by FFPLP with the Securities and
Exchange Commission and distributed to its unitholders of record as of December
5, 1997.
<PAGE>
PART II
Item 5. Market for the Registrant's Units and Related Security Holder Matters.
The Class A Units of FFPLP are listed for trading on the American
Stock Exchange (symbol "FFP"). At April 2, 1998, there were 189 holders of
record of the Class A Units. {See Item 12. Security Ownership of Certain
Beneficial Owners and Management.}
In August 1989, FFPLP entered into a Rights Agreement and
distributed to its Unitholders Rights to purchase Units under certain
circumstances. Initially the Rights were attached to all Unit Certificates
representing Units then outstanding and no separate Rights Certificates were
distributed. Under the Rights Agreement, the Rights were to separate from the
Units and be distributed to Unitholders following a public announcement that a
person or group of affiliated or associated persons (an "Acquiring Person") had
acquired, or obtained a right to acquire, beneficial ownership of 20% or more of
Class A Units of FFPLP or all classes of outstanding Units. On August 8, 1994, a
group of Unitholders announced that they had an informal understanding that they
would vote their Units together as a block. The agreement related to units that
constituted approximately 25% of the Class A Units then outstanding. Therefore,
the Rights became exercisable on October 7, 1994, the record date for the
issuance of the Rights Certificates (the "Distribution Date").
The Rights currently represent the right to purchase a Rights Unit
(which is substantially equivalent to a Class A Unit) of FFPLP at a price of
$20.00 per Unit. However, the Rights Agreement provides, among other things,
that if any person acquires 30% or more of the Class A Units or of all classes
of outstanding Units then each holder of a Right, other than an Acquiring
Person, will have the right to receive, upon exercise, Rights Units (or in
certain circumstances, other property) having a value of $40.00 per Unit. The
Rights will expire on August 13, 1999, and do not have any voting rights or
rights to cash distributions.
The following table sets forth the range of high and low sales
prices for the Class A Units of FFPLP as reported on the American Stock Exchange
for the periods indicated:
High Low
Dollars
1996
First Quarter 8 6 3/16
Second Quarter 7 13/16 6
Third Quarter 7 5/8 6
Fourth Quarter 7 7/16 5 1/8
1997
First Quarter 5-13/16 4-1/4
Second Quarter 5-1/8 3-9/16
Third Quarter 4-15/16 3-3/8
Fourth Quarter 4-1/4 3-1/16
Following the restructuring of FFPLP in December 1997 discussed
earlier in this report and the related distribution of FFP Marketing common
stock to FFPLP's unitholders, the price of FFPLP's Class A Units reflects the
restructuring. From January 14, 1998 (the date on which FFPLP Class A Units and
FFP Marketing common stock began trading separately), through March 31, 1998,
FFPLP Class A Units have traded at prices ranging from $1-5/16 to $1-7/8.
The following table sets forth the distributions declared and paid
by FFPLP in 1996:
Amount per
Class A and
Record Date Date Paid Class B Unit
April 10, 1996 April 24, 1996 $0.205
August 27, 1996 September 11, 1996 0.210
No distributions were paid in 1997.
Distributions in the future will be dependent upon the level of
earnings and cash flow of FFPLP, expenditures to acquire additional real
estate, and requirements for servicing FFPLP's debt. {See Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations, Liquidity and Capital Resources.}
<PAGE>
Item 6. Selected Financial and Operating Data.
December 28, 1997
(In thousands)
Real property $27,517
Accumulated depreciation (9,374)
Real property, net $18,143
Current installments of long-term debt $1,208
Long-term debt, excluding current installmaent 14,730
Total debt $15,938
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
This discussion should be read in conjunction with the selected
financial and operating data, the description of the Company's business
operations, and the financial statements and related notes and schedules
included elsewhere in this Annual Report on Form 10-K. {See Item 1. Business
- - Forward-Looking Statements.}
Concurrently with the close of its 1997 fiscal year, FFPLP completed
a restructuring in which the real estate used in its former retail operations
was retained by it while all its other assets and businesses were transferred to
FFP Marketing Company, Inc. In addition to retaining the real estate referred to
above, FFPLP also retained certain liabilities, principally bank debt and other
debt secured by the real estate retained by it. All other liabilities (including
trade accounts payable and accrued expenes, money orders payable, deferred
income taxes, and obligations under capital leases) were transferred to FFP
Marketing.
Accordingly, FFPLP's business going forward will consist of the
leasing and management of its current real estate holdings and the acquisition
of additional real properties.
Liquidity and Capital Resources
In connection with the December 1997 restructuring of FFPLP, the
real estate used in its retail operations was retained by FFPLP, along with the
year end balances due under a bank revolving credit facility ($7,439,000), a
bank term loan ($7,905,000), and other debt ($594,000) securing the real estate.
All other businesses, assets and liabilities were transferred to FFP Marketing.
However, subsidiaries of FFP Marketing remain liable on the debt retained by
FFPLP, pending its refinancing, and could be required to repay the debt if FFPLP
is unable to do so. Accordingly, FFPLP has indemnified FFP Marketing against
this liability and has granted to FFP Marketing the right to offset any payments
FFP Marketing might be required to make on the debt retained by FFPLP against
any amounts otherwise due to FFPLP by FFP Marketing.
Although FFPLP retained the liability for the $7,439,000 due under
the revolving credit line portion of the bank debt at the date of the December
1997 restructuring, FFP Marketing retains availability under this revolving
credit facility. The revolving credit line provides for borrowings up to
$15,000,000, with the amount available at any time related to a borrowing base
comprised of FFP Marketing's trade receivables and inventories. To the extent
that borrowings under this credit facility fall below the $7,439,000 balance
retained by FFPLP they are treated as loans by FFP Marketing to FFPLP and FFPLP
will pay interest to FFP Marketing on such amounts at the lender's prime rate,
which is same rate that is payable to the lender. FFP Marketing bears the
interest cost on any balances under the revolving credit facility that exceed
the $7,439,000 amount.
The revolving credit facility and the bank term loan both bear
interest at the lender's prime rate, payable monthly; the term loan requires
monthly principal payments of $95,000; and both loans mature in November 2000.
The loans are subject to a Loan and Security Agreement among FFP Partners and
two companies that prior to the December 1997 restructuring were subsidiaries of
FFP Partners but are now subsidiaries of FFP Marketing. The agreement contains
various restrictive convenants including financial covenants relating to the
maintenance of a specified minimum tangible net worth, a debt to tangible net
worth ratio, and a cash flow coverage ratio, all as defined in the agreement. As
a result of the restructuring, these ratios are calculated on a combined basis
for FFPLP and FFP Marketing. The loans under the agreement are secured by a
negative pledge of the assets of FFPLP. They are also secured by FFP Marketing's
trade accounts receivable, inventories, and its equipment not otherwise
encumbered, and by a negative pledge of its other assets.
FFPLP expects to refinance the bank and other debt during 1998. FFP
Marketing will have no liability for the obligations that refinance the existing
debt.
In addition to refinancing the existing debt, FFPLP is seeking to
obtain funds to expand its real estate assets and has had discussions with
various lenders who have expressed an interest in providing such financing.
However, the Company has not yet received any formal proposals to refinance the
current debt or to fund the acquisition of additional properties.
"Year 2000" Computer Issues
FFPLP uses a various computer software programs to manage its
properties. The functioning of such software is subject to problems if it does
not properly interpret dates in the year 2000 and beyond. Software which
properly handles dates beginning in 2000 is said to be "year 2000 compliant."
FFPLP's principal accounting and management information software is currently
year 2000 compliant, as is its computer networking and operating system
software. The Company believes the cost to modify any incidental software that
it uses to make it year 2000 compliant, or to replace such software, will not be
material.
FFPLP is also dependent upon software used in conjunction with or
provided by third parties, such as its banks and various governmental
authorities that levy taxes on real property. While the direct cost of rendering
any such software year 2000 compliant will be borne by others, there could be an
adverse impact on the Company's operations if the necessary modifications are
not made in a timely manner. The third parties involved are large, sophisticated
organizations that the Company believes are responsible in managing their
businesses and business relationships and, accordingly, believes that they will
take appropriate steps to make their systems year 2000 compliant. However, the
Company is in the process of determining if such software is year 2000
compliant, and, if not, the timetable of the respective third parties to make it
compliant and will monitor their progress in doing so.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 8. Financial Statements and Supplementary Data.
The financial statements and supplementary data filed herewith begin
on page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
There were no changes in, nor disagreements with, accountants during
1997.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
General Partner
FFP Real Estate Trust (the "General Partner"), a Texas real estate
investment trust formed in December 1997, is the general partner of and manages
the affairs and business of FFPLP. FFP Real Estate Trust succeeded FFP Partners
Management Company, Inc., as the general partner in conjunction with the
restructuring of FFPLP that occurred in December 1997. The Unitholders have no
power, as limited partners, to direct, or participate in the control of, the
business of FFPLP.
Management of the General Partner
Set forth below are the names, ages, positions, and business
experience of the executive officers and trust managers of FFP Real Estate
Trust:
Name Age Position
John H. Harvison 64 Chairman of the Board of Trust
Managers, President, and
Chief Executive Officer
Steven B. Hawkins 50 Vice President - Finance and
Administration, Secretary,
Treasurer, and Chief Financial
Officer
Robert E. Garrison, II [1] 56 Trust Manager
Joseph F. Leonardo [1] 51 Trust Manager
J. D. St.Clair 63 Trust Manager
Randall W. Harvison 40 Trust Manager
- --------------------------------
[1] Member of Audit Committee
John H. Harvison has been Chairman of the Board of FFPLP's general
partner since the commencement of FFPLP's operations in May 1987; he is also the
Chairman of the Board and Chief Executive Officer of FFP Marketing Company,
Inc., which leases all the real estate owned by FFPLP. Mr. Harvison is a founder
and an executive officer of each of the companies from which FFPLP initially
acquired the retail outlets that were transferred to FFP Marketing in the
December 1997 restructuring of FFPLP. He has been active in the retail gasoline
business since 1958 and in the convenience store business since 1973. In
addition, he has been involved in oil and gas exploration and production, the
ownership and management of an oil refinery and other personal investments. In
January 1995, Mr. Harvison consented to the entry of a cease and desist order by
the United States Office of Thrift Supervision that, among other things,
prohibits him from participating in any manner in the conduct of the affairs of
federally insured depository institutions. This Order was issued in connection
with Mr. Harvison's ownership in a federal savings bank and transactions between
him (and companies in which he had an ownership interest) and that institution.
In consenting to the issuance of the Order, Mr. Harvison did not admit any of
the allegations against him and consented to the issuance of the Order solely to
avoid the cost and distraction that would be caused by prolonged litigation to
contest the positions taken by the Office of Thrift Supervision. Mr. Harvison is
the father of Randall W. Harvison, who is also a Trust Manager of the General
Partner.
Steven B. Hawkins has been Vice President - Finance and
Administration, Secretary, and Treasurer of FFPLP's general partner since May
1987. He is also the Vice President - Finance and Administration and Chief
Financial Officer of FFP Marketing Company, Inc., which leases all the real
estate owned by FFPLP. From April 1980 through December 1987, Mr. Hawkins was
employed as Secretary/Treasurer, Controller and Chief Financial Officer by
various companies affiliated through common ownership with the General Partner
and the former general partner of FFPLP. Prior to joining such affiliates, Mr.
Hawkins was employed for nine years by Arthur Andersen & Co., an international
public accounting firm. He is a member of both the American Institute of
Certified Public Accountants and the Texas Society of CPAs.
Robert E. Garrison, II, was a director of FFPLP's former general
partner from May 1987 until the December 1997 restructuring of FFPLP. He was
elected to the Board of Trust Managers of FFP Real Estate Trust in December
1997. Mr. Garrison is a managing partner of Harris, Webb & Garrison, a regional
merchant and investment bank, and is also Chairman and Chief Executive Officer
of Pinnacle Management & Trust Co., a state chartered independent trust company.
From October 1992 through February 1994, Mr. Garrison was Chairman of Healthcare
Capital Group, Inc., a regional investment bank focusing on the health care
industry. From April 1991 through October 1992, Mr. Garrison was Chairman and
Chief Executive Officer of Med Center Bank & Trust, one of the leading
independent banks in Houston, Texas. Mr. Garrison served as President of
Iroquois Brands, Ltd. ("IBL"), a manufacturer of material handling and
construction equipment, pharmaceutical and personal care products, and operator
of convenience stores and retail fuel outlets in the United Kingdom from 1989
until September 1990. From 1982 through March 1989, Mr. Garrison served as
Executive Vice President and director of Lovett Mitchell Webb & Garrison, Inc.
("LMW&G"), one of the representatives of the underwriters in the initial public
offering of the Company in May 1987, where he managed the Investment Research
and Investment Banking Division, and Boettcher & Company, Inc., which acquired
LMW&G in September 1987. From 1971 to 1982, Mr. Garrison was First Vice
President and Director of Institutional Research at Underwood Neuhaus & Co. From
1969 to 1971, Mr. Garrison was Vice President of BDSI, a venture capital
subsidiary of General Electric.
Joseph F. Leonardo was elected to the Board of Trust Managers of FFP
Real Estate Trust in December 1997. Since August 1992, Mr. Leonardo has been
President and Chief Executive Officer of Leonardo Management Corporation, which
provide strategic planning, market positioning, and other sales and marketing
consulting services. Mr. Leonardo also operates Convenience Directions which
publishes Info Marketing, a convenience store industry newsletter. Prior to
forming Leonardo Management, Mr. Leonardo served in various executive positions
with several convenience store operators.
J. D. St.Clair was a director of FFPLP's former general partner from
May 1987 until the December 1997 restructuring of FFPLP. He was elected to the
Board of Trust Managers of FFP Real Estate Trust in December 1997. Mr. St.Clair
is also a director of FFP Marketing Company, Inc., which leases all the real
estate owned by FFPLP, and has been Vice President - Fuel Supply and
Distribution of FFP Marketing, and its predecessor, since May 1987. Mr. St.Clair
is a founder and an executive officer of several of the companies from which
FFPLP initially acquired the retail outlets that were transferred to FFP
Marketing in the December 1997 restructuring of FFPLP. He has been involved in
the retail gasoline marketing and convenience store business since 1971. Prior
to 1971, Mr. St.Clair performed operations research and system analysis for Bell
Helicopter, Inc., from 1967 to 1971; for the National Aeronautics and Space
Administration from 1962 to 1967; and Western Electric Company from 1957 to
1962.
Randall W. Harvison was elected to the Board of Trust Managers in
December 1997. He is an attorney and has been engaged in a solo practice in Fort
Worth, Texas, since 1994. Since 1987, Mr. Harvsion has also been an employee of
a subsidiary of FFP Marketing (a former subisidiary of FFPLP) and of various
companies controlled by the Harvison Family that are engaged in real estate
investment and management and other investment activities. Randall W. Harvison
is the son of John H. Harvison, the Chairman of the Board of Trust Managers.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Regulations issued under the Securities Exchange Act of 1934 require
certain persons to report their holdings of the Company's Class A and Class B
Units to the Securities and Exchange Commission ("SEC") and to the Company. To
the best of the Company's knowledge, based upon copies of reports and other
representations provided to the Company, all 1997 reports required under Section
16 of the Securities Exchange Act of 1934 were filed in a timely manner except
that the following reports were filed late: (i) report for the month of December
setting forth the year-end holdings for Robert E. Garrison, II; (ii) report for
the month of December setting forth the year-end holdings and changes in the
price of options to acquire Class A Units due to the December 1997 restructuring
of FFPLP for Steven B. Hawkins; (iii) report for the month of December 1997
reporting the initial holdings for Joseph F. Leonardo; (iv) report for the month
of December 1997 reporting the disposition of Class A Units and Class B Units
and changes in the price of options to acquire Class A Units, all due to the
December 1997 restructuring of FFPLP, for John H. Harvison and for J. D.
St.Clair; and (v) report for the month of December 1997 reporting the
disposition of Class A Units and Class B Units due to the December 1997
restructuring of FFPLP for Randall W. Harvison.
Item 11. Executive Compensation.
The Company reimburses its general partner for all of its direct and
indirect costs (principally officers' compensation and other general and
administrative costs) allocable to the Company.
Each trust manager who is not an officer or employee of the general
partner or the Company receives an annual retainer of $4,000 plus $1,000 for
each Board meeting, or committee meeting not held in conjunction with a Board
meeting, which he attends and $500 for each telephone meeting in which he
participates. Each director is also reimbursed for expenses related to
attendance at board meetings.
In addition, non-employee trust managers are generally granted
options to acquire 25,000 Class A Units at the fair market value of the
underlying units on the date of grant. The options become exercisable with
respect to one-third of the units covered thereby on each of the anniversary
dates following the grant and expire ten years after grant. In the event of a
change in control of the Company, any unexercisable portion of the options will
become immediately exercisable. Upon exercise, the option price may be paid, in
whole or in part, in Class A Units owned by the trust manager.
Trust managers who are officers or employees of the general partner
or the Company receive no additional compensation for attendance at Board or
committee meetings.
Summary Compensation Table
The following table provides information regarding compensation paid
during each of FFPLP's last three fiscal years to its general partner's Chief
Executive Officer and to each other executive officer who earned salary and
bonus of more than $100,000 in the latest fiscal year. The amounts reported
below are the payments made to officers of FFPLP's former general partner. In
connection with the December 1997 restructuring of FFPLP, the former general
partner was replaced by FFP Real Estate Trust. Mr. Harvison is the Chairman,
President, and Chief Executive Officer of FFP Real Estate Trust.
Summary Compensation Table
Annual Compensation
-------------------
Other
Annual
Compen-
Name and Principal Position Year Salary sation
John H. Harvison 1997 $135,000 -
Chairman and Chief Executive Officer 1996 137,597[1] -
1995 135,000 -
Robert J. Byrnes [2] 1997 $135,000 -
President, Chief Operating Officer 1996 137,597[1] -
and Director 1995 135,000 -
- --------------------
[1]The annual salaries did not change from 1995 to 1996. The Company pays its
employees on a weekly basis and there were 53 pay periods in 1996 vs 52 pay
periods in 1997 and 1995.
[2]In connection with the December 1997 restructuring of FFPLP, FFP Real Estate
Trust became the general partner of FFPLP. Mr. Byrnes is not a trust manager,
officer, or employee of FFP Real Estate Trust. There were no long-term
compensation awards or payouts during any of the last three years.
FFP Real Estate Trust, the general partner of FFPLP, and FFP
Marketing have entered into a reimbursement agreement pursuant to which FFP Real
Estate Trust will reimburse FFP Marketing for all direct and indirect costs
(principally officers' compensation and other general and administrative costs)
paid by FFP Marketing that are allocable to FFP Real Estate Trust. The
reimbursement for officers' compensation costs incurred by FFP Marketing in
connection with FFP Real Estate Trust's activities will be determined by the
amount of time management and other personnel spend on activities of FFP Real
Estate Trust compared to the amount of time they spend on activities of FFP
Marketing. Since FFP Real Estate Trust's only activity is to serve as the
general partner of FFPLP, all of FFP Real Estate Trust's costs and expenses will
be borne by FFPLP. The costs to be reimbursed to FFP Marketing by FFP Real
Estate Trust for 1998 are expected to be approximately $200,000.
Options Exercised during Fiscal 1997 and Fiscal Year End Option
Values. All options held by directors, officers, and employees to acquire Class
A Units of FFPLP that were outstanding at the completion of the December 1997
restructuring of FFPLP were divided into separate options to purchase Class A
Units of FFPLP and a like number of FFP Marketing common shares. The exercise
price for the existing FFPLP unit options was divided between the two new
options in proportion to the average closing price on the American Stock
Exchange of FFPLP Class A Units and FFP Marketing common shares during the first
month of trading following completion of the restructuring.
The following table provides information about options to purchase
FFPLP Class A Units exercised during the last fiscal year and the value of
unexercised options to purchase FFPLP units held at the end of the fiscal year
by the named executive officers:
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
Value of
Number of Unexercised
Units Unexercised In-the-Money
Acquired Options/SARs Options/SARs
on Value at Fiscal at Fiscal
Exercise Realized Year End Year End
(#) ($) (#) ($) [1]
Name and Exercisable/ Exercisable/
Principal Position Unexercisable Unexercisable
John H. Harvison - 0 - - 0 - 40,000/0 $0/$0
Chairman and Chief
Executive Officer
Robert J. Byrnes [2] - 0 - - 0 - 35,000/0 $0/$0
President, Chief
Operating Officer, and
Director
- ---------------------
[1]The closing price for the Company's Class A Units as reported by the American
Stock Exchange on December 26, 1997, the last day of trading prior the end of
the Company's fiscal year was $3.75. The value shown is calculated by
multiplying the difference between this closing price and the option exercise
price times the number of units underlying the option.
[2]In connection with the December 1997 restructuring of FFPLP, FFP Real Estate
Trust became the general partner of FFPLP. Mr. Byrnes is not a trust manager,
officer, or employee of FFP Real Estate Trust.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Class A Units
The following table sets forth as of March 28, 1998, information
regarding the only persons known by the Company to own, directly or indirectly,
more than 5% of its Class A Units:
Amount and Percent
Nature of of Class
Name and Address Beneficial
of Beneficial Owner Ownership
Edmund & Mary Shea Real Property Trust 126,700 5.7%
Edmund H. Shea, Jr., Trustee Direct
655 Brea Canyon Road
P. O. Box 489
Walnut, California 91789-0489
The following table sets forth as of March 28, 1998, information
with respect to the Class A Units beneficially owned by all trust managers and
executive officers of FFP Real Estate Trust, the general partner of FFPLP (such
information is based on ownership reported to the Company by such persons):
Amount and Nature Percent
of Beneficial of
Name of Beneficial Owner Ownership [1] Class [1]
John H. Harvison, Chairman and President 40,000 [2] 1.8%
Steven B. Hawkins, Vice President 26,300 [3] 1.2%
Robert E. Garrison, II, Trust Manager 86,805 [4] 3.7%
Joseph F. Leonardo, Trust Manager 0 0.0%
J. D. St.Clair, Trust Manager 37,400 [5] 1.6%
Randall W. Harvison, Trust Manager 0 0.0%
All directors and executive officers
as a group (6 persons) 190,505 8.5%
- ------------------------------------------------------
[1]Based on 2,234,262 FFPLP Class A Units outstanding. FFPLP Class A Units that
an individual has the right to acquire within 60 days pursuant to the
exercise of options are deemed to be outstanding for the purpose of computing
the percentage ownership of such individual but are not deemed to be
outstanding for the purpose of computing the percentage ownership of any
other person or group shown in the table.
[2]Consists of options to acquire 40,000 units.
[3]Includes 1,300 units held by an Individual Retirement Account for the benefit
of Mr. Hawkins and options to acquire 25,000 units.
[4]Includes 79,751 units held directly and 7,054 units held by an Individual
Retirement Account for the benefit of Mr. Garrison.
[5] Includes 7,400 units held directly and options to acquire 30,000 units.
General Partner
FFP Real Estate Trust is the General Partner of FFPLP and, as such,
makes all decisions relating to the management of FFPLP. A company indirectly
owned by John H. Harvison and members of his immediate family is the sole
shareholder of FFP Real Estate Trust.
Item 13. Certain Relationships and Related Transactions.
Related Transactions
FFP Real Estate Trust, the general partner of FFPLP, and FFP
Marketing have entered into a reimbursement agreement pursuant to which FFP Real
Estate Trust will reimburse FFP Marketing for all direct and indirect costs
(principally officers' compensation and other general and administrative costs)
paid by FFP Marketing that are allocable to FFP Real Estate Trust. The
reimbursement for officers' compensation costs incurred by FFP Marketing in
connection with FFP Real Estate Trust's activities will be determined by the
amount of time management and other personnel spend on activities of FFP Real
Estate Trust compared to the amount of time they spend on activities of FFP
Marketing. Since FFP Real Estate Trust's only activity is to serve as the
general partner of FFPLP, all of FFP Real Estate Trust's costs and expenses will
be borne by FFPLP. The costs to be reimbursed to FFP Marketing by FFP Real
Estate Trust for 1998 are expected to be approximately $200,000.
As a result of the December 1997 restructuring of FFPLP, FFPLP and
two of its former subsidiaries that are now subsidiaries of FFP Marketing are
jointly liable on substantially all the debt that was transferred to FFPLP in
the restructuring. FFPLP has indemnified FFP Marketing (and its subsidiaries)
against this liability and has granted to FFP Marketing the right to offset any
payments FFP Marketing might be required to make on the debt retained by FFPLP
against any amounts otherwise due to FFPLP by FFP Marketing.
FFP Marketing leases buildings or land and buildings for some of its
retail outlets from FFP Partners, L.P. John H. Harvison, Chairman and Chief
Executive Officer of FFP Marketing, and Steven B. Hawkins, Vice President -
Finance and Chief Financial Officer of FFP Marketing, hold similar positions
with FFP Partners, L.P. In addition, companies owned directly or indirectly by
Mr. Harvison and members of his immediate family and/or other members of the
senior management of FFP Marketing hold corresponding ownership interests in FFP
Partners. The leases on these properties were entered into in conjunction with
the restructuring of FFP Partners that was completed in December 1997 in which
the non-real estate assets and businesses of FFP Partners were transferred to
FFP Marketing while the real estate used in the retail operations was retained
by FFP Partners. The lease rates for the locations were established based on
knowledge of the properties by the management of FFP Partners and FFP Marketing
and their general experience in acting as lessor and lessee for similar
properties. The management of FFP Marketing believes that the lease rates are
comparable to leases that could be entered into with unrelated third parties.
However, FFP Marketing did not engage any third party advisors or refer to any
third party surveys or analyses of rental rates in making this determination.
Since these leases were effective concurrently with the approval of the
restructuring of FFP Partners which occurred at the close of FFP Partners' 1997
fiscal year, no lease payments were made by FFP Marketing during its 1997 fiscal
year. However, FFP Marketing anticipates that it will pay approximately
$2,430,000 in lease payments for these properties during fiscal 1998.
Prior to the December 1997 restructuring of FFPLP, in the conduct of
the retail businesses previously conducted by it, FFPLP leased land or land and
buildings for some of its retail outlets and some administrative and executive
office facilities from various entities directly or indirectly owned by Messrs.
John H. Harvison (and/or members of his immediate family), Robert J. Byrnes, J.
D. St.Clair, and Garland R. McDonald, all of whom were on the Board of FFPLP's
previous general partner. During fiscal 1997, the Company paid $908,000 to such
entities with respect to these leases. FFPLP believes the leases with these
affiliates are on terms that are more favorable to the Company than terms that
could have been obtained from unaffiliated third parties for similar properties.
These leases have been assumed by FFP Marketing in connection with the December
1997 restructuring.
John H. Harvison, Chairman and Chief Executive Officer of FFPLP's
former general partner, owns 50% of Product Supply Services, Inc. ("Product
Supply"), which provided consulting services and acted as an agent for the
Company in connection with the procurement of motor fuel for sale by the
Company, prior to the December 1997 restructuring. Product Supply provided such
services to the Company pursuant to an agreement providing that the Company will
pay Product Supply $5,000 per month, supply it with office space and support
services, such as telephone and clerical assistance, and pay its reasonable
out-of-pocket costs in providing such services. The agreement may be canceled
either by the Company or Product Supply upon sixty days' written notice. During
fiscal year 1997, the Company paid $68,000 to Product Supply for its services.
This agreement has been assumed by FFP Marketing in connection with the December
1997 restructuring.
E. Michael Gregory, a Director of FFPLP's former general partner, is
the owner and president of Gregory Consulting, Inc. ("Gregory Consulting"),
which provided engineering, consulting, and other similar services to the
Company prior to the December 1997 restructuring. During fiscal year 1997, the
Company paid Gregory Consulting $265,000 for such services.
Because, under Texas law, the Company was not permitted to hold
licenses to sell alcoholic beverages at its former retail outlets in Texas, it
had entered into agreements with Nu-Way Beverage Company ("Nu-Way Beverage"), a
company wholly owned by John H. Harvison, under which Nu-Way Beverage sold
alcoholic beverages at the Company's former retail outlets in Texas. Under this
agreement, the Company received rent and a management fee relative to the sale
of alcoholic beverages and it loaned funds to Nu-Way Beverage to pay for
alcoholic beverage purchases. The Company received interest on such funds at
1/2% above the prime rate charged by a major commercial bank and the loan was
secured by the alcoholic beverage inventory located in the Company's Texas
outlets. During 1997, the highest balance due under this loan was $431,000 and
the balance at the end of the year was $426,000. During 1997, Nu-Way Beverage
sold $8,330,000 of alcoholic beverages at the Company's Texas outlets. After
deducting cost of sales and other expenses related to these sales, including
$1,355,000 of rent, management fees, and interest paid to the Company, Nu-Way
Beverage had earnings of $83,000 from sales of alcoholic beverages at the
Company's outlets. In conjunction with the restructuring, the agreements related
to this arrangement were assumed by FFP Marketing.
In June 1994, the Company concluded the settlement of a lawsuit
which it had filed against Nu-Way Oil Company and Nu-Way Distributing Company
(the "Nu-Way Companies"), both of which are controlled by John Harvison and
members of his immediate family, and a related suit which the Nu-Way Companies
had filed against the Company. Under the settlement, all claims in both of the
lawsuits were dismissed and the Company received cash, a promissory note from an
affiliated company (secured by first and second liens on real estate), and title
to a convenience store which was being leased by the Company from an affiliate.
The Company estimated the assets it received had an aggregate value of $485,000.
The affiliated companies received approximately $65,000 in cash (held in the
Registry of the Court) and 30,000 Class B Units owned by an affiliate that were
being held by an escrow agent. This agreement was approved by the disinterested
directors of the General Partner. The note which the Company received in
connection with this settlement is to be repaid over five years, with interest
at 9.5%; the highest balance outstanding during 1997 under the note was $65,000,
and the balance outstanding at year end 1997 was $44,000. This note was
transferred to FFP Marketing in connection with the December 1997 restructuring
of FFPLP.
The Company provides vehicles to various employees, primarily field
supervisory personnel, in conjunction with the performance of their employment
duties. In 1997, the Company purchased vehicles totaling $106,000 from EZ Auto,
L.L.C., a company 50%-owned by members of John H. Harvison's immediate family.
Management believes that the cost of these vehicles was comparable to that which
could have been obtained from unrelated third parties for similar vehicles.
In 1980 and 1982, certain of the Affiliated Companies granted to E-Z
Serve, Inc. ("E-Z Serve"), the right to sell motor fuel at retail for a period
of ten years at certain outlets owned or leased by companies controlled,
directly or indirectly, by John H. Harvison and members of his immediate family
or their affiliates. All rights to commissions under these agreements and the
right to sell motor fuel at wholesale to E-Z Serve at such locations were
assigned to the Company on May 21, 1987, in connection with the acquisition of
its initial base of retail operations. In December 1990, in connection with the
expiration or termination of the agreements with E-Z Serve, the Company entered
into agreements with Thrift Financial Co. ("Thrift Financial"), a company owned
and controlled by members of John H. Harvison's immediate family, which grant to
the Company the exclusive right to sell motor fuel at certain retail locations.
The terms of these agreements are comparable to agreements that the Company has
with other unrelated parties. During fiscal 1997, the Company paid Thrift
Financial $323,000 under these agreements. These agreements were transferred to
FFP Marketing in connection with the restructuring.
Cost Allocations. Prior to the December 1997 restructuring of FFP
Partners, the affairs of the Company were managed by its General Partner. The
General Partner made determinations with respect to costs incurred by it
(whether directly or indirectly through its affiliates) that were reimbursed by
the Company. The Company reimbursed the General Partner and any of its
affiliates for direct and indirect general and administrative costs, principally
officers' compensation and associated expenses, related to the business of the
Company. The reimbursement was based on the time devoted by employees to the
Company's business or upon such other reasonable basis as was determined by the
General Partner. In fiscal 1997, the Company reimbursed the General Partner and
its affiliates $763,000 for such expenses.
During 1997, the Company paid $386,000 to affiliates to reimburse
them for legal fees they had paid that benefited the Company. This payment was
the final portion of an amount which had been accrued in 1996.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.
(a) The following documents are filed as part of this Annual Report on
Form 10-K:
(1) Financial Statements.
See Index to Financial Statements and Financial Statement
Schedules on page F-1 hereof.
(2) Financial Statement Schedules.
None.
(3) Exhibits.
3.1 Amended and Restated Certificate of Limited Partnership of
FFP Partners, L.P. {1 - Ex.
3.7}
4.1 Amended and Restated Agreement of Limited Partnership of
FFP Partners, L.P., dated May 21, 1987, as amended by the
First Amendment to Amended and Restated Agreement of
Limited Partnership dated August 14, 1989, and by the
Second Amendment to Amended and Restated Agreement of
Limited Partnership dated July 12, 1991. {2 - Ex 4.1}
4.2 Third Amendment to Amended and Restated Agreement of
Limited Partnership of FFP Partners, L.P., dated as of
December 28, 1997. {4}
4.3 Rights Agreement dated as of August 14, 1989,
between the Company and NCNB Texas National
Bank, as Rights Agent. {3 - Ex. 1}
10.1 Nonqualified Unit Option Plan of FFP Partners,
L.P. {1 - Ex. 10.2}
10.2 Form of Lease Agreement between FFP Properties, L.P., and
FFP Operating Partners, L.P. {4}
10.3 Form of Building Lease Agreement between FFP Properties,
L.P., and FFP Operating Partners, L.P. {4}
10.4 Loan Agreement among FFP Partners, L.P., FFP Operating
Partners, L.P., Direct Fuels, L.P., and HSBC Business
Loans, Inc., dated October 31, 1997. {4}
21.1 Subsidiary of the Registrant. {4}
23.1 Consent of KPMG Peat Marwick LLP. {4}
27 Financial data schedule. {4}
- -----------------------------------
{1} Included as the indicated exhibit in the Partnership's
Registration Statement on Form S-1 (Registration
No. 33-12882) dated May 14, 1987, and incorporated herein
by reference.
{2} Included as the indicated exhibit in the Partnership's
Annual Report on Form 10-K for the fiscal year ended
December 27, 1992, and incorporated herein by reference.
{3} Included as the indicated exhibit in the Partnership's
registration statement on Form 8-A dated as of August 29,
1989, and incorporated herein by reference.
{4} Included herewith.
(b) No reports on Form 8-K were filed during the last quarter of the
period covered by this Annual Report on Form 10-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the Registrant has duly caused this Annual
Report on Form 10-K to be signed on its behalf by the undersigned, thereunto
duly authorized.
Dated: April 13, 1998 FFP Partners, L.P.
(Registrant)
By: FFP Real Estate Trust
General Partner
By: /s/ John H. Harvison
------------------------------
John H. Harvison
President
-----------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report has been signed below by the following persons on behalf of
the Registrant in the capacities indicated as of April 13, 1998.
/s/ John H. Harvison President and Chief Executive
- --------------------------------- Officer and Trust Manager of FFP
John H. Harvison Real Estate Trust (Principal
executive officer)
/s/ Steven B. Hawkins Vice President - Finance and
- --------------------------------- Administration, and Chief
Steven B. Hawkins Financial Officer of FFP Real
Estate Trust (Principal financial
and accounting officer)
Trust Manager of FFP Real Estate
- --------------------------------- Trust
Robert E. Garrison, II
Trust Manager of FFP Real Estate
- --------------------------------- Trust
Joseph F. Leonardo
/s/ J. D. St.Clair Trust Manager of FFP Real Estate
- --------------------------------- Trust
J. D. St.Clair
/s/ Randall W. Harvison Trust Manager of FFP Real Estate
- --------------------------------- Trust
Randall W. Harvison
<PAGE>
Item 8. Index to Financial Statements
Page
Number
Independent Auditors' Report F-2
Consolidated Balance Sheet as of December 28, 1997 F-3
Notes to Consolidated Financial Statements F-4
<PAGE>
Independent Auditors' Report
The Partners
FFP Partners, L.P.:
We have audited the accompanying consolidated balance sheet of FFP
Partners, L.P. (a Delaware Limited Partnership) and subsidiary as of December
28, 1997. This financial statement is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit of a balance sheet includes examining, on a test
basis, evidence supporting the amounts and disclosures in that balance sheet. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit of the balance sheet provides a
reasonable basis for our opinion.
In our opinion, the consolidated balance sheet referred to above
presents fairly, in all material respects, the financial position of FFP
Partners, L.P. and subsidiary as of December 28, 1997, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Fort Worth, Texas
March 17, 1998
<PAGE>
FFP Partners, L.P., and Subsidiary
Consolidated Balance Sheet
December 28, 1997
(In thousands)
1997
Assets
Current Assets
Prepaid expenses $196
Real Property
Land and improvements 6,026
Buildings 21,491
-------
27,517
Accumulated depreciation (9,374)
-------
18,143
-------
Total Assets $18,339
=======
Liabilities and Partners' Capital
Current Liabilities
Current installments of long-term debt $1,208
Long-term debt, excluding current installments 14,730
-------
Total Liabilities 15,938
Minority interest in subsidiary 960
Commitments and contingencies
Partners' Capital
Limited partners' equity 1,418
General partner's equity 23
-------
Total Partners' Capital 1,441
-------
Total Liabilities and Partners' Capital $18,339
=======
See accompanying notes to consolidated balance sheet.
<PAGE>
FFP Partners, L.P., and Subsidiary
Notes to Consolidated Balance Sheet
December 28, 1997
1. Basis of Presentation
(a) Organization of Company
FFP Partners, L.P. ("FFPLP" or the "Company"), a Delaware limited
partnership, was formed in December 1986, pursuant to the Agreement of Limited
Partnership of FFP Partners, L.P. (the "Partnership Agreement"), with FFP
Partners Management Company, Inc. ("FFPMC") as its general partner. In May 1987,
FFPLP purchased convenience stores, truck stops, other retail motor fuel
outlets, and ancillary businesses from affiliates of its general partner. The
purchase of these outlets was completed in conjunction with the Company's
initial public offering of Class A Units of limited partnership interest.
Through its subsidiaries, FFPLP owned and operated these outlets, and other
businesses, until December 1997.
In December 1997, FFPLP completed a restructuring by which the real
estate used in the aforementioned retail operations was retained by FFPLP while
the convenience store, truck stop, other retail motor fuel outlets, and other
businesses it conducted were transferred to FFP Marketing Company, Inc. ("FFP
Marketing"), in exchange for all the common stock of FFP Marketing. The common
stock of FFP Marketing was then distributed to the general partner and limited
partners of FFPLP. The assets and liabilities in the accompanying consolidated
balance sheet of FFPLP have been reflected at the historical carrying values of
the predecesor entity prior to the restructuring. Accordingly, no gain or loss
was recognized as a result of the 1997 restructuring.
The real estate retained by FFPLP was contributed to FFP Properties,
L.P. ("FFP Properties"), a newly formed Texas limited partnership, in exchange
for the general partnership interest in FFP Properties. The limited partnership
interests in FFPLP held by John H. Harvison, the Chairman and Chief Executive
Officer of FFPMC, members of his family, and corporations, partnerships, trusts,
and other business entities affiliated with him or his family members
(collectively, the "Harvison Family") were exchanged for economically equivalent
limited partnership interests in FFP Properties, L.P. In addition, FFP Real
Estate Trust, a newly formed Texas real estate investment trust that is wholly
owned by FFPMC, became the general partner of FFPLP.
By virture of this restructuring, all of the operating activities of
FFPLP were transferred to FFP Marketing and FFPLP's future business will consist
of the ownership and rental of real estate.
The Company owns the real estate and conducts its rental activities
through FFP Properties, in which it owns a 60% general partner interest. The
minority interest in subsidiary on the consolidated balance sheet represents the
Harvison Family's 40% limited partnership interest in FFP Properties.
(b) Consolidation
The consolidated financial statement includes the accounts of the
Company and its majority owned subsidiary. All significant intercompany accounts
and transactions are eliminated in the consolidated financial statement.
2. Significant Accounting Polices
(a) Real Property
Real property is stated at cost. Depreciation is provided on the
straight-line method over the estimated useful lives of the respective assets,
which range from five to twenty years.
(b) Fair Value of Financial Instruments
The carrying amount of long-term debt approximates fair value due to
the variable interest rate on substantially all such obligations.
(c) Units Issued and Outstanding
The equity interests in the Company are comprised of Class A Units
of Limited Partnership interest and units representing the general partner
interest. The units issued and outstanding at year end 1997, after giving effect
to the restructuring, were as follows:
1997
Limited partner 2,234,262
General partner 37,416
The Company's limited partner units are traded on the American Stock
Exchange. The general partner units are held by its sole general partner, FFP
Real Estate Trust.
(d) Use of Estimates
The use of estimates is required to prepare the Company's
consolidated financial statement in conformity with generally accepted
accounting principles. Although management believes that such estimates are
reasonable, actual results could differ from the estimates.
(e) Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of such assets to future net cash flows
expected to be generated by the assets. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets.
(f) Rental Revenue
The Company recognizes rental revenues when earned.
(g) Unit Option Plan
The Company accounts for its unit option plan in accordance with the
provisions of Accounting Principles Board ("APB") Option No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. As such, compensation
expense would be recorded only if the current market price of the underlying
unit on the date of the grant of the option exceeded the exercise price of the
option.
(g) Income Taxes
As a publicly traded partnership, FFPLP pays no federal income tax.
Rather, the income or loss of FFPLP is allocated to its partners to be included
in their respective tax returns. The net difference between the tax bases and
the reported amounts of assets and liabilities at year end 1997 is $4,923,000.
3. Notes Payable and Long-Term Debt
In connection with the December 1997 restructuring of FFPLP, the
Company retained the obligation for the year end balances due under a bank
revolving credit facility ($7,439,000), a bank term loan ($7,905,000), and other
debt ($594,000) securing the real estate it also retained. However, subsidiaries
of FFP Marketing remain liable on the debt retained by FFPLP, pending its
refinancing, and could be required to repay the debt if FFPLP is unable to do
so. Accordingly, FFPLP has indemnified FFP Marketing against this liability and
has granted to FFP Marketing the right to offset any payments FFP Marketing
might be required to make on the debt retained by FFPLP against any amounts
otherwise due to FFPLP by FFP Marketing.
Although FFPLP retained the liability for the $7,439,000 due under
the revolving credit line portion of the bank debt at the date of the December
1997 restructuring, FFP Marketing retains availability under this revolving
credit facility. The revolving credit line provides for borrowings up to
$15,000,000, with the amount available at any time related to a borrowing base
comprised of FFP Marketing's trade receivables and inventories. To the extent
that borrowings under this credit facility fall below the $7,439,000 balance
retained by FFPLP they are treated as loans by FFP Marketing to FFPLP and FFPLP
will pay interest to FFP Marketing on such amounts at the lender's prime rate,
which is same rate that is payable to the lender. FFP Marketing bears the
interest cost on any balances under the revolving credit facility that exceed
the $7,439,000 amount.
The revolving credit facility and the bank term loan both bear
interest at the lender's prime rate, payable monthly; the term loan requires
monthly principal payments of $95,000; and both loans mature in November 2000.
The loans are subject to a Loan and Security Agreement among FFP Partners and
two companies that prior to the December 1997 restructuring were subsidiaries of
FFP Partners but are now subsidiaries of FFP Marketing. The agreement contains
various restrictive convenants including financial covenants relating to the
maintenance of a specified minimum tangible net worth, a debt to tangible net
worth ratio, and a cash flow coverage ratio, all as defined in the agreement. As
a result of the restructuring, these ratios are caculated on a combined basis
for FFPLP and FFP Marketing. As of year end, FFPLP and FFP Marketing were not in
compliance with certain requirements under the loan agreement; the lender has
waived declaring a default due to such noncompliance. The loans under the
agreement are secured by a negative pledge of the assets of FFPLP. They are also
secured by FFP Marketing's trade accounts receivable, inventories, and its
equipment not otherwise encumbered, and by a negative pledge of its other
assets.
FFPLP expects to refinance the bank and other debt during 1998. The
Company anticipates that FFP Marketing will have no liability for the
obligations that refinance the existing debt.
The Company has other notes payable which bear interest at 6% to 10%
and are due in monthly or annual installments through 2012. Such notes are
secured by land and had aggregate balances of $594,000 at December 28, 1997.
The aggregate fixed maturities of long-term debt for each of the
five yeras subsequent to 1997 are as follows:
(In thounsands)
1998 $1,208
1999 1,299
2000 13,118
2001 55
2002 53
Thereafter 205
-------
$15,938
=======
4. Nonqualified Unit Option Plan and Unit Purchase Rights.
The Company has outstanding at year end 1997 nonqualified options to
acquire 241,999 Class A Units. Such options were granted under its Nonqualified
Unit Option Plan and a Nonqualified Unit Option Plan for Nonexecutive Employees.
The Nonqualified Unit Option plan has terminated and no further options under it
may be granted. There are 37,998 units available for grant under the
Nonqualified Unit Option Plan for Nonexecutive Employees.
All options to acquire Class A Units of FFPLP that were outstanding
at the completion of the December 1997 restructuring of FFPLP were divided into
separate options to purchase Class A Units of FFPLP and a like number of FFP
Marketing common shares. The exercise price for the existing FFPLP unit options
was divided between the two new options in proportion to the closing price on
the American Stock Exchange of FFPLP Class A Units and FFP Marketing common
shares. The adjusted exercise prices of the unit options outstanding at year end
1997 are:
Exercise Options
Price Outstanding
$1.211 165,333
1.252 6,666
1.393 20,000
1.938 25,000
2.261 25,000
-------
241,999
=======
The weighted average exercise price of outstanding options at year
end was $1.41 with a remaining contractual life of 5.5 years. The weighted
average exercise price of the 205,333 options exercisable at year end was $1.36.
In August 1989, the Company entered into a Rights Agreement and
distributed to its unitholders rights to purchase Rights Units (substantially
equivalent to a Class A Unit) under certain circumstances. Initially the Rights
were attached to all unit certificates representing units then outstanding and
no separate Rights Certificates were distributed. Under the Rights Agreement,
the Rights were to separate from the Units and be distributed to Unitholders
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") had acquired, or obtained a right to
acquire, beneficial ownership of 20% or more of the Partnership's Class A Units
or all classes of outstanding Units. On August 8, 1994, a group of Unitholders
announced that they had an informal understanding that they would vote their
Units together as a block. The agreement related to units constituting
approximately 25% of the Class A Units then outstanding. Therefore, the Rights
became exercisable on October 7, 1994, the record date for the issuance of the
Rights Certificates (the "Distribution Date").
The Rights currently represent the right to purchase a Rights Unit
(which is substantially equivalent to a Class A Unit) of the Company at a price
of $20.00 per Unit. However, the Rights Agreement provides, among other things,
that if any person acquires 30% or more of the Class A Units or of all classes
of outstanding Units then each holder of a Right, other than an Acquiring Person
(as defined in the Rights Agreement), will have the right to receive, upon
exercise, Rights Units (or in certain circumstances, other property) having a
value of $40.00 per Unit. The Rights will expire on August 13, 1999, and do not
have any voting rights or rights to cash distributions.
5. Leases.
The real property owned by the Company is being leased to FFP
Marketing under operating leases which generally expire in 2002 with two
five-year renewal periods at the sole option of FFP Marketing. Future minimum
rent under these leases is $2,430,000 annualy through 2002.
THIRD AMENDMENT TO THE
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
FFP PARTNERS, L.P.
This Third Amendment (this "Amendment") to the Amended and Restated
Agreement of Limited Partnership of FFP Partners, L.P. (the "Partnership") is
effective as of the 28th day of December, 1997, by and among FFP Partners
Management Company, Inc. a Delaware corporation, as the outgoing General
Partner of the Partnership ("FFPMC"), FFP Real Estate Trust, a Texas real
estate investment trust, as the incoming General Partner (the "REIT") and the
Limited Partners of the Partnership as reflected on the records of the
Partnership.
The Partnership was formed by the filing of a certificate of limited
partnership with the Secretary of State of Delaware on December 31, 1986.
The agreement of limited partnership was amended and restated on May 21,
1987, and further amended by the First Amendment to the Amended and Restated
Agreement of Limited Partnership dated August 14, 1989, and the Second
Amendment to the Amended and Restated Agreement of Limited Partnership dated
July 12, 1991, and as it currently exists is referred to as the "Partnership
Agreement." Terms used in this Amendment and not otherwise defined herein
shall have the meanings given them in the Partnership Agreement.
FFPMC is now the General Partner of the Partnership.
The Board of Directors of FFPMC has approved a restructuring of the
Partnership, as a result of which, upon the occurrence of certain later
events, the REIT will become the General Partner of the Partnership and
Limited Partners will be able to have their Units redeemed for cash or Units
of the REIT, in the discretion of the REIT.
To facilitate the operation and trading of the REIT, to the benefit of
the Limited Partners, the Board of Directors of FFPMC has approved these
amendments to the Agreement.
Limited Partners whose Percentage Interests constitute at least the
minimum amount of Percentage Interests necessary to approve the amendments
have approved the amendments.
FFPMC, acting on behalf of itself and on behalf of the Limited Partners
pursuant to the power of attorney contained in Section 1.4 of the Partnership
Agreement, and the REIT, as the incoming General Partner, therefore desire to
amend the Amended and Restated Agreement of Limited Partnership pursuant to
Article XV thereof.
NOW THEREFORE, the Agreement is amended as follows:
1. Article II, "Definitions," is hereby amended by the inclusion of or
changes to the following terms:
"Adoption Date" means the effective date of the REIT's
election to be taxed as a real estate investment trust for
purposes of the Code, as determined by the Trust Managers of the
REIT by duly adopted resolution.
"Associated Persons" means (i) a Trust Manager, director,
officer or employee of the REIT, the General Partner or the
Partnership; (ii) any entity in which such Person directly or
indirectly owns more than a 10% interest; (iii) any trust or
estate in which such Person has a substantial beneficial interest
or a to which such Person serves as trustee; or (iv) any member
of the immediate family of such Person.
"Cash Amount" means an amount of cash equal to the REIT
Share Price on the Valuation Date of the REIT Shares Amount.
"Conversion Factor" means 1.0; provided, however, that if
the REIT (i) declares or pays a dividend on its outstanding REIT
Shares in REIT Shares or makes a distribution to all holders of
its outstanding REIT Shares in REIT Shares, (ii) subdivides its
outstanding REIT Shares or (iii) combines its outstanding REIT
Shares into a smaller number of REIT Shares, the Conversion
Factor shall be adjusted by multiplying the Conversion Factor
then in effect by a fraction, the numerator of which shall be the
number of REIT Shares issued and outstanding on the record date
for such dividend or distribution or the effective date for such
subdivision or combination (assuming for such purposes that such
dividend or distribution or such subdivision or combination
occurred as of such time), and the denominator of which shall be
the actual number of REIT Shares (determined without the above
assumption) issued and outstanding on the record date for such
dividend or distribution or the effective date for such
subdivision or combination. Any adjustment to the Conversion
Factor shall become effective immediately after the record date
for such dividend or distribution or the effective date of such
subdivision or combination.
"Declaration of Trust" means the Declaration of Trust of
the REIT, as amended from time to time in accordance with its
terms.
"Effective Date" means the date of this Amendment.
"General Partner" means the REIT, or its successor in its
capacity as general partner of the Partnership.
"Independent Trust Manager" means a Trust Manager who is
not an employee of the REIT or of any Affiliate of the REIT.
"New Securities" means (i) for the Partnership, any
additional Partnership Interests or rights, options, warrants or
convertible or exchangeable securities having the right to
subscribe for or purchase Partnership Interests issued after the
Effective Date and (ii) for the REIT, any additional REIT Shares
(other than REIT Shares issued pursuant to Section 7.6) or
rights, options, warrants or convertible or exchangeable
securities having the right to subscribe for or purchase REIT
Shares issued after the Effective Date.
"Operating Partnership" means FFP Properties, L.P. and any
other partnerships, corporations, limited liability companies or
other entities through which the Partnership does business.
"Properties" means interests in the Operating Partnership
and other interests in real property acquired by the Partnership
from time to time.
"QRS" means any "qualified REIT subsidiary" as defined in
Section 856(i)(2) of the Code.
"Redeeming Partner" has the meaning set forth in Section
7.6(a).
"Redemption Amount" means the Cash Amount or REIT Shares
Amount, as determined by the General Partner in its sole and
absolute discretion. A Redeeming Partner shall have no right,
without the REIT's consent, to receive the Redemption Amount in
the form of the REIT Shares Amount.
"Redemption Notice" means the Redemption Notice
substantially in the form of Exhibit A to this Agreement.
"Redemption Right" shall have the meaning set forth in
Section 7.6(a).
"Real Estate Investment Trust" means a real estate
investment trust under section 856 of the Code.
"REIT" means FFP Real Estate Trust, a Texas real estate
investment trust.
"REIT Common Share" means common shares, par value $0.01 of
the REIT.
"REIT Preferred Share" means preferred shares, par value
$0.01 of the REIT
"REIT Share" means either a REIT Common Share or a REIT
Preferred Share, as the context requires.
"REIT Share Price" means, as of any date of determination
(a) if the REIT Shares are listed or admitted to trading on one
or more National Securities Exchanges, the average of the last
reported sale price per REIT Share regular way, or, in case no
such reported sale has taken place on any such day, the average
of the last reported bid and asked prices per REIT Share regular
way, in either case on the principal National Securities Exchange
on which the REIT Shares are listed or admitted to trading, for
the four trading days immediately preceding the date of
determination, (b) if the REIT Shares are not listed or admitted
to trading on a National Securities Exchange but are quoted on
NASDAQ, the average of the closing bid price per REIT Share for
the four trading days immediately preceding such date of
determination, as furnished by the National Quotation Bureau
Incorporated, or other such nationally recognized quotation
service as may be selected by the General Partner for such
purpose if said Bureau is not at the time furnishing quotations,
or (c) if the REIT Shares are not listed for trading on a
National Securities Exchange or quoted by NASDAQ, an amount equal
to the fair market value of a REIT Share as of such date of
determination, as determined by the General Partner using any
reasonable method of valuation.
"REIT Shares Amount" shall mean a number of REIT Shares
equal to the product of the number of Shares offered for
redemption by a Redeeming Partner, multiplied by the Conversion
Factor; provided, however, that if the REIT issues to all holders
of REIT Shares rights, options, warrants or convertible or
exchangeable securities entitling the shareholders to subscribe
for or purchase the REIT Shares or any other securities or
property, the value of which is not included in the value of the
REIT Shares (collectively, the "Rights") then the REIT Shares
Amount shall also include the Rights that a holder of that number
of REIT Shares would be entitled to receive.
"REIT Termination Date" means the first day after the date
on which at least a majority of the Independent Trust Managers
determine by duly adopted resolution that it is no longer in the
best interests of the REIT to attempt to qualify as a real estate
investment trust.
"Specified Redemption Date" means the tenth Business Day
after receipt by the General Partner of a Redemption Notice.
"Trust Managers" means the trust managers of the REIT, as
elected and qualified from time to time.
"Valuation Date" means the date of receipt by the REIT of a
Redemption Notice or, if such date is not a Business Day, the
first Business Day thereafter.
2. Article II, "Definitions," shall be amended, on the Adoption Date, by
deleting the definition "Unit Price" in its entirety and, thereafter, all
references in the Partnership Agreement to Unit Price shall be deemed to be
references to REIT Share Price.
3. Article III, "Purpose," is hereby deleted in its entirety and replaced
by the following:
"(a) Purpose. The purpose and business of the Partnership
shall be any business which may be lawfully conducted by a
limited partnership organized pursuant to the Delaware Act,
including, without limitation, directly or indirectly, the
(i) owning, operating, maintaining, administering, developing,
holding, improving, rehabilitating, redeveloping, renovating,
expanding, leasing, mortgaging, selling, exchanging, disposing
of, and generally dealing in and with, real estate and related
assets and any other property owned by the Partnership,
(ii) financing or refinancing for any of the foregoing purposes,
or for any other purpose in furtherance of, or necessary,
convenient, or incidental to the business or requirements of the
Partnership, (iii) seeking to acquire, acquiring, obtaining
options or other rights to acquire (pursuant to a purchase for
cash and/or other consideration, exchange, merger, contribution
to the capital of the Partnership, or otherwise) interests in, or
in Persons owning, or owning an interest or interests in property
or properties in anticipation of developing same, or any other
property as shall be specifically, in all such cases, designated
from time to time by the REIT, (iv) holding an interest as a
partner (general and/or limited), member or shareholder in a
management leasing, development, administrative or other service
company, including interests incidental to such interests, and
(v) engaging in any other activities (including the ownership of
property that is in furtherance of or necessary or incidental or
related to any of the foregoing).
(b) Real Estate Investment Trust Requirements.
Notwithstanding anything to the contrary contained in this
Agreement, from the Adoption Date and until the REIT Termination
Date and for so long as the REIT is a Partner, the Partnership
shall operate in such a manner and the Partnership shall take or
omit to take all actions as may be necessary (including making
appropriate distributions from time to time), so as to permit the
REIT (i) to continue to qualify as a Real Estate Investment Trust
under Sections 856 through 860 of the Code so long as such
requirements exist and as such provisions may be amended from
time to time, or corresponding provisions of succeeding law (the
"REIT Requirements"), and (ii) to minimize its exposure to the
imposition of an excise tax under Section 4981(a) of the Code or
a tax under Section 857(b) of the Code, so long as such taxes may
be imposed and as such provisions may be amended from time to
time, or corresponding provisions of succeeding law, each of (i)
and (ii) to at all times be determined (a) as if the REIT's sole
asset is its Partnership Interest, and (b) without regard to the
action or inaction of the REIT with respect to distributions (by
way of dividends or otherwise) and the timing thereof."
4. Article IV, "Capital Contributions," is hereby amended to include a new
Section 4.11 in its entirety as follows:
"4.11 New Securities. Notwithstanding anything to the contrary in this
Agreement:
(a) New Securities of the Partnership may not
be issued to the General Partner unless either (1)(A)
the New Securities of the Partnership are issued in
connection with the grant, award or issuance of New
Securities of the REIT that have designations,
preferences and other rights such that the economic
interests attributable to such New Securities of the
REIT are substantially similar to the designations,
preferences and other rights of the New Securities of
the Partnership issued to the REIT and (B) the REIT
shall make a capital contribution to the Partnership
in an amount equal to the proceeds, if any, raised in
connection with the issuance of such New Securities
of the REIT (subject to actual or deemed
reimbursement of any expenses, including underwriting
discount, commissions, or fees by the Partnership to
the General Partner pursuant to Section 6.5), or (2)
the New Securities of the Partnership are issued to
all Partners in proportion to their respective
Percentage Interests in the Partnership.
(b) The REIT may not grant, award or issue
New Securities of the REIT other than to all holders
of REIT Shares unless (i) the REIT shall cause the
Partnership to issue to the REIT New Securities of
the Partnership having designations, preferences and
other rights, all such that the economic interests
are substantially the same as those of the New
Securities of the REIT; and (ii) the REIT makes a
capital contribution to the Partnership of the
proceeds from the grant, award or issuance of such
New Securities of the REIT (subject to actual or
deemed reimbursement of any expenses, including
underwriting discount, commission or fees by the
Partnership to the REIT pursuant to Section 6.5).
Without limiting the foregoing, the REIT is expressly
authorized to grant, award or issue New Securities
for less than fair market value, and to cause the
Partnership to issue to the REIT corresponding
Partnership Interests, so long as the REIT concludes
in good faith that such issuance is in the best
interests of the Partnership."
5. Article V, "Allocation and Distribution," is hereby amended as follows:
Section 5.1(a) is hereby replaced in its entirety with the following:
"For purposes of maintaining the Capital Accounts and in determining
the rights of the Partners among themselves, except as otherwise provided in
this Section 5.1, Operating Income, Operating Loss, and all items of income
gain, loss and deduction from a Terminating Capital Transaction recognized
during a fiscal year of the Partnership shall be allocated among the Partners
in accordance with their respective Percentage Interests."
Section 5.3(a) is hereby replaced in its entirety with the following:
"(a) The General Partner may from time to time in its sole discretion
cause the Partnership to distribute cash, Units, and other property to the
Partners in accordance with their Percentage Interests; provided, however,
that the proceeds from a Terminating Capital Transaction shall be distributed
solely in accordance with Article XIV, after the allocation of any item of
income, gain, loss or deduction with respect thereto and concomitant
adjustment in the Partners' Capital Accounts as a result thereof.
Notwithstanding the foregoing, from the Adoption Date and until the REIT
Termination Date, the REIT shall use its best efforts to cause the
Partnership to distribute sufficient amounts of cash to the REIT to enable
the REIT to pay shareholder dividends that will (a) satisfy the distribution
requirements for qualification as a Real Estate Investment Trust as set forth
in Section 857 of the Code and (b) avoid any federal income or excise tax
liability being imposed on the REIT by the Code; provided, however, that in
no event may a Partner receive a distribution of cash with respect to a Unit
if such Partner is entitled to receive a distribution of such cash with
respect to a REIT Share for which such Unit has been redeemed or exchanged."
Sections 5.3(c) and (d) are hereby deleted in their entirety.
Effective on the Adoption Date, Section 5.3(e) is deleted in its
entirety.
6. Article VI, "Management and Operation of Business," is hereby amended
as follows:
The following is hereby added at the end of Section 6.1(a):
"and (xiii) the taking of any such other action, executing, acknowledging,
swearing to or delivering such other documents or instruments, and performing
any and all other acts that the General Partner deems necessary or
appropriate for the formation, continuation and conduct of the business and
affairs of the Partnership (including, without limitation, all actions
consistent with allowing the REIT at all times to qualify as a Real Estate
Investment Trust from the Adoption Date to the REIT Termination Date) and to
possess and enjoy all of the rights and powers of a general partner as
provided by the Act."
Section 6.5(b) is hereby replaced in its entirety with the following:
"(b) The REIT shall be reimbursed for all expenses, disbursements and
advances incurred or made in connection with the organization and/or
reorganization of the Partnership, the Operating Partnership and/or the REIT,
the qualification of the Partnership, the Operating Partnership, the REIT
and/or the General Partner to do business, any initial or subsequent offering
of REIT Shares by the REIT and any other issuance of additional Partnership
Interests, REIT Shares or New Securities."
The next to last sentence of Section 6.5(c) is hereby replaced with the
following:
"The Limited Partners acknowledge that the REIT's sole business is the
ownership of Partnership Interests and related assets in connection with the
operation of the Partnership and that all of the REIT's expenses are incurred
for the benefit of the Partnership."
Section 6.5(d) is hereby replaced in its entirety with the following:
"(d) The REIT in its sole discretion and without the approval of the
Limited Partners may propose and adopt benefit plans, including plans
involving the issuance of Partnership Interests, for the benefit of employees
of the General Partner, the REIT, the Operating Partnership or any Affiliate
of any of them in respect of services performed, directly or indirectly, for
the benefit of the Partnership, the REIT or the Operating Partnership."
Section 6.6 (a) is hereby replaced in its entirety with the following:
"(a) Other than by means of the REIT, the Partnership and the REIT's
interest in other Persons, including the Operating Partnership, no executive
officer of the General Partner, nor any Person in which such executive
officer directly or indirectly holds a controlling interest, may own, operate
or manage, or have any equity interest in any Person owning, operating or
managing convenience stores or retail gasoline facilities, unless such
ownership or operation is first approved by a majority of the disinterested
directors of the General Partner. The foregoing shall not be deemed to apply
to the ownership by any executive officer or any member of his family of
equity securities of any publicly-held entity in the same or similar business
as the REIT, the Partnership or the Operating Partnership, provided such
equity ownership by any such Person does not exceed 10% of the total
outstanding voting securities of such entity.
The following Subsections are added in their entirety:
"(c) Notwithstanding Subsections (a) and (b) of this Section 6.6, the
REIT may engage in any and all activities required by, and relating to, the
exchange of ownership on the Effective Date.
(d) During the term of the Partnership, the REIT shall not directly
or indirectly enter into or conduct any business, other than as the General
Partner or a Limited Partner and the management of the business of the
Partnership, and such activities as are incidental thereto, and the REIT
shall not directly or indirectly enter into or conduct any business other
than in connection with the making of loans or guarantee of loans made to the
Partnership as set forth in Section 6.8, the ownership, acquisition or
disposition of Partnership Interests as a General Partner or as a Limited
Partner, the ownership of the stock of one or more QRSs as may be necessary
to facilitate acquisitions by or loans for the Partnership and such
activities as are incidental thereto or to the business of the REIT, the
Partnership or any QRS. The REIT shall not incur any indebtedness for
borrowed money unless the proceeds from such borrowing are reloaned to the
Partnership on the same terms and conditions as the borrowing by the REIT.
The REIT shall not own any assets other than Partnership Interests as a
General Partner or as a Limited Partner and debt obligations of the
Partnership, stock and debt obligations of one or more QRSs formed for the
purposes set forth above and such bank accounts and similar instruments as
may be necessary to carry out the responsibilities set forth in its
organizational documents as in effect on the Effective Date of this Agreement.
(e) During the term of the Partnership, the REIT will not engage in
any action that would result in the REIT owning any real estate or
improvements thereon other than through the Partnership (or through an
interest in any Person that is directly or indirectly owned or controlled by
the Partnership and, except to the extent that the formation of one or more
QRSs is required to cause such Person to be classified as a partnership for
federal income tax purposes, the REIT's entire economic interest in such
Person is owned through the Partnership) or conduct any business other than
directly or indirectly through the Partnership.
(f) If the REIT purchases REIT Shares, then the REIT shall cause the
Partnership to purchase from the REIT that number of Units equal to the
product of the number of REIT Shares to be purchased by the REIT (and/or the
General Partner) multiplied by the Conversion Factor on the same terms and
for the same aggregate price that the REIT purchased such REIT Shares."
The following Section 6.12(c) is hereby added in its entirety:
"(c) From the Adoption Date and until the REIT Termination Date,
notwithstanding any other provisions of this Agreement or the Act, any action
of the REIT on behalf of the Partnership or any decision of the REIT to
refrain from acting on behalf of the Partnership, undertaken in the good
faith belief that such action or omission is necessary or advisable in order
(i) to protect the ability of the REIT to qualify as a real estate investment
trust or (ii) to allow the REIT to avoid incurring any liability for taxes
under Section 857 or Section 4981 of the Code, is expressly authorized under
this Agreement and is deemed approved by all of the Limited Partners."
Section 6.14, "Maintenance of Net Worth" is hereby deleted in its
entirety
7. Article VII, "Rights and Obligations of Limited Partners," is hereby
amended to include a new Section 7.6 in its entirety as follows:
7.6 Redemption Rights.
"a) (i) Except as provided in Sections 7.6 (b) and (c) and except as
may otherwise be prohibited by the Securities Act, on or at any time after
the Adoption Date and until the REIT Termination Date, each Limited Partner,
other than the REIT shall have the right (the "Redemption Right") to require
the Partnership to redeem on a Specified Redemption Date all or a portion of
the Units held by such Limited Partner at a redemption price equal to, and in
the form of the Cash Amount to be paid by the Partnership. The Redemption
Right shall be exercised pursuant to a Redemption Notice (a form of which is
attached as Exhibit A hereto) delivered to the REIT by the Limited Partner
who is exercising the Redemption Right (the "Redeeming Partner"); provided,
however, that the Partnership shall not be obligated to satisfy such
Redemption Right if the REIT purchases the Units subject to the Redemption
Notice pursuant to Section 7.6(a)(ii). A Limited Partner may not exercise
the Redemption Right for less than 100 Units or, if such Limited Partner
holds less than 100 Units, all of the Units held by such Limited Partner.
The Redeeming Partner shall have no right, with respect to any Units so
redeemed, to receive any distributions paid after the Specified Redemption
Date if the Partnership Record Date for that distribution is after the
Specified Redemption Date. The Assignee of any Limited Partner may exercise
the rights such Limited Partner has pursuant to this Section 7.6(a)(i) (in
which case the Assignee will be the "Redeeming Partner" for the purposes of
the rights and restrictions contained in this Section 7.6) and such Limited
Partner shall be deemed to have assigned such rights to such Assignee and
shall be bound by the exercise of such rights by such Limited Partner's
Assignee. In connection with any exercise of such rights by such Assignee on
behalf of such Limited Partner, the Redemption Amount shall be paid by the
Partnership directly to such Assignee and not to such Limited Partner.
(ii) Notwithstanding the provisions of Section 7.6(a)(i), a
Limited Partner or Assignee who exercises a Redemption Right shall be deemed
to have offered to sell the Units described in the Redemption Notice to the
REIT, and the REIT may, in its sole and absolute discretion, assume directly
and satisfy a Redemption Right by paying to the Redeeming Partner the
Redemption Amount on the Specified Redemption Date, whereupon the REIT shall
acquire the Units offered for redemption by the Redeeming Partner and shall
be treated for all purposes of this Agreement as the owner of such Units. If
the REIT shall exercise its right to satisfy the Redemption Right in the
manner described in the preceding sentence, the Partnership shall have no
obligation to pay any amount to the Redeeming Partner with respect to such
Redeeming Partner's exercise of the Redemption Right and each of the
Redeeming Partner and the Partnership, shall treat the transaction between
the REIT and the Redeeming Partner as a sale of the Redeeming Partner's
Partnership Units to the REIT for federal income tax purposes. Each
Redeeming Partner agrees to execute such documents as the REIT may reasonably
require in connection with the issuance of REIT Shares upon the Partner's
exercise of the Redemption Right. If the REIT elects to assume and satisfy
the Redemption Right, the REIT may deliver REIT Shares as payment of the
Redemption Amount to the Limited Partner only if the REIT Shares are
registered for sale to the public under applicable securities laws, to the
extent required.
(iii) Notwithstanding the provisions of Section 7.6(a)(i),a
Limited Partner or Assignee shall not be entitled to exercise a Redemption
Right pursuant to Section 7.6(a)(i) if the delivery of REIT Shares to such
Limited Partner or Assignee by the REIT on the Specified Redemption Date
pursuant to Section 7.6(a)(ii) (regardless of whether the REIT would, in
fact, exercise its rights under Section 7.6(a)(ii)) would cause such Limited
Partner or Assignee to violate the Ownership Limit or any other terms of the
REIT's Declaration of Trust. The REIT, in its sole and absolute discretion,
however, may elect to acquire such Units in exchange for the Cash Amount
attributable to such Units.
(iv) Notwithstanding the provisions of Section 7.6(a)(i), a
Limited Partner or Assignee shall not be entitled to exercise the Redemption
Right pursuant to Section 7.6(a)(i) if the delivery of REIT Shares to such
Limited Partner or Assignee by the REIT on the Specified Redemption Date
pursuant to Section 7.6(a)(ii) (regardless of whether the REIT would, in
fact, exercise its rights under Section 7.6(a)(ii)) would be prohibited under
applicable law.
(v) If the Redemption Right is satisfied by the REIT by the
delivery of REIT Shares, the Redeeming Partner shall be deemed to become a
holder of REIT Shares as of the close of business on the Specified Redemption
Date.
(b) Each Limited Partner and Assignee covenants and agrees with the
REIT that all Units delivered for redemption shall be delivered to the
Partnership or the REIT free and clear of all liens, and should any liens
exist or arise with respect to such Units, neither the Partnership, nor the
REIT shall be under any obligation to acquire the same. Each Limited Partner
and Assignee further agrees that, if any state or local property transfer tax
is payable as a result of the transfer of its Units to the Partnership or the
REIT, such Limited Partner or Assignee shall assume and pay such transfer
tax, and neither the Partnership nor the REIT shall have any obligation to
complete the transfer until such transfer tax has been paid.
(c) If more than one Unit shall be redeemed for REIT Shares at the
same time by the same Redeeming Partner, the number of full REIT Shares that
shall be issuable upon the exercise thereof shall be computed on the basis of
the aggregate number of REIT Shares represented by the Units so presented.
If any fraction of a REIT Share would be issuable upon the redemption of any
Units, the Partnership or the REIT shall pay an amount in cash equal to the
value of a REIT Share multiplied by such fraction.
(d) Nothing contained in this Agreement shall be construed as
conferring upon the holders of the Units the right to vote or to receive
dividends or other distributions or to consent or to receive notice as
shareholders in respect of any meeting of shareholders for the election of
Trust Managers or any other matter, or any rights whatsoever as shareholders
of the REIT prior to the issuance of REIT Shares on the Specified Redemption
Date. The REIT hereby agrees to reserve for issuance sufficient REIT Shares
to satisfy the Redemption Amount for all Limited Partners."
8. Article XI, "Transfer of Interests" is hereby amended by adding the
following Sections in their entirety as follows:
"11.9 Restrictions on Transfer of Units. Notwithstanding the terms of
this Article XI, after the date to be set forth by the Board of Trust
Managers (such date to be no earlier than the Adoption Date,) no outstanding
Unit may be sold, pledged, hypothecated or otherwise transferred to any
Person, other than to the REIT or the Partnership pursuant to Section 7.6, or
a pledge, hypothecation or encumbrance of Units by the REIT unless, prior to
such transfer, such Unit is exchanged for REIT Shares pursuant to the terms
of Section 7.6.
Section 11.10 Restrictions on Ownership, Transfer, Acquisition and
Redemption of Units.
(a) Sections 11.10 through 11.15 hereof shall be in effect until the
Adoption Date, after which date Sections 11.9 through 11.15 shall apply.
(b) Definitions. For purposes of Sections 11.10 and 11.11, the
following terms shall have the following meanings:
"Acquire" shall mean the acquisition of Beneficial or
Constructive Ownership of Units by any means, including, without limitation,
the exercise of any rights under any option, warrant, convertible security,
pledge or other security interest or similar right to acquire Units, but
shall not include the acquisition of any such rights unless, as a result, the
acquiror would be considered a Constructive Owner. The terms "Acquires" and
"Acquisition" shall have correlative meanings.
"Beneficiary" shall mean a beneficiary of the Excess Units Trust
as determined pursuant to paragraph (a) of Section 11.11.
"Closing Price" on any day shall mean the last sale price,
regular way on such day, or, if no such sale takes place on that day, the
average of the closing bid and asked prices, regular way, in either case as
reported on the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the American Stock
Exchange, or if the affected class or series of Units is not so listed or
admitted to trading on the American Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to
securities listed on the principal United States securities exchange
registered under the Securities Exchange Act of 1934 on which the affected
class or series of Units is listed or admitted to trading or, if the affected
class or series of Units is not so listed or admitted to trading, the last
quoted price or, if not quoted, the average of the high bid and low asked
prices on NASDAQ or any other nationally recognized automated quotation
system then in use, or, if the affected class or series of Units is not so
quoted by any such system, the average of the closing bid and asked prices as
furnished by a professional market maker selected by the General Partner
making a market in the affected class or series of Units, or, if there is no
such market maker or such closing prices otherwise are not available, the
fair market value of the affected class or series of Units as of such day, as
determined by the General Partner in its discretion.
Person who would be treated as an owner of such Units, either actually or
constructively, directly or indirectly, through the application of Section
318 of the Code, as modified by Section 7704(d)(3)(B) thereof. The terms
"Constructive Owner," "Constructively Own," "Constructively Owns" and
"Constructively Owned" shall have correlative meanings.
"Conversion Date" shall mean the first date that limited partners
of FFP Partners, L.P. are permitted or required to exchange units of FFP
Partners, L.P. for REIT Common Shares.
"Excess Units" shall mean Units exchanged as provided in
paragraph (d) of this Section 11.10.
"Excess Units Trust" shall mean the trust created pursuant to
paragraph (a) of Section 11.11.
"Excess Units Trustee" shall mean the Partnership as trustee for
the Excess Units Trust, and any successor trustee appointed by the Trust.
"Market Price" on any day shall mean the average of the Closing
Prices for the ten (10) consecutive Trading Days immediately preceding such
day (or those days during such 10-day period for which Closing Prices are
available).
"Ownership Limit" shall mean 4.9 percent of the outstanding Units
of the Partnership.
"Person" shall mean an individual, corporation, partnership,
estate, trust (including a trust qualified under Section 401(a) or 501(c)(17)
of the Code), a portion of a trust permanently set aside for or to be used
exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 509(a) of the
Code, joint stock company or other entity, or a group as that term is used
for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended.
"Purported Beneficial Holder" shall mean, with respect to any
event or transaction other than a purported Transfer or Acquisition which
results in Excess Units, the Person for whom the applicable Purported Record
Holder held the Units that were, pursuant to paragraph (c) of this Section
11.10, automatically exchanged for Excess Units upon the occurrence of such
event or transaction. The Purported Beneficial Holder and the Purported
Record Holder may be the same Person.
"Purported Beneficial Transferee" shall mean, with respect to any
purported Transfer or Acquisition which results in Excess Units, the
purported beneficial transferee for whom the Purported Record Transferee
would have acquired Units if such Transfer or Acquisition had been valid
under paragraph (c) of this Section 11.10. The Purported Beneficial
Transferee and the Purported Record Transferee may be the same Person.
"Purported Record Holder" shall mean, with respect to any event
or transaction other than a purported Transfer or Acquisition which results
in Excess Units, the record holder of the Units that were, pursuant to
paragraph (c) of this Section 11.10, automatically exchanged for Excess Units
upon the occurrence of such an event or transaction. The Purported Record
Holder and the Purported Beneficial Holder may be the same Person.
"Purported Record Transferee" shall mean, with respect to any
purported Transfer or Acquisition which results in Excess Units, the record
holder of the Units if such Transfer had been valid under paragraph (b) of
this Section 11.10. The Purported Record Transferee and the Purported
Beneficial Transferee may be the same Person.
"Trading Day" shall mean a day on which the principal national
securities exchange on which the affected class or series of Units is listed
or admitted to trading is open for the transaction of business or, if the
affected class or series of Units is not listed or admitted to trading, shall
mean any day other than a Saturday, Sunday or other day on which banking
institutions in the State of New York are authorized or obligated by law or
executive order to close.
"Transfer" shall mean any sale, transfer, gift, hypothecation,
assignment, devise or other disposition of a direct or indirect interest in
Units or the right to vote or receive dividends on Units (including (i) the
granting of any option (including any option to acquire an option or any
series of such options) or entering into any agreement for the sale, transfer
or other disposition of Units or the right to vote or receive dividends on
Units or (ii) the sale, transfer, assignment or other disposition of any
securities or rights convertible into or exchangeable for Units, whether
voluntary or involuntary, of record, constructively or beneficially, and
whether by operation of law or otherwise. The terms "Transfers,"
"Transferred" and "Transferable" shall have correlative meanings.
(c) Ownership and Transfer Limitations.
(i) Notwithstanding any other provision of this Partnership
Agreement, except as provided in paragraph (j) of this Section 11.10 and
Section 11.11, from and after the Effective Date, no Person other than the
REIT shall Constructively Own Partnership Units in excess of the Ownership
Limit.
(ii) Notwithstanding any other provision of this Partnership
Agreement, except as provided in paragraph (j) of this Section 11.10 and
Section 11.12, from and after the Effective Date, any Transfer, Acquisition,
change in the capital structure of the Partnership, or other purported change
in Constructive Ownership of Units or other event or transaction that, if
effective, would result in any Person other than the REIT Constructively
Owning Units in excess of the applicable Ownership Limit shall be void ab
initio as to the Transfer, Acquisition, change in the capital structure of
the Partnership, or other purported change in Constructive Ownership or other
event or transaction with respect to that number of Units which would
otherwise be Constructively Owned by such Person in excess of the applicable
Ownership Limit, and none of the Purported Beneficial Transferee, the
Purported Record Transferee, the Purported Beneficial Holder or the Purported
Record Holder, as applicable, shall acquire any rights in that number of
Units.
(iii) Notwithstanding any other provision of this Partnership
Agreement, except as provided in Section 11.10(j), from and after the
Effective Date, any Transfer, Acquisition, change in capital structure of the
Partnership, or other purported change in Constructive Ownership of Units or
other event or transaction that, if effective, would (i) cause the
Partnership to own (directly or Constructively) an interest in a tenant, the
rents received or accrued from whom would not qualify as rents from real
property under Section 7704(c)(3) and (ii) cause the Partnership to fail to
satisfy any of the gross income requirements of Section 7704(c)(3) of the
Code, shall be void ab initio as to the Transfer, Acquisition, change in
capital structure of the Partnership, or other purported change in
Constructive Ownership or other event or transaction with respect to that
number of Units which would cause the Partnership to own an interest
(directly or Constructively) in a tenant, the rents received or accrued from
whom would not qualify as rents from real property under Section 7704(c)(3),
and none of the Purported Beneficial Transferee, the Purported Record
Transferee, the Purported Beneficial Holder or the Purported Record Holder
shall acquire any rights in that number of Units.
(d) Exchange for Excess Units.
(i) If, notwithstanding the other provisions contained in this
Article XI, at any time from and after the Effective Date, there is a
purported Transfer, Acquisition, change in the capital structure of the
Partnership, or other purported change in the Constructive Ownership of Units
or other event or transaction such that any Person would Constructively Own
Units in excess of the applicable Ownership Limit or then, except as
otherwise provided in paragraph (j) of this Section 11.10, such number of
Units (rounded up to the next whole number of Units) in excess of the
applicable Ownership Limit automatically shall be exchanged for an equal
number of Excess Units having terms, rights, restrictions and qualifications
identical thereto, except to the extent that this Article XI requires
different terms. Such exchange shall be effective as of the close of
business on the business day next preceding the date of the purported
Transfer, Acquisition, change in capital structure, or other purported change
in Constructive Ownership of Units or other event or transaction.
(ii) If, notwithstanding the other provisions contained in this
Article XI, at any time from and after the Effective Date, there is a
purported Transfer, Acquisition, change in the capital structure of the
Partnership, or other purported change in Constructive Ownership of Units or
other event or transaction which, if effective, would result in a violation of
any of the restrictions described in subparagraphs (ii) or (iii) of paragraph
(c) of this Section 11.10 or, directly or indirectly, would for any reason
cause the Partnership to fail to be classified as a partnership under the
Code, then the number of Units (rounded up to the next whole number of Units)
being Transferred or Acquired or which are otherwise affected by the change in
capital structure or other purported change in Constructive Ownership or other
event or transaction and which would result in a violation of any of the
restrictions described in subparagraphs (ii) and (iii) of paragraph (c) of
this Section 11.10 or, directly or indirectly, would for any reason cause the
Partnership to fail to be classified as a partnership under the Code,
automatically shall be exchanged for an equal number of Excess Units having
terms, rights, restrictions and qualifications identical thereto, except to
the extent that this Article XI requires different terms. Such exchange shall
be effective as of the close of business on the business day prior to the date
of the purported Transfer, Acquisition, change in capital structure, or other
purported change in Constructive Ownership or other event or transaction.
(iii) The General Partner recognizes that Section 11.10(d)(i) or
Section 11.10(d)(ii) may become operative because of the purported ownership
of Units by two or more (i) partners of a partnership, (ii) shareholders of a
corporation or (iii) members of any other Person. In such event, the General
Partner shall have the authority in its sole, complete and absolute
discretion to determine the number of Units and the identity of the Units of
each partner, shareholder or member that automatically shall be exchanged for
an equal number of Excess Units.
(e) Remedies For Breach. If the General Partner or its designee
shall at any time determine in good faith that a Transfer, Acquisition, or
change in the capital structure of the Partnership or other purported change
in Constructive Ownership or other event or transaction has taken place in
violation of paragraph (c) of this Section 11.10 or that a Person intends to
Acquire or has attempted to Acquire Constructive Ownership of any Units in
violation of paragraph (c) of this Section 11.10, the General Partner or its
designee shall take such action as it deems advisable to refuse to give
effect to or to prevent such Transfer, Acquisition, or change in the capital
structure of the Partnership, or other attempt to Acquire Constructive
Ownership of any Units or other event or transaction, including, but not
limited to, refusing to give effect thereto on the books of the Partnership
or instituting injunctive proceedings with respect thereto; provided,
however, that any Transfer, Acquisition, change in the capital structure of
the Partnership, attempted Transfer, or other attempt to Acquire Constructive
Ownership of any Units or event or transaction in violation of subparagraphs
(ii) or (iii) of paragraph (c) of this Section 11.10 (as applicable) shall be
void ab initio and, where applicable, automatically shall result in the
exchange described in paragraph (d) of this Section 11.10, irrespective of
any action (or inaction) by the General Partner or its designee.
(f) Notice of Restricted Transfer. Any Person who Acquires or
attempts to Acquire Constructive Ownership of Units in violation of paragraph
(c) of this Section 11.10 and any Person who Constructively Owns Excess Units
as a transferee of Units resulting in an exchange for Excess Units, pursuant
to paragraph (c) of this Section 11.10, or otherwise, immediately shall give
written notice to the Partnership, or, in the event of a proposed or
attempted Transfer or Acquisition or purported change in Constructive
Ownership, shall give at least fifteen (15) days prior written notice to the
Partnership, of such event and shall promptly provide to the Partnership such
other information as the Partnership, in its sole discretion, may request in
order to determine the effect, if any, of such Transfer, attempted Transfer,
Acquisition, attempted Acquisition or other purported change in Constructive
Ownership on the Partnership's status as a partnership under the Code.
(g) Owners Required To Provide Information. From and after the
Effective Date:
(i) Every Constructive Owner of more than 5 percent, or such
lower percentage or percentages as determined pursuant to regulations under
the Code or as may be requested by the General Partner in its sole
discretion, of the outstanding Units of any class or series of Units of the
Partnership annually shall, no later than January 31 of each calendar year,
give written notice to the Partnership stating (i) the name and address of
such Constructive Owner; (ii) the number of Units of each class or series of
Units Constructively Owned; and (iii) a description of how such Units are
held. Each such Constructive Owner promptly shall provide to the Partnership
such additional information as the Partnership, in its sole discretion, may
request in order to determine the effect, if any, of such Constructive
Ownership on the Partnership's status as a partnership under the Code and to
ensure compliance with the applicable Ownership Limit and other restrictions
set forth herein.
(ii) Each Person who is a Constructive Owner of Units and each
Person (including the shareholder of record) who is holding Units for a
Constructive Owner promptly shall provide to the Partnership such information
as the Partnership, in its sole discretion, may request in order to determine
the Partnership's status as a partnership under the Code, to comply with the
requirements of any taxing authority or other governmental agency, to
determine any such compliance or to ensure compliance with the applicable
Ownership Limit and other restrictions set forth herein.
(h) Remedies Not Limited. Nothing contained in this Article XI
except Section 11.10(j) hereof shall limit the scope or application of the
provisions of this Section 11.10, the ability of the Partnership to implement
or enforce compliance with the terms thereof or the authority of the General
Partner to take any such other action or actions as it may deem necessary or
advisable to protect the Partnership and the interests of its Unitholders by
preservation of the Partnership's status as a partnership under the Code and
to ensure compliance with the applicable Ownership Limit and other
restrictions set forth herein, including, without limitation, refusal to give
effect to a transaction on the books of the Partnership.
(i) Ambiguity. In the case of ambiguity in the application of any of
the provisions of this Section 11.10, including any definition contained in
paragraph (b) hereof, the General Partner shall have the power and authority,
in its sole discretion, to determine the application of the provisions of
this Section 11.10 with respect to any situation, based on the facts known to
it.
(j) Exceptions. The General Partner, upon receipt of a ruling from
the Internal Revenue Service, an opinion of counsel, or other evidence
satisfactory to the General Partner, in its sole discretion, in each case to
the effect that the restrictions contained in subparagraphs (iii) of
paragraph (c) of this Section 11.10 will not be violated, may waive or
change, in whole or in part, the application of the applicable Ownership
Limit with respect to any Person that Constructively Owned at least 4.9% of
any class of the outstanding Units at or concurrently with the Effective
Date. In connection with any such waiver or change, the General Partner may
require such representations and undertakings from such Person or affiliates
and may impose such other conditions, as the General Partner deems necessary,
advisable or prudent, in its sole discretion, to determine the effect, if
any, of the proposed transaction or ownership of Units on the Partnership's
status as a partnership under the Code.
(k) Increase in Ownership Limit. The General Partner is hereby
expressly vested with the full power and authority from time to time to
increase the Ownership Limit. No such increase shall constitute or be deemed
to constitute an amendment of this Partnership Agreement, and shall take
effect automatically without any action on the part of any Unitholder as of
the date specified by the General Partner that is subsequent to the General
Partner's resolution approving and effecting such reduction.
(l) Legend. From and after the Effective Date, each certificate for
Units shall bear substantially the following legend:
"The securities represented by this certificate are subject
to the restrictions on transfer and ownership for the purpose of
maintenance of the status as a partnership under the Internal
Revenue Code of 1986, as amended (the "Code"). Except as
otherwise provided pursuant to the Partnership Agreement of the
Partnership, no Person may (i) Constructively Own Units of the
Partnership in excess of 4.9 percent of the outstanding Units or
(ii) Constructively Own Units (of any class or series) which
would cause the Partnership to fail to qualify as a partnership
for federal income tax purposes under any applicable Code
Section, including, without limitation, Section 7704 of the
Code. Any Person who has Constructive Ownership, or who Acquires
or attempts to Acquire Constructive Ownership of Units in excess
of the above limitations and any Person who Constructively Owns
Excess Units as a transferee of Units resulting in an exchange
for Excess Units (as described below) immediately must notify the
Partnership in writing or, in the event of a proposed or
attempted Transfer or Acquisition or purported change in the
Constructive Ownership, must give written notice to the
Partnership at least fifteen (15) days prior to the proposed or
attempted transfer, transaction or other event. Any Transfer or
Acquisition of Units or other event which results in violation of
the ownership or transfer limitations set forth in the
Partnership Agreement of the Partnership, shall be void ab initio
and the Purported Beneficial and Record Transferee shall not have
or acquire any rights in such Units. If the transfer and
ownership limitations referred to herein are violated, the Units
represented hereby automatically will be exchanged for Excess
Units to the extent of violation of such limitations, and such
Excess Units will be held in trust by the Partnership, all as
provided by the Partnership Agreement of the Partnership. All
defined terms used in this legend have the meanings identified in
the Partnership Agreement of the Partnership, as the same may be
amended from time to time, a copy of which, including the
restrictions on transfer, will be sent without charge to each
Unitholder who so requests."
Section 11.11 Excess Units.
(a) Ownership In Partnership. Upon any purported Transfer, Acquisition,
change in the capital structure of the Partnership, or other purported change
in the Constructive Ownership or event or transaction that results in Excess
Units pursuant to paragraph (d) of Section 11.10, such Excess Units shall be
deemed to have been transferred to the Partnership, as Excess Units Trustee of
an Excess Units Trust for the benefit of such Beneficiary or Beneficiaries to
whom an interest in such Excess Units may later be transferred pursuant to
paragraph (e) of this Section 11.11. Excess Units so held in trust shall be
issued and outstanding Units of the Partnership. The Purported Record
Transferee (or Purported Record Holder) shall have no rights in such Excess
Units except the right to designate a transferee of such Excess Units upon the
terms specified in paragraph (e) of this Section 11.11. The Purported
Beneficial Transferee (or Purported Beneficial Holder) shall have no rights in
such Excess Units except as provided in paragraphs (c) and (e) of this Section
11.11.
(b) Distribution Rights. Excess Units shall not be entitled to any
distributions (except as provided in Paragraph (c) of this Section 11.11).
Any distribution paid prior to the discovery by the Partnership that the
Units have been exchanged for Excess Units shall be repaid to the Partnership
upon demand, and any distribution declared but unpaid at the time of such
discovery shall be void ab initio with respect to such Excess Units.
(c) Rights Upon Liquidation.
(i) Except as provided below, in the event of any voluntary or
involuntary liquidation, dissolution or winding up, or any other distribution
of the assets, of the Partnership, each holder of Excess Units resulting from
the exchange of preferred Units of any specified series shall be entitled to
receive, ratably with each other holder of Excess Units resulting from the
exchange of preferred Units of such series and each holder of preferred Units
of such series, such accrued and unpaid dividends, liquidation preferences
and other preferential payments, if any, as are due to holders of preferred
Units of such series. In the event that holders of Units of any series of
preferred Units are entitled to participate in the Partnership's distribution
of its residual assets, each holder of Excess Units resulting from the
exchange of preferred Units of any such series shall be entitled to
participate, ratably with (i) each other holder of Excess Units resulting
from the exchange of preferred Units of all series entitled to so
participate; (ii) each holder of preferred Units of all series entitled to so
participate; and (iii) each holder of other Units and Excess Units resulting
from the exchange of other Units (to the extent permitted by paragraph (d) of
Section 11.10 hereof), that portion of the aggregate assets available for
distribution (determined in accordance with applicable law) as the number of
such Excess Units held by such holder bears to the total number of
(i) outstanding Excess Units resulting from the exchange of preferred Units
of all series entitled to so participate; (ii) outstanding preferred Units of
all series entitled to so participate; and (iii) other outstanding Units and
Excess Units resulting from the exchange of other Units. The Partnership, as
holder of Excess Units in trust, or, if the Partnership shall have been
dissolved, any trustee appointed by the Partnership prior to its dissolution,
shall distribute ratably to the Beneficiaries of the Excess Units Trust, when
determined, any such assets received in respect of the Excess Units in any
liquidation, dissolution or winding up, or any distribution of the assets, of
the Partnership. Anything to the contrary herein notwithstanding, in no
event shall the amount payable to a holder with respect to Excess Units
resulting from the exchange of preferred Units exceed (i) the price per share
such holder paid for the preferred Units in the purported Transfer,
Acquisition, change in capital structure, or other transaction or event that
resulted in the Excess Units or the price per share such holder paid for the
preferred Units that were exchanged for the Excess Units or (ii) if the
holder did not give full value for such Excess Units (as through a gift,
devise or other event or transaction), a price per share equal to the Market
Price for the preferred Units on the date of the purported Transfer,
Acquisition, change in capital structure or other transaction or event that
resulted in such Excess Units or the Market Price for the preferred Units on
the date they were exchanged for the Excess Units. Any amount available for
distribution in excess of the foregoing limitations shall be paid ratably to
the holders of preferred Units and Excess Units resulting from the exchange
of preferred Units to the extent permitted by the foregoing limitations.
(ii) Except as provided below, in the event of any voluntary or
involuntary liquidation, dissolution or winding up, or any other distribution
of the assets, of the Partnership, each holder of Excess Units resulting from
the exchange of Units shall be entitled to receive, ratably with (i) each
other holder of such Excess Units and (ii) each holder of other Units, that
portion of the aggregate assets available for distribution to holders of
Units (including holders of Excess Units resulting from the exchange of other
Units pursuant to paragraph (d) of Section 11.10 hereof), determined in
accordance with applicable law, as the number of such Excess Units held by
such holder bears to the total number of outstanding other Units and
outstanding Excess Units resulting from the exchange of other Units then
outstanding. The Partnership, as holder of the Excess Units in trust, or, if
the Partnership shall have been dissolved, any trustee appointed by the
Partnership prior to its dissolution, shall distribute ratably to the
Beneficiaries of the Excess Units Trust, when determined, any such assets
received in respect of the Excess Units in any liquidation, dissolution or
winding up, or any distribution of the assets, of the Partnership. Anything
herein to the contrary notwithstanding, in no event shall the amount payable
to a holder with respect to Excess Units exceed (i) the price per share such
holder paid for the Units in the purported Transfer, Acquisition, change in
capital structure, or other transaction or event that resulted in the Excess
Units or the price per share such holder paid for the Units that were
exchanged for the Excess Units or (ii) if the holder did not give full value
for such Excess Units (as through a gift, devise or other event or
transaction), a price per share equal to the Market Price for the Units on
the date of the purported Transfer, Acquisition, change in capital structure
or other transaction or event that resulted in such Excess Units or the
Market Price for the Units on the date they were exchanged for the Excess
Units. Any amount available for distribution in excess of the foregoing
limitations shall be paid ratably to the holders of other Units and Excess
Units resulting from the exchange of other Units to the extent permitted by
the foregoing limitations.
(d) Voting Rights. The holders of Excess Units shall not be entitled
to vote on any matters (except as required by the Delaware Act).
(e) Restrictions on Transfer; Designation of Beneficiary.
(i) Excess Units shall not be Transferable. The Purported
Record Transferee (or Purported Record Holder) may freely designate a
Beneficiary of its interest in the Excess Units Trust (representing the
number of Excess Units held by the Excess Units Trust attributable to the
purported Transfer that resulted in the Excess Units), if (A) the Excess
Units held in the Excess Units Trust would not be Excess Units in the hands
of such Beneficiary and (B) the Purported Beneficial Transferee (or Purported
Beneficial Holder) does not receive a price for designating such Beneficiary
that reflects a price per share for such Excess Units that exceeds (x) the
price per share such Purported Beneficial Transferee (or Purported Beneficial
Holder) paid for the Units in the purported Transfer, Acquisition, change in
capital structure, or other transaction or event that resulted in the Excess
Units or the price per share paid for the Units that were exchanged for the
Excess Units or (y) if the Purported Beneficial Transferee (or Purported
Beneficial Holder) did not give value for such Excess Units (as through a
gift, devise or other event or transaction), a price per share equal to the
Market Price for the Units on the date of the purported Transfer,
Acquisition, change in capital structure, or other transaction or event that
resulted in the Excess Units or the Market Price for the Units on the date
they were exchanged for the Excess Units. Upon such Transfer of an interest
in the Excess Units Trust, the corresponding Excess Units in the Excess Units
Trust automatically shall be exchanged for an equal number of Units
(depending on the type and class of Units that originally were exchanged for
such Excess Units) and such Units shall be transferred of record to the
Beneficiary of the interest in the Excess Units Trust designated by the
Purported Record Transferee (or Purported Record Holder), as described above,
if such Units would not be Excess Units in the hands of such Beneficiary.
Prior to any Transfer of any interest in the Excess Units Trust, the
Purported Record Transferee (or Purported Record Holder) must give written
notice to the Partnership of the intended Transfer and the Partnership must
have waived in writing its purchase rights under paragraph (f) of this
Section 11.11.
(ii) Notwithstanding the foregoing, if a Purported Beneficial
Transferee (or Purported Beneficial Holder) receives a price for designating
a Beneficiary of an interest in the Excess Units Trust that exceeds the
amounts allowable under subparagraph (i) of this paragraph (e), such
Purported Beneficial Transferee (or Purported Beneficial Holder) shall pay,
or cause the Beneficiary of the interest in the Excess Units Trust to pay,
such excess in full to the Trust.
(iii) If any of the Transfer restrictions set forth in this
paragraph (e) or any application thereof is determined to be void, invalid or
unenforceable by any court having jurisdiction over the issue, the Purported
Record Transferee (or Purported Record Holder) may be deemed, at the option
of the Partnership, to have acted as the agent of the Partnership in
acquiring the Excess Units as to which such restrictions would otherwise, by
their terms, apply, and to hold such Excess Units on behalf of the
Partnership.
(f) Purchase Right in Excess Units. Excess Units shall be deemed to
have been offered for sale to the Partnership or its designee at a price per
share equal to the lesser of (i) the price per share in the transaction that
created such Excess Units (or, in the case of a devise or gift or event other
than a Transfer or Acquisition which results in the issuance of Excess Units,
the Market Price at the time of such devise or gift or event other than a
Transfer or Acquisition which results in the issuance of Excess Units) or
(ii) the Market Price of the Units exchanged for such Excess Units on the
date the Partnership or its designee accepts such offer. The Partnership and
its assignees shall have the right to accept such offer for a period of
ninety (90) days after the later of (i) the date of the purported Transfer,
Acquisition, change in capital structure of the Partnership, or purported
change in Constructive Ownership or other event or transaction which resulted
in such Excess Units and (ii) the date on which the General Partner
determines in good faith that a Transfer, Acquisition, change in capital
structure of the Partnership, or purported change in Constructive Ownership
or other event or transaction resulting in Excess Units has occurred, if the
Trust does not receive a notice pursuant to paragraph (e) of Section 11.10,
but in no event later than a permitted Transfer pursuant to, and in
compliance with, the terms of paragraph (e) of this Section 11.11.
(g) Remedies Not Limited. Nothing contained in this Article XI
except Section 11.12 hereof shall limit the scope or application of the
provisions of this Section 11.11, the ability of the Partnership to implement
or enforce compliance with the terms hereof or the authority of the General
Partner to take any such other action or actions as it may deem necessary or
advisable to protect the Partnership and the interests of its shareholders by
preservation of the Partnership's status as a partnership and to ensure
compliance with the applicable Ownership Limits and the other restrictions
set forth herein, including, without limitation, refusal to give effect to a
transaction on the books of the Partnership.
Section 11.12 Settlements.
Nothing in Sections 11.10 and 11.11 shall preclude the settlement of
any transaction with respect to the Units entered into through the facilities
of the New York Stock Exchange or the American Stock Exchange.
Section 11.13 Severability.
If any provision of this Article XI or any application of any such
provision is determined to be void, invalid or unenforceable by any court
having jurisdiction over the issue, the validity and enforceability of the
remainder of this Article XI shall not be affected and other applications of
such provision shall be affected only to the extent necessary to comply with
the determination of such court.
Section 11.14 Waiver.
The Partnership shall have authority at any time to waive the
requirements that Excess Units be issued or be deemed outstanding in
accordance with the provisions of this Article XI if the Partnership
determines, based on an opinion of tax counsel, that the issuance of such
Excess Units or the fact that such Excess Units are deemed to be outstanding,
would jeopardize the status of the Partnership as a partnership under the
Code.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date first set forth above.
OUTGOING GENERAL PARTNER
FFP PARTNERS MANAGEMENT
COMPANY, INC.
By: /s/John H. Harvison
John H. Harvison, President
INCOMING GENERAL PARTNER:
FFP REAL ESTATE TRUST
By: /s/John H. Harvison
John H. Harvison, President
LIMITED PARTNERS:
All Limited Partners now and hereafter
admitted as limited partners of the
Partnership, pursuant to the power of
attorney contained in Section 1.4 of the
Partnership Agreement.
By: FFP Partners Management Company, Inc.
By: /s/John H. Harvison
John H. Harvison, President
EXHIBIT A
REDEMPTION NOTICE
The undersigned hereby irrevocably tenders for redemption
Units in FFP Partners, L.P. in accordance with the terms of the Amended and
Restated Agreement of Limited Partnership of FFP Partners, L.P. dated May 21,
1987, as it may be amended from time to time (the "Partnership Agreement").
All capitalized terms used in this Redemption Notice and not otherwise
defined have the meaning given to them in the Partnership Agreement.
The undersigned hereby represents and warrants that (i) it has full
power and authority to transfer all of its right, title and interest in such
Units, (ii) such Units are free and clear of all liens and encumbrances, and
(iii) it will assume and pay any state or local transfer tax that may be
payable as a result of the transfer of such Units.
Dated:
Name of Limited Partner:
Signature of Limited Partner:
By:
Title:
Address:
(Street Address)
(City) (State) (Zip
Code)
Signature Witnessed By:
LEASE AGREEMENT
THIS CONTRACT CONTAINS ARBITRATION PROVISIONS AND SHALL BE
SUBJECT TO ARBITRATION UNDER THE TEXAS GENERAL ARBITRATION ACT
(ARTICLE 224 ET SEQ. REVISED CIVIL STATUTES OF TEXAS).
THIS LEASE AGREEMENT is made and entered into on January 1, 1998, by and
between FFP Properties, L.P., a Texas limited partnership ("Lessor"), and
FFP Operating Partners, L.P., a Delaware limited partnership ("Lessee").
WHEREAS, the Lessor owns the property described on Exhibit A including all
improvements, buildings, and structures located thereon ("Premises"); and,
WHEREAS, Lessee desires to occupy and use such property for the conduct of
its business;
NOW, THEREFORE, it is agreed by and between Lessor and Lessee as follows:
ARTICLE I
Premises
Section 1.01. Lessor, in consideration of the covenants and agreements to be
performed by Lessee and upon the terms and conditions hereinafter stated,
does hereby lease, demise, and let unto Lessee the land described on Exhibit
A attached hereto ("Land"), together with all improvements, buildings, and
structures of Lessor, if any, situated on the Land (the "Improvements") and
all rights, easements and appurtenances pertaining to the Land, including all
parking and access rights relating thereto (collectively, the "Leased
Premises").
ARTICLE II
Term
Section 2.01. The term of this Lease shall be for a period commencing on
January 1, 1998 ("Commencement Date"), and ending on the December 31, 2002
("Term").
ARTICLE III
Use of Premises
Section 3.01. The Leased Premises shall be used for any lawful use,
including, but not limited to, the operation of the Leased Premises as a
convenience store, truck stop, and/or self-service gasoline station.
Section 3.02. Lessee shall not perform any acts or carry on any practices
which may injure the Leased Premises or constitute a nuisance, or use the
Leased Premises for any business which is unlawful or in violation of any
public or city ordinances.
ARTICLE IV
Rent
Section 4.01. Lessee, without offset or deduction, agrees to pay the Lessor
at 2801 Glenda Avenue, Fort Worth, Texas, or such other address as Lessor may
designate, rent for the Leased Premises at the rate of
___________________________________ dollars ($______________) per month
("Monthly Rent") in advance on the first day of each and every calendar month
during the Term of this Lease, the first such payment becoming due and
payable on the Commencement Date.. If the Commencement Date is other than
the first day of a month or if the term of the Lease terminates on a day
other than the last day of the month, a prorated monthly rental installment
shall be paid.
Section 4.02. All rental installments or payments (including any amounts
payable as additional rent) more than ten (10) days past due shall subject
Lessee to liability for payment of a late payment charge equal to five
percent (5.0%) of each such late monthly installment or payment.
ARTICLE V
Possession of Presmises
Section 5.01 Lessee acknowledges that Lessee has fully inspected the Leased
Premises and on the basis of such inspection Lessee hereby accepts the Leased
Premises "AS IS". Lessee acknowledges that the Improvements, if any,
situated thereon, are suitable for the purposes for which the same are
leased, in their present condition.
ARTICLE VI
Alteration, Operating Expenses,
Construction, and Ownership of Improvements
Section 6.01. Alterations and Improvements. Lessee shall have the right to
make alterations to or construct Improvements on the Leased Premises. Any
alteration or improvement made to the Leased Premises shall be made in a
workmanlike manner and in compliance with all valid laws, governmental
orders, and building ordinances and regulations pertaining thereto. Lessee
shall promptly pay and discharge all costs, expenses, damages, and other
liabilities which may arise in connection with or by reason of any
alterations, reconstruction, demolition, or other work on the Leased
Premises. All alterations, reconstruction, demolition or other work on the
Leased Premises when completed shall be of such a nature as not to reduce or
otherwise adversely affect the value of the Leased Premises. Lessee shall
have the right to grant easements upon the estate of Lessor which are
required for utilities or access in connection with construction of the
Improvements and Lessor agrees to execute all documents which Lessee may
reasonably request in order to grant such easements.
Section 6.02. Operating Expenses. Lessee agrees to pay any and all expenses
of operation of the Leased Premises including, but not being limited to,
electricity, water, gas, and other utility services to persons and parties
occupying the Leased Premises, it being the intention of this Lease that the
amounts payable to Lessor hereunder as rent shall be absolutely net to
Lessor, without diminution by reason of any expenses of operation of the
Leased Premises.
Section 6.03. Repairs; Compliance with Laws. Lessee shall keep all
Improvements from time to time situated on the Leased Premises in a good
repair and condition, and at the end or other expiration of the term of this
Lease deliver up the Leased Premises and all Improvements thereon, whether on
the Leased Premises at the time of execution of this Lease or constructed by
Lessee in accordance herewith, in good condition, reasonable wear and tear
excepted (subject to Article XII hereof). Lessee shall at its sole cost and
expense comply with all requirements of all municipal, state, and federal
authorities now in force or which may hereafter be in force, pertaining to
the Leased Premises and shall faithfully observe in the use of the Leased
Premises all municipal, state, and federal laws and regulations now in force
or which may hereafter be in force.
Section 6.04 Release. Lessor hereby releases Lessee, and Lessee hereby
releases Lessor, and their respective officers, agents, employees, and
representatives, from any and all claims or demands for damages, loss,
expense, or injury to the Leased Premises, or to the furnishings, fixtures,
and equipment, or inventory or other property of either Lessor or Lessee in,
about, or upon the Leased Premises, as the case may be, which is caused by or
results from perils, events, or happenings which are the subject of insurance
carried by the respective parties and in force at the time of any such loss;
provided, however, that such waiver shall be effective only to the extent
permitted by the insurance covering such loss and to the extent such
insurance is not prejudiced thereby or the expense of such insurance is not
thereby increased.
Section 6.05. Title to the Improvements. All Improvements presently
constituting a part of the Leased Premises shall be owned by Lessor. Title
to all Improvements and any modifications, additions, restorations, repairs,
and replacements thereof hereafter placed or constructed by Lessee upon the
Leased Premises shall be in Lessee, its successors and assigns, until the
expiration of the Lease Term; provided, however, that the terms and
provisions of this Lease shall apply to all such Improvements and that all
such Improvements (with the exception only of moveable equipment and trade
fixtures, and gasoline storage tanks, pumps, and equipment) shall be
surrendered to Lessor upon the termination of the Lease Term.
Section 6.06. Liens. Lessor does not consent, and has not by the execution
and delivery of this Lease consented, to the imposition by Lessee or any
contractor or subcontractor of any liens upon the Lessor's interest in the
Leased Premises. Lessee agrees that all Improvements at any time constructed
upon the Leased Premises will be completed free and clear of all liens and
claims of contractors, subcontractors, mechanics, laborers, and materialmen,
and other claimants. Lessee further covenants and agrees to protect,
indemnify, defend, and hold harmless Lessor from and against all bills and
claims, liens and rights to liens for labor and materials and architect's,
contractor's, and subcontractor's claims, and all fees, claims, and expenses
incident to the construction and completion of any Improvements, including
without limitation, reasonable attorneys' fees and court costs incurred by
Lessor.
ARTICLE VII
Utility Charges
Section 7.01. Lessee shall pay or cause to be paid promptly when due all
charges for water, electricity, gas, telephone, or any other utility services
furnished to the Leased Premises. Lessee expressly agrees that Lessor is
not, nor shall it be, required to furnish to Lessee or any other occupant of
the Leased Premises any water, sewer, gas, heat, electricity, light, power,
or any other facilities, equipment, labor, materials, or services of any kind
whatsoever.
ARTICLE VIII
Indemnification
Section 8.01. Lessee covenants and agrees, at its sole cost and expense, to
indemnify and hold Lessor harmless from and against any and all claims by or
on behalf of any person, firm, corporation, or governmental authority,
arising from the occupation, use, possession, conduct, or management of, or
from any work or thing whatsoever done in and about, the Leased Premises
during the Lease Term and any Renewal Term, or the subletting of any part
thereof. Lessee further agrees to indemnify and save Lessor harmless from
and against any and all claims arising from any condition of the Leased
Premises or the Improvements (including, but not limited to claims or
liability under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 and the Resource Conservation and Recovery Act of 1976)
or rising from any breach or default on the part of Lessee to be performed
pursuant to the terms of this Lease, or arising from any action, injury, or
damage whatsoever caused to any person, firm, or corporation, including any
sublessees of Lessee (other than those caused by Lessor or his
representatives and employees) occurring during the Lease Term or any Renewal
Term in or about the Leased Premises or upon and under the sidewalks and the
land adjacent thereto. The indemnification obligations of Lessee hereunder
shall include all costs, expenses, and liabilities incurred by Lessor,
including reasonable attorneys' fees. If any action or proceeding shall be
brought against Lessor by reason of any such claim, Lessee upon receipt of
written notice from Lessor covenants to defend such action or proceeding with
counsel satisfactory to Lessor, unless such action or proceeding is defended
by any carrier of public liability insurance maintained by Lessee. If Lessee
procures or maintains insurance insuring Lessee against liability for injury
to or death of a person or persons, such policy or policies shall name Lessor
as an additional insured.
ARTICLE IX
Taxes and Assessments
Section 9.01. Lessee shall pay to, or on behalf of, Lessor as additional
rent the amount of the real estate taxes allocable to the Leased Premises
(which shall be separately assessed) for each tax year included within the
Term or any Renewal Term of this Lease; for the first and last tax years
included in part within the term of this Lease, Lessee shall pay to Lessor a
pro rata share of such taxes for such tax years, based upon the portions of
such tax years included within the term of this Lease. Real estate taxes
shall not include any income, excess profits, estate, inheritance,
succession, transfer, franchise, capital, or other tax or assessment upon
Lessor or upon the rentals payable under this Lease, all of which shall be
the obligation of Lessor.
Section 9.02. If there shall be more than one taxing authority, the real
estate taxes for any period shall be the sum of such taxes for such period
attributable to each taxing authority. The real estate taxes for any tax
year shall mean such amounts as shall be finally determined to be the real
estate taxes assessed and payable for such tax year less any abatements,
refunds, or rebates made thereof. For the purpose of determining payments
due from Lessee to Lessor in accordance with the provisions hereof, (i) the
real estate taxes for any tax year shall be deemed to be the real estate
taxes assessed and payable for such tax year until such time as the same may
be reduced by abatement, refund or rebate, and (ii) if any abatement, refund
or rebate shall be made for such tax year, the real estate taxes for such tax
year shall be deemed to be the real estate taxes as so reduced plus the
expenses of obtaining the reduction, with an appropriate adjustment to be
made in the amount payable from or paid by Lessee to Lessor on account of
real estate taxes.
Section 9.03. Lessee shall have such rights to contest the validity or
amount of any real estate taxes as permitted to Lessor, or Lessee, by law,
either in its own name or in the name of Lessor. Lessor shall cooperate with
Lessee in any such contest and, in connection therewith, shall make available
to Lessee such information in its files as Lessee may reasonably request. If
any abatement, refund or rebate shall be obtained, the expenses of obtaining
the same shall be a first charge thereon.
Section 9.04. Lessor shall submit to Lessee copies of the real estate tax
bills for each tax year. Lessor shall bill Lessee for any amount that may be
payable by Lessee pursuant to the provisions herein. Such bill shall be
accompanied by a computation of the amount payable. The amount payable by
Lessee hereunder for any tax year shall be payable on or before the time that
Lessor shall be required to pay real estate taxes to the taxing authority for
such tax year, but if Lessee shall not have received a bill therefor at least
fourteen days prior to such time for payment, Lessee shall not be required to
make payment until fourteen days after the receipt of such bill. (If real
estate taxes are payable to any taxing authority for any tax year in
installments, the amount payable by Lessee hereunder shall be payable in
similar installments. If real estate taxes are payable to different taxing
authorities for any tax year at different times, an appropriate apportionment
shall be made of the amount payable by Lessee for such tax year and the
apportioned amounts shall be payable at such times). Lessor agrees that real
estate taxes upon the Leased Premises shall be paid by Lessor prior to the
last day that the same may be paid without penalty or interest, or if a
discount shall be available for early payment, prior to the last day of that
such discount shall be available. Lessor agrees to provide Lessee evidence
of any taxes paid by Lessor.
Section 9.05. Lessee agrees to pay all taxes levied against personal
property, trade fixtures, and inventory owned or placed by Lessee in, on, or
about the Leased Premises.
ARTICLE X
Title
Section 10.01. Lessor's Warranty of Title. Lessor warrants and represents
that the Leased Premises is owned by Lessor in fee, free, and clear of any
restrictions which would materially adversely affect the use of the Leased
Premises by Lessee and that Lessor has the legal right to make and enter into
this Lease.
Section 10.02. Peaceable Possession. Lessor warrants to Lessee the
peaceable enjoyment of the Leased Premises against the lawful let, hindrance,
or disturbance of any person or persons whomsoever.
ARTICLE XI
Assignment and Subletting
Section 11.01. Lessee may not assign this Lease or sublet all or any part of
the Leased Premises, without Lessor's prior written consent, which consent
shall not be unreasonably withheld.
Section 11.02. If Lessee assigns this Lease or sublets all or any part of
the Leased Premises, Lessee shall remain liable and responsible under this
Lease for the performance of the covenants and obligations of Lessee
hereunder unless Lessor shall have, in writing, specifically released Lessee
from such obligations.
Section 11.03. If Lessee assigns this Lease and shall remain liable
hereunder, then Lessor, when giving notice to said assignee or any future
assignee in respect of any default, shall also serve a copy of such notice
upon the original tenant first named hereinabove in this Lease ("Original
Lessee") and no notice of default shall be effective until a copy thereof is
received by the Original Lessee. The Original Lessee shall have the same
period after receipt of such notice to cure such default as is given to
Lessee under this Lease. If this Lease terminates or this Lease and the term
hereof ceases and expires because of a default of such assignee after an
assignment of this Lease shall have been made, Lessor shall promptly give the
Original Lessee notice thereof. The Original Lessee shall have the option to
be exercised by notifying Lessor within twenty (20) days after receipt by the
Original Lessee of Lessor's notice, to cure any default and become tenant
under a new lease for the remainder of the term of this Lease (including any
renewal periods) upon all of the same terms and conditions as then remain
under this Lease as it may have been amended by agreement between Lessor and
Original Lessee. If any default of such assignee is incapable of being cured
by the Original Lessee, then, notwithstanding the failure to cure same, the
Original Lessee shall have the foregoing option to enter into a new lease.
Such new lease shall commence on the date of termination of this Lease.
Notwithstanding the foregoing, if Lessor delivers to the Original Lessee,
together with Lessor's notice, a release as to all liability under this Lease
as theretofore amended, the Original Lessee shall not have the foregoing
option.
ARTICLE XII
Condemnation
Section 12.01. Entire Taking. If all of the Leased Premises shall be taken
in condemnation proceedings, this Lease shall terminate as of the taking and
the minimum rent and additional rent shall be paid to the date of such
termination. Lessor shall give Lessee a proportionate refund of any rent
paid in advance.
Section 12.02. Partial Taking.
A. If less than all of the Leased Premises shall be taken in
condemnation proceedings, Lessor and Lessee shall mutually determine, within
a reasonable time after such taking, whether the remaining building or
buildings (after necessary repairs and reconstruction to constitute the same
a complete architectural unit or units) can economically and feasibly be used
and subleased by Lessee. If Lessor and Lessee cannot mutually agree upon
such matter within ninety (90) days after notice of intent to take, the same
shall be determined thereafter upon request of either party by arbitration in
accordance with the provisions of Section 18.11. In arriving at their
decision, the arbitrators, among other things, shall take into consideration
whether such remaining premises will produce a fair and reasonable net return
to Lessor and will produce a fair and reasonable profit to Lessee.
B. If it is determined either by mutual agreement or arbitration that
such remaining building or buildings cannot economically and feasibly be used
by Lessee, Lessor or Lessee, at its election, may terminate this Lease on ten
(10) days' notice to the other party to such effect, and the minimum rent and
additional rent shall be paid to the date of such termination. Lessor shall
give Lessee a proportionate refund of any rent paid in advance. If between
the taking and the date of such termination, the condemning authority shall
have entered into physical possession of the condemned portion of the Leased
Premises, the Rental, during such period, shall be reduced to accommodate
such event and any dispute as to the amount of such reduction shall be
determined by arbitration in accordance with the provisions of Section
18.11. However, such election to terminate must be exercised within thirty
(30) days after the determination, as aforesaid, that the remaining building
or buildings cannot economically and feasibly be used by Lessee.
Section 12.03. Application of Award. If this Lease shall terminate
pursuant to the provisions of Section 12.01 or Section 12.02 of this Article,
Lessor's share of the condemnation award together with any separate award to
Lessee shall be apportioned and paid in the following order of priority:
A. There shall be first paid any and all reasonable expenses, charges
and fees, including reasonable counsel tees, in collecting the award.
B. Lessor shall then be entitled to receive an amount equal to the
reasonable market value of the Leased Premises, on a basis without
consideration of any unexpired portion of the term of this Lease and
unencumbered by this Lease. If Lessor and Lessee cannot agree as to such
value, the same shall be determined by arbitration in accordance with the
provisions of Section 18.11.
C. The balance of the award shall be paid to the Lessee; provided,
that if the remainder of the Lease Term is, at the time of the taking, less
than one year, such balance shall be paid to lessor.
Section 12.04. Application of Award in Partial Taking. If it is
determined pursuant to the provisions of Section 12.03, that the remaining
Improvements after a partial condemnation can be used economically by Lessee,
(i) this Lease shall not terminate but shall continue in full force and
effect as to the portion of the Leased Premises not taken, (ii) Lessee shall
commence and proceed with reasonable diligence to repair or reconstruct the
remaining building or buildings on the Leased Premises to a complete
architectural unit or units to the extent proceeds of the condemnation award
are available therefor, and (iii) the fixed annual rentals payable by Lessee
hereunder shall be reduced during the unexpired portion of this Lease to that
proportion of the annual fixed results herein reserved which the value of the
part of the Leased Premises not so taken bears to the value of the total of
the Leased Premises, such values to be determined as of the date when Lessee
is disturbed in its possession as a result of the taking. Lessor's share of
the award in condemnation proceedings for any partial taking where repair or
reconstruction is undertaken, together with any separate award to Lessee,
shall be apportioned and paid in the following order of priority:
A. There shall first be paid any and all reasonable expenses, charges
and fees, including reasonable counsel fees, in collecting the awards.
B. The proceeds of the awards shall next be used as a fund for the
restoration of the building, improvements and equipment situated on the
Leased Premises to a complete architectural unit or units. Said proceeds
shall be held by Lessor and shall be paid out from time to time to persons
furnishing labor or materials, or both, including architects' fees and
contractors' compensation in such restoration work on vouchers approved by a
licensed architect engineer or other person approved by Lessor and employed
by Lessee to superintend the work.
C. Lessor shall then be entitled to an amount equal to the reasonable
market value of the portion of the Leased Premises taken, without
consideration of any unexpired portion of the term of this Lease,
unencumbered by this Lease, plus a sum of money equal to damages sustained by
Lessor for severance damages to the remaining and untaken portion of the
Leased Premises, also unencumbered by this Lease as to such remaining untaken
portion of the Leased Premises.
D. The balance of the award shall be paid to Lessee.
Section 12.05. Temporary Possession. If any right of temporary possession
or occupancy of all or any portion of the Leased Premises shall be obtained
by any competent authority in the exercise of the power of eminent domain,
the foregoing provisions of this Article shall be inapplicable thereto and
this Lease shall continue in full force and effect without reduction or
suspension of minimum rent and additional rent and Lessee shall be entitled
to make claim for and recover any award or awards, whether in the form of
rental or otherwise, recoverable in respect of such possession or occupancy.
The award shall be paid to Lessor and applied against the Rental payable by
Lessee under this Lease, as the same becomes due, with any surplus to be paid
to Lessee; provided that if any portion of the award is intended to cover the
cost of restoring the Leased Premises to the condition they were in prior to
such temporary possession or occupancy or to make any repairs occasioned by
or resulting from such possession or occupancy, such portion shall be so
applied.
Section 12.06. Consent to settlement by Lessor. Lessee shall have primary
responsibility for dealing with the condemning authority in the condemnation
proceedings but Lessee shall not make any settlement with the condemning
authority nor convey or agree to convey the whole or any portion of the
Leased Premises to such authority in lieu of condemnation without first
obtaining the written consent of Lessor thereto, which consent shall not be
unreasonably withheld if Lessor receives (i) not less than the fair market
value of the Leased Premises taken at the time and (ii) a reasonable amount
for any diminution in value of the remaining portion.
ARTICLE XIII
Events of Default and Remedies
Section 13.01. Events of Default. The following events ("Events of
Default") shall be deemed to be events of default by Lessee under this Lease:
A. Failure by Lessee to pay any installment of the Monthly Rent or any
additional rent or any other sum of money payable hereunder on the date the
same is due and such failure shall continue for a period of ten (10) days
after written notice to Lessee.
B. Failure by Lessee to comply with any term, provision, or covenant
of this Lease, other than the payment of rent or other sums of money, and
shall not cure such failure within thirty (30) days after written notice
thereof to Lessee; or if such failure cannot reasonably be cured within the
said thirty (30) days and Lessee shall not have commenced to cure such
failure within such thirty (30) day period and shall not thereafter with all
due diligence and good faith proceed to cure such failure.
C. The entering of a decree or order by a court of competent
jurisdiction adjudging Lessee a bankrupt or insolvent or appointing a
receiver or trustee or assignee in bankruptcy or insolvency of all or
substantially all of its property, and any such decree or order shall have
continued in force undischarged or unstayed for a period of sixty (60) days.
D. The doing or permitting to be done by Lessee or any sublessee,
assignee, grantee, or agent of Lessee shall of anything which creates a lien
upon Lessor's interest in the Leased Premises, and any such lien is not
discharged or bonded within thirty (30) days after filing.
E. The insolvency of Lessee or the making a transfer in fraud of
creditors, an assignment for the benefit of creditors, or the filing of a
proceeding in bankruptcy by Lessee, or the appointing of a receiver or
trustee for Lessee or any of the assets of Lessee.
Section 13.02. Remedies. Upon the occurrence of any Event of Default
enumerated in Section 13.01 hereof, Lessor shall have the option of (i)
terminating this Lease by written notice thereof to Lessee, (ii) continuing
this Lease in full force and effect, or (iii) curing the default on behalf of
Lessee.
A. In the event that Lessor shall elect to terminate this Lease, upon
written notice to Lessee, this Lease shall be ended as to Lessee and all
persons holding under Lessee, and all of Lessee's rights shall be forfeited
and lapsed, as fully as if this Lease had expired by lapse of time. In such
event, Lessee shall be required immediately to vacate the Leased Premises and
there shall immediately become due and payable the amount by which (a) the
total rent and other benefits which would have accrued to Lessor under this
Lease for the remainder of the Term of this Lease if the terms and provisions
of this Lease had been fully complied with by Lessee exceeds (b) the total
fair market rental value of the Leased Premises for the balance of the Term
of this Lease (it being the intention of both parties hereto that Lessor
shall receive the benefit of its bargain); and Lessor shall at once have all
of the rights of re-entry upon the Leased Premises, without becoming liable
for damages or guilty of a trespass. In addition to the sum immediately due
from Lessee under the foregoing provision, there shall be recoverable from
Lessee: (w) the reasonable cost of restoring the Leased Premises to good
condition, normal wear and tear excepted (subject to Article XII hereof); (x)
all accrued unpaid sums, plus interest at the highest lawful rate per annum
and late charges, if in arrears, under the terms of this Lease up to the date
of termination; (y) Lessor's reasonable cost of recovering possession of the
Leased Premises; and (z) rent and sums accruing subsequent to the date of
termination pursuant to the holdover provisions of Section 18.14 hereof.
B. In the event that Lessor shall elect to continue this Lease in full
force and effect, Lessee shall continue to be liable for all rents. Lessor
shall nevertheless have all of the rights of re-entry upon said Leased
Premises without becoming liable for damages or being guilty of a trespass
and Lessor after re-entry may relet the Leased Premises or any part thereof,
to a substitute tenant or tenants for a period of time equal to or lesser or
greater than the remainder of the term on whatever terms and conditions
Lessor, at Lessor's sole discretion, deems advisable. Against the rents and
sums due from Lessee to Lessor during the remainder of the term, credit shall
be given Lessee in the net amount of rent received from the new tenant after
deduction by Lessor for: (a) the reasonable costs incurred by Lessor in
reletting the Leased Premises (including, without limitation, remodeling
costs, brokerage fees, legal fees, and the like); (b) the accrued sums, plus
interest and late charges if in arrears, under the terms of this Lease; (c)
Lessor's reasonable cost of recovering possession of the Leased Premises; and
(d) the cost of storing any of Lessee's property left on the Leased Premises
after re-entry. Notwithstanding any provision in this paragraph B of Section
13.02 to the contrary, upon the default of any substitute tenant or upon the
expiration of the lease term of such substitute tenant before the expiration
of the Term of this Lease, Lessor may, at Lessor's election, either relet to
still another substitute tenant or terminate this Lease and exercise its
rights under paragraph A of this Section 13.02.
C. In the event that Lessor shall elect to cure the default of Lessee,
all sums expended by Lessor in effecting such cure, plus interest thereon at
the highest lawful rate per annum, shall be due and payable immediately.
Such sum shall constitute additional rent hereunder, and failure to pay such
sum when due shall enable Lessor to exercise all of its remedies under this
Lease.
Section 13.03. Cumulative Rights. Pursuit of any of the foregoing remedies
shall not preclude pursuit of any of the other remedies herein provided or
any other remedies provided by law, nor shall pursuit of any remedy herein
provided constitute a forfeiture or waiver of any rent due to Lessor
hereunder or of any damages accruing to Lessor by reason of the violation of
any of the terms, provisions and covenants herein contained. Failure by
Lessor to enforce one or more of the remedies herein provided, upon any event
of default, shall not be deemed or construed to constitute a waiver of such
default or of any other violations or breach of any of the terms, provisions
and covenants herein contained.
Section 13.04. Re-Entry by Lessor. No re-entry or taking possession of the
Leased Premises by Lessor shall be construed as an election on its part to
terminate this Lease unless a written notice of such intention is given to
Lessee. Lessor, at its option, may make such alterations or repairs to the
Improvements as it, in its reasonable judgment, considers advisable and
necessary upon the occurrence of an Event of Default, at the cost of Lessee,
and the making of such alterations or repairs shall not operate or be
construed to release Lessee from liability hereunder. Lessor shall in no
event be liable in any way whatsoever for failure to relet the Leased
Premises and the improvements or, in the event the Leased Premises and the
Improvements are relet, for failure to collect rent thereof under such
reletting; and in no event shall Lessee be entitled to receive any excess of
such rent over the sums payable by Lessee to Lessor hereunder; provided,
however, that Lessor shall during such time as Lessor is in possession of the
Leased Premises as the result of any re-entry by Lessor hereunder, and prior
to any termination of this Lease, exercise reasonable efforts to cause tenant
space in the Leased Premises to be leased.
Section 13.05. Effect of Waiver or Forbearance. No waiver by Lessor of any
breach by Lessee of any of its obligations, agreements or covenants hereunder
shall be a waiver of any subsequent breach or of any obligation, agreement or
covenant, nor shall any forbearance by Lessor to seek a remedy for any breach
by Lessee be a waiver by Lessor of its rights and remedies with respect to
such subsequent breach.
Section 13.06. Bankruptcy of Lessee. The provisions of paragraph C and E
Section 13.01 above shall only apply with respect to the Lessee which is the
then owner of the leasehold estate. Notwithstanding the provisions of
Section 13.01 to the contrary, the happening of any of the Events of Default
mentioned in paragraph C or E of Section 13.01 above shall not operate or
permit Lessor to declare a default hereunder or terminate this Lease so long
as all covenants of Lessee hereunder shall be performed by Lessee or its
successor in interest or a Leasehold Mortgagee in accordance with the terms
of this Lease.
Section 13.07. New Lease with Leasehold Mortgagee Upon Termination. If this
Lease shall terminate by reason of the occurrence of any contingency
mentioned in Section 13.01 hereof, and in the manner therein set forth, and
if Lessor shall obtain possession of the Leased premises herefor, Lessor
agrees that any Leasehold Mortgagee shall have the right, for a period of
thirty (30) days subsequent to written notice of said termination of this
Lease, to elect to demand a new lease of the Leased premises of the character
and, when executed and delivered and possession of the Leased Premises is
taken thereunder, having the effect hereinafter set forth. Such new lease
shall be for a term to commence at the said termination of this Lease, as in
this Section 13.01 provided, and shall have as the date for the expiration
thereof the same date stated in this Lease as the date for the expiration
thereof. The rent thereof shall be at the same rate as would have been
applicable during such term under the provisions of this Lease, had this
Lease as the date for the expiration thereof. The rent therefor shall be at
the same rate as would have been applicable during such term under the
provisions of this Lease, had this Lease not so expired or terminated, and
all the rents, covenants, conditions and provisions of such new lease,
including, but not limited to, the conditional limitations set forth in this
Lease, shall be the same as the terms, conditions and provisions of this
Lease. If any such Leasehold Mortgagee as aforesaid shall elect to demand
such new lease within such 30-day period, such Leasehold Mortgagee shall give
written notice to Lessor of such election; and, thereupon, within ten (10)
days thereafter, Lessor and such Leasehold Mortgagee agree to execute and
deliver such new lease upon the terms above set forth, and such Leasehold
Mortgagee shall, at the time of the execution and delivery of such new lease,
pay to Lessor all rent and additional rent and other sums which would have
become payable hereunder by Lessee to Lessor to the date of the execution and
delivery of such new lease, had this Lease not terminated, and which remain
unpaid at the time of the execution and delivery of such new lease, together
with reasonable attorneys fees and expenses in connection therewith. Any
such new lease as contemplated in this Section 13.07 may, at the option of
the Leasehold Mortgagee, be executed by a nominee of such holder, without the
Leasehold Mortgagee assuming the burdens and obligations of Lessee thereunder
beyond the period of its ownership of the leasehold estate created hereby.
Any Leasehold Mortgagee of less than all of the Leased Premises who
elects to demand a new lease pursuant to this section with respect to the
part of the Leased Premises as to which it has obtained possession shall, as
a condition to Lessor's obligation to grant such new lease, agree to
guarantee the payment of rental for all of the Leased Premises.
Section 13.08. Notice to Leasehold Mortgagee. Lessor agrees, if and
so long as the leasehold estate of Lessee is encumbered by a leasehold
mortgage in favor of a Leasehold Mortgagee, to give such Leasehold Mortgagee
at such address or addresses as may be specified by the Leasehold Mortgagee
to Lessor in writing, written notice of any default or of the happening of
any contingency referred to in Section 13.01 hereof, simultaneously with the
giving of such notice to Lessee, and no such notice to Lessee shall be
effective or be deemed to have been given to Lessee hereunder unless such
notice is also given to the Leasehold Mortgagee; and the Leasehold Mortgagee
shall have the right, within the period limited by any such notice and for an
additional period of thirty (30) days thereafter, and to the same extent and
with the same effect as though done by Lessee, to take such action or to make
such payment as may be necessary or appropriate to cure any such default or
contingency so specified, it being the intention of the parties hereto that
Lessor shall not exercise its right to terminate this Lease as in Section
13.01 provided without first affording to any Leasehold Mortgagee the same
rights and the same notices with respect to any such default or contingency
and the same period or periods of time within which to cure the same,
including the right to enter into possession of the Leased Premises, to
enable the Leasehold Mortgagee also to do, as are afforded to Lessee
hereunder (and a period of thirty (30) days thereafter, and as are afforded
to the leasehold mortgagee under this Section 13.08).
Section 13.09. Foreclosure by Leasehold Mortgagee. Anything in this Lease
and specifically in this Article XI to the contrary notwithstanding, Lessor
shall not be entitled to exercise its right to terminate this Lease as in
this Article XIII provided during the period that any Leasehold Mortgagee
shall require to foreclose its mortgage or otherwise to fulfill or complete
its remedies under such leasehold mortgage or to cure any Event of Default,
provided, however, that such period shall in no event exceed ninety (90) days
and that within such period of time: (a) such Leasehold Mortgagee proceeds
promptly and with due diligence with its remedies under its mortgage on the
leasehold estate and thereafter prosecutes the same with all due diligence;
and (b) there is timely paid to Lessor the rent, additional rent and other
sums which have, or may, become due and payable during said period of time
and as the same become due and payable, and all other terms and provisions of
this Lease are duly complied with.
Section 13.10. No Voluntary Surrender of Leasehold Estate Without Consent of
Leasehold Mortgagee. So long as there exists any unpaid or undischarged
Leasehold Mortgage on the estate of Lessee created hereby, Lessor expressly
agrees for the benefit of such Leasehold Mortgagee that it will not accept a
voluntary surrender of the Leased Premises or a cancellation of this Lease
from Lessee prior to the termination of this Lease without the written
consent of the Leasehold Mortgagee, and Lessor and Lessee hereby agree for
the benefit of any Leasehold Mortgagee that they will not subordinate this
Lease to any mortgage that may hereafter be placed on the fee or amend or
alter any terms or provisions of this Lease or consent to any prepayment of
any rental or additional rental without securing the written consent thereto
of any such Leasehold Mortgagee. Nothing contained herein shall be construed
to limit the right of Lessor to sell or pledge its rights hereunder,
including but not limited to the right to receive rent pursuant to Article IV
hereof, without the prior consent or permission of any person.
ARTICLE XIV
Leasehold Mortgage
Section 14.01. Rights of Leasehold Mortgagee.
A. Lessee may, without Lessor's consent, mortgage, pledge, grant deeds of
trust, or otherwise encumber the leasehold estate created hereby and all or
any portion of the right, title and interest of Lessee hereunder, and assign,
hypothecate or pledge the same, as security for the payment of any debt to
any holder or beneficiary of a deed of trust or mortgage securing the payment
of indebtedness to Leasehold Mortgagee; provided, that no mortgagee, trustee,
or other person claiming by, through or under any instrument creating any
such encumbrance shall by virtue thereof acquire any greater right in the
Leased Premises than Lessee then had under this Lease, except for the right
expressly granted to such mortgagee, trustee or other person under the terms
of this Lease; and provided further, that such mortgage, deed of trust or
other instrument of encumbrance, and the indebtedness secured thereby, shall
at all times be and remain subject to all of the conditions, covenants and
obligations of this Lease and to all of the rights of Lessor hereunder. As
to any such Leasehold Mortgage Lessor consents to provisions therein, at the
option of Lessee, (a) for an assignment of Lessee's share of the net proceeds
from any award or other compensation resulting from a total or partial (other
than temporary) taking as set forth in Article X of this Lease, (b) for the
entry of any Leasehold Mortgagee upon the Leased Premises during business
hours, without notice to Lessor or Lessee, to view the state of the Leased
Premises, (c) that a default by Lessee under this Lease shall constitute a
default under any such leasehold mortgage, (d) for an assignment of Lessee's
right, if any, to terminate, cancel, modify, change, supplement, alter or
amend this Lease, (e) for an assignment of any sublease to which any such
leasehold mortgage is subordinated, subject to the rights of Lessor
hereunder, and (f) effective upon any default in any such leasehold mortgage,
(i) for the foreclosure of the Leasehold Mortgage pursuant to a power of sale
by judicial proceedings or other lawful means and the subsequent sale of the
leasehold estate to the purchaser at the foreclosure sale and a sale by such
purchaser or a sale by any subsequent purchaser, (ii) for the appointment of
a receiver, irrespective of whether any Leasehold Mortgagee accelerates the
maturity of all indebtedness secured by the Leasehold Mortgage, (iii) for the
rights of the Leasehold Mortgagee or the receiver to enter and take
possession of the Leased Premises, to manage and operate the same, to collect
the subrentals, issues and profits therefrom (subject to the rights of Lessor
hereunder), and to cure any default under the Leasehold Mortgage or any
default by Lessee under this Lease, and (iv) for an assignment of Lessee's
right, title and interest in and to the premiums for or dividends upon any
insurance required by the terms of this Lease, as well as in all refunds or
rebates of taxes or assessments upon or other charges against the Leased
Premises, whether paid or to be paid.
B. If at any time after the execution and recordation of any such mortgage
or deed of trust, the mortgagee or trustee therein shall notify Lessor in
writing that any such mortgage or deed of trust has been given and executed
by Lessee, and shall at the same time furnish Lessor with the address to
which it desires copies of notices to be mailed, or designate some person or
corporation as its agent and representative for the purpose of receiving
copies of notices, Lessor hereby agrees that it will thereafter mail to such
mortgagee or trustee and to the agent or representative so designated by such
mortgagee or trustee, at the address so given, duplicate copies of any and
all notices in writing which Lessor may from time to time give or serve upon
Lessee under and pursuant to the terms and provisions of this Lease.
Section 14.02. Liability of Leasehold Mortgagee. No Leasehold Mortgagee
shall be or become liable to Lessor as an assignee of this Lease or otherwise
until it expressly assumes by written instrument such liability, and no
assumption shall be inferred or result from foreclosure or other appropriate
proceedings in the nature thereof or as the result of any other action or
remedy provided for by any mortgage or deed of trust or other instrument
executed in connection with such leasehold mortgage or from a conveyance from
Lessee pursuant to which the purchaser at foreclosure or grantee shall
acquire the rights and interests of Lessee under the terms of this Lease.
ARTICLE XV
Attorney's Fees; Lessor's Lien
Section 15.01. Attorney's Fees. If on account of any breach or default by
either party hereunder, it shall become necessary for the other party hereto
to employ an attorney to enforce or defend any of said party's rights or
remedies hereunder, and should such party prevail in a final judgment, the
party against whom enforcement was sought shall pay to the other party any
reasonable attorney's fees incurred by reason of such proceedings.
Section 15.02. Lessor's Lien. In addition to the statutory landlord's lien,
Lessor shall have at all times, and Lessee does hereby grant to Lessor, a
valid contractual lien upon and a security interest upon all goods, wares,
equipment, fixtures, furniture and other personal property of Lessee
presently or which may hereafter be situated on the Leased Premises and all
proceeds therefrom to secure the payment by Lessee of all rentals and other
sums of money due hereunder, and such property shall not be removed therefrom
without the consent of Lessor until all arrearages in rent, as well as any
and all other sums of money then due to Lessor hereunder, shall first have
been paid and discharged. Upon the occurrence of an event of default by
Lessee, Lessor may sell any and all improvements, goods, wares, equipment,
fixtures, furniture and other personal property of Lessee situated on the
Leased Premises at one or more public or private sales after giving Lessee
reasonable notice of the time and place of any public sale or sales or of the
time after which any private sale or sales are to be made, with or without
having such property at the sale, at which Lessor or its assigns may purchase
property to be sold, being the highest bidder therefor. The requirement of
reasonable notice to Lessee hereunder shall be met if such notice is given in
the manner prescribed in Section 18.06 of this Lease at least ten (10) days
before the time of sale. The proceeds from any such disposition less any and
all expenses connected with the taking of possession, holding and selling of
the property (including reasonable attorney's fees and legal expenses) shall
be applied as a credit against any sums due by Lessee to Lessor. Any surplus
shall be paid to Lessee or as otherwise required by law. Upon request by
Lessor, Lessee agrees to execute and deliver to Lessor a financing statement
in form sufficient to perfect the security interest of Lessor in the
aforesaid property and proceeds under the provisions of the Uniform
Commercial Code in force in the state in which the Leased Premises are
located. Notwithstanding anything to the contrary stated herein, the
statutory lien of Lessor and the landlord's lien and security interest
granted in this paragraph are subject and subordinate to the rights, if any,
of the holder of any indebtedness secured by Lessee's leasehold interest in
the Leased Premises or in equipment or other property located thereon, and
Lessor agrees to execute such additional documents as shall be necessary to
effect or evidence such subordination.
ARTICLE XVI
Renewal Options
Section 16.01. Option to Renew. Lessee shall have, and is hereby given, two
(2) five (5) year options (the "Options") to renew and to extend the Term of
this Lease, such Options to follow consecutively upon the expiration of the
Term of this Lease, provided that at the time that each option to renew is
exercised, this Lease shall be in full force and effect and Lessee shall not
be in default hereunder. Each Option shall be for a term of five (5) years
(the "Renewal Term"). The Option shall be exercised by Lessee's giving to
Lessor written notice of its intention to renew and extend the Term of this
Lease at least three (3) months before the expiration date of the initial
Term of this Lease and any Renewal Term thereof. The renewal and extension
of this Lease for the Renewal Term shall be on and under the same covenants,
agreements, terms, provisions and conditions as are contained herein for the
initial Term of this Lease, except that rental shall be computed in the
manner set forth in Section 16.02 below. Any termination of this Lease
during the initial Term shall terminate all rights of renewal and extension
set forth herein.
Section 16.02. Adjustment to Monthly Rental. Commencing with the first
(1st) day of the first calendar month of each Renewal Term, the applicable
rental for each calendar month during such Renewal Term shall be equal to the
Monthly Rent multiplied by the percentage of increase by which the Consumer
Price Index in the calendar month three (3) months preceding the first month
of the Renewal Term exceeds the Consumer Price Index in December 1997;
provided, however, that in no event shall such adjusted rental for the
Renewal Term be less than the rental payable during the initial Term.
"Consumer Price Index" shall mean the Consumer Price Index for Urban Wage
Earners and Clerical Workers-All Items (Base Year 1967) of the United States
Bureau of Labor Statistics. If the manner in which such Consumer Price Index
is determined by the Bureau of Labor Statistics shall be substantially
revised, an adjustment shall be made in such revised index which would
produce results equivalent, as nearly as possible, to those which would have
been obtained if the Consumer Price Index had not been revised. If the
Consumer Price Index shall become unavailable to the public because
publication is discontinued, or otherwise, Lessor will substitute therefor a
comparable index based upon changes in the cost of living or purchasing power
of the consumer dollar published by any other governmental agency or, if no
such index shall be available, then a comparable index published by a major
bank or other financial institution or by a recognized financial publication.
ARTICLE XVII
Right of First Refusal
Sectoin 17.01. As long as Lessee is Lessee under this Lease and provided
Lessee is not in default hereunder, if at any time after the execution of
this Lease, Lessor shall receive a bona fide offer which it is willing to
accept to sell or transfer legal title to the Leased Premises (or any
interest therein) to any person (other than an affiliate, shareholder,
partner, joint venturer, spouse or lineal descendant of Lessor or any trust
for their benefit), Lessor shall, within fifteen (15) days after Lessor's
receipt of the acceptable offer, notify Lessee of the terms of such offer
("Lessor's Offer Notice"). Lessor's Offer Notice shall include the name of
the offeror and the offered consideration and other terms of such offer
(together with a copy of the offer) and Lessee, within ten (10) days after
receipt of Lessor's Offer Notice, shall have the right to purchase the
interest to be sold or transferred on all the other terms and conditions
stated in Lessor's Offer Notice. Failure of Lessee to exercise such right
within said ten (10) day period shall be deemed a waiver of such right. Upon
notice from Lessee of its decision not to exercise such right or upon waiver
of the same, Lessor shall be free to consummate the sale or transfer in
accordance with the terms set forth in Lessor's Offer Notice. In the event
such sale or transfer is not consummated within six (6) months after the date
of the delivery of Lessor's Offer Notice, the right granted to Lessee in this
Article XVII shall be reinstated, and any such subsequent sale or transfer
shall be subject to this right. Any sale or transfer contemplated by this
Article XVII shall be subject to the provisions of this Lease including,
without limitation, the rights of Lessee contained herein. Upon Lessee's
exercise of its right of first refusal hereunder, Lessee may assign such
rights to any other person or entity without the consent of Lessor or any
trust for their benefit, but any assignment shall not relieve Lessee of its
obligations hereunder or thereunder. The right of first refusal herein
granted to Lessee shall not apply to any transfer by Lessor of the Leased
Premises to any affiliate, shareholder, partner, joint venturer, spouse or
lineal descendant of Lessor or any trust for their benefit or to any transfer
by gift, will or the laws of descent and distribution.
ARTICLE XVIII
Miscellaneous
Section 18.01. Inspection. Lessee shall permit Lessor and its agents to
enter into and upon the Leased Premises at all reasonable times and upon
reasonable notice for the purpose of inspecting the same on condition that
Lessee's and Lessee's tenants use and quiet enjoyment of the same is not
interfered with.
Section 18.02. Estoppel Certificates. Lessee and Lessor shall, at any time
and from time to time upon not less than ten (10) days' prior request by the
other party, execute, acknowledge, and deliver to Lessor, or Lessee, as the
case may be, a statement in writing certifying that (i) this Lease is
unmodified and in full force and effect (or if there have been any
modifications, that the same are in full force and effect as modified and
stating the modifications) and, if so, the dates to which the fixed rent and
any other charges have been paid in advance, and (ii) that no default
hereunder on the part of the Lessor or Lessee, as the case may be, exists
(except that if any such default does exist, the certifying party shall
specify such default), it being intended that any such statement delivered
pursuant to this Section 18.02 may be relied upon by a prospective purchaser
or encumbrancer (including assignees) of the Leased Premises.
Section 18.03. Release. If requested by Lessor, Lessee shall upon
termination of this Lease, execute and deliver to Lessor an appropriate
release, in form proper for recording, of all Lessee's interest in the Leased
Premises, and upon request of Lessee, Lessor will execute and deliver a
written cancellation or termination of Lease in proper form for recording;
provided, that in no event shall any such release, cancellation or
termination constitute a release or relinquishment by either party of his or
its rights against the other party for any amounts payable by such other
party under the terms of this Lease or any damages to which such party is
entitled as a result of any default by the other party hereunder.
Section 18.04. Lessor's Right to Perform Lessee's Covenants. If Lessee
shall default in the performance of any of its covenants, obligations or
agreements contained in this Lease, other than the obligation to pay rent,
Lessor after ten (10) days' notice to Lessee, specifying such default (or
shorter notice if any emergency exists), may (but without any obligation so
to do) perform the same for the account and at the expense of Lessee, and the
amount of any payment made or other reasonable expenses, including reasonable
attorneys' fees incurred by Lessor for curing such default, with interest
thereon at the lower of twelve percent (12.0%) per annum or the maximum
amount allowed by law, shall be payable by Lessee to Lessor on demand.
Section 18.05. Non-Merger. Unless agreed to in writing by such person,
there shall be no merger of this Lease, the leasehold estate created hereby
or the Improvements with the fee state in and to the Leased Premises by
reason of the fact that this Lease, the leasehold estate created thereby or
the Improvements, or any interest in either thereof, may be held directly or
indirectly by or for the account of any person who shall own the fee estate
in and to the Leased Premises, or any portion thereof, and no such merger
shall occur unless and until all persons at the time having any interest in
the fee estate and all person having any interest in this Lease, the
leasehold estate or the Improvements, including the holder of any mortgage
upon the fee estate in and to the Leased Premises, shall join in a written
instrument effecting such merger.
Section 18.06. Notices. Any notice to be given or to be served in
connection with this Lease must be in writing, and may be given by facsimile,
by certified mail, or by overnight delivery service and shall be deemed to
have been given and received upon the earlier of receipt thereof by the
receiving party or on the third business day after a letter containing such
notice, properly addressed, with postage prepaid is deposited in the United
States Mail or given to a nationally recognized overnight delivery service,
addressed as follows:
If to Lessor:
FFP Properties, L.P.
Attn: Lease Administration
2801 Glenda Avenue
Fort Worth, Texas
76117-4391
Facsimile: 817/838-1871
If to Lessee:
FFP Operating Partners, L.P.
Attn: Contracts Adminstration
2801 Glenda Avenue
Fort Worth, Texas
76117-4391
Facsimile: 817/838-1871
Each party hereto shall have the right, by giving not less than five (5)
days' prior written notice to the other parties hereto, to change any address
of such party for the purpose of notices under this Section 18.06.
Section 18.07. Successors and Assigns. Lessor, as used in this instrument
shall extend to and include any and all persons, whether natural or
artificial who at any time or from time to time during the term of this Lease
shall succeed to the interest and estate of Lessor in the Leased Premises;
and all of the covenants, agreements, conditions and stipulations herein
contained which inure to the benefit of and are binding upon Lessor shall
also inure to the benefit of and shall be, jointly and severally, binding
upon the heirs, executors, administrators, successors, assigns and grantees
of Lessor, and each of them, and any and all persons who at any time or from
time to time during the term of this Lease shall succeed to the interest and
estate of Lessor in the real estate and property hereby demised. The word
"Lessee" as used in this instrument shall extend to and include any and all
persons, whether natural or artificial, who at any time or from time to time
during the term of this Lease shall succeed to the interest and estate of
Lessee hereunder and all of the covenants, agreements, conditions and
stipulations herein contained which inure to the benefit of or are binding
upon Lessee shall also inure to the benefit of and be jointly and severally
binding upon the successors, assigns, or other representatives of Lessee, and
of any and all persons who shall at any time or from time to time during the
term of this Lease succeed to the interest and estate of Lessee hereby
created in the Leased Premises. Lessee shall have the right to assign this
Lease to any person or entity.
Section 18.08. Modifications. This Lease may be modified only by written
agreement signed by the Lessor and Lessee.
Section 18.09. Descriptive Headings. The descriptive headings of this Lease
are inserted for convenience in reference only and do not in any way limit or
amplify the terms and provisions of this Lease.
Section 18.10. No Joint Venture. The relationship between Lessor and Lessee
at all times shall remain solely that of landlord and tenant and shall not be
deemed a partnership or joint venture.
Section 18.11. Arbitration. Wherever in this Lease it is provided that any
question shall be determined by arbitration, such question shall be settled
and finally determined by arbitration in accordance with the rules then in
effect of the American Arbitration Association, or its successors, and the
judgment upon the award rendered may be entered in any court having
jurisdiction thereover. Such arbitration shall be held in the City of Fort
Worth, Texas. The number of arbitrators to be appointed shall be three (3).
The arbitrators shall have at least five (5) years experience in real estate
in the area where the Leased Premises is located and shall not be related to
either party. The parties to the arbitration, in addition to the rights
granted under the rules of the Association, shall have the right to offer
evidence and testify at the hearings and cross-examine witnesses. The cost
of such arbitration shall be split equally between the parties.
Section 18.12. Memorandum of Lease. Lessor and Lessee agree that they
shall, at any time at the request of the other, promptly execute a memorandum
or short form of this Lease, in recordable form, setting forth a description
of the Leased Premises, the term of this Lease, and any other provisions
herein, or the substance thereof, as either party desires.
Section 18.13. Partial Invalidity. If any term or provision of this Lease
or the application thereof to any person or circumstance shall to any extent
be invalid or unenforceable, the remainder of this Lease, or the application
of such term or provision to any person or circumstances other than those as
to which it is invalid or unenforceable, shall not be affected thereby, and
each term of this Lease shall be valid and be in force to the fullest extent
permitted by law.
Section 18.14. Holding Over. Subject to the rights and remedies of Lessor
as set forth in Section 11.02 hereof and in addition thereto, in case of
holding over by Lessee after expiration or termination of the Term of this
Lease, Lessee shall pay monthly, as rent, an amount equal to 125% of the
amount of Monthly Rent under Section 4.01 hereof during each month or partial
month of the holdover period. No holding over by Lessee after the Term of
this Lease, either with or without consent and acquiescence of Lessor, shall
operate to extend the Lease for a longer period than one month unless (a) a
holdover agreement in writing specifies a longer period or (b) this Lease is
extended in writing; and any holding over without consent of Lessor in
writing shall thereafter constitute this Lease a lease from month to month.
In the event of any unauthorized holding over, Lessee shall indemnify Lessor
against all claims for damages by any other tenant or prospective tenant to
whom Lessor may have leased all or any part of the Leased Premises, resulting
from delay by Lessor in delivering possession of all or any part of the
Leased Premises.
Section 18.15. Lessor Default. In the event of any default hereunder by
Lessor, Lessee may, if such default continues after a reasonable notice
period following receipt of written notice thereof to Lessor, cure such
default for the account and at the expense of Lessor. If Lessee at any time
after the expiration of such curative period by reason of such breach, is
compelled to pay, or elects to pay, any sum of money or do any act which will
require the payment of any sum of money, or is compelled to incur any
expense, including reasonable attorney's fees, in instituting, prosecuting
and/or defending any action or proceeding to enforce Lessee's rights
hereunder or otherwise, the sum or sums so paid by Lessee, with all interest,
costs and damages, shall on demand be paid by Lessor to Lessee but Lessee
shall have no right to offset any such sums against any amounts which may be
due to Lessor hereunder.
Section 18.16. Lessor Covenant. Lessor shall pay when due all principal and
interest on any mortgage or superior lease to which this Lease is subordinate
or subordinated, and shall pay or discharge (by bonding or otherwise) all
valid mechanic's liens filed against the Leased Premises by reasons of any
construction by Lessor.
Section 18.17. Sublease. If this Lease is in fact a sublease, Lessee
accepts this Lease subject to all of the terms and conditions of the
underlying lease under which Lessor holds the Leased Premises as lessee.
Lessee covenants that it will do no act or thing which would constitute a
violation by Lessor of its obligation under such underlying lease; provided,
however, that Lessee's agreement in this regard is premised on Lessor's
assurances to the effect that the terms of this Lease do not violate such
underlying lease.
Section 18.18. Net Lease. It is understood and agreed that this Lease
Agreement is intended to be a net lease. It is the intention of the parties
that Lessor shall receive the Monthly Rent hereunder free from all charges
and expenses imposed upon or by reason of the Leased Premises and the
ownership thereof by Lessor.
Section 18.19. Venue. This Lease is entered into in Tarrant County, Texas,
and is performable and enforceable in that county.
IN WITNESS WHEREOF, the parties have executed this instrument the day and
year first above written.
LESSOR:
FFP PROPERTIES, L.P.
By: FFP Partners, L.P.
its sole general partner
By: FFP Real Estate Trust
its sole general partner
By: ______________________________
[Name and Title]
LESSEE:
FFP OPERATING PARTNERS, L.P.
By: FFP Operating LLC
its sole general partner
By: __________________________________
[Name and Title]
===============================================================================
THE STATE OF TEXAS
COUNTY OF TARRANT
This instrument was acknowledged before me on ___________________,
1998, by
________________________________________________________________ the
___________________________ of FFP Real Estate Trust who stated that the same
was signed in the capacity and for the purposes indicated therein.
_________________________________________
Notary Public, State of Texas
Commission Expires: _______________________
Printed Name: _____________________________
THE STATE OF TEXAS
COUNTY OF TARRANT
This instrument was acknowledged before me on ___________________,
1998, by
________________________________________________________________ the
___________________________ of FFP Operating LLC who stated that the same was
signed in the capacity and for the purposes indicated therein.
_________________________________________
Notary Public, State of Texas
Commission Expires: _______________________
Printed Name: _____________________________
BUILDING LEASE AGREEMENT
THIS CONTRACT CONTAINS ARBITRATION PROVISIONS AND SHALL BE
SUBJECT TO ARBITRATION UNDER THE TEXAS GENERAL ARBITRATION ACT
(ARTICLE 224 ET SEQ. REVISED CIVIL STATUTES OF TEXAS).
THIS BUILDING LEASE AGREEMENT is made and entered into on January 1, 1998,
by and between FFP Properties, L.P., a Texas limited partnership ("Lessor"),
and FFP Operating Partners, L.P., a Delaware limited partnership ("Lessee").
WHEREAS, the Lessor owns all buildings, structures, and other improvements
located on the property described on Exhibit A (such buildings, structures,
and improvements being referred to as the "Premises"); and,
WHEREAS, Lessee desires to occupy and use such property for the conduct of
its business;
NOW, THEREFORE, it is agreed by and between Lessor and Lessee as follows:
ARTICLE I
Premises
Section 1.01. Lessor, in consideration of the covenants and agreements to be
performed by Lessee and upon the terms and conditions hereinafter stated,
does hereby lease, demise, and let unto Lessee the buildings, structures, and
other improvements located on the property described on Exhibit A attached
hereto and all rights, easements and appurtenances pertaining thereto
(collectively, the "Leased Premises").
ARTICLE II
Term
Section 2.01. The term of this Lease shall be for a period commencing on
January 1, 1998 ("Commencement Date"), and ending on the December 31, 2002
("Term").
Section 2.02. It is expressly acknowledged by Lessor and Lessee that the
Leased Premises are situated on land leased by the Lessee hereunder from
another party and that the Term of this Building Lease Agreement, including
any renewals thereof, shall not extend beyond the termination date, including
any renewals thereof, of the lease on the land; provided, however, that if
the lease on the land shall terminate due to an event of default under such
lease by Lessee, then Lessee shall continue to be obligated to pay the
Monthly Rent (as hereinafter set forth) for the remainder of the Term, or
Renewal Term (as hereinafter defined), as applicable, hereunder.
ARTICLE III
Use of Premises
Section 3.01. The Leased Premises shall be used for any lawful use,
including, but not limited to, the operation of the Leased Premises as a
convenience store, truck stop, and/or self-service gasoline station.
Section 3.02. Lessee shall not perform any acts or carry on any practices
which may injure the Leased Premises or constitute a nuisance, or use the
Leased Premises for any business which is unlawful or in violation of any
public or city ordinances.
ARTICLE IV
Rent
Section 4.01. Lessee, without offset or deduction, agrees to pay the Lessor
at 2801 Glenda Avenue, Fort Worth, Texas, or such other address as Lessor may
designate, rent for the Leased Premises at the rate of
___________________________________ dollars ($______________) per month
("Monthly Rent") in advance on the first day of each and every calendar month
during the Term of this Lease, the first such payment becoming due and
payable on the Commencement Date.. If the Commencement Date is other than
the first day of a month or if the term of the Lease terminates on a day
other than the last day of the month, a prorated monthly rental installment
shall be paid.
Section 4.02. All rental installments or payments (including any amounts
payable as additional rent) more than ten (10) days past due shall subject
Lessee to liability for payment of a late payment charge equal to five
percent (5.0%) of each such late monthly installment or payment.
ARTICLE V
Possession of Presmises
Section 5.01 Lessee acknowledges that Lessee has fully inspected the Leased
Premises and on the basis of such inspection Lessee hereby accepts the Leased
Premises "AS IS". Lessee acknowledges that the Improvements, if any,
situated thereon, are suitable for the purposes for which the same are
leased, in their present condition.
ARTICLE VI
Alteration, Operating Expenses,
Construction, and Ownership of Improvements
Section 6.01. Alterations and Improvements. Lessee shall have the right to
make alterations to or construct Improvements on the Leased Premises. Any
alteration or improvement made to the Leased Premises shall be made in a
workmanlike manner and in compliance with all valid laws, governmental
orders, and building ordinances and regulations pertaining thereto. Lessee
shall promptly pay and discharge all costs, expenses, damages, and other
liabilities which may arise in connection with or by reason of any
alterations, reconstruction, demolition, or other work on the Leased
Premises. All alterations, reconstruction, demolition or other work on the
Leased Premises when completed shall be of such a nature as not to reduce or
otherwise adversely affect the value of the Leased Premises. Lessee shall
have the right to grant easements upon the estate of Lessor which are
required for utilities or access in connection with construction of the
Improvements and Lessor agrees to execute all documents which Lessee may
reasonably request in order to grant such easements.
Section 6.02. Operating Expenses. Lessee agrees to pay any and all expenses
of operation of the Leased Premises including, but not being limited to,
electricity, water, gas, and other utility services to persons and parties
occupying the Leased Premises, it being the intention of this Lease that the
amounts payable to Lessor hereunder as rent shall be absolutely net to
Lessor, without diminution by reason of any expenses of operation of the
Leased Premises.
Section 6.03. Repairs; Compliance with Laws. Lessee shall keep all
Improvements from time to time situated on the Leased Premises in a good
repair and condition, and at the end or other expiration of the term of this
Lease deliver up the Leased Premises and all Improvements thereon, whether on
the Leased Premises at the time of execution of this Lease or constructed by
Lessee in accordance herewith, in good condition, reasonable wear and tear
excepted (subject to Article XII hereof). Lessee shall at its sole cost and
expense comply with all requirements of all municipal, state, and federal
authorities now in force or which may hereafter be in force, pertaining to
the Leased Premises and shall faithfully observe in the use of the Leased
Premises all municipal, state, and federal laws and regulations now in force
or which may hereafter be in force.
Section 6.04 Release. Lessor hereby releases Lessee, and Lessee hereby
releases Lessor, and their respective officers, agents, employees, and
representatives, from any and all claims or demands for damages, loss,
expense, or injury to the Leased Premises, or to the furnishings, fixtures,
and equipment, or inventory or other property of either Lessor or Lessee in,
about, or upon the Leased Premises, as the case may be, which is caused by or
results from perils, events, or happenings which are the subject of insurance
carried by the respective parties and in force at the time of any such loss;
provided, however, that such waiver shall be effective only to the extent
permitted by the insurance covering such loss and to the extent such
insurance is not prejudiced thereby or the expense of such insurance is not
thereby increased.
Section 6.05. Title to the Improvements. All Improvements presently
constituting a part of the Leased Premises shall be owned by Lessor. Title
to all Improvements and any modifications, additions, restorations, repairs,
and replacements thereof hereafter placed or constructed by Lessee upon the
Leased Premises shall be in Lessee, its successors and assigns, until the
expiration of the Lease Term; provided, however, that the terms and
provisions of this Lease shall apply to all such Improvements and that all
such Improvements (with the exception only of moveable equipment and trade
fixtures, and gasoline storage tanks, pumps, and equipment) shall be
surrendered to Lessor upon the termination of the Lease Term.
Section 6.06. Liens. Lessor does not consent, and has not by the execution
and delivery of this Lease consented, to the imposition by Lessee or any
contractor or subcontractor of any liens upon the Lessor's interest in the
Leased Premises. Lessee agrees that all Improvements at any time constructed
upon the Leased Premises will be completed free and clear of all liens and
claims of contractors, subcontractors, mechanics, laborers, and materialmen,
and other claimants. Lessee further covenants and agrees to protect,
indemnify, defend, and hold harmless Lessor from and against all bills and
claims, liens and rights to liens for labor and materials and architect's,
contractor's, and subcontractor's claims, and all fees, claims, and expenses
incident to the construction and completion of any Improvements, including
without limitation, reasonable attorneys' fees and court costs incurred by
Lessor.
ARTICLE VII
Utility Charges
Section 7.01. Lessee shall pay or cause to be paid promptly when due all
charges for water, electricity, gas, telephone, or any other utility services
furnished to the Leased Premises. Lessee expressly agrees that Lessor is
not, nor shall it be, required to furnish to Lessee or any other occupant of
the Leased Premises any water, sewer, gas, heat, electricity, light, power,
or any other facilities, equipment, labor, materials, or services of any kind
whatsoever.
ARTICLE VIII
Indemnification
Section 8.01. Lessee covenants and agrees, at its sole cost and expense, to
indemnify and hold Lessor harmless from and against any and all claims by or
on behalf of any person, firm, corporation, or governmental authority,
arising from the occupation, use, possession, conduct, or management of, or
from any work or thing whatsoever done in and about, the Leased Premises
during the Lease Term and any Renewal Term, or the subletting of any part
thereof. Lessee further agrees to indemnify and save Lessor harmless from
and against any and all claims arising from any condition of the Leased
Premises or the Improvements (including, but not limited to claims or
liability under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 and the Resource Conservation and Recovery Act of 1976)
or rising from any breach or default on the part of Lessee to be performed
pursuant to the terms of this Lease, or arising from any action, injury, or
damage whatsoever caused to any person, firm, or corporation, including any
sublessees of Lessee (other than those caused by Lessor or his
representatives and employees) occurring during the Lease Term or any Renewal
Term in or about the Leased Premises or upon and under the sidewalks and the
land adjacent thereto. The indemnification obligations of Lessee hereunder
shall include all costs, expenses, and liabilities incurred by Lessor,
including reasonable attorneys' fees. If any action or proceeding shall be
brought against Lessor by reason of any such claim, Lessee upon receipt of
written notice from Lessor covenants to defend such action or proceeding with
counsel satisfactory to Lessor, unless such action or proceeding is defended
by any carrier of public liability insurance maintained by Lessee. If Lessee
procures or maintains insurance insuring Lessee against liability for injury
to or death of a person or persons, such policy or policies shall name Lessor
as an additional insured.
ARTICLE IX
Taxes and Assessments
Section 9.01. Lessee shall pay to, or on behalf of, Lessor as additional
rent the amount of the real estate taxes allocable to the Leased Premises
(which shall be separately assessed) for each tax year included within the
Term or any Renewal Term of this Lease; for the first and last tax years
included in part within the term of this Lease, Lessee shall pay to Lessor a
pro rata share of such taxes for such tax years, based upon the portions of
such tax years included within the term of this Lease. Real estate taxes
shall not include any income, excess profits, estate, inheritance,
succession, transfer, franchise, capital, or other tax or assessment upon
Lessor or upon the rentals payable under this Lease, all of which shall be
the obligation of Lessor.
Section 9.02. If there shall be more than one taxing authority, the real
estate taxes for any period shall be the sum of such taxes for such period
attributable to each taxing authority. The real estate taxes for any tax
year shall mean such amounts as shall be finally determined to be the real
estate taxes assessed and payable for such tax year less any abatements,
refunds, or rebates made thereof. For the purpose of determining payments
due from Lessee to Lessor in accordance with the provisions hereof, (i) the
real estate taxes for any tax year shall be deemed to be the real estate
taxes assessed and payable for such tax year until such time as the same may
be reduced by abatement, refund or rebate, and (ii) if any abatement, refund
or rebate shall be made for such tax year, the real estate taxes for such tax
year shall be deemed to be the real estate taxes as so reduced plus the
expenses of obtaining the reduction, with an appropriate adjustment to be
made in the amount payable from or paid by Lessee to Lessor on account of
real estate taxes.
Section 9.03. Lessee shall have such rights to contest the validity or
amount of any real estate taxes as permitted to Lessor, or Lessee, by law,
either in its own name or in the name of Lessor. Lessor shall cooperate with
Lessee in any such contest and, in connection therewith, shall make available
to Lessee such information in its files as Lessee may reasonably request. If
any abatement, refund or rebate shall be obtained, the expenses of obtaining
the same shall be a first charge thereon.
Section 9.04. Lessor shall submit to Lessee copies of the real estate tax
bills for each tax year. Lessor shall bill Lessee for any amount that may be
payable by Lessee pursuant to the provisions herein. Such bill shall be
accompanied by a computation of the amount payable. The amount payable by
Lessee hereunder for any tax year shall be payable on or before the time that
Lessor shall be required to pay real estate taxes to the taxing authority for
such tax year, but if Lessee shall not have received a bill therefor at least
fourteen days prior to such time for payment, Lessee shall not be required to
make payment until fourteen days after the receipt of such bill. (If real
estate taxes are payable to any taxing authority for any tax year in
installments, the amount payable by Lessee hereunder shall be payable in
similar installments. If real estate taxes are payable to different taxing
authorities for any tax year at different times, an appropriate apportionment
shall be made of the amount payable by Lessee for such tax year and the
apportioned amounts shall be payable at such times). Lessor agrees that real
estate taxes upon the Leased Premises shall be paid by Lessor prior to the
last day that the same may be paid without penalty or interest, or if a
discount shall be available for early payment, prior to the last day of that
such discount shall be available. Lessor agrees to provide Lessee evidence
of any taxes paid by Lessor.
Section 9.05. Lessee agrees to pay all taxes levied against personal
property, trade fixtures, and inventory owned or placed by Lessee in, on, or
about the Leased Premises.
ARTICLE X
Title
Section 10.01. Lessor's Warranty of Title. Lessor warrants and represents
that the Leased Premises is owned by Lessor in fee, free, and clear of any
restrictions which would materially adversely affect the use of the Leased
Premises by Lessee and that Lessor has the legal right to make and enter into
this Lease.
Section 10.02. Peaceable Possession. Lessor warrants to Lessee the
peaceable enjoyment of the Leased Premises against the lawful let, hindrance,
or disturbance of any person or persons whomsoever.
ARTICLE XI
Assignment and Subletting
Section 11.01. Lessee may not assign this Lease or sublet all or any part of
the Leased Premises, without Lessor's prior written consent, which consent
shall not be unreasonably withheld.
Section 11.02. If Lessee assigns this Lease or sublets all or any part of
the Leased Premises, Lessee shall remain liable and responsible under this
Lease for the performance of the covenants and obligations of Lessee
hereunder unless Lessor shall have, in writing, specifically released Lessee
from such obligations.
Section 11.03. If Lessee assigns this Lease and shall remain liable
hereunder, then Lessor, when giving notice to said assignee or any future
assignee in respect of any default, shall also serve a copy of such notice
upon the original tenant first named hereinabove in this Lease ("Original
Lessee") and no notice of default shall be effective until a copy thereof is
received by the Original Lessee. The Original Lessee shall have the same
period after receipt of such notice to cure such default as is given to
Lessee under this Lease. If this Lease terminates or this Lease and the term
hereof ceases and expires because of a default of such assignee after an
assignment of this Lease shall have been made, Lessor shall promptly give the
Original Lessee notice thereof. The Original Lessee shall have the option to
be exercised by notifying Lessor within twenty (20) days after receipt by the
Original Lessee of Lessor's notice, to cure any default and become tenant
under a new lease for the remainder of the term of this Lease (including any
renewal periods) upon all of the same terms and conditions as then remain
under this Lease as it may have been amended by agreement between Lessor and
Original Lessee. If any default of such assignee is incapable of being cured
by the Original Lessee, then, notwithstanding the failure to cure same, the
Original Lessee shall have the foregoing option to enter into a new lease.
Such new lease shall commence on the date of termination of this Lease.
Notwithstanding the foregoing, if Lessor delivers to the Original Lessee,
together with Lessor's notice, a release as to all liability under this Lease
as theretofore amended, the Original Lessee shall not have the foregoing
option.
ARTICLE XII
Condemnation
Section 12.01. Entire Taking. If all of the Leased Premises shall be taken
in condemnation proceedings, this Lease shall terminate as of the taking and
the minimum rent and additional rent shall be paid to the date of such
termination. Lessor shall give Lessee a proportionate refund of any rent
paid in advance.
Section 12.02. Partial Taking.
A. If less than all of the Leased Premises shall be taken in
condemnation proceedings, Lessor and Lessee shall mutually determine, within
a reasonable time after such taking, whether the remaining building or
buildings (after necessary repairs and reconstruction to constitute the same
a complete architectural unit or units) can economically and feasibly be used
and subleased by Lessee. If Lessor and Lessee cannot mutually agree upon
such matter within ninety (90) days after notice of intent to take, the same
shall be determined thereafter upon request of either party by arbitration in
accordance with the provisions of Section 18.11. In arriving at their
decision, the arbitrators, among other things, shall take into consideration
whether such remaining premises will produce a fair and reasonable net return
to Lessor and will produce a fair and reasonable profit to Lessee.
B. If it is determined either by mutual agreement or arbitration that
such remaining building or buildings cannot economically and feasibly be used
by Lessee, Lessor or Lessee, at its election, may terminate this Lease on ten
(10) days' notice to the other party to such effect, and the minimum rent and
additional rent shall be paid to the date of such termination. Lessor shall
give Lessee a proportionate refund of any rent paid in advance. If between
the taking and the date of such termination, the condemning authority shall
have entered into physical possession of the condemned portion of the Leased
Premises, the Rental, during such period, shall be reduced to accommodate
such event and any dispute as to the amount of such reduction shall be
determined by arbitration in accordance with the provisions of Section
18.11. However, such election to terminate must be exercised within thirty
(30) days after the determination, as aforesaid, that the remaining building
or buildings cannot economically and feasibly be used by Lessee.
Section 12.03. Application of Award. If this Lease shall terminate
pursuant to the provisions of Section 12.01 or Section 12.02 of this Article,
Lessor's share of the condemnation award together with any separate award to
Lessee shall be apportioned and paid in the following order of priority:
A. There shall be first paid any and all reasonable expenses, charges
and fees, including reasonable counsel tees, in collecting the award.
B. Lessor shall then be entitled to receive an amount equal to the
reasonable market value of the Leased Premises, on a basis without
consideration of any unexpired portion of the term of this Lease and
unencumbered by this Lease. If Lessor and Lessee cannot agree as to such
value, the same shall be determined by arbitration in accordance with the
provisions of Section 18.11.
C. The balance of the award shall be paid to the Lessee; provided,
that if the remainder of the Lease Term is, at the time of the taking, less
than one year, such balance shall be paid to lessor.
Section 12.04. Application of Award in Partial Taking. If it is
determined pursuant to the provisions of Section 12.03, that the remaining
Improvements after a partial condemnation can be used economically by Lessee,
(i) this Lease shall not terminate but shall continue in full force and
effect as to the portion of the Leased Premises not taken, (ii) Lessee shall
commence and proceed with reasonable diligence to repair or reconstruct the
remaining building or buildings on the Leased Premises to a complete
architectural unit or units to the extent proceeds of the condemnation award
are available therefor, and (iii) the fixed annual rentals payable by Lessee
hereunder shall be reduced during the unexpired portion of this Lease to that
proportion of the annual fixed results herein reserved which the value of the
part of the Leased Premises not so taken bears to the value of the total of
the Leased Premises, such values to be determined as of the date when Lessee
is disturbed in its possession as a result of the taking. Lessor's share of
the award in condemnation proceedings for any partial taking where repair or
reconstruction is undertaken, together with any separate award to Lessee,
shall be apportioned and paid in the following order of priority:
A. There shall first be paid any and all reasonable expenses, charges
and fees, including reasonable counsel fees, in collecting the awards.
B. The proceeds of the awards shall next be used as a fund for the
restoration of the building, improvements and equipment situated on the
Leased Premises to a complete architectural unit or units. Said proceeds
shall be held by Lessor and shall be paid out from time to time to persons
furnishing labor or materials, or both, including architects' fees and
contractors' compensation in such restoration work on vouchers approved by a
licensed architect engineer or other person approved by Lessor and employed
by Lessee to superintend the work.
C. Lessor shall then be entitled to an amount equal to the reasonable
market value of the portion of the Leased Premises taken, without
consideration of any unexpired portion of the term of this Lease,
unencumbered by this Lease, plus a sum of money equal to damages sustained by
Lessor for severance damages to the remaining and untaken portion of the
Leased Premises, also unencumbered by this Lease as to such remaining untaken
portion of the Leased Premises.
D. The balance of the award shall be paid to Lessee.
Section 12.05. Temporary Possession. If any right of temporary possession
or occupancy of all or any portion of the Leased Premises shall be obtained
by any competent authority in the exercise of the power of eminent domain,
the foregoing provisions of this Article shall be inapplicable thereto and
this Lease shall continue in full force and effect without reduction or
suspension of minimum rent and additional rent and Lessee shall be entitled
to make claim for and recover any award or awards, whether in the form of
rental or otherwise, recoverable in respect of such possession or occupancy.
The award shall be paid to Lessor and applied against the Rental payable by
Lessee under this Lease, as the same becomes due, with any surplus to be paid
to Lessee; provided that if any portion of the award is intended to cover the
cost of restoring the Leased Premises to the condition they were in prior to
such temporary possession or occupancy or to make any repairs occasioned by
or resulting from such possession or occupancy, such portion shall be so
applied.
Section 12.06. Consent to settlement by Lessor. Lessee shall have primary
responsibility for dealing with the condemning authority in the condemnation
proceedings but Lessee shall not make any settlement with the condemning
authority nor convey or agree to convey the whole or any portion of the
Leased Premises to such authority in lieu of condemnation without first
obtaining the written consent of Lessor thereto, which consent shall not be
unreasonably withheld if Lessor receives (i) not less than the fair market
value of the Leased Premises taken at the time and (ii) a reasonable amount
for any diminution in value of the remaining portion.
ARTICLE XIII
Events of Default and Remedies
Section 13.01. Events of Default. The following events ("Events of
Default") shall be deemed to be events of default by Lessee under this Lease:
A. Failure by Lessee to pay any installment of the Monthly Rent or any
additional rent or any other sum of money payable hereunder on the date the
same is due and such failure shall continue for a period of ten (10) days
after written notice to Lessee.
B. Failure by Lessee to comply with any term, provision, or covenant
of this Lease, other than the payment of rent or other sums of money, and
shall not cure such failure within thirty (30) days after written notice
thereof to Lessee; or if such failure cannot reasonably be cured within the
said thirty (30) days and Lessee shall not have commenced to cure such
failure within such thirty (30) day period and shall not thereafter with all
due diligence and good faith proceed to cure such failure.
C. The entering of a decree or order by a court of competent
jurisdiction adjudging Lessee a bankrupt or insolvent or appointing a
receiver or trustee or assignee in bankruptcy or insolvency of all or
substantially all of its property, and any such decree or order shall have
continued in force undischarged or unstayed for a period of sixty (60) days.
D. The doing or permitting to be done by Lessee or any sublessee,
assignee, grantee, or agent of Lessee shall of anything which creates a lien
upon Lessor's interest in the Leased Premises, and any such lien is not
discharged or bonded within thirty (30) days after filing.
E. The insolvency of Lessee or the making a transfer in fraud of
creditors, an assignment for the benefit of creditors, or the filing of a
proceeding in bankruptcy by Lessee, or the appointing of a receiver or
trustee for Lessee or any of the assets of Lessee.
Section 13.02. Remedies. Upon the occurrence of any Event of Default
enumerated in Section 13.01 hereof, Lessor shall have the option of (i)
terminating this Lease by written notice thereof to Lessee, (ii) continuing
this Lease in full force and effect, or (iii) curing the default on behalf of
Lessee.
A. In the event that Lessor shall elect to terminate this Lease, upon
written notice to Lessee, this Lease shall be ended as to Lessee and all
persons holding under Lessee, and all of Lessee's rights shall be forfeited
and lapsed, as fully as if this Lease had expired by lapse of time. In such
event, Lessee shall be required immediately to vacate the Leased Premises and
there shall immediately become due and payable the amount by which (a) the
total rent and other benefits which would have accrued to Lessor under this
Lease for the remainder of the Term of this Lease if the terms and provisions
of this Lease had been fully complied with by Lessee exceeds (b) the total
fair market rental value of the Leased Premises for the balance of the Term
of this Lease (it being the intention of both parties hereto that Lessor
shall receive the benefit of its bargain); and Lessor shall at once have all
of the rights of re-entry upon the Leased Premises, without becoming liable
for damages or guilty of a trespass. In addition to the sum immediately due
from Lessee under the foregoing provision, there shall be recoverable from
Lessee: (w) the reasonable cost of restoring the Leased Premises to good
condition, normal wear and tear excepted (subject to Article XII hereof); (x)
all accrued unpaid sums, plus interest at the highest lawful rate per annum
and late charges, if in arrears, under the terms of this Lease up to the date
of termination; (y) Lessor's reasonable cost of recovering possession of the
Leased Premises; and (z) rent and sums accruing subsequent to the date of
termination pursuant to the holdover provisions of Section 18.14 hereof.
B. In the event that Lessor shall elect to continue this Lease in full
force and effect, Lessee shall continue to be liable for all rents. Lessor
shall nevertheless have all of the rights of re-entry upon said Leased
Premises without becoming liable for damages or being guilty of a trespass
and Lessor after re-entry may relet the Leased Premises or any part thereof,
to a substitute tenant or tenants for a period of time equal to or lesser or
greater than the remainder of the term on whatever terms and conditions
Lessor, at Lessor's sole discretion, deems advisable. Against the rents and
sums due from Lessee to Lessor during the remainder of the term, credit shall
be given Lessee in the net amount of rent received from the new tenant after
deduction by Lessor for: (a) the reasonable costs incurred by Lessor in
reletting the Leased Premises (including, without limitation, remodeling
costs, brokerage fees, legal fees, and the like); (b) the accrued sums, plus
interest and late charges if in arrears, under the terms of this Lease; (c)
Lessor's reasonable cost of recovering possession of the Leased Premises; and
(d) the cost of storing any of Lessee's property left on the Leased Premises
after re-entry. Notwithstanding any provision in this paragraph B of Section
13.02 to the contrary, upon the default of any substitute tenant or upon the
expiration of the lease term of such substitute tenant before the expiration
of the Term of this Lease, Lessor may, at Lessor's election, either relet to
still another substitute tenant or terminate this Lease and exercise its
rights under paragraph A of this Section 13.02.
C. In the event that Lessor shall elect to cure the default of Lessee,
all sums expended by Lessor in effecting such cure, plus interest thereon at
the highest lawful rate per annum, shall be due and payable immediately.
Such sum shall constitute additional rent hereunder, and failure to pay such
sum when due shall enable Lessor to exercise all of its remedies under this
Lease.
Section 13.03. Cumulative Rights. Pursuit of any of the foregoing remedies
shall not preclude pursuit of any of the other remedies herein provided or
any other remedies provided by law, nor shall pursuit of any remedy herein
provided constitute a forfeiture or waiver of any rent due to Lessor
hereunder or of any damages accruing to Lessor by reason of the violation of
any of the terms, provisions and covenants herein contained. Failure by
Lessor to enforce one or more of the remedies herein provided, upon any event
of default, shall not be deemed or construed to constitute a waiver of such
default or of any other violations or breach of any of the terms, provisions
and covenants herein contained.
Section 13.04. Re-Entry by Lessor. No re-entry or taking possession of the
Leased Premises by Lessor shall be construed as an election on its part to
terminate this Lease unless a written notice of such intention is given to
Lessee. Lessor, at its option, may make such alterations or repairs to the
Improvements as it, in its reasonable judgment, considers advisable and
necessary upon the occurrence of an Event of Default, at the cost of Lessee,
and the making of such alterations or repairs shall not operate or be
construed to release Lessee from liability hereunder. Lessor shall in no
event be liable in any way whatsoever for failure to relet the Leased
Premises and the improvements or, in the event the Leased Premises and the
Improvements are relet, for failure to collect rent thereof under such
reletting; and in no event shall Lessee be entitled to receive any excess of
such rent over the sums payable by Lessee to Lessor hereunder; provided,
however, that Lessor shall during such time as Lessor is in possession of the
Leased Premises as the result of any re-entry by Lessor hereunder, and prior
to any termination of this Lease, exercise reasonable efforts to cause tenant
space in the Leased Premises to be leased.
Section 13.05. Effect of Waiver or Forbearance. No waiver by Lessor of any
breach by Lessee of any of its obligations, agreements or covenants hereunder
shall be a waiver of any subsequent breach or of any obligation, agreement or
covenant, nor shall any forbearance by Lessor to seek a remedy for any breach
by Lessee be a waiver by Lessor of its rights and remedies with respect to
such subsequent breach.
Section 13.06. Bankruptcy of Lessee. The provisions of paragraph C and E
Section 13.01 above shall only apply with respect to the Lessee which is the
then owner of the leasehold estate. Notwithstanding the provisions of
Section 13.01 to the contrary, the happening of any of the Events of Default
mentioned in paragraph C or E of Section 13.01 above shall not operate or
permit Lessor to declare a default hereunder or terminate this Lease so long
as all covenants of Lessee hereunder shall be performed by Lessee or its
successor in interest or a Leasehold Mortgagee in accordance with the terms
of this Lease.
Section 13.07. New Lease with Leasehold Mortgagee Upon Termination. If this
Lease shall terminate by reason of the occurrence of any contingency
mentioned in Section 13.01 hereof, and in the manner therein set forth, and
if Lessor shall obtain possession of the Leased premises herefor, Lessor
agrees that any Leasehold Mortgagee shall have the right, for a period of
thirty (30) days subsequent to written notice of said termination of this
Lease, to elect to demand a new lease of the Leased premises of the character
and, when executed and delivered and possession of the Leased Premises is
taken thereunder, having the effect hereinafter set forth. Such new lease
shall be for a term to commence at the said termination of this Lease, as in
this Section 13.01 provided, and shall have as the date for the expiration
thereof the same date stated in this Lease as the date for the expiration
thereof. The rent thereof shall be at the same rate as would have been
applicable during such term under the provisions of this Lease, had this
Lease as the date for the expiration thereof. The rent therefor shall be at
the same rate as would have been applicable during such term under the
provisions of this Lease, had this Lease not so expired or terminated, and
all the rents, covenants, conditions and provisions of such new lease,
including, but not limited to, the conditional limitations set forth in this
Lease, shall be the same as the terms, conditions and provisions of this
Lease. If any such Leasehold Mortgagee as aforesaid shall elect to demand
such new lease within such 30-day period, such Leasehold Mortgagee shall give
written notice to Lessor of such election; and, thereupon, within ten (10)
days thereafter, Lessor and such Leasehold Mortgagee agree to execute and
deliver such new lease upon the terms above set forth, and such Leasehold
Mortgagee shall, at the time of the execution and delivery of such new lease,
pay to Lessor all rent and additional rent and other sums which would have
become payable hereunder by Lessee to Lessor to the date of the execution and
delivery of such new lease, had this Lease not terminated, and which remain
unpaid at the time of the execution and delivery of such new lease, together
with reasonable attorneys fees and expenses in connection therewith. Any
such new lease as contemplated in this Section 13.07 may, at the option of
the Leasehold Mortgagee, be executed by a nominee of such holder, without the
Leasehold Mortgagee assuming the burdens and obligations of Lessee thereunder
beyond the period of its ownership of the leasehold estate created hereby.
Any Leasehold Mortgagee of less than all of the Leased Premises who
elects to demand a new lease pursuant to this section with respect to the
part of the Leased Premises as to which it has obtained possession shall, as
a condition to Lessor's obligation to grant such new lease, agree to
guarantee the payment of rental for all of the Leased Premises.
Section 13.08. Notice to Leasehold Mortgagee. Lessor agrees, if and
so long as the leasehold estate of Lessee is encumbered by a leasehold
mortgage in favor of a Leasehold Mortgagee, to give such Leasehold Mortgagee
at such address or addresses as may be specified by the Leasehold Mortgagee
to Lessor in writing, written notice of any default or of the happening of
any contingency referred to in Section 13.01 hereof, simultaneously with the
giving of such notice to Lessee, and no such notice to Lessee shall be
effective or be deemed to have been given to Lessee hereunder unless such
notice is also given to the Leasehold Mortgagee; and the Leasehold Mortgagee
shall have the right, within the period limited by any such notice and for an
additional period of thirty (30) days thereafter, and to the same extent and
with the same effect as though done by Lessee, to take such action or to make
such payment as may be necessary or appropriate to cure any such default or
contingency so specified, it being the intention of the parties hereto that
Lessor shall not exercise its right to terminate this Lease as in Section
13.01 provided without first affording to any Leasehold Mortgagee the same
rights and the same notices with respect to any such default or contingency
and the same period or periods of time within which to cure the same,
including the right to enter into possession of the Leased Premises, to
enable the Leasehold Mortgagee also to do, as are afforded to Lessee
hereunder (and a period of thirty (30) days thereafter, and as are afforded
to the leasehold mortgagee under this Section 13.08).
Section 13.09. Foreclosure by Leasehold Mortgagee. Anything in this Lease
and specifically in this Article XI to the contrary notwithstanding, Lessor
shall not be entitled to exercise its right to terminate this Lease as in
this Article XIII provided during the period that any Leasehold Mortgagee
shall require to foreclose its mortgage or otherwise to fulfill or complete
its remedies under such leasehold mortgage or to cure any Event of Default,
provided, however, that such period shall in no event exceed ninety (90) days
and that within such period of time: (a) such Leasehold Mortgagee proceeds
promptly and with due diligence with its remedies under its mortgage on the
leasehold estate and thereafter prosecutes the same with all due diligence;
and (b) there is timely paid to Lessor the rent, additional rent and other
sums which have, or may, become due and payable during said period of time
and as the same become due and payable, and all other terms and provisions of
this Lease are duly complied with.
Section 13.10. No Voluntary Surrender of Leasehold Estate Without Consent of
Leasehold Mortgagee. So long as there exists any unpaid or undischarged
Leasehold Mortgage on the estate of Lessee created hereby, Lessor expressly
agrees for the benefit of such Leasehold Mortgagee that it will not accept a
voluntary surrender of the Leased Premises or a cancellation of this Lease
from Lessee prior to the termination of this Lease without the written
consent of the Leasehold Mortgagee, and Lessor and Lessee hereby agree for
the benefit of any Leasehold Mortgagee that they will not subordinate this
Lease to any mortgage that may hereafter be placed on the fee or amend or
alter any terms or provisions of this Lease or consent to any prepayment of
any rental or additional rental without securing the written consent thereto
of any such Leasehold Mortgagee. Nothing contained herein shall be construed
to limit the right of Lessor to sell or pledge its rights hereunder,
including but not limited to the right to receive rent pursuant to Article IV
hereof, without the prior consent or permission of any person.
ARTICLE XIV
Leasehold Mortgage
Section 14.01. Rights of Leasehold Mortgagee.
A. Lessee may, without Lessor's consent, mortgage, pledge, grant deeds of
trust, or otherwise encumber the leasehold estate created hereby and all or
any portion of the right, title and interest of Lessee hereunder, and assign,
hypothecate or pledge the same, as security for the payment of any debt to
any holder or beneficiary of a deed of trust or mortgage securing the payment
of indebtedness to Leasehold Mortgagee; provided, that no mortgagee, trustee,
or other person claiming by, through or under any instrument creating any
such encumbrance shall by virtue thereof acquire any greater right in the
Leased Premises than Lessee then had under this Lease, except for the right
expressly granted to such mortgagee, trustee or other person under the terms
of this Lease; and provided further, that such mortgage, deed of trust or
other instrument of encumbrance, and the indebtedness secured thereby, shall
at all times be and remain subject to all of the conditions, covenants and
obligations of this Lease and to all of the rights of Lessor hereunder. As
to any such Leasehold Mortgage Lessor consents to provisions therein, at the
option of Lessee, (a) for an assignment of Lessee's share of the net proceeds
from any award or other compensation resulting from a total or partial (other
than temporary) taking as set forth in Article X of this Lease, (b) for the
entry of any Leasehold Mortgagee upon the Leased Premises during business
hours, without notice to Lessor or Lessee, to view the state of the Leased
Premises, (c) that a default by Lessee under this Lease shall constitute a
default under any such leasehold mortgage, (d) for an assignment of Lessee's
right, if any, to terminate, cancel, modify, change, supplement, alter or
amend this Lease, (e) for an assignment of any sublease to which any such
leasehold mortgage is subordinated, subject to the rights of Lessor
hereunder, and (f) effective upon any default in any such leasehold mortgage,
(i) for the foreclosure of the Leasehold Mortgage pursuant to a power of sale
by judicial proceedings or other lawful means and the subsequent sale of the
leasehold estate to the purchaser at the foreclosure sale and a sale by such
purchaser or a sale by any subsequent purchaser, (ii) for the appointment of
a receiver, irrespective of whether any Leasehold Mortgagee accelerates the
maturity of all indebtedness secured by the Leasehold Mortgage, (iii) for the
rights of the Leasehold Mortgagee or the receiver to enter and take
possession of the Leased Premises, to manage and operate the same, to collect
the subrentals, issues and profits therefrom (subject to the rights of Lessor
hereunder), and to cure any default under the Leasehold Mortgage or any
default by Lessee under this Lease, and (iv) for an assignment of Lessee's
right, title and interest in and to the premiums for or dividends upon any
insurance required by the terms of this Lease, as well as in all refunds or
rebates of taxes or assessments upon or other charges against the Leased
Premises, whether paid or to be paid.
B. If at any time after the execution and recordation of any such mortgage
or deed of trust, the mortgagee or trustee therein shall notify Lessor in
writing that any such mortgage or deed of trust has been given and executed
by Lessee, and shall at the same time furnish Lessor with the address to
which it desires copies of notices to be mailed, or designate some person or
corporation as its agent and representative for the purpose of receiving
copies of notices, Lessor hereby agrees that it will thereafter mail to such
mortgagee or trustee and to the agent or representative so designated by such
mortgagee or trustee, at the address so given, duplicate copies of any and
all notices in writing which Lessor may from time to time give or serve upon
Lessee under and pursuant to the terms and provisions of this Lease.
Section 14.02. Liability of Leasehold Mortgagee. No Leasehold Mortgagee
shall be or become liable to Lessor as an assignee of this Lease or otherwise
until it expressly assumes by written instrument such liability, and no
assumption shall be inferred or result from foreclosure or other appropriate
proceedings in the nature thereof or as the result of any other action or
remedy provided for by any mortgage or deed of trust or other instrument
executed in connection with such leasehold mortgage or from a conveyance from
Lessee pursuant to which the purchaser at foreclosure or grantee shall
acquire the rights and interests of Lessee under the terms of this Lease.
ARTICLE XV
Attorney's Fees; Lessor's Lien
Section 15.01. Attorney's Fees. If on account of any breach or default by
either party hereunder, it shall become necessary for the other party hereto
to employ an attorney to enforce or defend any of said party's rights or
remedies hereunder, and should such party prevail in a final judgment, the
party against whom enforcement was sought shall pay to the other party any
reasonable attorney's fees incurred by reason of such proceedings.
Section 15.02. Lessor's Lien. In addition to the statutory landlord's lien,
Lessor shall have at all times, and Lessee does hereby grant to Lessor, a
valid contractual lien upon and a security interest upon all goods, wares,
equipment, fixtures, furniture and other personal property of Lessee
presently or which may hereafter be situated on the Leased Premises and all
proceeds therefrom to secure the payment by Lessee of all rentals and other
sums of money due hereunder, and such property shall not be removed therefrom
without the consent of Lessor until all arrearages in rent, as well as any
and all other sums of money then due to Lessor hereunder, shall first have
been paid and discharged. Upon the occurrence of an event of default by
Lessee, Lessor may sell any and all improvements, goods, wares, equipment,
fixtures, furniture and other personal property of Lessee situated on the
Leased Premises at one or more public or private sales after giving Lessee
reasonable notice of the time and place of any public sale or sales or of the
time after which any private sale or sales are to be made, with or without
having such property at the sale, at which Lessor or its assigns may purchase
property to be sold, being the highest bidder therefor. The requirement of
reasonable notice to Lessee hereunder shall be met if such notice is given in
the manner prescribed in Section 18.06 of this Lease at least ten (10) days
before the time of sale. The proceeds from any such disposition less any and
all expenses connected with the taking of possession, holding and selling of
the property (including reasonable attorney's fees and legal expenses) shall
be applied as a credit against any sums due by Lessee to Lessor. Any surplus
shall be paid to Lessee or as otherwise required by law. Upon request by
Lessor, Lessee agrees to execute and deliver to Lessor a financing statement
in form sufficient to perfect the security interest of Lessor in the
aforesaid property and proceeds under the provisions of the Uniform
Commercial Code in force in the state in which the Leased Premises are
located. Notwithstanding anything to the contrary stated herein, the
statutory lien of Lessor and the landlord's lien and security interest
granted in this paragraph are subject and subordinate to the rights, if any,
of the holder of any indebtedness secured by Lessee's leasehold interest in
the Leased Premises or in equipment or other property located thereon, and
Lessor agrees to execute such additional documents as shall be necessary to
effect or evidence such subordination.
ARTICLE XVI
Renewal Options
Section 16.01. Option to Renew. Lessee shall have, and is hereby given, two
(2) five (5) year options (the "Options") to renew and to extend the Term of
this Lease, such Options to follow consecutively upon the expiration of the
Term of this Lease, provided that at the time that each option to renew is
exercised, this Lease shall be in full force and effect and Lessee shall not
be in default hereunder. Each Option shall be for a term of five (5) years
(the "Renewal Term"). The Option shall be exercised by Lessee's giving to
Lessor written notice of its intention to renew and extend the Term of this
Lease at least three (3) months before the expiration date of the initial
Term of this Lease and any Renewal Term thereof. The renewal and extension
of this Lease for the Renewal Term shall be on and under the same covenants,
agreements, terms, provisions and conditions as are contained herein for the
initial Term of this Lease, except that rental shall be computed in the
manner set forth in Section 16.02 below. Any termination of this Lease
during the initial Term shall terminate all rights of renewal and extension
set forth herein.
Section 16.02. Adjustment to Monthly Rental. Commencing with the first
(1st) day of the first calendar month of each Renewal Term, the applicable
rental for each calendar month during such Renewal Term shall be equal to the
Monthly Rent multiplied by the percentage of increase by which the Consumer
Price Index in the calendar month three (3) months preceding the first month
of the Renewal Term exceeds the Consumer Price Index in December 1997;
provided, however, that in no event shall such adjusted rental for the
Renewal Term be less than the rental payable during the initial Term.
"Consumer Price Index" shall mean the Consumer Price Index for Urban Wage
Earners and Clerical Workers-All Items (Base Year 1967) of the United States
Bureau of Labor Statistics. If the manner in which such Consumer Price Index
is determined by the Bureau of Labor Statistics shall be substantially
revised, an adjustment shall be made in such revised index which would
produce results equivalent, as nearly as possible, to those which would have
been obtained if the Consumer Price Index had not been revised. If the
Consumer Price Index shall become unavailable to the public because
publication is discontinued, or otherwise, Lessor will substitute therefor a
comparable index based upon changes in the cost of living or purchasing power
of the consumer dollar published by any other governmental agency or, if no
such index shall be available, then a comparable index published by a major
bank or other financial institution or by a recognized financial publication.
ARTICLE XVII
Right of First Refusal
Sectoin 17.01. As long as Lessee is Lessee under this Lease and provided
Lessee is not in default hereunder, if at any time after the execution of
this Lease, Lessor shall receive a bona fide offer which it is willing to
accept to sell or transfer legal title to the Leased Premises (or any
interest therein) to any person (other than an affiliate, shareholder,
partner, joint venturer, spouse or lineal descendant of Lessor or any trust
for their benefit), Lessor shall, within fifteen (15) days after Lessor's
receipt of the acceptable offer, notify Lessee of the terms of such offer
("Lessor's Offer Notice"). Lessor's Offer Notice shall include the name of
the offeror and the offered consideration and other terms of such offer
(together with a copy of the offer) and Lessee, within ten (10) days after
receipt of Lessor's Offer Notice, shall have the right to purchase the
interest to be sold or transferred on all the other terms and conditions
stated in Lessor's Offer Notice. Failure of Lessee to exercise such right
within said ten (10) day period shall be deemed a waiver of such right. Upon
notice from Lessee of its decision not to exercise such right or upon waiver
of the same, Lessor shall be free to consummate the sale or transfer in
accordance with the terms set forth in Lessor's Offer Notice. In the event
such sale or transfer is not consummated within six (6) months after the date
of the delivery of Lessor's Offer Notice, the right granted to Lessee in this
Article XVII shall be reinstated, and any such subsequent sale or transfer
shall be subject to this right. Any sale or transfer contemplated by this
Article XVII shall be subject to the provisions of this Lease including,
without limitation, the rights of Lessee contained herein. Upon Lessee's
exercise of its right of first refusal hereunder, Lessee may assign such
rights to any other person or entity without the consent of Lessor or any
trust for their benefit, but any assignment shall not relieve Lessee of its
obligations hereunder or thereunder. The right of first refusal herein
granted to Lessee shall not apply to any transfer by Lessor of the Leased
Premises to any affiliate, shareholder, partner, joint venturer, spouse or
lineal descendant of Lessor or any trust for their benefit or to any transfer
by gift, will or the laws of descent and distribution.
ARTICLE XVIII
Miscellaneous
Section 18.01. Inspection. Lessee shall permit Lessor and its agents to
enter into and upon the Leased Premises at all reasonable times and upon
reasonable notice for the purpose of inspecting the same on condition that
Lessee's and Lessee's tenants use and quiet enjoyment of the same is not
interfered with.
Section 18.02. Estoppel Certificates. Lessee and Lessor shall, at any time
and from time to time upon not less than ten (10) days' prior request by the
other party, execute, acknowledge, and deliver to Lessor, or Lessee, as the
case may be, a statement in writing certifying that (i) this Lease is
unmodified and in full force and effect (or if there have been any
modifications, that the same are in full force and effect as modified and
stating the modifications) and, if so, the dates to which the fixed rent and
any other charges have been paid in advance, and (ii) that no default
hereunder on the part of the Lessor or Lessee, as the case may be, exists
(except that if any such default does exist, the certifying party shall
specify such default), it being intended that any such statement delivered
pursuant to this Section 18.02 may be relied upon by a prospective purchaser
or encumbrancer (including assignees) of the Leased Premises.
Section 18.03. Release. If requested by Lessor, Lessee shall upon
termination of this Lease, execute and deliver to Lessor an appropriate
release, in form proper for recording, of all Lessee's interest in the Leased
Premises, and upon request of Lessee, Lessor will execute and deliver a
written cancellation or termination of Lease in proper form for recording;
provided, that in no event shall any such release, cancellation or
termination constitute a release or relinquishment by either party of his or
its rights against the other party for any amounts payable by such other
party under the terms of this Lease or any damages to which such party is
entitled as a result of any default by the other party hereunder.
Section 18.04. Lessor's Right to Perform Lessee's Covenants. If Lessee
shall default in the performance of any of its covenants, obligations or
agreements contained in this Lease, other than the obligation to pay rent,
Lessor after ten (10) days' notice to Lessee, specifying such default (or
shorter notice if any emergency exists), may (but without any obligation so
to do) perform the same for the account and at the expense of Lessee, and the
amount of any payment made or other reasonable expenses, including reasonable
attorneys' fees incurred by Lessor for curing such default, with interest
thereon at the lower of twelve percent (12.0%) per annum or the maximum
amount allowed by law, shall be payable by Lessee to Lessor on demand.
Section 18.05. Non-Merger. Unless agreed to in writing by such person,
there shall be no merger of this Lease, the leasehold estate created hereby
or the Improvements with the fee state in and to the Leased Premises by
reason of the fact that this Lease, the leasehold estate created thereby or
the Improvements, or any interest in either thereof, may be held directly or
indirectly by or for the account of any person who shall own the fee estate
in and to the Leased Premises, or any portion thereof, and no such merger
shall occur unless and until all persons at the time having any interest in
the fee estate and all person having any interest in this Lease, the
leasehold estate or the Improvements, including the holder of any mortgage
upon the fee estate in and to the Leased Premises, shall join in a written
instrument effecting such merger.
Section 18.06. Notices. Any notice to be given or to be served in
connection with this Lease must be in writing, and may be given by facsimile,
by certified mail, or by overnight delivery service and shall be deemed to
have been given and received upon the earlier of receipt thereof by the
receiving party or on the third business day after a letter containing such
notice, properly addressed, with postage prepaid is deposited in the United
States Mail or given to a nationally recognized overnight delivery service,
addressed as follows:
If to Lessor:
FFP Properties, L.P.
Attn: Lease Administration
2801 Glenda Avenue
Fort Worth, Texas
76117-4391
Facsimile: 817/838-1871
If to Lessee:
FFP Operating Partners, L.P.
Attn: Contracts Adminstration
2801 Glenda Avenue
Fort Worth, Texas
76117-4391
Facsimile: 817/838-1871
Each party hereto shall have the right, by giving not less than five (5)
days' prior written notice to the other parties hereto, to change any address
of such party for the purpose of notices under this Section 18.06.
Section 18.07. Successors and Assigns. Lessor, as used in this instrument
shall extend to and include any and all persons, whether natural or
artificial who at any time or from time to time during the term of this Lease
shall succeed to the interest and estate of Lessor in the Leased Premises;
and all of the covenants, agreements, conditions and stipulations herein
contained which inure to the benefit of and are binding upon Lessor shall
also inure to the benefit of and shall be, jointly and severally, binding
upon the heirs, executors, administrators, successors, assigns and grantees
of Lessor, and each of them, and any and all persons who at any time or from
time to time during the term of this Lease shall succeed to the interest and
estate of Lessor in the real estate and property hereby demised. The word
"Lessee" as used in this instrument shall extend to and include any and all
persons, whether natural or artificial, who at any time or from time to time
during the term of this Lease shall succeed to the interest and estate of
Lessee hereunder and all of the covenants, agreements, conditions and
stipulations herein contained which inure to the benefit of or are binding
upon Lessee shall also inure to the benefit of and be jointly and severally
binding upon the successors, assigns, or other representatives of Lessee, and
of any and all persons who shall at any time or from time to time during the
term of this Lease succeed to the interest and estate of Lessee hereby
created in the Leased Premises. Lessee shall have the right to assign this
Lease to any person or entity.
Section 18.08. Modifications. This Lease may be modified only by written
agreement signed by the Lessor and Lessee.
Section 18.09. Descriptive Headings. The descriptive headings of this Lease
are inserted for convenience in reference only and do not in any way limit or
amplify the terms and provisions of this Lease.
Section 18.10. No Joint Venture. The relationship between Lessor and Lessee
at all times shall remain solely that of landlord and tenant and shall not be
deemed a partnership or joint venture.
Section 18.11. Arbitration. Wherever in this Lease it is provided that any
question shall be determined by arbitration, such question shall be settled
and finally determined by arbitration in accordance with the rules then in
effect of the American Arbitration Association, or its successors, and the
judgment upon the award rendered may be entered in any court having
jurisdiction thereover. Such arbitration shall be held in the City of Fort
Worth, Texas. The number of arbitrators to be appointed shall be three (3).
The arbitrators shall have at least five (5) years experience in real estate
in the area where the Leased Premises is located and shall not be related to
either party. The parties to the arbitration, in addition to the rights
granted under the rules of the Association, shall have the right to offer
evidence and testify at the hearings and cross-examine witnesses. The cost
of such arbitration shall be split equally between the parties.
Section 18.12. Memorandum of Lease. Lessor and Lessee agree that they
shall, at any time at the request of the other, promptly execute a memorandum
or short form of this Lease, in recordable form, setting forth a description
of the Leased Premises, the term of this Lease, and any other provisions
herein, or the substance thereof, as either party desires.
Section 18.13. Partial Invalidity. If any term or provision of this Lease
or the application thereof to any person or circumstance shall to any extent
be invalid or unenforceable, the remainder of this Lease, or the application
of such term or provision to any person or circumstances other than those as
to which it is invalid or unenforceable, shall not be affected thereby, and
each term of this Lease shall be valid and be in force to the fullest extent
permitted by law.
Section 18.14. Holding Over. Subject to the rights and remedies of Lessor
as set forth in Section 11.02 hereof and in addition thereto, in case of
holding over by Lessee after expiration or termination of the Term of this
Lease, Lessee shall pay monthly, as rent, an amount equal to 125% of the
amount of Monthly Rent under Section 4.01 hereof during each month or partial
month of the holdover period. No holding over by Lessee after the Term of
this Lease, either with or without consent and acquiescence of Lessor, shall
operate to extend the Lease for a longer period than one month unless (a) a
holdover agreement in writing specifies a longer period or (b) this Lease is
extended in writing; and any holding over without consent of Lessor in
writing shall thereafter constitute this Lease a lease from month to month.
In the event of any unauthorized holding over, Lessee shall indemnify Lessor
against all claims for damages by any other tenant or prospective tenant to
whom Lessor may have leased all or any part of the Leased Premises, resulting
from delay by Lessor in delivering possession of all or any part of the
Leased Premises.
Section 18.15. Lessor Default. In the event of any default hereunder by
Lessor, Lessee may, if such default continues after a reasonable notice
period following receipt of written notice thereof to Lessor, cure such
default for the account and at the expense of Lessor. If Lessee at any time
after the expiration of such curative period by reason of such breach, is
compelled to pay, or elects to pay, any sum of money or do any act which will
require the payment of any sum of money, or is compelled to incur any
expense, including reasonable attorney's fees, in instituting, prosecuting
and/or defending any action or proceeding to enforce Lessee's rights
hereunder or otherwise, the sum or sums so paid by Lessee, with all interest,
costs and damages, shall on demand be paid by Lessor to Lessee but Lessee
shall have no right to offset any such sums against any amounts which may be
due to Lessor hereunder.
Section 18.16. Lessor Covenant. Lessor shall pay when due all principal and
interest on any mortgage or superior lease to which this Lease is subordinate
or subordinated, and shall pay or discharge (by bonding or otherwise) all
valid mechanic's liens filed against the Leased Premises by reasons of any
construction by Lessor.
Section 18.17. Sublease. If this Lease is in fact a sublease, Lessee
accepts this Lease subject to all of the terms and conditions of the
underlying lease under which Lessor holds the Leased Premises as lessee.
Lessee covenants that it will do no act or thing which would constitute a
violation by Lessor of its obligation under such underlying lease; provided,
however, that Lessee's agreement in this regard is premised on Lessor's
assurances to the effect that the terms of this Lease do not violate such
underlying lease.
Section 18.18. Net Lease. It is understood and agreed that this Lease
Agreement is intended to be a net lease. It is the intention of the parties
that Lessor shall receive the Monthly Rent hereunder free from all charges
and expenses imposed upon or by reason of the Leased Premises and the
ownership thereof by Lessor.
Section 18.19. Venue. This Lease is entered into in Tarrant County, Texas,
and is performable and enforceable in that county.
IN WITNESS WHEREOF, the parties have executed this instrument the day and
year first above written.
LESSOR:
FFP PROPERTIES, L.P.
By: FFP Partners, L.P.
its sole general partner
By: FFP Real Estate Trust
its sole general partner
By: ______________________________
[Name and Title]
LESSEE:
FFP OPERATING PARTNERS, L.P.
By: FFP Operating LLC
its sole general partner
By: __________________________________
[Name and Title]
===============================================================================
THE STATE OF TEXAS
COUNTY OF TARRANT
This instrument was acknowledged before me on ___________________,
1998, by
________________________________________________________________ the
___________________________ of FFP Real Estate Trust who stated that the same
was signed in the capacity and for the purposes indicated therein.
_________________________________________
Notary Public, State of Texas
Commission Expires: _______________________
Printed Name: _____________________________
THE STATE OF TEXAS
COUNTY OF TARRANT
This instrument was acknowledged before me on ___________________,
1998, by
________________________________________________________________ the
___________________________ of FFP Operating LLC who stated that the same was
signed in the capacity and for the purposes indicated therein.
_________________________________________
Notary Public, State of Texas
Commission Expires: _______________________
Printed Name: _____________________________
LOAN AND SECURITY AGREEMENT
among
FFP PARTNERS, L.P.
("FFPP")
FFP OPERATING PARTNERS, L.P.
("FFPO")
DIRECT FUELS, L.P.
("Direct Fuels")
2801 Glenda Avenue
Fort Worth, Texas 76117-4391
and
HSBC BUSINESS LOANS, INC.
("Secured Party")
12655 North Central Expressway, Suite 300
Dallas, Texas 75243-1717
Dated: October 31, 1997
TABLE OF CONTENTS
1. DEFINITIONS.............................................................1
1.1. CERTAIN SPECIFIC TERMS.......................................1
1.2. SINGULARS AND PLURALS........................................8
1.3. UCC DEFINITIONS..............................................9
2. ADVANCES................................................................9
2.1. REQUESTS FOR ADVANCES FOR REVOLVING LOANS....................9
2.2. PROCEEDS OF ADVANCES FOR REVOLVING LOANS.....................9
2.3. ESTABLISHMENT OF RESERVES....................................9
2.4. LETTERS OF CREDIT............................................9
3. COLLATERAL AND INDEBTEDNESS SECURED....................................10
3.1. SECURITY INTEREST...........................................10
3.2. OTHER COLLATERAL.............................................11
3.3. INDEBTEDNESS SECURED........................................11
4. CONDITIONS TO ADVANCES.................................................11
4.1. PARTNERSHIP ACTION..........................................11
4.2. PARTNERSHIP DOCUMENTS.......................................11
4.3. OPINIONS.....................................................11
4.4. TRANSACTION DOCUMENTS.......................................12
4.5. THIRD PARTY ACTION...........................................12
4.6. GUARANTIES...................................................12
4.7. OTHER MATTERS................................................12
5. REPRESENTATIONS AND WARRANTIES.........................................12
5.1. PARTNERSHIP EXISTENCE.......................................12
5.2. PARTNERSHIP CAPACITY........................................12
5.3. VALIDITY OF RECEIVABLES.....................................12
5.4. INVENTORY...................................................13
5.5. TITLE TO COLLATERAL.........................................13
5.6. NOTES RECEIVABLE............................................13
5.7. EQUIPMENT...................................................13
5.8. PLACE OF BUSINESS...........................................14
5.9. FINANCIAL CONDITION.........................................14
5.10. TAXES......................................................14
5.11. LITIGATION.................................................14
5.12. ERISA MATTERS..............................................14
5.13. ENVIRONMENTAL MATTERS......................................15
5.14. VALIDITY OF TRANSACTION DOCUMENTS..........................15
5.15. NO CONSENT OR FILING.......................................15
5.16. NO VIOLATIONS..............................................15
5.17. TRADEMARKS AND PATENTS.....................................16
5.18. CONTINGENT LIABILITIES.....................................16
5.19. SOLVENCY....................................................16
5.20. COMPLIANCE WITH LAWS.......................................16
5.21. LICENSES, PERMITS, ETC.....................................16
5.22. USE OF PROCEEDS; MARGIN STOCK...............................16
5.23. COMMISSIONS.................................................17
5.24. LABOR CONTRACTS............................................17
5.25. CONSOLIDATED SUBSIDIARIES..................................17
5.26. ACCURACY OF REPRESENTATIONS.................................17
5.27. PARTNERSHIP INTERESTS......................................17
5.28. NO ADVERSE CHANGE..........................................17
5.29. NO DEFAULT.................................................17
5.30. MATERIAL AGREEMENTS........................................17
5.31. NO FINANCING OF CORPORATE TAKEOVERS........................17
6. CERTAIN DOCUMENTS TO BE DELIVERED TO SECURED PARTY.....................17
6.1. DOCUMENTS...................................................17
6.2. INVOICES....................................................18
6.3. CHATTEL PAPER...............................................18
7. COLLECTIONS............................................................18
8. PAYMENT OF PRINCIPAL, INTEREST, FEES, AND COSTS AND EXPENSES...........18
8.1. PROMISE TO PAY PRINCIPAL....................................18
8.2. PROMISE TO PAY INTEREST.....................................19
8.3. PROMISE TO PAY FEES.........................................19
8.4. PROMISE TO PAY COSTS AND EXPENSES...........................20
8.5. METHOD OF PAYMENT OF PRINCIPAL, INTEREST, FEES, AND
COSTS AND EXPENSES.......................................20
8.6. COMPUTATION OF DAILY OUTSTANDING BALANCE....................21
8.7. ACCOUNT STATED..............................................21
8.8. CAPITAL ADEQUACY.............................................21
8.9. ADDITIONAL PROVISIONS APPLICABLE TO LIBOR....................22
9. PROCEDURES AFTER SCHEDULING RECEIVABLES................................24
9.1. RETURNED MERCHANDISE........................................24
9.2. CREDITS AND EXTENSIONS......................................25
9.3. RETURNED INSTRUMENTS.......................................25
9.4. DEBIT MEMORANDA.............................................25
9.5. NOTES RECEIVABLE............................................25
10. AFFIRMATIVE COVENANTS.................................................26
10.1. FINANCIAL STATEMENTS.......................................26
10.2. GOVERNMENT AND OTHER SPECIAL RECEIVABLES...................26
10.3. TERMS OF SALE..............................................27
10.4. BOOKS AND RECORDS..........................................27
10.5. INVENTORY IN POSSESSION OF THIRD PARTIES...................27
10.6. EXAMINATIONS...............................................27
10.7. VERIFICATION OF COLLATERAL.................................27
10.8. RESPONSIBLE PARTIES........................................27
10.9. TAXES......................................................27
10.10. LITIGATION................................................28
10.11. INSURANCE.................................................28
10.12. EXISTENCE; BUSINESS.......................................28
10.13. PENSION REPORTS...........................................29
10.14. NOTICE OF NON-COMPLIANCE..................................29
10.15. COMPLIANCE WITH ENVIRONMENTAL LAWS........................29
10.16. DEFEND COLLATERAL..........................................29
10.17. USE OF PROCEEDS...........................................29
10.18. COMPLIANCE WITH LAWS......................................29
10.19. MAINTENANCE OF PROPERTY...................................29
10.20. LICENSES, PERMITS, ETC....................................30
10.21. TRADEMARKS AND PATENTS....................................30
10.22. ERISA.....................................................30
10.23. MAINTENANCE OF OWNERSHIP..................................30
10.24. ACTIVITIES OF CONSOLIDATED SUBSIDIARIES...................30
10.25. LANDLORD AND WAREHOUSEMAN WAIVERS..........................30
10.26. COMPLIANCE WITH MATERIAL AGREEMENTS........................30
10.27. OTHER NOTICES..............................................30
11. NEGATIVE COVENANTS....................................................31
11.1. LOCATION OF INVENTORY, EQUIPMENT, AND BUSINESS RECORDS.....31
11.2. BORROWED MONEY.............................................31
11.3. SECURITY INTEREST AND OTHER ENCUMBRANCES...................31
11.4. STORING AND USE OF COLLATERAL..............................31
11.5. MERGERS, CONSOLIDATIONS, OR SALES..........................31
11.6. PARTNERSHIP INTERESTS......................................31
11.7. DISTRIBUTIONS..............................................31
11.8. INVESTMENTS AND ADVANCES...................................31
11.9. GUARANTIES.................................................32
11.10. LEASES....................................................32
11.11. CAPITAL EXPENDITURES......................................32
11.12. COMPENSATION..............................................32
11.13. NAME CHANGE...............................................32
11.14. DISPOSITION OF COLLATERAL.................................32
11.15. FINANCIAL COVENANTS.......................................32
11.16. FISCAL YEAR AND ACCOUNTING METHOD.........................32
11.17. LINES OF BUSINESS.........................................32
12. EVENTS OF DEFAULT.....................................................33
12.1. EVENTS OF DEFAULT..........................................33
12.2. EFFECTS OF AN EVENT OF DEFAULT.............................35
13. SECURED PARTY'S RIGHTS AND REMEDIES...................................35
13.1. GENERALLY..................................................35
13.2. NOTIFICATION OF ACCOUNT DEBTORS............................35
13.3. POSSESSION OF COLLATERAL...................................36
13.4. COLLECTION OF RECEIVABLES..................................36
13.5. ENDORSEMENT OF CHECKS; DEBTOR'S MAIL.......................36
13.6. LICENSE TO USE PATENTS, TRADEMARKS, AND TRADENAMES.........36
14. MISCELLANEOUS.........................................................36
14.1. PERFECTING THE SECURITY INTEREST; PROTECTING THE
COLLATERAL...............................................36
14.2. PERFORMANCE OF DEBTOR'S DUTIES.............................36
14.3. NOTICE OF SALE.............................................37
14.4. WAIVER BY SECURED PARTY....................................37
14.5. WAIVER BY DEBTOR...........................................37
14.6. SETOFF.....................................................37
14.7. ASSIGNMENT.................................................37
14.8. SUCCESSORS AND ASSIGNS.....................................37
14.9. MODIFICATION...............................................37
14.10. COUNTERPARTS..............................................37
14.11. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES..................38
14.12. INDEMNIFICATION...........................................38
14.13. TERMINATION; PREPAYMENT PREMIUM...........................39
14.14. FURTHER ASSURANCES........................................40
14.15. HEADINGS..................................................40
14.16. CUMULATIVE SECURITY INTEREST, ETC.........................40
14.17. SECURED PARTY'S DUTIES....................................40
14.18. NOTICES GENERALLY.........................................40
14.19. SEVERABILITY..............................................40
14.20. INCONSISTENT PROVISIONS...................................40
14.21. USURY SAVINGS.............................................41
14.22. PARTICIPATIONS.............................................41
14.23. APPLICABLE LAW............................................41
14.24. CONSENT TO JURISDICTION...................................42
14.25. JURY TRIAL WAIVER.........................................42
14.26. ARTICLE 15.10(b)..........................................42
14.27. FINAL AGREEMENT...........................................42
Debtor and Secured Party agree as follows:
1. DEFINITIONS.
1.1. CERTAIN SPECIFIC TERMS. For purposes of this Loan and Security
Agreement (this "Agreement"), the following terms shall have the following
meanings:
(a) ACCOUNT DEBTOR means the person, firm, or entity obligated to pay
a Receivable.
(b) ADVANCE means any Revolving Loan or Term Loan made to Debtor by
Secured Party pursuant to this Agreement.
(c) BORROWING CAPACITY means, at the time of computation, the amount
specified in Item 1 of the Schedule.
(d) BUSINESS DAY means a day other than a Saturday, Sunday, or other
day on which banks are authorized or required to close under the laws of
New York or the State; provided, that such day is a day in which
transactions occur in the London interbank market, and provided, further,
that for purposes of Item 20 of the Schedule and of calculations made with
reference thereto, a Business Day shall be deemed to be the equivalent of
1.4 calendar days.
(e) COLLATERAL means collectively all of the property of Debtor
subject to the Security Interest and described in Sections 3.1 and 3.2.
(f) CONSOLIDATED SUBSIDIARY means any entity of which at least 50% of
the equity interest is owned by Debtor directly, or indirectly through one
or more of its subsidiaries. If Debtor has no Consolidated Subsidiaries,
the provisions of this Agreement relating to Consolidated Subsidiaries
shall be inapplicable without affecting the applicability of such
provisions to Debtor alone.
(g) CREDIT means any discount, allowance, credit, rebate, or
adjustment granted by Debtor with respect to a Receivable, other than a
cash discount described in Item 3 of the Schedule.
(h) DEBT SERVICE COVERAGE means, for the period of determination, a
ratio with the Net Profit After Taxes (as defined below) plus depreciation
and amortization expense as the numerator and the sum of the regular
principal payments of any long term debt due over the next 12 months as the
denominator.
(i) DEBT TO TANGIBLE NET WORTH RATIO means a ratio with total
liabilities minus the principal balance of any debt that is subordinated to
Secured Party in a manner satisfactory to Secured Party as the numerator
and with Tangible Net Worth (as defined below) as the denominator.
(j) DEBTOR means, collectively, FFPP, FFPO and Direct Fuels (as
defined on the cover page to this Agreement) and, if the context so
requires, DEBTOR shall refer to any of such parties.
(k) DISPOSAL means the intentional or unintentional abandonment,
discharge, deposit, injection, dumping, spilling, leaking, storing,
burning, thermal destruction, or placing of any Hazardous Substances so
that they or any of their constituents may enter the environment.
(l) ELIGIBLE EQUIPMENT means that Equipment of Debtor in which Secured
Party has a first-priority perfected security interest reduced by (i) any
Equipment as to which a representation or warranty contained in Section 5.5
or 5.7 is not, or does not continue to be, true and accurate; and (ii) any
Equipment which is otherwise unacceptable to Secured Party, in its
reasonable judgment.
(m) ELIGIBLE INVENTORY means all Inventory of Debtor in which Secured
Party has a first-priority perfected security interest reduced by (i) any
Inventory as to which a representation or warranty contained in Section 5.4
or 5.5 is not, or does not continue to be, true and accurate; and (ii) any
Inventory which is otherwise unacceptable to Secured Party, in its
reasonable judgment.
(n) ENVIRONMENT means any water including, but not limited to, surface
water and ground water or water vapor; any land including land surface or
subsurface; stream sediments; air; fish, wildlife, plants; and all other
natural resources or environmental media.
(o) ENVIRONMENTAL LAWS means all federal, state, and local
environmental, land use, zoning, health, chemical use, safety and
sanitation laws, statutes, ordinances, regulations, codes, and rules
relating to the protection of the Environment and/or governing the use,
storage, treatment, generation, transportation, processing, handling,
production, or disposal of Hazardous Substances and the policies,
guidelines, procedures, interpretations, decisions, orders, and directives
of federal, state, and local governmental agencies and authorities with
respect thereto.
(p) ENVIRONMENTAL PERMITS means all licenses, permits, approvals,
authorizations, consents, or registrations required by any applicable
Environmental Laws and all applicable judicial and administrative orders in
connection with ownership, lease, purchase, transfer, closure, use, and/or
operation of any property owned, leased, or operated by Debtor or any
Consolidated Subsidiary and/or as may be required for the storage,
treatment, generation, transportation, processing, handling, production, or
disposal of Hazardous Substances.
(q) ENVIRONMENTAL QUESTIONNAIRE means a questionnaire and all
attachments thereto concerning (i) activities and conditions affecting the
Environment at any property of Debtor or any Consolidated Subsidiary or
(ii) the enforcement or possible enforcement of any Environmental Law
against Debtor or any Consolidated Subsidiary.
(r) ENVIRONMENTAL REPORT means a written report prepared for Secured
Party by an environmental consulting or environmental engineering firm.
(s) ERISA means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
(t) EURODOLLAR INTEREST PERIOD means the period of time for which
LIBOR shall be in effect as to any Advance bearing interest at LIBOR,
commencing on the date of the Advance or the expiration date of the
immediately preceding Eurodollar Interest Period, as the case may be,
applicable to and ending on the effective date of any rate change or rate
continuation made as provided in Section 8.9(a) as a Debtor may specify in
a Notice of Continuation/Conversion, subject, however to the early
termination provisions herein; provided, however, that (i) any Eurodollar
Interest Period which would otherwise end on a day which is not a Business
Day shall be extended to the next succeeding Business Day unless such
Business Day falls in another calendar month, in which case such Eurodollar
Interest Period shall end on the next preceding Business Day, (ii) each
Eurodollar Interest Period shall be three or six calendar months for each
Revolving Loan, and six or twelve calendar months for the Term Loan, or be
of such other length as the Debtor and the Secured Party may mutually
agree, (iii) a Eurodollar Interest Period may not be selected for any
Advance if such period would terminate later than the time specified in
Section 14.13(a), and (iv) a Eurodollar Interest Period may not be selected
for any Advance if such period would terminate beyond a date on which a
scheduled payment of principal on such Advance is required.
(u) EURODOLLAR LENDING OFFICE means the office specified as the
Secured Party's "Eurodollar Lending Office" in Item 37 of the Schedule.
(v) EURODOLLAR RESERVE PERCENTAGE means, for any Eurodollar Interest
Period for any Advance bearing interest at LIBOR, the reserve percentage
applicable during such Eurodollar Interest Period (or if more than one such
percentage shall be so applicable, the daily average of such percentages
for those days in such Eurodollar Interest Period during which any such
percentage shall be so applicable) under regulations issued from time to
time by the Board of Governors of the Federal Reserve System.
(w) EVENT OF DEFAULT means an Event of Default or Events of Default as
defined in Section 12.1.
(x) EXTENSION means the granting to an Account Debtor of additional
time within which such Account Debtor is required to pay a Receivable.
(y) FEDERAL BANKRUPTCY CODE means Title 11 of the United States Code,
entitled "Bankruptcy," as amended, or any successor federal bankruptcy law.
(z) GUARANTOR means, collectively, Direct Fuels Management Company,
Inc. and FFP Partners Management Company, Inc., and if the context so
requires, GUARANTOR shall refer to any of such parties.
(aa) HAZARDOUS SUBSTANCES means, without limitation, any explosives,
radon, radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum and petroleum products, methane,
hazardous materials, hazardous wastes, hazardous or toxic substances, and
any other material defined as a hazardous substance in Section 101(14) of
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. Section 9601(14).
(bb) HIGHEST LAWFUL RATE means, with respect to the Secured Party and
Marine Midland Bank, the maximum nonusurious interest rate, if any, that at
any time or from time to time may be contracted for, taken, reserved,
charged or received with respect to the Advances or on other amounts, if
any, due to Secured Party or Marine Midland Bank pursuant to this Agreement
or any other Transaction Document, under laws applicable to Secured Party
and Marine Midland Bank which are presently in effect, or, to the extent
allowed by law, under such applicable laws which may hereafter be in effect
and which allow a higher maximum nonusurious interest rate than applicable
laws now allow.
(cc) INDEBTEDNESS means the indebtedness secured by the Security
Interest and described in Section 3.3.
(dd) INELIGIBLE RECEIVABLES means the following described Receivables
and any other Receivables which are not reasonably satisfactory to Secured
Party for credit or any other reason:
(i) Any Receivable which has remained unpaid for more than the number
of days specified in Item 4 of the Schedule.
(ii) Any Receivable with respect to which a representation or warranty
contained in Sections 5.3, 5.5, or 5.6 is not, or does not continue to be,
true and accurate, including, without limitation, any Receivable subject to
a setoff.
(iii) Any Receivable with respect to which Debtor has extended the
time for payment without the consent of Secured Party, except as provided
in Section 9.2(a).
(iv) Any Receivable as to which any one or more of the following
events occurs: a request or petition for liquidation, reorganization,
arrangement, adjustment of debts, adjudication as a bankrupt, or other
relief under the bankruptcy, insolvency, or similar laws of the United
States, any state or territory thereof, or any foreign jurisdiction, now or
hereafter in effect, shall be filed by or against a Responsible Party; a
Responsible Party shall make any general assignment for the benefit of
creditors; a receiver or trustee, including, without limitation, a
"custodian," as defined in the Federal Bankruptcy Code, shall be appointed
for a Responsible Party or for any of the assets of a Responsible Party;
any other type of insolvency proceeding with respect to a Responsible Party
(under the bankruptcy laws of the United States or otherwise) or any formal
or informal proceeding for the dissolution or liquidation of, settlement of
claims against, or winding up of affairs of, a Responsible Party shall be
instituted; all or any material part of the assets of a Responsible Party
shall be sold, assigned, or transferred; a Responsible Party shall fail to
pay its debts as they become due; or a Responsible Party shall cease doing
business as a going concern.
(v) All Receivables owed by an Account Debtor owing Receivables
classified as ineligible under any criterion set forth in any of Sections
1.1(dd)(i) through 1.1(dd)(iv), if the outstanding dollar amount of such
Receivables constitutes a percentage of the aggregate outstanding dollar
amount of all Receivables owed by such Account Debtor equal to or greater
than the percentage specified in Item 5 of the Schedule.
(vi) All Receivables owed by an Account Debtor which does not maintain
its chief executive office in the United States or which is not organized
under the laws of the United States or any state, unless otherwise
specified in Item 6 of the Schedule.
(vii) All Receivables owed by an Account Debtor if Debtor or any
person who, or entity which, directly or indirectly controls Debtor, either
owns in whole or material part, or directly or indirectly controls, such
Account Debtor.
(viii) Any Receivable arising from a consignment or other arrangement,
pursuant to which the subject Inventory is returnable if not sold or
otherwise disposed of by the Account Debtor; any Receivable constituting a
partial billing under terms providing for payment only after full shipment
or performance; any Receivable arising from a bill and hold sale or in
connection with any prebilling where the Inventory or services have not
been delivered, performed, or accepted by the Account Debtor if Secured
Party has not entered into a written agreement satisfactory to Secured
Party with such Account Debtor relating to such Receivables; and any
Receivable as to which the Account Debtor contends the balance reported by
Debtor is incorrect or not owing.
(ix) Any Receivable which is unenforceable against the Account Debtor
for any reason.
(x) Any Receivable which is an Instrument, Document, or Chattel Paper
or which is evidenced by a note, draft, trade acceptance, or other
instrument for the payment of money where such Instrument, Document,
Chattel Paper, note, draft, trade acceptance, or other instrument has not
been endorsed and delivered by Debtor to Secured Party.
(xi) Any Receivable or Receivables owed by an Account Debtor which
exceeds any credit limit established by Secured Party for such Account
Debtor; provided, that such Receivable or Receivables shall be ineligible
only to the extent of such excess.
(ee) INTANGIBLE ASSETS means (1) all loans or advances to, and other
receivables owing from, any officers, employees, subsidiaries and other
affiliates, (2) all investments, whether in a subsidiary or otherwise, (3)
goodwill, (4) any other assets deemed intangible under generally accepted
accounting principles, and (5) any other assets deemed intangible by
Secured Party in its reasonable credit judgement.
(ff) INTERNAL REVENUE CODE means the Internal Revenue Code of 1986, as
amended from time to time.
(gg) INVENTORY means inventory, as defined in the Uniform Commercial
Code as in effect in the State as of the date of this Agreement, and in any
event shall include returned or repossessed Goods.
(hh) INVENTORY BORROWING BASE means, at the time of computation, an
amount up to the percentages specified in Item 2 of the Schedule of the
dollar value of Eligible Inventory, such dollar value to be calculated at
the lower of actual cost or market value and accounted for in the manner
specified in Item 7 of the Schedule, less the amount of any reserves
established by Secured Party in accordance with Section 2.3.
(ii) INVOICE means any document or documents used, or to be used, to
evidence a Receivable.
(jj) LETTER OF CREDIT means any documentary or standby letter of
credit issued by Marine Midland Bank for the account of the Debtor.
(kk) LIBOR means with respect to the applicable Eurodollar Interest
Period in effect for each Advance bearing interest at LIBOR, the quotient
obtained by dividing (a) the annual rate of interest determined by Marine
Midland Bank, at or before 10:00 a.m. (London time) (or as soon thereafter
as practicable), on the third Business Day prior to the first day of such
Eurodollar Interest Period, to be the annual rate of interest at which
deposits of U.S. dollars are offered to Marine Midland Bank by prime banks
in the London interbank market as may be selected by Marine Midland Bank in
its sole discretion, acting in good faith, at the time of determination and
in accordance with the then existing practice in such market for delivery
on the first day of such Eurodollar Interest Period in immediately
available funds and having a maturity equal to such Eurodollar Interest
Period in an amount equal (or as nearly equal as may be possible) to the
unpaid principal amount of such Advance by (b) a percentage equal to 100%
minus the Eurodollar Reserve Percentage for such Eurodollar Interest
Period. Each determination of LIBOR made by Marine Midland Bank in
accordance with this paragraph shall be conclusive except in the case of
manifest error.
(ll) MARINE PAYMENT ACCOUNT means the special bank account to which
Proceeds of Collateral, including, without limitation, payments on
Receivables and other payments from sales or leases of Inventory, are
credited. There is a Marine Payment Account if so indicated in Item 8 of
the Schedule.
(mm) NET PROFIT AFTER TAXES means, for a period of determination, net
income after provisions for taxes for such period, determined in accordance
with generally accepted accounting principles consistently applied.
(nn) NOTICE OF CONTINUATION/CONVERSION is defined in Section 8.9(a).
(oo) PENSION EVENT means, with respect to any Pension Plan, the
occurrence of (i) any prohibited transaction described in Section 406 of
ERISA or in Section 4975 of the Internal Revenue Code; (ii) any Reportable
Event; (iii) any complete or partial withdrawal, or proposed complete or
partial withdrawal, of Debtor or any Consolidated Subsidiary from such
Pension Plan; (iv) any complete or partial termination, or proposed
complete or partial termination, of such Pension Plan; or (v) any
accumulated funding deficiency (whether or not waived), as defined in
Section 302 of ERISA or in Section 412 of the Internal Revenue Code.
(pp) PENSION PLAN means any pension plan, as defined in Section 3(2)
of ERISA, which is a multiemployer plan or a single employer plan, as
defined in Section 4001 of ERISA, and subject to Title IV of ERISA and
which is (i) a plan maintained by Debtor or any Consolidated Subsidiary for
employees or former employees of Debtor or of any Consolidated Subsidiary;
(ii) a plan to which Debtor or any Consolidated Subsidiary contributes or
is required to contribute; (iii) a plan to which Debtor or any Consolidated
Subsidiary was required to make contributions at any time during the five
(5) calendar years preceding the date of this Agreement; or (iv) any other
plan with respect to which Debtor or any Consolidated Subsidiary has
incurred or may incur liability, including, without limitation, contingent
liability, under Title IV of ERISA either to such plan or to the Pension
Benefit Guaranty Corporation. For purposes of this definition, and for
purposes of Sections 1.1(ii), 5.12, and 12.1(i), Debtor shall include any
trade or business (whether or not incorporated) which, together with Debtor
or any Consolidated Subsidiary, is deemed to be a "single employer" within
the meaning of Section 4001(b)(1) of ERISA.
(qq) PRIME RATE means the rate of interest publicly announced by
Marine Midland Bank from time to time as its prime rate, which rate is a
base rate for calculating interest on certain loans. The rate announced by
Marine Midland Bank as its prime rate may or may not be the most favorable
rate charged by Marine Midland Bank to its customers.
(rr) RECEIVABLE means the right to payment for Goods sold or leased or
services rendered by Debtor, whether or not earned by performance, and may,
without limitation, in whole or in part be in the form of an Account,
Chattel Paper, Document, or Instrument.
(ss) RECEIVABLES BORROWING BASE means, at the time of its computation,
the aggregate amount of the outstanding Receivables in which Secured Party
has a first priority perfected security interest (adjusted with respect to
Credits and returned merchandise as provided in Article 9 hereof) less the
amount of Ineligible Receivables and any reserves established by Secured
Party in accordance with Section 2.3.
(tt) RELEASE means "release," as defined in Section 101(22) of the
Comprehensive, Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. Section 9601(22), and the regulations promulgated
thereunder.
(uu) REPORTABLE EVENT means any event described in Section 4043(b) of
ERISA or in regulations issued thereunder with regard to a Pension Plan.
(vv) RESPONSIBLE PARTY means an Account Debtor, a general partner of
an Account Debtor, or any party otherwise in any way directly or indirectly
liable for the payment of a Receivable.
(ww) REVOLVING LOAN is defined in Section 2.1.
(xx) SCHEDULE means the schedule executed in connection with, and
which is a part of, this Agreement.
(yy) SECURED PARTY means the person or entity defined on the cover
page of this Agreement and any successors or assigns of Secured Party.
(zz) SECURITY INTEREST means the security interest granted to Secured
Party by Debtor as described in Section 3.1.
(aaa) SOLVENT means, with respect to any person or entity on a
particular determination date, that on such date (i) the fair value of the
property of such person or entity is greater than the total amount of debts
and other liabilities, including, without limitation, contingent and
unliquidated liabilities, of such person or entity; (ii) the present fair
salable value of the assets of such person or entity is greater than the
amount that will be required to pay the probable liability of such person
or entity on its existing debts and other liabilities as they become
absolute and matured; (iii) such person or entity is able to realize upon
its assets and pay its debts and other liabilities, contingent obligations,
and other commitments as they mature in the normal course of business; (iv)
such person or entity does not intend to, and does not believe that it
will, incur debts or other liabilities beyond such person's or entity's
ability to pay as such debts and other liabilities mature or become due;
and (v) such person or entity is not engaged in a business or transaction,
and is not about to engage in a business or a transaction, for which such
person's or entity's property would constitute unreasonably small capital.
(bbb) STATE means the State of the United States specified in Item 31
of the Schedule.
(ccc) TANGIBLE NET WORTH means the sum of stockholders' and owners'
equity plus the principal balance of any debt that is subordinated to
Secured Party in a manner satisfactory to Secured Party minus the book
value of Intangible Assets (as defined above), all determined in accordance
with generally accepted accounting principles consistently applied.
(ddd) TERM LOAN is defined in Section 2.5.
(eee) THIRD PARTY means any person or entity who has executed and
delivered, or who in the future may execute and deliver, to Secured Party
any agreement, instrument, or document, pursuant to which such person or
entity has guaranteed to Secured Party the payment of the Indebtedness or
has granted Secured Party a security interest in or lien on some or all of
such person's or entity's real or personal property to secure the payment
of the Indebtedness.
(fff) TRANSACTION DOCUMENTS means this Agreement and all documents,
including, without limitation, collateral documents, letter of credit
agreements, notes, acceptance credit agreements, security agreements,
pledges, guaranties, mortgages, title insurance, assignments, and
subordination agreements required to be executed by Debtor, any Third
Party, or any Responsible Party pursuant hereto or in connection herewith.
(ggg) TREASURY RATE means the weekly average yield on United States
Treasury Securities-Constant Maturity Series issued by the United States
Government for a term of three (3) years, as most recently published by the
Federal Reserve Board in Federal Reserve Statistical Release H.15(519),
immediately prior to the date of the applicable Advance. Each determination
of the Treasury Rate by the Secured Party shall, in the absence of manifest
error, be conclusive and binding. The parties understand and agree that at
any particular time Secured Party may not be able to obtain a quotation of
an applicable Treasury Rate and in such circumstance the Treasury Rate will
not be available.
(hhh) VALIDITY GUARANTY means an unlimited, continuing guaranty of the
validity of the collateral by Steven B. Hawkins or other officers of the
Debtor acceptable to the Secured Party, in a form acceptable to the Secured
Party.
(iii) VALUE means, with respect to Inventory, the lower of actual cost
or market value, with respect to Equipment, the net book value, and with
respect to Real Property, the fair market value, in each case as determined
by appraisers acceptable to Secured Party in its sole discretion.
1.2. SINGULARS AND PLURALS. Unless the context otherwise requires,
words in the singular number include the plural, and in the plural include
the singular.
1.3. UCC DEFINITIONS. Unless otherwise defined in Section 1.1 or
elsewhere in this Agreement, capitalized words shall have the meanings set
forth in the Uniform Commercial Code as in effect in the State as of the
date of this Agreement.
2. ADVANCES.
2.1. REQUESTS FOR ADVANCES FOR REVOLVING LOANS. From time to time
prior to the expiration of this Agreement, each Debtor may make a written
or oral request for an Advance as a revolving loan so long as the sum of
the aggregate principal balance of all outstanding revolving loans and such
requested Advance of such requesting Debtor does not exceed the Borrowing
Capacity designated for such requesting Debtor as then computed (each, a
"Revolving Loan"); and Secured Party shall make such requested Advance,
provided that (i) the Borrowing Capacity would not, after giving effect to
the requested Advance, be so exceeded; (ii) there has not occurred an Event
of Default or an event which, with notice or lapse of time or both, would
constitute an Event of Default; and (iii) all representations and
warranties contained in this Agreement and in the other Transaction
Documents are true and correct on the date such requested Advance is made
as though made on and as of such date. Notwithstanding any other provision
of this Agreement, Secured Party may from time to time reduce the
percentages applicable to the Receivables Borrowing Base and the Inventory
Borrowing Base as they relate to amounts of the Borrowing Capacity if
Secured Party determines in its reasonable judgment, that there has been a
material change in circumstances related to any or all Receivables or
Inventory from those circumstances in existence on or prior to the date of
this Agreement or in the financial or other condition of Debtor. Subject to
the provisions contained in Section 8.9 herein, if Secured Party shall
reduce such percentage, then Debtor shall have the right to prepay in full
the total outstanding balance owing to Secured Party under this Agreement
without penalty, notwithstanding the provisions contained in Section
14.13(b) herein; provided, however, there shall not have occurred an Event
of Default. Each oral request for an Advance shall be conclusively presumed
to be made by a person authorized by Debtor to do so, and the making of the
Advance to Debtor as hereinafter provided shall conclusively establish
Debtor's obligation to repay the Advance.
2.2. PROCEEDS OF ADVANCES FOR REVOLVING LOANS. Advances shall be made
in the manner agreed by Debtor and Secured Party in writing or, absent any
such agreement, as determined by Secured Party.
2.3. ESTABLISHMENT OF RESERVES. Secured Party may, at any time and
from time to time, in its reasonable judgment, establish reserves against
the Receivables or the Inventory of Debtor. The amount of such reserves
shall be subtracted from the Receivables Borrowing Base or Inventory
Borrowing Base, as applicable, when calculating the amount of the Borrowing
Capacity. Subject to the provisions contained in Section 8.9 herein, if
Secured Party shall establish such reserve, then Debtor shall have the
right to prepay in full the total outstanding balance owing to Secured
Party under this Agreement without penalty, notwithstanding the provisions
contained in Section 14.13(b) herein; provided, however, there shall not
have occurred an Event of Default.
2.4. LETTERS OF CREDIT. At the request of Debtor, and upon execution
of Letter of Credit documentation satisfactory to Marine Midland Bank,
Secured Party, within the limits of the Borrowing Capacity as then
computed, may guarantee Letters of Credit issued from time to time by the
Marine Midland Bank for the account of Debtor in an amount not exceeding in
the aggregate at any one time outstanding the amount set forth in Item 9 of
the Schedule. The Letters of Credit shall be on terms mutually acceptable
to Secured Party and Debtor and no Letters of Credit shall have an
expiration date later than the termination date of this Agreement. An
Advance in an amount equal to any amount paid by Marine Midland Bank on any
draft drawn under any Letter of Credit shall be made to Debtor, and the
proceeds thereof delivered to Marine Midland Bank, immediately upon
notification to Secured Party that Marine Midland Bank made payment on such
draft. In connection with the issuance of any Letters of Credit, Debtor
shall pay to Secured Party the applicable fees charged by Marine Midland
Bank.
2.5 TERM LOAN. A term loan in the amount of $8,000,000 (the "Term
Loan") is available to Debtor in a one-time Advance on the date of this
Agreement.
2.6 JOINT AND SEVERAL LIABILITY. FFPP, FFPO and Direct Fuels shall be
jointly and severally liable for each Revolving Loan, each Letter of Credit
and the Term Loan.
3. COLLATERAL AND INDEBTEDNESS SECURED.
3.1. SECURITY INTEREST. Debtor hereby grants to Secured Party a
security interest in, and a lien on, the following property of Debtor
wherever located and whether now owned or hereafter acquired:
(a) All Accounts, Inventory, Goods, Fixtures, Chattel Paper,
Documents, and Instruments, whether or not specifically assigned to Secured
Party (including, without limitation, all Receivables).
(b) All General Intangibles, whether or not assigned to Secured Party,
including without limitation, contracts, contract rights and general
intangibles of Debtor, including without limitation all tax refunds,
claims, causes of action, judgments, franchises, permits, licenses, supply
contracts, purchase contracts, agreements, goodwill, trademarks,
copyrights, trade secrets, patents, and all rights and benefits of Debtor
with respect thereto.
(c) All Equipment (whether or not affixed to realty), whether now
owned or hereafter acquired, wherever located unless otherwise set forth on
Exhibit B, under the heading Capital Leases Secured by Equipment.
(d) All guaranties, collateral, liens on, or security interests in,
real or personal property, leases, letters of credit, and other rights,
agreements, and property securing or relating to payment of Receivables.
(e) All books, records, ledger cards, data processing records,
computer software, and other property at any time evidencing or relating to
Collateral.
(f) All monies, securities, and other property now or hereafter held,
or received by, or in transit to, Secured Party from or for Debtor, and all
of Debtor's deposit accounts, credits, and balances with Secured Party
existing at any time.
(g) All parts, accessories, attachments, special tools, additions,
replacements, substitutions, and accessions to or for all of the foregoing.
(h) All proceeds of letters of credit of which Debtor is the
beneficiary or in which Debtor has a beneficial interest.
(i) All proceeds and products of all of the foregoing in any form,
including, without limitation, amounts payable under any policies of
insurance insuring the foregoing against loss or damage, and all increases
and profits received from all of the foregoing.
3.2. OTHER COLLATERAL.
Nothing contained in this Agreement shall limit the rights of Secured
Party in and to any other collateral securing the Indebtedness which may
have been, or may hereafter be, granted to Secured Party by Debtor or any
Third Party, pursuant to any other agreement.
3.3. INDEBTEDNESS SECURED. The Security Interest secures payment of
any and all indebtedness, and performance of all obligations and
agreements, of Debtor to Secured Party, whether now existing or hereafter
incurred or arising, of every kind and character, primary or secondary,
direct or indirect, absolute or contingent, sole, joint or several, and
whether such indebtedness is from time to time reduced and thereafter
increased, or entirely extinguished and thereafter reincurred, including,
without limitation: (a) all Advances; (b) all interest which accrues on any
such indebtedness, until payment of such indebtedness in full, including,
without limitation, all interest provided for under this Agreement; (c) all
other monies payable by Debtor, and all obligations and agreements of
Debtor to Secured Party, pursuant to the Transaction Documents; (d) all
debts owed, or to be owed, by Debtor to others which Secured Party has
obtained, or may obtain, by assignment or otherwise; (e) all monies payable
by any Third Party, and all obligations and agreements of any Third Party
to Secured Party, pursuant to any of the Transaction Documents; and (f) all
monies due, and to become due, pursuant to Section 8.3.
4. CONDITIONS TO ADVANCES. Notwithstanding any other provision of this
Agreement or any of the other Transaction Documents, and without affecting
in any manner the rights of Secured Party under any other provision of this
Agreement, Secured Party shall not be obligated to make Advances unless and
until the following conditions have been, and continue to be, satisfied:
4.1. PARTNERSHIP ACTION. Debtor shall have taken all necessary and
appropriate partnership action, and the Partners of Debtor shall have
adopted resolutions authorizing, and the partners of Debtor (to the extent
required under Debtor's organizational documents or applicable law) shall
have consented to, this Agreement, and the borrowings hereunder, the
execution and delivery of the Transaction Documents and the taking of all
action required of Debtor by the Transaction Documents; and Debtor shall
have furnished to Secured Party certified copies of such partnership
resolutions and such other corporate documents as Secured Party shall
reasonably request.
4.2. PARTNERSHIP DOCUMENTS. There shall have been furnished to Secured
Party (a) copies of the certificate of limited partnership and limited
partnership agreements of Debtor, certified by its general partner as of
the date of this Agreement; (b) a certificate of Debtor's existence or
equivalent certificate duly issued of recent date by the Secretary of State
of the state specified in Item 10 of the Schedule, and certificates of
authority to do business in each state in which Debtor is licensed or
qualified to do business; (c) a certificate of incumbency specifying the
officers of the general partner of Debtor, together with their specimen
signatures; and (d) such other and further documents as Secured Party may
reasonably request, including, without limitation, tax status reports
covering payment of franchise taxes, if any, and other taxes.
4.3. OPINIONS. Independent counsel for Debtor shall have furnished to
Secured Party their favorable opinion, in form and content satisfactory to
Secured Party and Debtor and their respective counsel, dated the date of
this Agreement. If this Agreement is being executed and delivered in
connection with the acquisition of stock or assets by Debtor, Debtor shall
also have caused the seller of such stock or assets to furnish to Secured
Party an opinion of counsel for such seller or a letter authorizing Secured
Party to rely on such an opinion, in form and content satisfactory to
Secured Party and its counsel, dated the date of this Agreement.
4.4. TRANSACTION DOCUMENTS. Debtor shall have delivered to Secured
Party all the Transaction Documents, as required by, and in form and
content satisfactory to, Secured Party and its counsel.
4.5. THIRD PARTY ACTION. Each Third Party shall have (i) taken all
necessary and appropriate corporate and shareholder action, and the Board
of Directors of the Third Party shall have adopted resolutions authorizing
the execution and delivery of the guaranty of such Third Party and the
taking of all action called for thereby; and (ii) furnished to Secured
Party certified copies of evidence of such corporate and shareholder action
and such other corporate documents as Secured Party shall reasonably
request.
4.6. GUARANTIES. Guarantors shall have executed and delivered to
Secured Party guaranties in form and substance acceptable to Secured Party,
covering all indebtedness of Debtor to Secured Party, however incurred and
whenever arising, containing a waiver of subrogation and similar rights,
and the Secured Party shall have received the Validity Guaranty in form and
substance acceptable to Secured Party.
4.7. OTHER MATTERS. All matters incidental to the execution and
delivery of the Transaction Documents, and all action required by the
Transaction Documents, shall be satisfactory to Secured Party and to its
counsel.
5. REPRESENTATIONS AND WARRANTIES. To induce Secured Party to enter
into this Agreement, and make Advances to Debtor from time to time as
herein provided, Debtor represents and warrants and, so long as any
Indebtedness remains unpaid or this Agreement remains in effect, shall be
deemed continuously to represent and warrant as follows:
5.1. PARTNERSHIP EXISTENCE. Debtor is duly organized and existing
under the laws of the state specified in Item 10 of the Schedule and is
duly licensed or qualified to do business and in good standing in every
state in which the nature of its business or ownership of its property
requires such licensing or qualification.
5.2. PARTNERSHIP CAPACITY. The execution, delivery, and performance of
the Transaction Documents are within Debtor's powers, have been duly
authorized by all necessary and appropriate partnership action, and are not
in contravention of any law or the terms of Debtor's certificate of limited
partnership or limited partnership agreement or any amendment thereto, or
of any indenture, agreement, undertaking, or other document to which Debtor
is a party or by which Debtor or any of Debtor's property is bound or
affected.
5.3. VALIDITY OF RECEIVABLES. (a) Each Receivable is genuine and
enforceable in accordance with its terms and represents an undisputed and
bona fide indebtedness owing to Debtor by the Account Debtor obligated
thereon; (b) there are no defenses, setoffs, or counterclaims against any
Receivable; (c) no payment has been received on any Receivable, and no
Receivable is subject to any Credit or Extension or agreements therefor
unless written notice specifying such payment, Credit, Extension, or
agreement has been delivered to Secured Party; (d) each copy of each
Invoice is a true and genuine copy of the original Invoice sent to the
Account Debtor named therein and accurately evidences the transaction from
which the underlying Receivable arose, and the date payment is due as
stated on each such Invoice or computed based on the information set forth
on each such Invoice is correct; (e) all Chattel Paper, and all promissory
notes, drafts, trade acceptances, and other instruments for the payment of
money relating to or evidencing each Receivable, and each endorsement
thereon, are true and genuine and in all respects what they purport to be,
and are the valid and binding obligation of all parties thereto, and the
date or dates stated on all such items as the date on which payment in
whole or in part is due is correct; (f) all Inventory described in each
Invoice has been delivered to the Account Debtor named in such Invoice or
placed for such delivery in the possession of a carrier not owned or
controlled directly or indirectly by Debtor; (g) all evidence of the
delivery or shipment of Inventory is true and genuine; (h) all services to
be performed by Debtor in connection with each Receivable have been
performed by Debtor; and (i) all evidence of the performance of such
services by Debtor is true and genuine.
5.4. INVENTORY. (a) All representations made by Debtor to Secured
Party, and all documents and schedules given by Debtor to Secured Party,
relating to the description, quantity, quality, condition, and valuation of
the Inventory are true and correct; (b) Debtor has not received any
Inventory on consignment or approval unless Debtor (i) has delivered
written notice to Secured Party describing any Inventory which Debtor has
received on consignment or approval, (ii) has marked such Inventory on
consignment or approval or has segregated it from all other Inventory, and
(iii) has appropriately marked its records to reflect the existence of such
Inventory on consignment or approval; (c) Inventory is located only at the
address or addresses of Debtor set forth at the beginning of this
Agreement, the locations specified in Item 11 of the Schedule, or such
other place or places as approved by Secured Party in writing; (d) all
Inventory is insured as required by Section 10.11, pursuant to policies in
full compliance with the requirements of such Section; and (e) all
Inventory has been produced by Debtor in accordance with the Federal Fair
Labor Standards Act of 1938, as amended, and all rules, regulations, and
orders promulgated thereunder.
5.5. TITLE TO COLLATERAL. (a) Debtor is the owner of the Collateral
free of all security interests, liens, and other encumbrances except the
Security Interest and except as described in Item 12 of the Schedule; (b)
Debtor has the unconditional authority to grant the Security Interest to
Secured Party; and (c) assuming that all necessary Uniform Commercial Code
filings have been made and, if applicable, assuming compliance with the
Federal Assignment of Claims Act of 1940, as amended, Secured Party has an
enforceable first lien on all Collateral, subordinate only to those
security interests, liens, or encumbrances described as having priority
over the Security Interest in Item 12 of the Schedule.
5.6. NOTES RECEIVABLE. No Receivable is an Instrument, Document, or
Chattel Paper or is evidenced by any note, draft, trade acceptance, or
other instrument for the payment of money, except such Instrument,
Document, Chattel Paper, note, draft, trade acceptance, or other instrument
as has been endorsed and delivered by Debtor to Secured Party and has not
been presented for payment and returned uncollected for any reason.
5.7. EQUIPMENT. Equipment is located, and Equipment which is a Fixture
is affixed to real property, only at the address or addresses of Debtor set
forth at the beginning of this Agreement, the locations specified in Item
11 of the Schedule, or such other place or places as approved by Secured
Party in writing. Such real property is owned by Debtor or by the person or
persons named in Item 11 of the Schedule and if owned by the Debtor is
encumbered only by the mortgage or mortgages listed in Item 11 of the
Schedule.
5.8. PLACE OF BUSINESS. (a) Unless otherwise disclosed to Secured
Party in Item 11 or Item 13 of the Schedule, Debtor is engaged in business
operations which are in whole, or in part, carried on at the address or
addresses specified at the beginning of this Agreement and at no other
address or addresses; (b) if Debtor has more than one place of business,
its chief executive office is at the address specified as such at the
beginning of this Agreement; and (c) Debtor's records concerning the
Collateral are kept at the address or addresses specified at the beginning
of this Agreement or in Item 13 of the Schedule.
5.9. FINANCIAL CONDITION. Debtor has furnished to Secured Party
Debtor's most current financial statements, which statements represent
correctly and fairly the results of the operations and transactions of
Debtor and the Consolidated Subsidiaries as of the dates, and for the
period referred to, and have been prepared in accordance with generally
accepted accounting principles consistently applied during each interval
involved and from interval to interval. Since the date of such financial
statements, there have not been any materially adverse changes in the
financial condition reflected in such financial statements, except as
disclosed in writing by Debtor to Secured Party.
5.10. TAXES. Except as disclosed in writing by Debtor to Secured
Party: (a) all federal and other tax returns required to be filed by Debtor
and each Consolidated Subsidiary have been filed, and all taxes required by
such returns have been paid; and (b) neither Debtor nor any Consolidated
Subsidiary has received any notice from the Internal Revenue Service or any
other taxing authority proposing additional taxes.
5.11. LITIGATION. Except as disclosed in writing by Debtor to Secured
Party, there are no actions, suits, proceedings, or investigations pending
or, to the knowledge of Debtor, threatened against Debtor or any
Consolidated Subsidiary or any basis therefor which, if adversely
determined, would, in any case or in the aggregate, materially adversely
affect the property, assets, financial condition, or business of Debtor or
any Consolidated Subsidiary or materially impair the right or ability of
Debtor or any Consolidated Subsidiary to carry on its operations
substantially as conducted on the date of this Agreement.
5.12. ERISA MATTERS. (a) No Pension Plan has been terminated, or
partially terminated, or is insolvent, or in reorganization, nor have any
proceedings been instituted to terminate or reorganize any Pension Plan;
(b) neither Debtor nor any Consolidated Subsidiary has withdrawn from any
Pension Plan in a complete or partial withdrawal, nor has a condition
occurred which, if continued, would result in a complete or partial
withdrawal; (c) neither Debtor nor any Consolidated Subsidiary has incurred
any withdrawal liability, including, without limitation, contingent
withdrawal liability, to any Pension Plan, pursuant to Title IV of ERISA;
(d) neither Debtor nor any Consolidated Subsidiary has incurred any
liability to the Pension Benefit Guaranty Corporation other than for
required insurance premiums which have been paid when due; (e) no
Reportable Event has occurred; (f) no Pension Plan or other "employee
pension benefit plan," as defined in Section 3(2) of ERISA, to which Debtor
or any Consolidated Subsidiary is a party has an "accumulated funding
deficiency" (whether or not waived), as defined in Section 302 of ERISA or
in Section 412 of the Internal Revenue Code; (g) the present value of all
benefits vested under any Pension Plan does not exceed the value of the
assets of such Pension Plan allocable to such vested benefits; (h) each
Pension Plan and each other "employee benefit plan," as defined in Section
3(3) of ERISA, to which Debtor or any Consolidated Subsidiary is a party is
in substantial compliance with ERISA, and no such plan or any
administrator, trustee, or fiduciary thereof has engaged in a prohibited
transaction described in Section 406 of ERISA or in Section 4975 of the
Internal Revenue Code; (i) each Pension Plan and each other "employee
benefit plan," as defined in Section 3(2) of ERISA, to which Debtor or any
Consolidated Subsidiary is a party has received a favorable determination
by the Internal Revenue Service with respect to qualification under Section
401(a) of the Internal Revenue Code; and (j) neither Debtor nor any
Consolidated Subsidiary has incurred any liability to a trustee or trust
established pursuant to Section 4049 of ERISA or to a trustee appointed
pursuant to Section 4042(b) or (c) of ERISA.
5.13. ENVIRONMENTAL MATTERS.
Except as provided in Exhibit D:
(a) Any Environmental Questionnaire previously provided to Secured
Party was and is accurate and complete and does not omit any material fact
the omission of which would make the information contained therein
materially misleading.
(b) No above ground or underground storage tanks containing Hazardous
Substances are, or have been located on, any property owned, leased, or
operated by Debtor or any Consolidated Subsidiary, except to the extent
permitted by law. Any such storage tank owned, leased, or operated by
Debtor materially complies with all Environmental Laws and neither is
leaking nor has leaked to a degree which would require remediation under
any applicable Environmental Laws, and that any and all acts required under
applicable Environmental Laws in connection with any such leakage have been
performed.
(c) No property owned, leased, or operated by Debtor or any
Consolidated Subsidiary is, or to the knowledge of Debtor has been, used
for the Disposal of any Hazardous Substance or for the treatment or
Disposal of Hazardous Substances, except to the extent permitted by law.
(d) No Release of any Hazardous Substances to the knowledge of Debtor
has occurred, or is threatened on, at or from any property owned, leased,
controlled, or operated by Debtor or any Consolidated Subsidiary.
(e) Neither Debtor nor any Consolidated Subsidiary has knowledge of
any existing, pending, or threatened suit, claim, notice of violation, or
request for information under any Environmental Law.
(f) Debtor and each Consolidated Subsidiary are in compliance with,
and have obtained all Environmental Permits required by, all Environmental
Laws.
5.14. VALIDITY OF TRANSACTION DOCUMENTS. The Transaction Documents
constitute the legal, valid, and binding obligations of Debtor and each
Consolidated Subsidiary and any Third Parties thereto, enforceable in
accordance with their respective terms, except as enforceability may be
limited by applicable bankruptcy and insolvency laws and laws affecting
creditors' rights generally.
5.15. NO CONSENT OR FILING. No consent, license, approval, or
authorization of, or registration, declaration, or filing with, any court,
governmental body or authority, or other person or entity is required in
connection with the valid execution, delivery, or performance of the
Transaction Documents or for the conduct of Debtor's business as now
conducted, other than filings and recordings to perfect security interests
in or liens on the Collateral in connection with the Transaction Documents.
5.16. NO VIOLATIONS. Neither Debtor nor any Consolidated Subsidiary is
in violation of any term of its articles, or certificate of incorporation,
or by-laws, or of any mortgage, borrowing agreement, or other instrument or
agreement pertaining to indebtedness for borrowed money. Neither Debtor nor
any Consolidated Subsidiary is in violation of any term of any other
indenture, instrument, or agreement to which it is a party or by which it
or its property may be bound, resulting, or which might reasonably be
expected to result, in a material and adverse effect upon its business or
assets. Neither Debtor nor any Consolidated Subsidiary is in violation of
any order, writ, judgment, injunction, or decree of any court of competent
jurisdiction or of any statute, rule, or regulation of any governmental
authority, the violation of which could materially adversely affect the
condition, business, or operations of Debtor or any Consolidated
Subsidiary. The execution and delivery of the Transaction Documents and the
performance of all of the same, is, and will be, in compliance with the
foregoing and will not result in any violation thereof, or result in the
creation of any mortgage, lien, security interest, charge, or encumbrance
upon, any properties or assets except in favor of Secured Party. There
exists no fact or circumstance (whether or not disclosed in the Transaction
Documents) which materially adversely affects, or in the future (so far as
Debtor can now foresee) may materially adversely affect, the condition,
business, or operations of Debtor or any Consolidated Subsidiary or any
Third Party.
5.17. TRADEMARKS AND PATENTS. Debtor and each Consolidated Subsidiary
possesses all trademarks, trademark rights, patents, patent rights,
tradenames, tradename rights and copyrights that are required to conduct
its business as now conducted without conflict with the rights or claimed
rights of others. A list of the foregoing is set forth in Item 14 of the
Schedule.
5.18. CONTINGENT LIABILITIES. There are no suretyship agreements,
guaranties, or other contingent liabilities of Debtor or any Consolidated
Subsidiary which are not disclosed by the financial statements described in
Section 5.9 or Item 25 of the Schedule.
5.19. SOLVENCY. Debtor individually is, and Debtor and the
Consolidated Subsidiaries taken as a whole are, and during the term of this
Agreement, Debtor individually, and the Consolidated Subsidiaries taken as
a whole, will be, at all times, Solvent, both before and after giving
effect to the transactions contemplated by the Transaction Documents and
any acquisition of stock or assets occurring in conjunction with or related
to the Transaction Documents.
5.20. COMPLIANCE WITH LAWS. Debtor is in compliance with all
applicable laws, rules, regulations, and other legal requirements with
respect to its business and the use, maintenance, and operations of the
real and personal property owned or leased by it in the conduct of its
business, the violation of which could materially adversely affect the
condition, business, operations of Debtor or any Consolidated Subsidiary.
5.21. LICENSES, PERMITS, ETC. Each material franchise, grant,
approval, authorization, license, permit, easement, consent, certificate,
and order of and registration, declaration, and filing with, any court,
governmental body or authority, or other person or entity required for or
in connection with the conduct of Debtor's and each Consolidated
Subsidiary's business as now conducted is in full force and effect. Neither
Debtor nor any of its Consolidated Subsidiaries is in default under or has
otherwise violated the terms of such licenses. As of the date hereof,
Debtor has advised Secured Party, in writing, of all regulatory defects or
deficiencies under any state laws applicable to Debtor and its Consolidated
Subsidiaries of which Debtor has been advised or has actual knowledge.
5.22. USE OF PROCEEDS; MARGIN STOCK. Neither Debtor's execution and
delivery of the Transaction Documents nor the borrowing by Debtor of any
sums pursuant thereto violates Section 7 of the Securities Act of 1934, as
amended, or any rule or regulation thereunder, and Debtor neither owns, nor
intends to purchase or carry, any "margin stock." None of the proceeds of
the Revolving Credit, Term Loan, or Letters of Credit will be used in
violation of Regulation G, U, T, or X of the Board of Governors of the
Federal Reserve System.
5.23. COMMISSIONS. No brokerage commission, finders fee, or investment
banking fees are payable by Debtor to any person or entity in connection
with the Transaction Documents or the transactions contemplated thereby,
other than the payment by Debtor to Tony Abernethey, or his assigns, of a
loan origination fee equal to one-half percent (0.5%) of the total amount
of the credit facilities provided hereunder.
5.24. LABOR CONTRACTS. Neither Debtor nor any Consolidated Subsidiary
is a party to any collective bargaining agreement or to any existing or
threatened labor dispute or controversies except as set forth in Item 15 of
the Schedule.
5.25. CONSOLIDATED SUBSIDIARIES. Debtor has no Consolidated
Subsidiaries other than those listed in Item 33 of the Schedule, and the
percentage ownership of Debtor in each such Consolidated Subsidiary is
specified in such Item 33.
5.26. ACCURACY OF REPRESENTATIONS. No representation, warranty, or
statement by Debtor or any Third Party contained herein, or in any
certificate, financial statement, or other document furnished by Debtor or
any Third Party pursuant hereto, or in connection herewith, fails to
contain any representation or warranty not misleading in any material
respect in light of the circumstances under which it is made.
5.27. PARTNERSHIP INTERESTS. Debtor's total partnership interests are
set forth in Item 16 of the Schedule. No other partnership interests of the
Debtor of any class or type are authorized or outstanding.
5.28. NO ADVERSE CHANGE. As of September 30, 1997, (a) no adverse
change has occurred in the financial condition of Debtor or any Third
Party, and (b) no other matter exists or has occurred which might have an
adverse affect on the Debtor or any Third Party, financial or otherwise.
5.29. NO DEFAULT. No event has occurred and is continuing which
constitutes an Event of Default or, upon passage of time, will constitute
an Event of Default.
5.30. MATERIAL AGREEMENTS. Debtor is not in default in any material
respect under any loan agreement, indenture, mortgage, security agreement,
or other material agreement or obligation to which it is a party or by
which any of its properties are bound.
5.31. NO FINANCING OF CORPORATE TAKEOVERS. No proceeds of the
Revolving Credit or the Term Loan will be used to acquire any security in
any transaction that is subject to Section 13 or 14 of the Securities
Exchange Act of 1934, including particularly (but without limitation)
Section 13(d) and 14(d) thereof.
6. CERTAIN DOCUMENTS TO BE DELIVERED TO SECURED PARTY.
6.1. DOCUMENTS. Debtor shall deliver to Secured Party, all documents
specified in Item 17 of the Schedule, as frequently as indicated therein or
at such other times as Secured Party may reasonably request, and all other
documents and information reasonably requested by Secured Party, all in
form, content and detail satisfactory to Secured Party. The documents and
schedules to be provided under this Section are solely for the convenience
of Secured Party in administering this Agreement and maintaining records of
the Collateral. Debtor's failure to provide Secured Party with any such
schedule shall not affect the Security Interest.
6.2. INVOICES. If requested by Secured Party, copies of all Invoices
not previously delivered to Secured Party shall be delivered to Secured
Party with each schedule of Receivables. Copies of all Invoices which are
voided or canceled or which, for any other reason, do not evidence a
Receivable shall be included in such delivery. If any Invoice or copy
thereof is lost, destroyed, or otherwise unavailable, Debtor shall account
in writing, in form satisfactory to Secured Party, for such missing
Invoice.
6.3. CHATTEL PAPER. The original of each item of Chattel Paper
evidencing a Receivable shall be delivered to Secured Party with the
schedule listing the Receivable which it evidences, together with an
assignment in form and content satisfactory to Secured Party of such
Chattel Paper by Debtor to the Secured Party.
7. COLLECTIONS. Unless Secured Party notifies Debtor that it
specifically dispenses with one or more of the following requirements, any
Proceeds of Collateral received by Debtor, including, without limitation,
payments on Receivables and other payments from sales or leases of
Inventory, shall be held by Debtor in trust for Secured Party in the same
medium in which received, shall not be commingled with any assets of
Debtor, and shall be delivered immediately to Secured Party. So long as
Secured Party elects to keep the Marine Payment Account in existence,
Debtor shall deposit Proceeds of Collateral into the Marine Payment Account
and shall, on the day of each such deposit, forward to Secured Party a copy
of the deposit receipt of the depository bank indicating that such deposit
has been made. Upon receipt of Proceeds of Collateral, Secured Party, shall
apply such Proceeds directly to the Indebtedness in the manner provided in
Section 8.5. Checks drawn on the Marine Payment Account, and all or any
part of the balance of the Marine Payment Account, shall be applied from
time to time to the Indebtedness in the manner provided in Section 8.5.
8. PAYMENT OF PRINCIPAL, INTEREST, FEES, AND COSTS AND EXPENSES.
8.1. PROMISE TO PAY PRINCIPAL.
(a) Debtor promises to pay to Secured Party the outstanding principal
of the Revolving Credit in full upon termination of this Agreement pursuant
to Section 14.13, or acceleration of the time for payment of the
Indebtedness, pursuant to Section 12.2. Whenever the outstanding principal
balance of the Revolving Credit exceeds the Borrowing Capacity, Debtor
shall immediately pay to Secured Party the excess of the outstanding
principal balance of the Revolving Credit over the Borrowing Capacity.
(b) Debtor promises to pay to Secured Party the outstanding principal
of the Term Loan as follows:
(i) In 35 consecutive monthly installments each in the amount of
$95,238.10, commencing on December 1, 1997, and thereafter, on the first
day of each succeeding calendar month through and including October 1,
2000, and
(ii) In one final installment on November 1, 2000, in the amount of
the unpaid principal balance of, and accrued interest upon, the Term Loan.
(iii) Notwithstanding the foregoing clauses (i) and (ii) of this
subsection (b), in the event this Agreement is terminated pursuant to
Section 14.13, or accelerated pursuant to Section 12.2, Debtor shall
immediately pay to Secured Party in full, the outstanding unpaid principal
balance of, and accrued interest upon, the Term Loan.
8.2. PROMISE TO PAY INTEREST.
(a) Debtor promises to pay to Secured Party interest on the principal
of Advances from time to time unpaid at the lesser of (i) the Highest
Lawful Rate or (ii) the fluctuating per annum rate specified in Item 18 of
the Schedule. From the date of the occurrence of, and during the
continuance of, an Event of Default, Debtor, as additional compensation to
Secured Party for its increased credit risk promises to pay interest on (i)
the principal of Advances, whether or not past due; and (ii) past due
interest and any other amount past due under the Transaction Documents, at
a per annum rate of the lesser of (i) the Highest Lawful Rate and (ii)
3.00% greater than each of the rates of interest specified in Item 18 of
the Schedule.
(b) Interest (other than past due interest as set forth in Section
8.2(a)) shall be due and payable (i) on the first day of each month in
arrears, (ii) on termination of this Agreement, pursuant to Section 14.13,
(iii) on acceleration of the time for payment of the Indebtedness, pursuant
to Section 12.2, and (iv) on the date the Indebtedness is paid in full.
Past due interest (as set forth in Section 8.2(a)) shall be due and payable
immediately upon demand.
(c) Any change in the interest rate resulting from a change in the
Prime Rate shall take effect simultaneously with such change in the Prime
Rate. Interest shall be computed on the daily unpaid principal balance of
Advances. Interest shall be calculated for each calendar day at 1/360th of
the applicable per annum rate which will result in an effective per annum
rate higher than that specified in Item 18 of the Schedule, unless such
calculation would exceed the Highest Lawful Rate, in which case interest
shall be calculated for each calendar day at 1/365th or 1/366th, as the
case may be, of the applicable per annum rate. In no event shall the rate
of interest exceed the Highest Lawful Rate. If Debtor pays to Secured Party
interest in excess of the Highest Lawful Rate, such excess shall be applied
in reduction of the principal of Advances made pursuant to this Agreement,
and any remaining excess interest, after application thereof to the
principal of Advances, shall be refunded to Debtor.
8.3. PROMISE TO PAY FEES.
(a) Debtor shall pay to Secured Party any fees specified in Item 19 of
the Schedule on the applicable due dates also specified in Item 19 of the
Schedule.
(b) The fees described in this Agreement represent compensation for
services rendered and to be rendered separate and apart from the lending of
money or the provision of credit and do not constitute compensation for the
use, detention, or forbearance of money, and the obligation of the Debtor
to pay each fee described herein shall be in addition to, and not in lieu
of, the obligation of Debtor to pay interest, other fees described in this
Agreement, and expenses otherwise described in this Agreement. All fees
including, without limitation, those referred to in this Section, shall be
part of the obligations of the Debtor hereunder, shall be nonrefundable,
and shall, to the fullest extent permitted by law, bear interest, if not
paid when due, at the rate of interest specified in Section 8.2 (a)(ii).
8.4. PROMISE TO PAY COSTS AND EXPENSES.
(a) Debtor agrees to pay to Secured Party, on demand, all costs and
expenses as provided in this Agreement, and all costs and expenses incurred
by Secured Party from time to time in connection with this Agreement,
including, without limitation, those incurred in: (i) preparing,
negotiating, amending, waiving, or granting consent with respect to the
terms of any or all of the Transaction Documents; (ii) enforcing the
Transaction Documents; (iii) performing, pursuant to Section 14.2, Debtor's
duties under the Transaction Documents upon Debtor's failure to perform
them; (iv) filing financing statements, assignments, or other documents
relating to the Collateral (e.g., filing fees, recording taxes, and
documentary stamp taxes); (v) maintaining the Marine Payment Account; (vi)
administering the Transaction Documents, but not ordinary general and
administrative expenses; (vii) compromising, pursuing, or defending any
controversy, action, or proceeding resulting, directly or indirectly, from
Secured Party's relationship with Debtor, regardless of whether Debtor is a
party to such controversy, action, or proceeding and of whether the
controversy, action, or proceeding occurs before or after the Indebtedness
has been paid in full; (viii) realizing upon or protecting any Collateral;
(ix) enforcing or collecting any Indebtedness or guaranty thereof; (x)
employing collection agencies or other agents to collect any or all of the
Receivables; (xi) examining Debtor's books and records or inspecting the
Collateral including, without limitation, the reasonable costs of
examinations and inspections conducted by third parties, provided that
nothing herein shall limit Secured Party's right to audit, examination,
inspection, or other fees otherwise payable under Section 8.3; and (xii)
obtaining independent appraisals from time to time as deemed necessary or
appropriate by Secured Party.
(b) Without limiting Section 8.4(a), Debtor also agrees to pay to
Secured Party, on demand, the reasonable fees and disbursements incurred by
Secured Party for attorneys retained by Secured Party for advice, suit,
appeal, or insolvency or other proceedings under the Federal Bankruptcy
Code or otherwise, in connection with this Agreement, including without
limitation any purpose specified in Section 8.4(a).
8.5. METHOD OF PAYMENT OF PRINCIPAL, INTEREST, FEES, AND COSTS AND
EXPENSES. Without limiting Debtor's obligation, pursuant to Sections 8.1,
8.2., 8.3, and 8.4 to pay the principal of Advances, interest, fees, and
costs and expenses, the following provisions shall apply to the payment
thereof:
(a) Payment of Principal. Debtor authorizes Secured Party to apply any
Proceeds of Collateral, including, without limitation, payments on
Receivables, other payments from sales or leases of Inventory, and any
funds in the Marine Payment Account, to the unpaid principal of Advances.
(b) Payment of Interest, Fees, and Costs and Expenses. Without
limiting Debtor's obligation to pay accrued interest, fees, and costs and
expenses, Debtor authorizes Secured Party to (provided, however, Secured
Party shall incur no liability for failure to): (i) make an Advance to pay
for such items; or (ii) apply Proceeds of Collateral, including, without
limitation, payments on Receivables, other payments from sales or leases of
Inventory, and any funds in the Marine Payment Account, to the payment of
such items.
(c) Notwithstanding any other provision of this Agreement, Secured
Party, in its sole discretion, shall determine the manner and amount of
application of payments and credits and Proceeds of Collateral, if any, to
be made on all or any part of any component or components of the
Indebtedness, whether principal, interest, fees, costs and expenses, or
otherwise.
8.6. COMPUTATION OF DAILY OUTSTANDING BALANCE. For the purpose of
calculating the aggregate principal balance of outstanding Advances under
Section 2.1, Advances shall be deemed to be paid on the date that checks
drawn on, or other funds received from, the Marine Payment Account are
applied by Secured Party to Advances, and on the date any other payments on
Receivables, or other payments from sales or leases of Inventory to be so
applied, have been processed for collection by Secured Party; provided,
however, for the purpose of calculating interest payable by Debtor, funds
from the Marine Payment Account, payments on Receivables, other payments
from sales or leases of Inventory, and any other payments, shall be deemed
to be applied to Advances the number of days specified in Item 20 of the
Schedule after the application of such funds from the Marine Payment
Account or receipt of such payments by Secured Party, and the amount of
interest payable will be adjusted by Secured Party from time to time
accordingly. Notwithstanding any other provision of this Agreement, if any
item presented for collection by Secured Party is not honored, Secured
Party may reverse any provisional credit which has been given for the item
and make appropriate adjustments to the amount of interest and principal
due.
8.7. ACCOUNT STATED. Debtor agrees that each monthly or other
statement of account mailed or delivered by Secured Party to Debtor
pertaining to the outstanding balance of Advances, the amount of interest
due thereon, fees, and costs and expenses shall be final, conclusive, and
binding on Debtor and shall constitute an "account stated" with respect to
the matters contained therein unless, within thirty (30) calendar days from
when such statement is mailed or, if not mailed, delivered to Debtor,
Debtor shall deliver to Secured Party written notice of any objections
which it may have as to such statement of account, and in such event, only
the items to which objection is expressly made in such notice shall be
considered to be disputed by Debtor.
8.8. CAPITAL ADEQUACY. Debtor shall pay directly to Secured Party as
set forth below, on request, such amounts as Secured Party may determine to
be necessary to compensate Secured Party for any costs which it determines
are attributable to the maintenance by Secured Party, pursuant to a
governmental requirement implemented or effective after the date hereof or
a change made in any governmental requirement after the date hereof, or any
change in the interpretation, application or administration thereof,
whether or not having the force of law, but affecting the banking industry
generally, of capital in respect of Secured Party's commitment to lend
hereunder, such compensation to include, without limitation, an amount
equal to any reduction of the rate of return on assets or equity of Secured
Party (or its parent holding company) which Secured Party could have
achieved with respect to such commitment but for such governmental
requirement or change in a governmental requirement or any such change in
the interpretation, application or administration thereof, whether or not
having the force of law, but affecting the banking industry generally.
Secured Party will notify Debtor of any event occurring after the date of
this Agreement that will entitle Secured Party to compensation pursuant to
this Section as promptly as practicable after it obtains knowledge thereof.
Debtor will not be responsible for any amounts as compensation pursuant to
this Section accruing prior to ninety (90) days before the notice to Debtor
in accordance with the preceding sentence. In the event Secured Party is
entitled to such compensation, Secured Party will furnish Debtor with a
certificate setting forth the amount of each request by Secured Party for
compensation under this Section, with such certificate setting forth in
reasonable detail the basis for determining, and the calculation of, such
compensation. Determinations and allocations by Secured Party for purposes
of this Section of the effect of any governmental requirement pursuant to
this Section, or of the effect of capital maintained pursuant to this
Section, on Secured Party's cost or rate of return of maintaining
Indebtedness or its obligation to make Advances, and of the amounts
required to compensate Secured Party hereunder, shall be conclusive absent
manifest error.
8.9. ADDITIONAL PROVISIONS APPLICABLE TO LIBOR.
(a) Notice of Continuation/Conversion. If Debtor desires at the
expiration of a Eurodollar Interest Period to continue such Advance as an
Advance bearing interest at LIBOR for a new Eurodollar Interest Period,
such Debtor shall give Secured Party notice thereof, either telephonically
or in writing, no later than 10:00 a.m. (London time) on the third Business
Day immediately preceding the last day of the then expiring Eurodollar
Interest Period, which shall specify the aggregate principal amount of the
Eurodollar Rate Loan to be continued for a new Eurodollar Interest Period
and the new Eurodollar Interest Period to be applicable thereto. If Debtor
desires at the expiration of an applicable Eurodollar Interest Period to
convert all or part of an Advance from an Advance bearing interest at LIBOR
to an Advance bearing interest at the Prime Rate, the Debtor shall give the
Secured Party notice thereof, either telephonically or in writing in the
aforesaid manner. Each continuation/conversion notice shall be in writing
(each a "Notice of Continuation/Conversion"), and any telephonic notice
shall be promptly followed by such Debtor's delivery to Secured Party of a
Notice of Continuation/Conversion.
(b) Failure to Deliver Notice of Continuation/Conversion. If the
applicable Debtor shall have failed to properly deliver a Notice of
Continuation/Conversion specifying a continuation or conversion pursuant to
Section 8.9(a), such Debtor shall be deemed to have elected to continue
such Advance bearing interest at LIBOR for a Eurodollar Interest Period of
the same duration as the Eurodollar Interest Period so expiring.
(c) Eurodollar Deposits Unavailable or LIBOR Unascertainable or
Uneconomical. In the event that, prior to the commencement of any
Eurodollar Interest Period for any Advance bearing interest at LIBOR, by
reason of circumstances affecting the Eurodollar interbank market
generally, the Secured Party or Marine Midland Bank shall have reasonably
determined in good faith (which determination shall be conclusive and
binding upon all parties hereto) that (i) U.S. dollars in the relevant
amount and for the relevant Eurodollar Interest Period for such Advances
bearing interest at LIBOR are not available in the applicable Eurodollar
interbank market generally, or (ii) adequate and reasonable means do not
exist for ascertaining LIBOR applicable to such Eurodollar Interest Period,
whereupon (x) any request for an Advance bearing interest at LIBOR shall be
deemed a request for an Advance based upon the Prime Rate, and (y) each
outstanding Advance bearing interest at LIBOR shall be converted, without
any additional notice to or from the affected Borrower, to an Advance based
upon the Prime Rate (disregarding any requirements for any notice or a
minimum aggregate principal amount) on the last day of the Eurodollar
Interest Period with respect thereto.
(d) Special Fees in Respect of Reserve Requirements. Debtor agrees to
pay to Secured Party on any such Advances bearing interest at LIBOR, as
additional interest, such amounts as will compensate Secured Party for any
cost to Secured Party, from time to time, of any additional reserve or
additional special deposit requirement against assets held by, or deposits
in or for the amount of any loans by, Secured Party which are imposed on,
or deemed applicable by, such Lender, from time to time, under or pursuant
to any applicable governmental requirements respecting the Eurodollar
Lending Office or any Advance bearing interest at LIBOR. In connection
herewith, Secured Party shall not be required to prove that it actually
funded any Advance bearing interest at LIBOR, in whole or in part, with
matching deposits in U.S. dollars acquired by Secured Party from a prime
bank in the Eurodollar interbank market, irrespective of whether Secured
Party has any such deposits. A certificate as to the amount of any such
cost (including calculations, in reasonable detail, showing how Secured
Party computed and allocated such cost) shall be promptly furnished by
Secured Party to Debtor and shall, in the absence of manifest error, be
conclusive and binding.
(e) Reasonable Efforts. Secured Party agrees that it will use all
reasonable efforts, including ,without limitation, reasonable good faith
efforts, to designate a different Eurodollar Lending Office to make or
maintain any Advance bearing interest at LIBOR, in order to avoid or to
minimize, as the case may be, the payment by Debtor of any additional
amounts under the terms of Section 8.9(d), and that it will, as promptly as
practicable, notify the Debtor of the existence of any event which will
require the payment by Debtor of any such additional amounts; provided,
that the Secured Party shall not be obligated to make Advances bearing
interest at LIBOR hereunder at any office located in the United States to
avoid or minimize such payments.
(f) Funding Losses. If Debtor makes any payment of principal on any
Advance bearing interest at LIBOR, or converts such an Advance into an
Advance bearing interest at the Prime Rate on any day other than the last
day of the Eurodollar Interest Period applicable thereto, Debtor shall
reimburse the Secured Party within ten (10) Business Days after demand, for
any resulting loss or expense actually incurred by it, including (without
limitation) any loss incurred in obtaining, liquidating, employing or
redeploying deposits or foreign currencies from third parties (including,
without limitation, the amount of Secured Party's consequential losses),
for the period after any such payment or conversion through the end of such
Eurodollar Interest Period (the calculation of such loss or expense shall
include a credit, not in excess of such loss or expense, for the interest
that could be earned by the Secured Party as a result of redepositing such
amount), together with interest thereon at the past due rate specified in
Section 8.2(a) from the date of demand until paid in full; provided that
Secured Party shall have delivered to Debtor a certificate as to the amount
of such loss or expense, which certificate shall be conclusive in the
absence of manifest error. In connection herewith, Secured Party shall not
be required to prove that it actually funded any Advance bearing interest
at LIBOR, in whole or in part, with matching deposits in U.S. dollars
acquired by the Secured Party from a prime bank in the applicable
Eurodollar interbank market, irrespective of whether Secured Party has any
such deposits.
(g) Changes in Law Rendering LIBOR Loans Unlawful. In the event that
after the date hereof it shall be unlawful for Secured Party, in the
reasonable determination in good faith of Secured Party, to make or
maintain any Advance as an Advance bearing interest at LIBOR, Secured Party
shall, upon the occurrence of such event, notify the Debtor in writing,
stating the reasons therefor; provided, however, that before giving any
such notice, Secured Party shall use reasonable good faith efforts to
designate a different Eurodollar Lending Office to make or maintain such
Advance as an Advance bearing interest at LIBOR if such designation will
avoid the need for giving such notice and will not be otherwise materially
disadvantageous to the Secured Party. Upon receiving a notice of any such
event, the Debtor shall have the following options, one of which must be
exercised:
(i) to prepay immediately all of the Advances which are so affected;
or,
(ii) convert all affected Advances (including accrued interest
thereon) to Advances based on the rate of interest based on the Prime Rate.
(h)......Reimbursable Taxes. Debtor covenants and agrees that, with
respect to each Advance bearing interest at LIBOR:
(i) Debtor will pay, when due (upon prior written notice by Secured
Party, and on an after-tax basis), all present and future income, stamp and
other taxes, levies, costs and charges whatsoever imposed, assessed, levied
or collected on or in respect of such Advance; provided, however, that if
Debtor disputes in good faith any such taxes, levies, costs or charges and
refuses to pay same pending resolution of such dispute, Debtor shall so
advise Secured Party in writing and shall make the appropriate reserves
therefor. Debtor's obligation pursuant hereto shall exclude, however, any
such taxes, levies, costs or charges imposed or determined by reference to
income of Secured Party or any Eurodollar Lending Office by any
jurisdiction in which the Secured Party or any such Eurodollar Lending
Office is located (all such non-excluded taxes, levies, costs and charges
being collectively called "Reimbursable Taxes" in this Section). Promptly
after the date on which payment of any such Reimbursable Tax is due
pursuant to applicable law, Debtor will, at the request of Secured Party,
furnish to Secured Party an official receipt issued by the relevant taxing
authority showing the amount of such tax and its payment by Debtor or such
other evidence in form and substance satisfactory to Secured Party that
Debtor has met its obligation under this Section.
(ii) Debtor will indemnify the Secured Party against, and reimburse
the Secured Party on demand for, any Reimbursable Taxes paid by Secured
Party upon Debtor's failure to pay such amounts in a timely manner after
written notice by the Secured Party, and any loss, liability, claim or
expense, including interest, penalties and reasonable legal fees, that
Secured Party may incur at any time arising out of or in connection with a
failure by the Debtor to pay such Reimbursable Taxes. A certificate of the
Secured Party as to the amount of any such Reimbursable Taxes and other
amounts paid by the Secured Party shall be conclusive and binding in the
absence of manifest error.
(iii) All payments on account of the principal of and interest on the
Advances and all other amounts payable by Debtor to the Secured Party
hereunder shall be made free and clear of and without reduction by reason
of any Reimbursable Taxes, all of which will be for the account of the
Debtor and paid when due by the Debtor.
(iv) If Debtor is ever required to pay any Reimbursable Tax with
respect to any Advance bearing interest at LIBOR, Debtor may elect to
convert all outstanding Advances bearing interest at LIBOR to Advances
bearing interest at the Prime Rate, but such election shall not diminish
Debtor's obligation to pay all Reimbursable Taxes theretofore imposed,
assessed, levied or collected.
(v) Notwithstanding the foregoing provisions of this Section to the
contrary, Debtor shall have no obligation to pay to the Secured Party any
amount payable by reason of the failure of the Secured Party to file, to
the extent the Secured Party is legally entitled to file, any statement of
exemption required by Treasury Regulation Section 1.1441-4(a) or any
subsequent version thereof promulgated under the Code, or any claim for
relief from United Kingdom Inland Tax pursuant to Article 11 of the United
States-United Kingdom Income Tax Treaty.
9. PROCEDURES AFTER SCHEDULING RECEIVABLES.
9.1. RETURNED MERCHANDISE. Debtor shall notify Secured Party
immediately of the return, rejection, repossession, stoppage in transit,
loss, damage, or destruction of any material portion of the Inventory.
Secured Party shall make appropriate adjustments to the Receivables
Borrowing Base and the Inventory Borrowing Base to reflect the return of
such Inventory.
9.2. CREDITS AND EXTENSIONS.
(a) Granting of Credits and Extensions. Debtor may grant such Credits
and such Extensions as are ordinary in the usual course of Debtor's
business without the prior consent of Secured Party; provided, however,
that any such Extension shall not extend the time for payment beyond thirty
(30) days after the original due date as shown on the Invoice evidencing
the related Receivable, or as computed based on the information set forth
on such Invoice.
(b) Accounting for Credits and Extensions. Debtor shall make a full
accounting of each grant of a Credit or an Extension, including a brief
description of the reasons therefor and a copy of all credit memoranda.
Such accountings shall be in form satisfactory to Secured Party and shall
be delivered to Secured Party daily or at such other intervals as may be
specified in Item 17 of the Schedule. All credit memoranda issued by Debtor
shall be numbered consecutively and copies of the same, when delivered to
Secured Party, shall be in numerical order and accounted for in the same
manner as provided in Section 6.2 with respect to Invoices.
(c) Adjustment to Receivables Borrowing Base. The Receivables
Borrowing Base will be reduced by the amount of all Credits reflected in an
accounting required by Section 9.2(b) and by the full amount of any
Receivables for which Extensions were granted.
9.3. RETURNED INSTRUMENTS. In the event that any check or other
instrument received in payment of a Receivable shall be returned
uncollected for any reason, Secured Party shall again forward the same for
collection or return the same to Debtor. Upon receipt of a returned check
or instrument by Debtor, Debtor shall immediately make the necessary
entries on its books and records to reinstate the Receivable as outstanding
and unpaid and immediately notify Secured Party of such entries. All
Receivables of an Account Debtor with respect to which such check or
instrument was received shall thereupon become Ineligible Receivables.
9.4. DEBIT MEMORANDA.
(a) Unless Secured Party otherwise notifies Debtor in writing, Debtor
shall deliver at least weekly to Secured Party, together with the schedule
of Receivables provided for in Item 17 of the Schedule, copies of all debit
memoranda issued by Debtor.
(b) All debit memoranda issued by Debtor, when delivered to Secured
Party, shall be accounted for in the same manner as provided in Section 6.2
with respect to Invoices.
9.5. NOTES RECEIVABLE. Any note or other instrument (except a check or
other instrument for the immediate payment of money) with respect to any
Receivable accepted by Debtor without the prior written consent of Secured
Party shall be excluded from the Borrowing Capacity. If Secured Party, in
its reasonable judgment, consents to the acceptance of any such note or
instrument, the same shall be considered as evidence of the Receivable
giving rise to such note or instrument, shall be subject to the Security
Interest and included in the determination of Borrowing Capacity, and shall
not constitute payment of such Receivable, and Debtor shall forthwith
endorse such note or instrument to the order of Secured Party and deliver
the same to Secured Party, together with the Schedule listing the
Receivables which it evidences. Upon collection, the proceeds of such note
or instrument may be applied directly to unpaid Advances, interest, and
costs and expenses as provided in Section 8.5.
10. AFFIRMATIVE COVENANTS. So long as any part of the Indebtedness
remains unpaid, or this Agreement remains in effect, Debtor shall comply
with the covenants contained in Item 21 of the Schedule or elsewhere in
this Agreement, and with the covenants listed below:
10.1. FINANCIAL STATEMENTS. Debtor shall furnish to Secured Party:
(a) Within 90 days after the end of each fiscal year, audited
consolidated financial statements of Debtor and all Consolidated
Subsidiaries as of the end of such year, fairly presenting their
consolidated financial position, which statements shall consist of a
balance sheet and related statements of income, retained earnings, and cash
flow covering the period of Debtor's immediately preceding fiscal year, and
which shall be audited by independent certified public accountants
satisfactory to Secured Party and accompanied by an opinion by such
certified public accountants (which shall not be qualified by reason of any
limitation imposed by Debtor) to the effect that the financial statements
have been prepared in accordance with generally accepted accounting
principles and that the examination of the accounts in connection with
those financial statements has been made in accordance with generally
accepted auditing standards and, accordingly, includes such tests of the
accounting records and such other audit procedures as were considered
necessary in the circumstances by such certified public accountants.
(b) Within thirty (30) days after the end of each month, consolidated
and consolidating financial statements of Debtor and each Consolidated
Subsidiary as of the end of such month, fairly presenting Debtor's and such
Consolidated Subsidiary's financial position, which statements shall
consist of a balance sheet and related statements of income, and retained
earnings covering the period from the end of the immediately preceding
fiscal year to the end of such month, all in such detail as Secured Party
may reasonably request and signed and certified to be correct by the
president or chief financial officer of Debtor or other financial officer
satisfactory to Secured Party.
(c) Within thirty (30) days after the end of each month, a compliance
certificate executed by the president or chief financial officer of Debtor
or other financial officer satisfactory to Secured Party in the form of
Exhibit A attached hereto and made a part hereof.
(d) Promptly after their preparation, copies of any and all proxy
statements, financial statements, and reports which Debtor or any Third
Party sends to its shareholders, and copies of any and all periodic and
special reports and registration statements which Debtor or any Third Party
files with the Securities and Exchange Commission.
(e) Such additional information, including but not limited to current
business plans by fiscal year end, as Secured Party may from time to time
reasonably request regarding the financial and business affairs of Debtor,
or any Consolidated Subsidiary, or any Third Party.
10.2. GOVERNMENT AND OTHER SPECIAL RECEIVABLES. Debtor shall promptly
notify Secured Party in writing of the existence of any Receivable as to
which the perfection, enforceability, or validity of Secured Party's
Security Interest in such Receivable, or Secured Party's right or ability
to obtain direct payment to Secured Party of the Proceeds of such
Receivable, is governed by any federal or state statutory requirements
other than those of the Uniform Commercial Code, including, without
limitation, any Receivable subject to the Federal Assignment of Claims Act
of 1940, as amended.
10.3. TERMS OF SALE. The terms on which sales or leases giving rise to
Receivables are made shall be as specified in Items 3 and 22 of the
Schedule.
10.4. BOOKS AND RECORDS. Debtor shall maintain, at its own cost and
expense, accurate and complete books and records with respect to the
Collateral, in form satisfactory to Secured Party, and including, without
limitation, records of all payments received and all Credits and Extensions
granted with respect to the Receivables, of the return, rejection,
repossession, stoppage in transit, loss, damage, or destruction of any
Inventory, and of all other dealings affecting the Collateral. Debtor shall
deliver such books and records to Secured Party or its representative on
request. At Secured Party's request, Debtor shall mark all or any records
to indicate the Security Interest. Debtor shall further indicate the
Security Interest on all financial statements issued by it or shall cause
the Security Interest to be so indicated by its accountants.
10.5. INVENTORY IN POSSESSION OF THIRD PARTIES. If any Inventory
remains in the hands or control of any of Debtor's agents, finishers,
contractors, or processors, or any other third party, Debtor, if requested
by Secured Party, shall notify such party of Secured Party's Security
Interest in the Inventory and shall instruct such party to hold such
Inventory for the account of Secured Party and subject to the instructions
of Secured Party.
10.6. EXAMINATIONS. Debtor shall at all reasonable times and from time
to time permit Secured Party or its agents to inspect the Collateral and to
examine and make extracts from, or copies of, any of Debtor's books,
ledgers, reports, correspondence, and other records.
10.7. VERIFICATION OF COLLATERAL. Secured Party shall have the right
to verify all or any Collateral in any manner and through any medium
Secured Party may consider appropriate and Debtor agrees to furnish all
assistance and information and perform any acts which Secured Party may
require in connection therewith. Third party inventory confirmation service
providers must be bonded and act as an Agent for Secured Party, permitting
Secured Party to rely directly upon all findings.
10.8. RESPONSIBLE PARTIES. Debtor shall notify Secured Party of the
occurrence of any event specified in Section 1.1(dd)(iv) with respect to
any Responsible Party promptly after receiving notice thereof.
10.9. TAXES. Debtor shall promptly pay and discharge all of its taxes,
assessments, and other governmental charges prior to the date on which
penalties are attached thereto, establish adequate reserves for the payment
of such taxes, assessments, and other governmental charges, make all
required withholding and other tax deposits, and, upon request, provide
Secured Party with receipts or other proof that such taxes, assessments,
and other governmental charges have been paid in a timely fashion;
provided, however, that nothing contained herein shall require the payment
of any tax, assessment, or other governmental charge so long as its
validity is being contested in good faith, and by appropriate proceedings
diligently conducted, and adequate reserves for the payment thereof have
been established.
10.10. LITIGATION.
(a) Debtor shall promptly notify Secured Party in writing of any
litigation, proceeding, or counterclaim against, or of any investigation
of, Debtor or any Consolidated Subsidiary if: (i) the outcome of such
litigation, proceeding, counterclaim, or investigation may materially and
adversely affect the finances or operations of Debtor or any Consolidated
Subsidiary or title to, or the value of, any Collateral; or (ii) such
litigation, proceeding, counterclaim, or investigation questions the
validity of any Transaction Document or any action taken, or to be taken,
pursuant to any Transaction Document.
(b) Debtor shall furnish to Secured Party such information regarding
any such litigation, proceeding, counterclaim, or investigation as Secured
Party shall request.
10.11. INSURANCE.
(a) Debtor shall at all times carry and maintain in full force and
effect such insurance as Secured Party may from time to time reasonably
require, in coverage, form, and amount, and issued by insurers,
satisfactory to Debtor and Secured Party, including, without limitation:
workers' compensation or similar insurance; public liability insurance; and
insurance against such other risks as are usually insured against by
business entities of established reputation engaged in the same or similar
businesses as Debtor and similarly situated.
(b) Debtor shall deliver to Secured Party certificates of insurance
required by Secured Party, with appropriate endorsements designating
Secured Party and Marine Midland Bank as an additional insured, mortgagee
and loss payee as requested by Secured Party. Each policy of insurance
shall provide that if such policy is canceled for any reason whatsoever, if
any substantial change is made in the coverage which affects Secured Party,
or if such policy is allowed to lapse for nonpayment of premium, such
cancellation, change, or lapse shall not be effective as to Secured Party
until thirty (30) days after receipt by Secured Party of written notice
thereof from the insurer issuing such policy.
(c) Debtor hereby appoints Secured Party as its attorney-in-fact, with
full authority in the place and stead of Debtor and in the name of Debtor,
Secured Party, or otherwise, from time to time in Secured Party's
discretion, to take any actions and to execute any instruments which
Secured Party may deem necessary or desirable to obtain, adjust, make
claims under, and otherwise deal with insurance required pursuant hereto
and to receive, endorse, and collect any drafts or other instruments
delivered in connection therewith; provided, however, Secured Party shall
not take any such action or make any such execution until an Event of
Default has occurred.
10.12. EXISTENCE; BUSINESS.
(a) Debtor shall take all necessary steps to preserve its existence
and its right to conduct business in all states in which the nature of its
business or ownership of its property requires such qualification.
(b) Debtor shall engage only in the operation of convenience stores,
truck stops, and the retail sale of motor fuel; the operation of fuel
terminals, including the processing of commingled products and storage and
delivery of fuel for third parties; the wholesale distribution of motor
fuel; and activities ancillary to the foregoing.
10.13. PENSION REPORTS. Upon the occurrence of any Pension Event,
Debtor shall furnish to Secured Party, as soon as possible and, in any
event, within thirty (30) days after Debtor knows, or has reason to know,
of such occurrence, the statement of the president or chief financial
officer of Debtor setting forth the details of such Pension Event and the
action which Debtor proposes to take with respect thereto.
10.14. NOTICE OF NON-COMPLIANCE. Debtor shall notify Secured Party in
writing of any failure by Debtor or any Third Party to comply with any
provision of any Transaction Document immediately upon learning of such
non-compliance, or if any representation or warranty contained in any
Transaction Document is no longer true in any material respect.
10.15. COMPLIANCE WITH ENVIRONMENTAL LAWS.
(a) Debtor shall materially comply with all Environmental Laws.
(b) Debtor shall not suffer, cause, or permit the Disposal of
Hazardous Substances at any property owned, leased, or operated by it or
any Consolidated Subsidiary in material violation of any Environmental Law.
For purposes of this Section 10.15, "material" means any fine, penalty, or
liabilities per occurrence in excess of $20,000.
(c) Debtor shall promptly notify Secured Party in the event of the
Disposal of any Hazardous Substance at any property owned, leased, or
operated by Debtor or any Consolidated Subsidiary, or in the event of any
Release, or threatened Release, of a Hazardous Substance, from any such
property in material violation of any Environmental Law.
(d) Debtor shall, at Secured Party's reasonable request, provide, at
Debtor's expense, updated Environmental Questionnaires and/or Environmental
Reports concerning any property owned, leased, or operated by Debtor or any
Consolidated Subsidiary at a maximum cost to Debtor annually of $20,000.
(e) Debtor shall deliver promptly to Secured Party (i) copies of any
documents received from the United States Environmental Protection Agency
or any state, county, or municipal environmental or health agency
concerning Debtor's or any Consolidated Subsidiary's operations; and (ii)
copies of any documents submitted by Debtor or any Consolidated Subsidiary
to the United States Environmental Protection Agency or any state, county,
or municipal environmental or health agency concerning its operations.
10.16. DEFEND COLLATERAL. Debtor shall defend the Collateral against
the claims and demands of all other parties (other than Secured Party),
including, without limitation, defenses, setoffs, and counterclaims
asserted by any Account Debtor against Debtor or Secured Party.
10.17. USE OF PROCEEDS. Debtor shall use the proceeds of Advances
solely for Debtor's working capital, for such other legal and proper
corporate purposes as are consistent with all applicable laws, Debtor's
certificate of limited partnership and partnership agreement, resolutions
of the Debtor's partners, and the terms of the Transaction Documents.
10.18. COMPLIANCE WITH LAWS. Debtor shall comply with all applicable
laws, rules, regulations, and other legal requirements with respect to its
business and the use, maintenance, and operations of the real and personal
property owned or leased by it in the conduct of its business.
10.19. MAINTENANCE OF PROPERTY. Debtor shall maintain its property,
including, without limitation, the Collateral, in good condition and repair
and shall prevent the Collateral, or any part thereof, from being or
becoming an accession to other goods not constituting Collateral.
10.20. LICENSES, PERMITS, ETC. Debtor shall maintain all of its
material franchises, grants, authorizations, licenses, permits, easements,
consents, certificates, and orders, if any, in full force and effect until
their respective expiration dates.
10.21. TRADEMARKS AND PATENTS. Debtor shall maintain all of its
material trademarks, trademark rights, patents, patent rights, licenses,
permits, tradenames, tradename rights, and approvals, if any, in full force
and effect until their respective expiration dates.
10.22. ERISA. Debtor shall comply with the provisions of ERISA and the
Internal Revenue Code with respect to each Pension Plan.
10.23. MAINTENANCE OF OWNERSHIP. Debtor shall at all times maintain
ownership of the percentages of issued and outstanding equity interests of
each Consolidated Subsidiary set forth in Item 33 of the Schedule and
notify Secured Party in writing prior to the formation of any new
Consolidated Subsidiary.
10.24. ACTIVITIES OF CONSOLIDATED SUBSIDIARIES. Unless the provisions
of this Section are expressly waived by Secured Party in writing, Debtor
shall cause each Consolidated Subsidiary to comply with Sections 10.1(b),
10.9, 10.11(a), 10.12, 10.15, and 10.18 through 10.22, inclusive, and any
of the provisions contained in Item 21 of the Schedule, and shall cause
each Consolidated Subsidiary to refrain from doing any of the acts
proscribed by Sections 11.2, 11.3, and 11.5 through 11.14, inclusive, or
proscribed by any of the provisions contained in Item 21 of the Schedule.
10.25. LANDLORD AND WAREHOUSEMAN WAIVERS. Unless expressly waived by
Secured Party in writing, Debtor shall use its best efforts to obtain from
each landlord from whom Debtor leases property, and the owner of each
warehouse in which Collateral is stored, a waiver or disclaimer of any
interest in, and an agreement to permit the removal of, all personal
property Collateral; provided, however, if Debtor does not obtain such
waiver, disclaimer, and agreement within sixty (60) days of the date hereof
with respect to such Collateral, such Collateral shall be excluded from the
Borrowing Capacity.
10.26. COMPLIANCE WITH MATERIAL AGREEMENTS. The Debtor shall, and
shall cause its Consolidated Subsidiary to, comply in all material respects
with all material agreements, indentures, mortgages or documents binding on
it or affecting its properties or business.
10.27. OTHER NOTICES. The Debtor shall, and shall cause its
Consolidated Subsidiary to, promptly notify the Secured Party of (a) any
change in its financial condition or its business, the effect of which
could have a material adverse effect, (b) any default under any agreement,
contract or other instrument to which it is a party or by which any of its
properties are bound, or any acceleration of the maturity of any
Indebtedness owing by the Debtor or its Consolidated Subsidiary, the effect
of which could have a material adverse effect, (c) any material adverse
claim against or affecting the Debtor or its Consolidated Subsidiary, or
any of their properties, or any actual or potential contingent liabilities,
involving an amount or amounts, in the aggregate, exceeding $25,000, and
(d) the commencement of, and any material determination in, any material
litigation with any third party or any proceeding before any Governmental
Authority affecting the Debtor or any Consolidated Subsidiary involving an
amount or amounts, in the aggregate, exceeding $25,000 other than any claim
or litigation referred to in (c) and (d) which is fully insured (less
customary deductibles) by one or more binding and enforceable insurance
policies in favor of the Debtor or its Consolidated Subsidiary, which
policies are issued in accordance with provisions of this Agreement.
11. NEGATIVE COVENANTS. So long as any part of the Indebtedness
remains unpaid or this Agreement remains in effect, Debtor, without the
written consent of Secured Party, shall not violate any covenant contained
in Item 21 of the Schedule and shall not:
11.1. LOCATION OF INVENTORY, EQUIPMENT, AND BUSINESS RECORDS. Move the
Inventory, Equipment, or the records concerning the Collateral from the
location where they are kept as specified in Items 11 and 13 of the
Schedule.
11.2. BORROWED MONEY. Create, incur, assume, or suffer to exist any
liability for borrowed money, except to Secured Party and except as may be
specified in Item 23 of the Schedule.
11.3. SECURITY INTEREST AND OTHER ENCUMBRANCES. Create, incur, assume,
or suffer to exist any mortgage, security interest, lien, or other
encumbrance upon any of its properties or assets, whether now owned or
hereafter acquired, except mortgages, security interests, liens, and
encumbrances (a) in favor of Secured Party and (b) as may be specified in
Item 12 of the Schedule. Debtor agrees that it will not, without the
Secured Party's prior written consent (a) create, incur, assume or suffer
to exist or to be created, incurred or assumed, any lien, security
interest, option or other encumbrance of any kind upon any of its rights,
title and interests in any of its real property assets. Further, Debtor
hereby agrees that it will not, without the Secured Party's prior written
consent, enter into any agreement with or in favor of any person or entity
other than the Secured Party, which agreement would hinder, qualify,
prohibit or otherwise limit in any manner the Debtor's right or ability to
(a) create, incur, assume or suffer to exist or to be created, incurred or
assumed, any lien, security interest, option or other encumbrance or any
kind upon any of its right, title and interest in any of its real property
assets whatsoever, or (b) sell, transfer, convey or assign any of its real
property assets unless in the ordinary course of business; provided,
however, none of the foregoing shall restrict or prohibit the granting of
purchase money security interests made in connection with any capital
expenditures contemplated in Section 11.11.
11.4. STORING AND USE OF COLLATERAL. Place the Collateral in any
warehouse which may issue a negotiable Document with respect thereto or use
the Collateral in violation of any provision of the Transaction Documents,
of any applicable statute, regulation, or ordinance, or of any policy
insuring the Collateral.
11.5. MERGERS, CONSOLIDATIONS, OR SALES. (a) Merge or consolidate with
or into any corporation; (b) enter into any joint venture or partnership
with any person, firm, or corporation; (c) convey, lease, or sell all or
any material portion of its property or assets or business to any other
person, firm, or corporation except for the sale of Inventory in the
ordinary course of its business and in accordance with the terms of this
Agreement; or (d) convey, lease, or sell any of its assets to any person,
firm, or corporation for less than the fair market value thereof; provided
however, that the distribution of assets and the mergers occurring in
connection with the division of FFPP and its Consolidated Subsidiaries into
two separate operating entities, as set forth in a registration statement
that will be filed with the United States Securities and Exchange
Commission shall be permitted.
11.6. PARTNERSHIP INTERESTS. Purchase or redeem any of its partnership
interests or otherwise change the capital structure of Debtor or change the
relative rights, preferences, or limitations relating to any of its
partnership interests; provided however, that any such change made in
connection with the division of FFPP and its Consolidated Subsidiaries into
two separate operating entities, as set forth in a registration statement
that will be filed with the United States Securities and Exchange
Commission shall be permitted.
11.7. DISTRIBUTIONS. Pay any cash distributions on any of its
partnership interests or dividends on any of its capital stock, if the
payment of such distributions or dividends would result in a failure to
comply with any of the financial covenants required by Item 30 of the
Schedule.
11.8. INVESTMENTS AND ADVANCES. Make any investment in, or advances
to, any other person, firm, or corporation, except (a) advance payments or
deposits against purchases made in the ordinary course of Debtor's regular
business; (b) direct obligations of the United States of America; (c) any
existing investments in, or existing advances to, the Consolidated
Subsidiaries; or (d) any investments or advances that may be specified in
Item 24 of the Schedule.
11.9. GUARANTIES. Become a guarantor, a surety, or otherwise liable
for the debts or other obligations of any other person, firm, or
corporation, whether by guaranty or suretyship agreement, agreement to
purchase indebtedness, agreement for furnishing funds through the purchase
of goods, supplies, or services (or by way of stock purchase, capital
contribution, advance, or loan) for the purpose of paying or discharging
indebtedness, or otherwise, except as an endorser of instruments for the
payment of money deposited to its bank account for collection in the
ordinary course of business and except as may be specified in Item 25 of
the Schedule.
11.10. LEASES. Enter, as lessee, into any lease of real or personal
property (whether such lease is classified on Debtor's financial statements
as a capital lease or operating lease) if the aggregate of the rentals of
such lease and of Debtor's other then existing leases would exceed, in any
one of Debtor's fiscal years, the amount specified in Item 26 of the
Schedule.
11.11. CAPITAL EXPENDITURES. Make or incur any capital expenditures in
any one fiscal year in an aggregate amount in excess of the amount, if any,
specified in Item 27 of the Schedule.
11.12. COMPENSATION.
(a) Pay, or obligate itself to pay, directly or indirectly, any
salaries, bonuses, dividends, or other compensation to its officers or
directors, or members of their immediate families, in the aggregate
exceeding the amount, if any, specified in Item 28 of the Schedule.
(b) Pay, or obligate itself to pay, directly or indirectly, any
salaries, bonuses, dividends, or other compensation to the individuals, if
any, specified in Item 29 of the Schedule in excess of the amount therein
specified for such individuals.
11.13. NAME CHANGE. Change its name without giving at least thirty
(30) days prior written notice of its proposed new name to Secured Party,
together with delivery to Secured Party of UCC-1 Financing Statements
reflecting Debtor's new name, all in form and substance satisfactory to
Secured Party.
11.14. DISPOSITION OF COLLATERAL. Sell, assign, or otherwise transfer,
dispose of, or encumber the Collateral or any interest therein, or grant a
security interest therein, or license thereof, except to Secured Party and
except the sale or lease of Inventory in the ordinary course of business of
Debtor and in accordance with the terms of this Agreement.
11.15. FINANCIAL COVENANTS. Fail to comply with the financial
covenants set forth in Item 30 of the Schedule.
11.16. FISCAL YEAR AND ACCOUNTING METHOD. Debtor shall not, and shall
not permit any of its Consolidated Subsidiaries to, change its fiscal year
or method of accounting other than as may be permitted by Generally
Accepted Accounting Principles.
11.17. LINES OF BUSINESS. The Debtor shall not, and shall not permit
its Consolidated Subsidiaries to, directly or indirectly, engage in any
business significantly and materially different from those in which it is
presently engaged or substantially alter its method of doing business.
12. EVENTS OF DEFAULT.
12.1. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an event of default (individually, an
Event of Default and, collectively, Events of Default):
(a) Nonpayment. Nonpayment when due of any principal, interest,
premium, fee, cost, or expense due under the Transaction Documents.
(b) Negative Covenants. Default in the observance of any of the
covenants or agreements of Debtor contained in Article 11.
(c) Article 7. Default in the observance of any of the covenants or
agreements of Debtor contained in Article 7.
(d) Other Covenants. Default in the observance of any of the covenants
or agreements of Debtor contained in the Transaction Documents -- other
than in Article 11, Article 7 or Sections 8.1, 8.2, 8.3, or 8.4 -- or in
any other agreement with Secured Party which is not remedied within the
earlier of ten (10) days after (i) notice thereof by Secured Party to
Debtor, or (ii) the date Debtor was required to give notice to Secured
Party under Section 10.14.
(e) Cessation of Business or Voluntary Insolvency Proceedings. The (i)
cessation of operations of Debtor's business as conducted on the date of
this Agreement; (ii) filing by Debtor of a petition or request for
liquidation, reorganization, arrangement, adjudication as a bankrupt,
relief as a debtor, or other relief under the bankruptcy, insolvency, or
similar laws of the United States of America or any state or territory
thereof or any foreign jurisdiction now or hereafter in effect; (iii)
making by Debtor of a general assignment for the benefit of creditors; (iv)
consent by the Debtor to the appointment of a receiver or trustee,
including, without limitation, a "custodian," as defined in the Federal
Bankruptcy Code, for Debtor or any of Debtor's assets; (v) making of any,
or sending of any, notice of any intended bulk sale by Debtor; or (vi)
execution by Debtor of a consent to any other type of insolvency proceeding
(under the Federal Bankruptcy Code or otherwise) or any formal or informal
proceeding for the dissolution or liquidation of, or settlement of, claims
against or winding up of affairs of, Debtor.
(f) Involuntary Insolvency Proceedings. (i) The appointment of a
receiver, trustee, custodian, or officer performing similar functions,
including, without limitation, a "custodian," as defined in the Federal
Bankruptcy Code, for Debtor or any of Debtor's assets; or the filing
against Debtor of a request or petition for liquidation, reorganization,
arrangement, adjudication as a bankrupt, or other relief under the
bankruptcy, insolvency, or similar laws of the United States of America,
any state or territory thereof, or any foreign jurisdiction now or
hereafter in effect; or of any other type of insolvency proceeding (under
the Federal Bankruptcy Code or otherwise) or any formal or informal
proceeding for the dissolution or liquidation of, settlement of claims
against, or winding up of affairs of Debtor shall be instituted against
Debtor; and (ii) such appointment shall not be vacated, or such petition or
proceeding shall not be dismissed, within sixty (60) days after such
appointment, filing, or institution.
(g) Other Indebtedness and Agreements. Failure by Debtor to pay, when
due (or, if permitted by the terms of any applicable documentation, within
any applicable grace period), any indebtedness owing by Debtor to Secured
Party or any other person or entity (other than the Indebtedness incurred
pursuant to this Agreement, and including, without limitation, indebtedness
evidencing a deferred purchase price), whether such indebtedness shall
become due by scheduled maturity, by required prepayment, by acceleration,
by demand, or otherwise, or failure by the Debtor to perform any term,
covenant, or agreement on its part to be performed under any agreement or
instrument (other than a Transaction Document) evidencing or securing or
relating to any indebtedness owing by Debtor when required to be performed
if the effect of such failure is to permit the holder to accelerate the
maturity of such indebtedness.
(h) Judgments. Any judgment or judgments against Debtor (other than
any judgment for which Debtor is fully insured) which individually, or in
the aggregate, are in an amount greater than $20,000.00 and which remain
unpaid, unstayed on appeal, undischarged, unbonded, or undismissed for a
period of thirty (30) days.
(i) Pension Default. Any Reportable Event which Secured Party shall
determine in good faith constitutes grounds for the termination of any
Pension Plan by the Pension Benefit Guaranty Corporation, or for the
appointment by an appropriate United States district court of a trustee to
administer any Pension Plan, shall occur and shall continue thirty (30)
days after written notice thereof to Debtor by Secured Party; or the
Pension Benefit Guaranty Corporation shall institute proceedings to
terminate any Pension Plan or to appoint a trustee to administer any
Pension Plan; or a trustee shall be appointed by an appropriate United
States district court to administer any Pension Plan; or any Pension Plan
shall be terminated; or Debtor or any Consolidated Subsidiary shall
withdraw from a Pension Plan in a complete withdrawal or a partial
withdrawal; or there shall arise vested unfunded liabilities under any
Pension Plan that, in the good faith opinion of Secured Party, have or will
or might have a material adverse effect on the finances or operations of
Debtor; or Debtor or any Consolidated Subsidiary shall fail to pay to any
Pension Plan any contribution which it is obligated to pay under the terms
of such plan or any agreement or which is required to meet statutory
minimum funding standards.
(j) Collateral; Impairment. There shall occur with respect to the
Collateral any (i) fraud; (ii) material misappropriation, conversion, or
diversion; (iii) levy, seizure, or attachment; or (iv) material loss,
theft, or damage.
(k) Change. There shall occur any materially adverse change in the
business or financial condition of Debtor.
(l) Third Party Default. There shall occur with respect to any Third
Party or any Consolidated Subsidiary, including, without limitation, any
Guarantor or Consolidated Subsidiary (i) any event described in Section
12.1(e), 12.1(f), 12.1(g), or 12.1(h); (ii) any pension default event such
as described in Section 12.1(i) with respect to any pension plan maintained
by such Third Party or such Consolidated Subsidiary; or (iii) any failure
by Third Party or such Consolidated Subsidiary to perform in accordance
with the terms of any agreement between such Third Party and Secured Party,
or any default or event of default by such Third Party under any such
agreement.
(m) Representations. Any certificate, statement, representation,
warranty, or financial statement furnished by, or on behalf of, Debtor or
any Third Party, pursuant to, or in connection with, this Agreement
(including, without limitation, representations and warranties contained
herein) or as an inducement to Secured Party to enter into this Agreement
or any other lending agreement with Debtor shall prove to have been false
in any material respect at the time as of which the facts therein set forth
were certified or to have omitted any substantial contingent or
unliquidated liability or claim against Debtor or any such Third Party, or
if on the date of the execution of this Agreement there shall have been any
materially adverse change in any of the facts disclosed by any such
statement or certificate which shall not have been disclosed in writing to
Secured Party at, or prior to, the time of such execution.
(n) Challenge to Validity. Debtor or any Third Party commences any
action or proceeding to contest the validity or enforceability of any
Transaction Document or any lien or security interest granted or
obligations evidenced by any Transaction Document.
(o) Death or Incapacity; Termination. Any Third Party dies or becomes
incapacitated, or terminates or attempts to terminate, in accordance with
its terms or otherwise, any guaranty or other Transaction Document executed
by such Third Party.
(p) Change of Ownership. If all, or a controlling interest of, the
equity interests of Debtor shall be sold, assigned, or otherwise
transferred, other than any sale, assignment, or transfer occurring in
connection with the division of FFPP and its Consolidated Subsidiaries into
two separate operating entities, as set forth in a registration statement
that will be filed with the United States Securities and Exchange
Commission, or if a security interest or other encumbrance shall be granted
or otherwise acquired therein or with respect thereto.
(q) Termination of Validity Agreement. Upon termination of any
Validity Guaranty then in effect, unless such Validity Guaranty is replaced
by another Validity Guaranty in substantially the same form and content
executed by an officer of Debtor in favor of and acceptable to Secured
Party effective upon any such termination.
12.2. EFFECTS OF AN EVENT OF DEFAULT.
(a) Upon the happening of one or more Events of Default (except an
Event of Default under either Section 12.1(e) or 12.1(f)), Secured Party
may declare any obligations it may have hereunder to be canceled, and the
principal of the Indebtedness then outstanding to be immediately due and
payable, together with all interest thereon and costs and expenses accruing
under the Transaction Documents. Upon such declaration, any obligations
Secured Party may have hereunder shall be immediately canceled, and the
Indebtedness then outstanding shall become immediately due and payable
without presentation, demand, or further notice of any kind to Debtor.
(b) Upon the happening of one or more Events of Default under Section
12.1(e) or 12.1(f), Secured Party's obligations hereunder shall be canceled
immediately, automatically, and without notice, and the Indebtedness then
outstanding shall become immediately due and payable without presentation,
demand, or notice of any kind to the Debtor.
13. SECURED PARTY'S RIGHTS AND REMEDIES.
13.1. GENERALLY. Secured Party's rights and remedies with respect to
the Collateral, in addition to those rights granted herein and in any other
agreement between Debtor and Secured Party now or hereafter in effect,
shall be those of a secured party under the Uniform Commercial Code as in
effect in the State and under any other applicable law.
13.2. NOTIFICATION OF ACCOUNT DEBTORS. At any time after the
occurrence of an Event of Default or an event which with notice or lapse of
time, or both, would constitute an Event of Default, Secured Party may, at
any time and from time to time, contact Account Debtors directly to notify
any or all Account Debtors of the Security Interest and may direct such
Account Debtors to make all payments on Receivables directly to Secured
Party. Notwithstanding the foregoing, Secured Party may at any time contact
Account Debtors directly to verify Receivables.
13.3. POSSESSION OF COLLATERAL. Whenever Secured Party may take
possession of the Collateral, pursuant to Section 13.1, Secured Party may
take possession of the Collateral on Debtor's premises or may remove the
Collateral, or any part thereof, to such other places as the Secured Party
may, in its sole discretion, determine. If requested by Secured Party,
Debtor shall assemble all the books and records relating to the Collateral
and deliver it to Secured Party at such place as may be designated by
Secured Party.
13.4. COLLECTION OF RECEIVABLES. Upon the occurrence of an Event of
Default or an event which with notice or lapse of time, or both, would
constitute an Event of Default, Secured Party may demand, collect, and sue
for all monies and Proceeds due, or to become due, on the Receivables (in
either Debtor's or Secured Party's name at the latter's option) with the
right to enforce, compromise, settle, or discharge any or all Receivables.
If Secured Party takes any action contemplated by this Section with respect
to any Receivable, Debtor shall not exercise any right that Debtor would
otherwise have had to take such action with respect to such Receivable.
13.5. ENDORSEMENT OF CHECKS; DEBTOR'S MAIL. Debtor hereby irrevocably
appoints Secured Party the Debtor's agent with full power, in the same
manner, to the same extent, and with the same effect as if Debtor were to
do the same, immediately after the occurrence of an Event of Default or an
event which with notice or lapse of time, or both, would constitute an
Event of Default, to endorse Debtor's name on any Instruments or Documents
pertaining to any Collateral, to receive and collect all mail addressed to
Debtor, to direct the place of delivery of such mail to any location
designated by Secured Party, to open such mail, to remove all contents
therefrom, and to retain all contents thereof constituting or relating to
the Collateral. This agency is unconditional and shall not terminate until
all of the Indebtedness is paid in full and this Agreement has been
terminated. Secured Party agrees to give Debtor notice in the event it
exercises this agency, except with respect to the endorsement of Debtor's
name on any instruments or documents pertaining to any Collateral.
13.6. LICENSE TO USE PATENTS, TRADEMARKS, AND TRADENAMES. Debtor
grants to Secured Party a royalty-free, non-transferable license to use any
and all patents, trademarks, and tradenames now or hereafter owned by, or
licensed to, Debtor for the purposes of manufacturing and disposing of
Inventory after the occurrence of an Event of Default. All Inventory shall
at least meet quality standards maintained by Debtor prior to such Event of
Default.
14. MISCELLANEOUS.
14.1. PERFECTING THE SECURITY INTEREST; PROTECTING THE COLLATERAL.
Debtor hereby authorizes Secured Party to file such financing statements
relating to the Collateral without Debtor's signature thereon as Secured
Party may deem appropriate, and appoints Secured Party as Debtor's
attorney-in-fact (without requiring Secured Party) to execute any such
financing statement or statements in Debtor's name and to perform all other
acts which Secured Party deems appropriate to perfect and continue the
Security Interest and to protect, preserve, and realize upon the Collateral
and any insurance proceeds thereof.
14.2. PERFORMANCE OF DEBTOR'S DUTIES. Upon Debtor's failure to perform
any of its duties under the Transaction Documents, including, without
limitation, the duty to obtain insurance as specified in Section 10.11,
Secured Party may, but shall not be obligated to, perform any or all such
duties.
14.3. NOTICE OF SALE. Without in any way requiring notice to be given
in the following manner, Debtor agrees that any notice by Secured Party of
sale, disposition, or other intended action hereunder, or in connection
herewith, whether required by the Uniform Commercial Code as in effect in
the State or otherwise, shall constitute reasonable notice to Debtor if
such notice is mailed by regular or certified mail, postage prepaid, at
least ten (10) days prior to such action, to Debtor's address, attention
Vice President - Finance, or addresses specified above or to any other
address which Debtor has specified in writing to Secured Party as the
address to which notices hereunder shall be given to Debtor,.
14.4. WAIVER BY SECURED PARTY. No course of dealing between Debtor and
Secured Party and no delay or omission by Secured Party in exercising any
right or remedy under the Transaction Documents or with respect to any
Indebtedness shall operate as a waiver thereof or of any other right or
remedy, and no single or partial exercise thereof shall preclude any other
or further exercise thereof or the exercise of any other right or remedy.
All rights and remedies of Secured Party are cumulative.
14.5. WAIVER BY DEBTOR. Secured Party shall have no obligation to
take, and Debtor shall have the sole responsibility for taking, any and all
steps to preserve rights against any and all Account Debtors and against
any and all prior parties to any note, Chattel Paper, draft, trade
acceptance, or other instrument for the payment of money covered by the
Security Interest whether or not in Secured Party's possession. Secured
Party shall not be responsible to Debtor for loss or damage resulting from
Secured Party's failure to enforce any Receivables or to collect any moneys
due, or to become due, thereunder or other Proceeds constituting Collateral
hereunder. Debtor waives protest of any note, check, draft, trade
acceptance, or other instrument for the payment of money constituting
Collateral at any time held by Secured Party on which Debtor is in any way
liable and waives notice of any other action taken by Secured Party,
including, without limitation, notice of Secured Party's intent to
accelerate the Indebtedness or any part thereof.
14.6. SETOFF. Without limiting any other right of Secured Party,
whenever Secured Party has the right to declare any Indebtedness to be
immediately due and payable (whether or not it has so declared), Secured
Party, at its sole election, may setoff against the Indebtedness any and
all monies then or thereafter owed to Debtor by Secured Party in any
capacity, whether or not the Indebtedness or the obligation to pay such
monies owed by Secured Party is then due, and Secured Party shall be deemed
to have exercised such right of setoff immediately at the time of such
election even though any charge therefor is made or entered on Secured
Party's records subsequent thereto.
14.7. ASSIGNMENT. The rights and benefits of Secured Party hereunder
shall, if Secured Party so agrees, inure to any party acquiring any
interest in the Indebtedness or any part thereof.
14.8. SUCCESSORS AND ASSIGNS. Secured Party and Debtor, as used
herein, shall include the successors or assigns of those parties, except
that Debtor shall not have the right to assign its rights hereunder or any
interest herein.
14.9. MODIFICATION. No modification, rescission, waiver, release, or
amendment of any provision of this Agreement shall be made, except as may
be provided in Item 35 of the Schedule or by a written agreement signed by
Debtor and a duly authorized officer of Secured Party.
14.10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and by Secured Party and Debtor on separate counterparts,
each of which, when so executed and delivered, shall be an original, but
all of which shall together constitute one and the same Agreement.
14.11. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Any financial
calculation to be made, all financial statements and other financial
information to be provided, and all books and records to be kept in
connection with the provisions of this Agreement, shall be in accordance
with generally accepted accounting principles consistently applied during
each interval and from interval to interval; provided, however, that in the
event changes in generally accepted accounting principles shall be mandated
by the Financial Accounting Standards Board or any similar accounting body
of comparable standing, or should be recommended by Debtor's certified
public accountants, to the extent such changes would affect any financial
calculations to be made in connection herewith, such changes shall be
implemented in making such calculations only from and after such date as
Debtor and Secured Party shall have amended this Agreement to the extent
necessary to reflect such changes in the financial and other covenants to
which such calculations relate.
14.12. INDEMNIFICATION.
(a) If after receipt of any payment of all, or any part of, the
Indebtedness, Secured Party is, for any reason, compelled to surrender such
payment to any person or entity because such payment is determined to be
void or voidable as a preference, an impermissible setoff, or a diversion
of trust funds, or for any other reason, the Transaction Documents shall
continue in full force and Debtor shall be liable, and shall indemnify and
hold Secured Party harmless for, the amount of such payment surrendered.
The provisions of this Section shall be and remain effective
notwithstanding any contrary action which may have been taken by Secured
Party in reliance upon such payment, and any such contrary action so taken
shall be without prejudice to Secured Party's rights under the Transaction
Documents and shall be deemed to have been conditioned upon such payment
having become final and irrevocable. The provisions of this Section shall
survive the termination of this Agreement and the Transaction Documents.
(B) DEBTOR AGREES TO INDEMNIFY, DEFEND, AND HOLD HARMLESS SECURED
PARTY, ITS OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES, AGENTS,
ATTORNEYS, ACCOUNTANTS, AND EXPERTS ("INDEMNIFIED PARTIES") FROM, AND
AGAINST, ANY AND ALL LIABILITIES, CLAIMS, DAMAGES, PENALTIES, EXPENDITURES,
LOSSES, OR CHARGES, INCLUDING, BUT NOT LIMITED TO, ALL COSTS OF
INVESTIGATION, MONITORING, LEGAL REPRESENTATIONS, REMEDIAL RESPONSE,
REMOVAL, RESTORATION, OR PERMIT ACQUISITION, WHICH MAY NOW, OR IN THE
FUTURE, BE UNDERTAKEN, SUFFERED, PAID, AWARDED, ASSESSED, OR OTHERWISE
INCURRED BY INDEMNIFIED PARTIES AS A RESULT OF THE PRESENCE OF, RELEASE OF,
OR THREATENED RELEASE OF HAZARDOUS SUBSTANCES IN VIOLATION OF ANY
ENVIRONMENTAL LAWS ON, IN, OR UNDER THE PROPERTY OWNED, LEASED, OR OPERATED
BY DEBTOR OR ANY CONSOLIDATED SUBSIDIARY. THE LIABILITY OF DEBTOR UNDER THE
COVENANTS OF THIS SECTION IS NOT LIMITED BY ANY EXCULPATORY PROVISIONS IN
THIS AGREEMENT OR ANY OTHER DOCUMENTS SECURING THE INDEBTEDNESS AND SHALL
SURVIVE REPAYMENT OF THE INDEBTEDNESS OR EXPIRATION OR ANY TRANSFER OR
TERMINATION OF THIS AGREEMENT REGARDLESS OF THE MEANS OF SUCH TRANSFER OR
TERMINATION. DEBTOR AGREES THAT INDEMNIFIED PARTIES SHALL NOT BE LIABLE IN
ANY WAY FOR THE COMPLETENESS OR ACCURACY OF ANY ENVIRONMENTAL REPORT OR THE
INFORMATION CONTAINED THEREIN. DEBTOR FURTHER AGREES THAT SECURED PARTY HAS
NO DUTY TO WARN DEBTOR OR ANY OTHER PERSON OR ENTITY ABOUT ANY ACTUAL OR
POTENTIAL ENVIRONMENTAL CONTAMINATION OR OTHER PROBLEM THAT MAY HAVE BECOME
APPARENT, OR WILL BECOME APPARENT, TO INDEMNIFIED PARTIES.
(C) DEBTOR AGREES TO PAY, INDEMNIFY, AND HOLD INDEMNIFIED PARTIES
HARMLESS FROM, AND AGAINST, ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR
DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER (INCLUDING, WITHOUT
LIMITATION, COUNSEL AND SPECIAL COUNSEL FEES AND DISBURSEMENTS IN
CONNECTION WITH ANY LITIGATION, INVESTIGATION, HEARING, OR OTHER
PROCEEDING) WITH RESPECT, OR IN ANY WAY RELATED, TO THE EXISTENCE,
EXECUTION, DELIVERY, ENFORCEMENT, PERFORMANCE, AND ADMINISTRATION OF THIS
AGREEMENT AND ANY OTHER TRANSACTION DOCUMENT (ALL OF THE FOREGOING,
COLLECTIVELY, THE "INDEMNIFIED LIABILITIES"). THE AGREEMENTS IN THIS
SECTION SHALL SURVIVE REPAYMENT OF THE INDEBTEDNESS.
(D) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED PARTIES
NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR
CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT
OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT
CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF
THE INDEMNIFIED PARTIES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT
FAULT ON ANY ONE OR MORE OF THE INDEMNIFIED PARTIES. TO THE EXTENT THAT AN
INDEMNIFIED PARTY IS FOUND TO HAVE COMMITTED AN ACT OF GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT, THIS CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL
CONTINUE BUT SHALL ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS DEEMED
TO HAVE OCCURRED BY REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENT OR
WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTY.
14.13. TERMINATION; PREPAYMENT PREMIUM.
(a) Termination. This Agreement is, and is intended to be, a
continuing Agreement and shall remain in full force and effect for an
initial term equal to the term set forth in Item 32 of the Schedule and for
any renewal term also specified in Item 32 of the Schedule; provided,
however, that either party may terminate this Agreement as of the end of
the initial term or any subsequent renewal term by giving the other party
notice to terminate in writing at least sixty (60) days prior to the end of
any such period whereupon at the end of such period all Indebtedness shall
be due and payable in full without presentation, demand, or further notice
of any kind, whether or not all or any part of such Indebtedness is
otherwise due and payable pursuant to the agreement or instrument
evidencing same. Secured Party may terminate this Agreement immediately and
without notice upon the occurrence of an Event of Default. Notwithstanding
the foregoing or anything in this Agreement or elsewhere to the contrary,
the Security Interest, Secured Party's rights and remedies under the
Transaction Documents and Debtor's obligations and liabilities under the
Transaction Documents, shall survive any termination of this Agreement and
shall remain in full force and effect until all of the Indebtedness
outstanding, or contracted or committed for (whether or not outstanding),
before the receipt of such notice by Secured Party, and any extensions or
renewals thereof (whether made before or after receipt of such notice),
together with interest accruing thereon after such notice, shall be finally
and irrevocably paid in full. No Collateral shall be released or financing
statement terminated until: (i) such final and irrevocable payment in full
of the Indebtedness as described in the preceding sentence; and (ii) Debtor
and Secured Party execute a mutual general release, subject to Section
14.12 of this Agreement, in form and substance satisfactory to the Secured
Party and Debtor and their respective counsel.
(b) Prepayment Premium. If Debtor pays in full all, or substantially
all, of the principal balance of Advances prior to the end of the initial
term or any renewal term of this Agreement as set forth in Item 32 of the
Schedule, other than temporarily from funds internally generated in the
ordinary course of business or from a public offering of equity interests,
at the time of any such payment Debtor shall also pay to Secured Party the
prepayment premium set forth in Item 34 of the Schedule. Any tender of
payment in full of such principal balance following an acceleration by
Secured Party of the Indebtedness, pursuant to Section 12.2 shall not be,
for purposes of this Section, deemed to be considered a prepayment
requiring Debtor to pay the prepayment premium set forth in Item 34 of the
Schedule.
14.14. FURTHER ASSURANCES. From time to time, Debtor shall take such
action and execute and deliver to Secured Party such additional documents,
instruments, certificates, and agreements as Secured Party may reasonably
request to effectuate the purposes of the Transaction Documents.
14.15. HEADINGS. Article and Section headings used in this Agreement
are for convenience only and shall not affect the construction of this
Agreement.
14.16. CUMULATIVE SECURITY INTEREST, ETC. The execution and delivery
of this Agreement shall in no manner impair or affect any other security
(by endorsement or otherwise) for payment or performance of the
Indebtedness, and no security taken hereafter as security for payment or
performance of the Indebtedness shall impair in any manner or affect this
Agreement, or the security interest granted hereby, all such present and
future additional security to be considered as cumulative security.
14.17. SECURED PARTY'S DUTIES. Without limiting any other provision of
this Agreement: (a) the powers conferred on Secured Party hereunder are
solely to protect its interests and shall not impose any duty to exercise
any such powers; and (b) except as may be required by applicable law,
Secured Party shall not have any duty as to any Collateral or as to the
taking of any necessary steps to preserve rights against any parties or any
other rights pertaining to any Collateral.
14.18. NOTICES GENERALLY. All notices and other communications
hereunder shall be made by telegram, telex, telecopy, facsimile, overnight
air courier, or certified or registered mail, return receipt requested, and
shall be deemed to be received (whether actually received or not) by the
party to whom sent: (i) one Business Day after sending, if sent by
telegram, telex, telecopy, facsimile, or overnight air courier; and (ii)
three Business Days after mailing, if sent by certified or registered mail.
All such notices and other communications to a party hereto shall be
addressed to such party at the address of that party (or in the case of a
telecopy, or facsimile machine, to the facsimile machine number of such
party) set forth on the cover page hereof or to such other address as such
party may designate for itself in a notice to the other party given in
accordance with this Section.
14.19. SEVERABILITY. The provisions of this Agreement are independent
of, and separable from, each other, and no such provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any
reason any other such provision may be invalid or unenforceable in whole or
in part. If any provision of this Agreement is prohibited or unenforceable
in any jurisdiction, such provision shall be ineffective in such
jurisdiction only to the extent of such prohibition or unenforceability,
and such prohibition or unenforceability shall not invalidate the balance
of such provision to the extent it is not prohibited or unenforceable nor
render prohibited or unenforceable such provision in any other
jurisdiction.
14.20. INCONSISTENT PROVISIONS. The terms of this Agreement and the
other Transaction Documents shall be cumulative except to the extent that
they are specifically inconsistent with each other, in which case the terms
of this Agreement shall prevail.
14.21. USURY SAVINGS. All agreements between the Debtor and the
Secured Party, whether now existing or hereafter arising and whether
written or oral, are hereby expressly limited so that in no contingency or
event whatsoever, whether by reason of demand being made on the
indebtedness or otherwise, shall the amount paid, or agreed to be paid, to
the Secured Party for the use, forbearance, or detention of the money to be
loaned under this Agreement or otherwise or for the payment or performance
of any covenant or obligation contained herein or in any other Loan
Document exceed the Highest Lawful Rate. If, as a result of any
circumstances whatsoever, fulfillment of any provision hereof or of any of
such documents, at the time performance of such provision shall be due,
shall involve transcending the limit of validity prescribed by applicable
usury law, then, ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity, and if, from any such circumstance,
the Secured Party shall ever receive interest or anything which might be
deemed interest under applicable law which would exceed the Highest Lawful
Rate, such amount which would be excessive interest shall be applied to the
reduction of the principal amount of the obligations of the Debtor to the
Secured Party and not to the payment of interest, or if such excessive
interest exceeds the unpaid principal balance of the obligations of Debtor
to the Secured Party under any Transaction Document, such excess shall be
refunded to Debtor. All sums paid or agreed to be paid to the Secured Party
for the use, forbearance, or detention of the indebtedness of Debtor to the
Secured Party shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full term of such
indebtedness until payment in full of the principal thereof (including the
period of any renewal or extension thereof) so that the interest on account
of such indebtedness shall not exceed the Highest Lawful Rate. The terms
and provisions of this Section shall control and supersede every other
provision of all agreements between Debtor and the Secured Party. If, at
any time and from time to time, (i) the amount of interest payable to the
Secured Party on any date shall be computed at the Highest Lawful Rate
pursuant to this Section and (ii) for any subsequent interest computation
period the amount of interest otherwise payable to the Secured Party would
be less than the Highest Lawful Rate, then the amount of interest payable
to the Secured Party, for such subsequent interest computation period shall
continue to be computed at the Highest Lawful Rate until the total amount
of interest payable to the Secured Party, shall equal the total amount of
interest which would have been payable to the Secured Party if the total
amount of interest had been computed without giving effect to this Section.
14.22. PARTICIPATIONS. Secured Party may at any time grant to one or
more banks or other institutions a participating interest in the Borrowing
Capacity or any or all of the Advances. In the event of any such grant by
Secured Party of a participating interest, Secured Party shall remain
responsible for the performance of its obligations hereunder, and Debtor
shall continue to deal solely and directly with Secured Party in connection
with Secured Party's rights and obligations under this Agreement. Any
agreement pursuant to which Secured Party may grant such a participating
interest shall provide that Secured Party shall retain the sole right and
responsibility to enforce the Indebtedness, including, without limitation,
the right to approve any amendment, modification or waiver of any provision
of this Agreement. Debtor shall cooperate with any audits and other credit
investigations and reviews undertaken for the purpose of a participation,
and Secured Party shall be entitled to disclose any information in Secured
Party's possession regarding Debtor, whether or not such information shall
be of a confidential nature, subject only to the agreement of such lenders
to maintain the confidentiality of any confidential information.
14.23. APPLICABLE LAW. THIS AGREEMENT, AND THE TRANSACTIONS EVIDENCED
HEREBY, SHALL BE GOVERNED BY, AND CONSTRUED UNDER, THE INTERNAL LAWS OF THE
STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW, AS THE SAME MAY
FROM TIME TO TIME BE IN EFFECT, INCLUDING, WITHOUT LIMITATION, THE UNIFORM
COMMERCIAL CODE AS IN EFFECT IN THE STATE.
14.24. CONSENT TO JURISDICTION. DEBTOR AND SECURED PARTY AGREE THAT
ANY ACTION OR PROCEEDING TO ENFORCE, OR ARISING OUT OF, THE TRANSACTION
DOCUMENTS MAY BE COMMENCED IN ANY COURT IN DALLAS, TEXAS, AND EACH WAIVES
PERSONAL SERVICE OF PROCESS AND AGREES THAT A SUMMONS AND COMPLAINT
COMMENCING AN ACTION OR PROCEEDING IN ANY SUCH COURT SHALL BE PROPERLY
SERVED AND SHALL CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED OR
CERTIFIED MAIL, OR AS OTHERWISE PROVIDED BY THE LAWS OF THE STATE OR THE
UNITED STATES.
14.25. JURY TRIAL WAIVER. DEBTOR AND SECURED PARTY HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY DEBTOR OR
SECURED PARTY MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR IN EQUITY, IN
CONNECTION WITH THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS RELATED
THERETO. DEBTOR REPRESENTS AND WARRANTS THAT NO REPRESENTATIVE OR AGENT OF
SECURED PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SECURED PARTY
WILL NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THIS RIGHT TO JURY
TRIAL WAIVER. DEBTOR ACKNOWLEDGES THAT SECURED PARTY HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE PROVISIONS OF THIS
SECTION.
14.26. ARTICLE 15.10(b). THE DEBTOR AND SECURED PARTY HEREBY AGREE
THAT, EXCEPT FOR ARTICLE 15.10(b) THEREOF, THE PROVISIONS OF CHAPTER 15 OF
TITLE 79 OF THE REVISED CIVIL STATUTES OF TEXAS, 1925, AS AMENDED
(REGULATING CERTAIN REVOLVING CREDIT LOANS AND REVOLVING TRI-PARTY
ACCOUNTS) SHALL NOT APPLY TO THE TRANSACTION DOCUMENTS.
14.27. FINAL AGREEMENT. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Accepted at Dallas, Texas by:
HSBC BUSINESS LOANS, INC. FFP PARTNERS, L.P.
("Secured Party") ("FFPP")
By: /s/Neal T. Legan By: FFP PARTNERS MANAGEMENT
Neal T. Legan COMPANY, INC., a Delaware
Vice President corporation, General Partner
By: /s/Steven B. Hawkins
Steven B. Hawkins, Vice President
FFP OPERATING PARTNERS, L.P.
("FFPO")
By: FFP PARTNERS MANAGEMENT
COMPANY, INC., a Delaware
corporation, General Partner
By: /s/Steven B. Hawkins
Steven B. Hawkins, Vice President
DIRECT FUELS, L.P.
("Direct Fuels")
By: DIRECT FUELS MANAGEMENT COMPANY, INC.
a Texas corporation, General Partner
By: /s/Steven B. Hawkins
Steven B. Hawkins, Vice President
SCHEDULE
This Schedule is a part of a Loan and Security Agreement, dated as of
October 31, 1997, between FFP PARTNERS, L.P., FFP OPERATING PARTNERS, L.P.,
DIRECT FUELS, L.P. and HSBC BUSINESS LOANS, INC. Capitalized terms used herein
have the same meaning given to such terms in the Loan and Security Agreement
unless otherwise defined herein. The abbreviation "N/A" means the information is
not applicable to this transaction.
1. Borrowing Capacity (ss. 1.1(c))
Borrowing Capacity in the aggregate with respect to FFP Partners, L.P.,
FFP Operating Partners, L.P., and Direct Fuels, L.P., at any time, shall
be the net amount determined by taking the lesser of the following
amounts:
(A) $15,000,000
or
(B) the amount equal to up to the sum of:
(i) 85% of the Receivables Borrowing Base; and
(ii) the lesser of $7,500,000 (the "Maximum Amount") or
50% of the Value of the amount of the Inventory
Borrowing Base;
and subtracting from the lesser of (A) or (B) above, the sum of
(w) banker's acceptances, plus (x) letters of guaranty, plus (y)
Letters of Credit.
2. Inventory Borrowing Base Percentages (ss.ss. 1.1(m) & 1.1(hh))
The following percentages of Value are applicable to the following
categories of Eligible Inventory:
Finished goods, to the extent up to 50%; raw materials, to the extent of
up to 50%.
3. Cash Discount (ss.ss. 1.1(g) & 10.3)
Maximum Cash Discount of 2%, 10 days.
4. Receivables--Age (ss. 1.1(dd)(i))
Three (3) times the normal and customary period of any given invoice,
but not to exceed 90 days after the Invoice date.
5. Receivables Disqualification Percentage (ss. 1.1 (dd)(v))
50% or more.
6. Permissible Foreign Account Debtors (ss. 1.1(dd)(vi))
None.
7. Inventory Accounting (ss. 1.1(hh)
First-in, First-out (FIFO).
8. Marine Payment Account (ss. 1.1(ll))
There is a Marine Payment Account that is governed by a separate blocked
Account Agreement with LaSalle National Bank, Chicago, Illinois.
Name and Address of depository bank:
LaSalle National Bank
135 S. LaSalle Avenue
Chicago, Illinois 60603
Account No. 2299-386
(Depository Account)
9. Letters of Credit (ss. 2.4)
$2,000,000.00 (subject to a sublimit of $1,000,000 for overnight
exposure related to Automated Clearing House transfers).
10. State of Organization (ss. 4.2 & 5.1)
FFP Partners, L.P.: Delaware
FFP Operating Partners, L.P.: Delaware
Direct Fuels, L.P.: Texas
11. Location (s) of Inventory and Equipment (ss.ss. 5.4(c), 5.7,
5.8(a), and 11.1)
See Attached Addendum.
12. Permitted Encumbrances (ss. 5.5(a), 5.5(c) & 11.3)
Only as shown on Exhibit B.
13. Business Records Location (ss. 5.8(a), 5.8(c) & 11.1)
See Item 11 above.
14. Trademarks and Patents (ss. 5.17)
Trademarks: FFP Partners; Kwik Pantry; Drivers; Drivers Diner;
Financial Express Money Order Company; Lazer Wizard
Patents: None.
15. Labor Contracts (ss. 5.24)
None.
16. Partnership Interests (ss. 5.27)
Hickory Branch Trading Company, L.L.C. -- 36.06%
See also Item 33.
17. Required Documents (ss.ss. 6.1, 9.2(b), 9.4(a))
Frequency
Due
Borrowing Base Report Monthly, within 20 days
after end of month.
Receivables Summary Aging Monthly, within 20 days
after end of month.
Invoice register / sales journal As requested.
Inventory Reports Monthly, within 20 days
after end of month.
Cash Receipts Journal and Schedule of As requested.
Payments on Receivables
Credits and Extensions Reports As requested.
Copies of shipping documents relating to As requested.
the Receivables
List of names and addresses of Account Semi-Annually on June 30
Debtors and December 31
Payable aging report Monthly, within 20 days
after end of month.
Reconciliation report, reconciling Monthly, within 30 days
monthly financial statements with after end of month.
Receivables Aging, Inventory and Payable
Aging
18. Interest Rate (ss. 8.2(a),(c))
Revolving Credit: At Debtor's option, (1) Prime Rate or (2) LIBOR plus
2.25%, available in increments of $500,000 for Interest Periods of 3 or
6 months.
Term Loan: At Debtor's option, (1) Prime Rate, (2) LIBOR plus 2.25%,
available in increments of $1,000,000 for Interest Periods of 6 months
or one year, or (3) Treasury Rate plus 2.50%.
19. Fees and Due Dates (ss.ss. 2.4 and 8.3(a))
Type Amount Due Date(s)
Loan Origination One-half of one percent (.50%) Closing Date only
(payable to Tony of the Borrowing Capacity
Abernethy)
Unused Line Fee Three-eighths of one percent Monthly, in arrears
(.375%) per annum on the
Revolving Credit Commitment.
Letter of Credit Normal and customary fees and Customary
charges.
Collateral $60/hour, not to exceed First day of month
Examination Expense $9,000.00 per year for actual following
Reimbursement time of examination. examination
20. Uncollected Funds Adjustment (ss. 8.6)
Zero (0) Business Days.
21. Additional Covenants (ss.ss. 10.24 and 11)
22. Terms of Sale (ss. 10.3)
Due dates of no more than thirty (30) calendar days from date of
Invoice, except in regard to transactions specified below under
"Datings."
Datings: None.
23. Permitted Borrowings (ss. 11.2)
Only as shown on Exhibit B.
24. Permitted Investments and Advances (ss. 11.8(d))
Up to $500,000 in advances to Nu-Way Beverage Company, outstanding at
any given time, which is presently evidenced by that certain promissory
note dated July 1, 1995 issued by Nu-Way Beverage Company to FFP
Operating Partners, L.P., in the original principal amount of $500,000.
25. Permitted Guaranties (ss.ss. 5.18, 11.9)
None.
26. Maximum Annual Lease Rentals(ss. 11.10)
N/A
27. Permitted Capital Expenditures (ss. 11.11)
Up to $6,000,000 annually.
28. Maximum Aggregate Compensation (ss. 11.12(a))
N/A
29. Maximum Annual Compensation for Certain Individuals (ss. 11.12(b))
N/A
30. Financial Covenants (ss. 11.7 & 11.15)
(a) Minimum Tangible Net Worth: Debtor shall maintain at all times a
minimum Tangible Net Worth ("TNW") in the amounts set forth below
which are to be measured monthly for the time period set forth
below:
Amount Time Period
$19,100,000 Closing through December 30, 1998
Prior year-end TNW plus $400,000 December 31, 1998 to December 30, 1999
Prior year-end TNW plus $400,000 December 31, 1999 to December 30, 2000
Prior year-end TNW plus $400,000
December 31, 2000 to
termination (in periods
terminating on December 30
and commencing on December
31)
Provided that for any extension period, the amount shall be
increased by $400,000 from the prior year-end TNW.
(b) Maximum Debt to Tangible Net Worth: Debtor shall maintain a ratio
of total liabilities (excluding the principal balance of any debt
that is subordinated to Secured Party in a manner satisfactory to
Secured Party) to Tangible Net Worth of no greater than the ratio
set forth below during the time periods set forth below:
Ratio Time Period
3.6 to 1 At each month-end
(c) Cash Flow Coverage: Debtor shall maintain, for the period of
determination indicated below, a ratio with: (i) the Net Profit
After Taxes, plus depreciation and amortization expense, less
distributions to holders of equity interests, all for the prior
twelve fiscal months as the numerator; and (ii) the sum of the
regular contractually scheduled principal payments of any long
term debt due over the next twelve fiscal months as the
denominator.
Ratio Time Period
1.5 to 1 Each fiscal year-end.
31. State (ss. 1.1(bbb))
Texas.
32. Term (ss. 14.13(a),(b))
Initial term: The initial term of the Loan Agreement commences on the
date hereof and terminates on November 1, 2000.
Renewal term: Twelve months.
33. Percentage of Equity Ownership of Consolidated Subsidiaries
(ss. 5.25 & 10.23)
FFP Operating Partners, L.P. -- 99%
FFP Financial Services, L.P. -- 99%
Direct Fuels, L.P. -- 99%
FFP Transportation, L.L.C. -- 100%
Practical Tank Management -- 100%
FFP Money Order Company, Inc. -- 100%
34. Prepayment Premium (ss. 14.13(b))
Revolving Credit Facility. 2% of the then approved Maximum Amount (as
defined in Item 1 hereof) in the first twelve months of the Agreement;
1% of the Maximum Amount in the second twelve months of the Agreement;
and 1/2% of the Maximum Amount in the third twelve months of the
Agreement.
Term Loan. 2% of the prepaid amount in the first twelve months of the
Agreement; 1% of the prepaid amount in the second twelve months of the
Agreement; and 1/2% of the prepaid amount in the third twelve months of
the Agreement. Notwithstanding the foregoing, the Term Loan may be
repaid without prepayment penalty if the prepayment is a result of the
proceeds of the formation of a real estate investment trust.
35. Other Provisions (ss. 14.9)
36. Licenses (ss. 5.21)
N/A
37. Eurodollar Lending Office (ss. 1.1(u))
38. Term Loan (ss. 2.5)
The lesser of:
(A) $8,000,000; or
(B) 60% of the Value of the Eligible Equipment on the closing date.
The undersigned have executed this Schedule on October 31, 1997.
HSBC BUSINESS LOANS INC. FFP PARTNERS, L.P.
By: FFP PARTNERS MANAGEMENT
By: /s/Neal T. Legan COMPANY, INC., General Partner
Neal T. Legan
Vice President
By: /s/Steven B. Hawkins
Steven B. Hawkins, Vice President
FFP OPERATING PARTNERS, L.P.
By: FFP PARTNERS MANAGEMENT
COMPANY, INC., General Partner
By: /s/Steven B. Hawkins
Steven B. Hawkins, Vice President
DIRECT FUELS, L.P.
By: DIRECT FUELS PARTNERS
MANAGEMENT COMPANY, INC.,
General Partner
By: /s/Steven B. Hawkins
Steven B. Hawkins, Vice President
Exhibit 21.1
FFP Partners, L.P.
Subsidiary of the Registrant
State of Type of Percentage
Legal Name of Subsidiary Organization Entity Owned
FFP Properties, L.P. Texas Limited 60%
partnership
Exhibit 23.1
Independent Auditors' Consent
The Partners
FFP Partners, L.P.:
We consent to incorporation by reference in the Registration Statement on Form
S-8 (No. 33-73170) of FFP Partners, L.P. of our report dated March 17, 1998,
relating to the consolidated balance sheet of FFP Partners, L.P. and
subsidiary as of December 28, 1997, which report appears in the 1997 annual
report on Form 10-K of FFP Partners, L.P.
KPMG Peat Marwick LLP
Fort Worth, Texas
April 13, 1998
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