FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the Fiscal Year Ended March 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 Number 1-11075
DAMES & MOORE, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-4316617
(State of incorporation) (I.R.S. Employer Identification No.)
911 Wilshire Boulevard, Suite 700 90017
Los Angeles, California (Zip Code)
(Address of principal executive offices)
(213) 683-1560
(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:
Common Stock, $0.01 par value New York Stock Exchange
Preferred Stock Purchase Rights New York 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 the 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 the registrant's voting stock held by
non-affiliates on June 6, 1997, based on the closing price on the
New York Stock Exchange was $186,910,374. For this purpose, all executive
officers and directors of the registrant were considered affiliates, as were
all beneficial owners of more than 10% of the registrant's common stock. As
of June 6, 1997, 18,041,348 shares of the registrant's common stock were
outstanding.
Documents Incorporated by Reference
Portions of the registrant's definitive proxy statement for the annual
meeting of shareholders of the registrant to be held on August 11, 1997 are
incorporated by reference into Part III hereof. The definitive proxy
statement will be filed with the Securities and Exchange Commission within
120 days after March 28, 1997.
PART I
Item 1. Business
General
Dames & Moore, Inc. (the "Company"), a Delaware corporation, is the successor
to the business of Dames & Moore, a California limited partnership, which was
originally organized in 1938. This incorporation was completed on March 12,
1992, concurrent with a public offer and sale of 2,500,000 shares of its
common stock. The Company's common stock has been publicly traded since that
date and is currently listed on the New York Stock Exchange.
Dames & Moore, Inc. comprises a global network of companies known as the
Dames & Moore Group (D&M Group). The D&M Group companies include: Dames &
Moore, Inc.; Walk Haydel & Associates, Inc.; O'Brien Kreitzberg, Inc.; the
BRW Group; DecisionQuest, Inc.; and Dames & Moore Ventures. These companies
provide discrete as well as integrated full-service multi-disciplinary
engineering, planning, integrated environmental services, program, project,
and construction management, strategic business communications and litigation
support as well as equity investments related to their areas of expertise.
Established in 1938, Dames & Moore has a history of successfully meeting the
needs of its clients, many of whom it has served continuously for decades.
The D&M Group companies and their subsidiaries have 197 offices in major
cities and countries worldwide staffed by over 5,700 employees.
The D&M Group is committed to providing solutions that take advantage of the
individual specialized expertise and integrated capabilities offered by the
group companies, globally as well as locally. The Company serves a broad
range of clients in both the private and public sectors, and over the years
has worked for more than 34,000 clients. The Company seeks to develop a
clientele that recognizes the value of high-quality professional services
delivered in a cost-effective and timely manner.
Acquisition, Equity and Management Participation Activities
Between March 12, 1992, when the Company became publicly traded, and the
close of fiscal year 1997 on March 28, 1997, the Company has acquired a
number of businesses to build the core business, expand strategically,
diversify our specialty engineering and consulting services and increase our
participation in equity ventures. Brief descriptions of significant prior
year and Fiscal Year 1997 activities are as follows:
Midwest Consulting Engineers, a Chicago-based firm specializing in
transportation and municipal design engineering with 75 employees, was
acquired in June 1992.
Aman Environmental Construction, (AECI) a California-based firm specializing
in demolition, environmental remediation, and construction with 60 employees,
was acquired in April 1993.
Bovay Northwest, Inc., a Spokane, Washington-based engineering company with
municipal and civil/environmental engineering expertise with 75 employees,
was acquired in December 1993.
O'Brien-Kreitzberg & Associates, a San Francisco-based company with 700
employees providing construction management, was acquired in March 1995.
Hardcastle & Richards, a 130-employee company based in Melbourne, providing
design engineering and project management services throughout Australia and
South-East Asia, was acquired in March 1995.
Walk, Haydel, & Associates, Inc., a 600-employee company based in New
Orleans, providing project management and process/chemical engineering, was
acquired in April 1995.
Hazelet + Erdal, a Midwest transportation design company with 50 employees
was acquired in May 1995.
Heyward Robinson, a New Jersey engineering firm with 20 staff, was purchased
in April of 1996.
DecisionQuest, a 100-employee Torrance, California based trial strategy
consulting, graphics, litigation support and behavioral science services
firm, was acquired in May 1996.
BRW Group, a Minneapolis based firm specializing in project planning, design
and construction phase services for transportation and infrastructure
projects with 450 employees, was acquired in May 1996.
HYA, a 30-employee engineering firm specializing in water reclamations and
reuse, with offices in Pasadena, Rancho Bernardo, Sacramento and Phoenix, was
acquired in June 1996.
In July 1996, the company completed the acquisition of the remaining 60% of
AACM International, a 50 employee international agriculture and forestry
consulting company in Australia.
The company acquired 40% of Reverse Engineering Ltd. in September 1996.
They are a British high-tech engineering firm with expertise in designing and
modeling the effects of impacts and deformations on critical structures.
In March 1997, the company acquired the bank debt of Cleveland Wrecking
Company (CWE), a demolition contractor. The company provides site
demolition, decommissioning, cleanup closure and redevelopment services on a
nationwide basis. It is the Company's intent to foreclose on the assets of
CWC and to combine the operations of CWC with its own demolition
contracting unit AECI.
Krehbiel Associates, a New York civil and municipal engineering company
providing service to private and municipal clients, was acquired in April
1997.
Weintraub & Associates, a Missouri civil and structural engineering services
firm was acquired in April 1997.
The company has a 50% interest in Dames & Moore/Brookhill (DMB) through its
subsidiary Dames & Moore Ventures. DMB was formed to acquire environmentally
impaired properties and to remediate, develop, redevelop, or reposition, and
to maintain, operate and lease such properties until their disposition.
The company also has a 9.9% interest in Glencoe Insurance Ltd., a company
formed to offer earthquake insurance in California.
Description of Business
Today the D & M Group brings together the resources of preeminent professional
service companies and provides world-class solutions for a wide array of
projects. Serving clients locally and globally, the D&M Group companies
combine their resources seamlessly to meet comprehensive needs and also work
independently to meet specialized needs. The experts at D & M Group bring
vision and value to every stage of project development. Understanding our
clients business to reach their goals, designing creative solutions,
engineering results, reducing risks, managing construction, controlling costs,
delivering results, and superior performance create the very best solutions
for our clients. Company capabilities are described in the following
paragraphs.
Service Areas
The Company provides broad-based expertise, experience and innovation
through a worldwide network of offices to a wide variety of businesses and
industries as well as all levels of government. Key areas of expertise
include:
Engineering - agricultural, chemical, civil, coastal, earthquake, electrical,
environmental, forensic, geotechnical, instrumentation, mechanical, mining,
nuclear, process, structural and transportation.
Environmental and Earth Sciences - air quality, ecology, water resources,
geosciences, permitting and licensing, regulatory compliance, waste
management, remediation, and decommissioning.
Construction - construction management, demolition, design-build, general
contracting, bidding, scheduling, cost control, and value engineering.
Specialized Consulting - architecture, economics, health and safety,
information management, litigation support, planning, public involvement,
risk management, presentation graphics and strategic communications.
Key Client Sectors
Business and Industry - capital projects, portfolio risk assessment, and
contaminated property redevelopment.
Oil and Gas - process design and expansion, infrastructure design, and
offshore platforms.
Power - utility facilities, cogeneration, and independent power producers'
projects.
Manufacturing - facility design, modernization, and waste minimization.
Mining - mine layout and design, mine waste management, and mined land
reclamation.
Infrastructure/Development - livable communities, water resources, and
wastewater/solid waste.
Transportation - airports and mass transit, highways and bridges, and ports
and harbors.
Government - program/project management, military planning and base closure,
and remediation and decommissioning.
Natural Resources - agribusiness, forestry, and sustainable development.
Litigation - expert witnesses, trial strategy and graphics, and dispute
resolution.
General Business
Marketing and business development activities take place through personnel
assigned to each of the Company's offices. In addition to these local
efforts, there are marketing activities focused on U.S. Federal government
agencies, and a firmwide marketing program targeting multinational clients.
These multinational clients also benefit from the Company's worldwide
expertise, its breadth of services and the coordination and cross-selling
activities of the D&M Group. These capabilities coupled with the Company's
broad distribution of offices worldwide allow the Company to mobilize
quickly and provide timely advice to clients whose sites and decision makers
are located in widely dispersed geographic areas. The Company's global
resources are particularly valuable when clients find it necessary to react
quickly to changing economic conditions, merger or acquisition opportunities,
natural or environmental crises, or pressures imposed by governmental
agencies and/or the public.
The Company currently derives approximately 14% of its net revenues from
work performed outside the United States. The Company is focused on expanding
its clientele and business operations in Europe and the former Soviet Union,
the Asia Pacific region, and Latin America. Reference is made to Note 14 of
the Notes to Company's Consolidated Financial Statements, which are included
in this Annual Report on Form 10-K, for additional information regarding the
Company's foreign and domestic operations.
Much of the Company's business is generated either directly or indirectly
as a result of Federal and state laws, regulations, and programs related to
environmental issues. Accordingly, a reduction of these laws and
regulations, or changes in governmental policies regarding the funding,
implementation or enforcement of these programs, could have a material
adverse effect on the Company's business. In fiscal year 1995, in the
United States, regulatory enforcement weakened, and one of the key
environmental laws affecting the company's business opportunities, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
("Superfund") did not receive congressional reauthorization. For further
information on regulatory issues, see the Results of Operations section of
Management's Discussion and Analysis of Financial Condition and Results of
Operations, which is included in this Annual Report on Form 10-K.
Backlog
The Company estimates that, as of March 28, 1997, the backlog of future net
revenues, from contracts in existence and authorized funded orders, including
those of recent acquisitions, was approximately $290,000,000, substantially
all of which is expected to be completed within the next twelve months.
However, there can be no assurance that some of this work will not be
postponed or canceled.
Competition
The Company believes that the principal competitive factors in the areas of
services it offers are reputation, experience, breadth and quality of
services offered, technical proficiency, proximity of offices, consulting
fees and total project cost, and ability to provide clear statements of
problems, alternative solutions and definitive recommendations. The Company
is engaged in highly competitive markets in all of its service areas. Given
the expanding demand for the types of services provided by the Company, it is
likely that additional competitors will emerge. At the same time, a fair
amount of consolidation is occurring in the environmental business,
particularly in the United States, due to mergers. The Company believes that
it will retain the ability to compete effectively with other firms that
provide similar services by continuing to offer a broad range of high-quality
consulting and environmental, engineering, and construction management services
through its worldwide network of offices.
Market Demand Factors
Virtually everywhere, business is experiencing a drive to reduce costs and
a concomitant trend to contract or outsource non-core activities. This trend
is creating significant opportunities for D&M Group and is expanding the ways
the Company provides value and services to our clients. Through the
aggressive acquisition of quality professional services companies, D&M Group
is able to provide the full spectrum of capabilities required to maximize
participation in this outsourcing trend. D&M Group is participating in a
growing number of alliances, extensions of staff, turnkey and venture
activities.
These activities are enabling D&M Group to secure larger scale assignments
and to significantly expand the business beyond traditional, fee-for-service
project work. These efforts are directed at one goal: increasing value to
clients and shareholders. Growing opportunities on the horizon are expected
in growth markets -- including energy, manufacturing and mining, water
and transportation -- as well as several emerging markets.
The quest for enhanced profitability and competitiveness is leading many
companies in the energy sector to refocus their operations through a
combination of major capital projects, mergers, acquisitions and divestitures
as well as internal improvement. These trends are resulting in a variety of
new assignments for D&M Group with opportunities in high-value oil and gas
services, new options for power producers and customers resulting from
privatization activities and growth in Asia where some of the largest energy,
manufacturing and infrastructure projects in the world are being carried out.
Growing demand for consumer goods in many overseas markets and attractive
metals prices are contributing to expanded business activities with the
manufacturing and mining sectors. These sectors are investing heavily in
new projects and facility improvements to lower production costs and enhance
performance. D&M Group is responding to these needs and the emerging market.
Many manufacturing clients have broad-based facilities and value the
Company's ability to provide rapid support on a nationwide and worldwide basis.
A dynamic aspect of D&M Group's business with manufacturers and other major
property owners are growing demolition and property redevelopment
activities. The mining sector is experiencing a resurgence in projects
worldwide.
A global trend toward adopting "best practices" for meeting municipal,
environmental, industrial and agricultural water needs is expanding business
opportunities with these markets. D&M Group has offices in a large number
of heavily industrialized areas and major population centers, as well as
areas with extensive agricultural needs and important environmental
resources. Proximity to clients in many locations positions the firm to
respond to broad-based opportunities domestically and internationally. The
market for municipal water and waste-water services encompasses a wide range
of stakeholders, including municipalities, private water companies, and land
developers. D&M Group provides these sectors with design/build/operate and
equity participation capabilities for their projects.
Government funding for non-highway transportation projects continues to
trend upward, with significant resources being directed toward mass transit,
intelligent transportation systems, airport upgrades and other projects.
Many transportation agencies are extending their resources by outsourcing
work. Opportunities with railroads also are increasing due to consolidation
and outsourcing in the U.S. and the trend toward privatization in the
international arena. D&M Group expects a greater need for services in the
U.S. under the administration's proposed transportation bill, the National
Economic Crossroads Transportation Efficiency Act, which is likely to be
enacted this year. Business opportunities also are growing in Asia, Latin
America and Australia, where transportation infrastructure is being expanded.
Diverse opportunities are seen in the areas of comprehensive services for
institutional facilities relating to the development, expansion and
renovation of education, health care and corrections facilities. An
adjunct to the professional services offered by D&M Group is the development
of advanced technologies that extend the business. Other emerging markets
include unique capabilities to serve needs related to offshore platform
decommissioning and the application of behavioral science capabilities to
help clients factor public perceptions of possible actions into their
initial planning and decision-making.
Regulation
Environmental Regulation
The Company's clients and, to a lesser extent, the Company are subject to
environmental laws and regulations. These laws and regulations are directly
related to the demand for many of the services offered by the Company. In
addition, the laws and regulations often subject the Company to stringent
regulation in the conduct of its operations. The principal environmental
legislation affecting the Company and its clients are:
o National Environmental Policy Act of 1969 ("NEPA")
o Resource Conservation and Recovery Act of 1976 ("RCRA")
o Comprehensive Environmental Response, Compensation and Liability Act
of 1980 ("Superfund")
o The Superfund Amendments and Reauthorization Act of 1986 ("SARA")
Although the liabilities imposed by the Superfund Act (and other
environmental legislation) are more directly related to the Company's
clients, they could under certain circumstances give rise to liability on
the part of the Company as a result of the Company's efforts in completing
client assignments that involve transportation or disposal of contaminated
samples or other hazardous materials belonging to its clients. Liabilities
imposed by the Superfund Act can be joint and several where other parties are
involved. In the opinion of management, it is unlikely that the company's
activities will result in any liability under either the Superfund Act or
other environmental legislation in an amount which will have a material
adverse effect on the Company's results of operations or financial condition,
and management is not aware of any current activity by the Company which is
likely to result in any such liability.
Other Regulations
In the ordinary course of its business, the Company and members of its
professional staff are subject to a variety of state, local, and foreign
licensing and permit requirements. The Company believes that it is in
substantial compliance with those requirements.
Potential Liability and Insurance
The Company's consulting services involve professional judgments about the
nature of soil conditions and other physical conditions, including the
extent to which toxic and hazardous materials are present, and about the
probable effect of procedures to mitigate problems or otherwise impact those
conditions. If those judgments and recommendations based upon them do not
result in the anticipated consequences, losses to the Company's clients can
occur for which the Company may be liable. In addition, the Company's
projects often involve hazardous and highly regulated material, the improper
characterization, handling, or disposal of which could constitute violations
of Federal, state or local statutes, and result in criminal fines and
penalties.
The Company through a wholly owned subsidiary insures the Company's risks
for professional liability, workers compensation, and general and automobile
claims up to certain policy limits. Claims in excess of these limits are
covered by unrelated insurance carriers. Management believes its insurance
coverage to be adequate for its present operations. Management has no reason
to believe that adequate coverage will not continue to be available, but
there can be no assurance that it will be. There also can be no assurance
that the Company's liabilities will not exceed the policy limits. However,
insurance has been provided without lapse for many years for limits in excess
of losses sustained.
Employees
As of March 28, 1997, the company had approximately 5,700 employees worldwide.
Approximately 70% perform professional or technical services, while the
remaining 30% perform administrative and support services. The Company
considers its relations with its employees to be excellent.
Item 2. Properties
The Company operates entirely in leased premises. The Company leases 99
office properties in the United States and 34 office properties in foreign
countries.
Item 3. Legal Proceedings
In 1994, Haseko-JDO Associates, a developer, and Lakeshore Townhomes
Community Association, a townhome association, filed an action against the
Company and two other co-defendants in the San Mateo Superior Court alleging
settlement problems with the foundation of townhomes. The Company recently
reached agreement to settle this matter, and received a good faith
determination from the court dismissing all cross-claims for implied
indemnification and contribution. The developers have indicated that they do
not intend to pursue any other claims against the Company. There was no
earnings impact in the current year resulting from this settlement.
The Company in the ordinary course of business is a defendant in various
lawsuits involving claims typically filed against engineering and consulting
professionals, primarily alleging professional errors or omissions. The
Company through a wholly owned subsidiary insures the Company's risks for
professional liability, workers compensation, and general and automobile
claims up to certain policy limits. Claims in excess of these limits
are covered by unrelated insurance carriers. Management makes estimates and
assumptions that affect the reported amount of liability and the disclosure
of contingent liabilities. As claims develop, it is possible that the
ultimate results of these claims may differ from management's estimates.
In the opinion of management, based upon information it presently possesses,
the resolution of these claims will not have a material adverse effect on the
Company's consolidated financial position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year ended March 28, 1997.
Item S-K 401(b). Executive Officers of the Company
Set forth below is certain information about the Company's executive
officers as of June 2, 1997. Each executive officer holds
office until his resignation or removal by the Board of Directors.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
George D. Leal 63 Chairman of the Board
Arthur C. Darrow 53 Chief Executive Officer, President
and Director
Robert M. Perry 65 Executive Vice President -
Corporate Affairs and Director
Henry Klehn, Jr. 60 Executive Vice President -
Corporate Development
Mark A. Snell 40 Executive Vice President and
Chief Financial Officer
Leslie S. Puget 42 Corporate Controller
Kevin J. Freeman 47 Senior Vice President and
Manager - Western North America
Division
Glenn D. Martin 47 Senior Vice President and Manager
- Central U.S. and Latin America
Division
Peter G. Rowley 46 Senior Vice President and Manager -
International Division
William D. Webb 51 Senior Vice President and
Manager - Eastern North America
Division
Richard C. Tucker 55 Senior Vice President and Manager -
Government Services Division and
Director
</TABLE>
GEORGE D. LEAL has been employed by the Company since 1959 and has served as
Chairman of the Board since 1981 and as Chief Executive Officer from 1981
through 1994. He is a director of BW/IP, Inc. Mr. Leal has bachelor's and
master's degrees in civil engineering from Santa Clara University and the
California Institute of Technology, respectively, and a master's degree in
business administration from the University of Chicago.
ARTHUR C. DARROW has been employed by the Company since 1973. He has
served as a director since 1994 and as Chief Executive Officer and President
since January 1995. Between 1993 and 1994, he served as President and Chief
Operating Officer; between 1991 and 1993, as Senior Vice President - Western
North America Division; and between 1988 and 1991, as the Company's Western
Region General Manager and Division Manager - Western North America. He has
bachelor's and master's degrees in geology from the University of California-
Santa Barbara.
ROBERT M. PERRY has been employed by the Company since 1955. He has served as
a director since 1981, and as Executive Vice President - Corporate Affairs
since 1995. Between 1978 and 1995, he served as Chief Financial Officer.
He has a bachelor's degree in civil engineering from the University of
Michigan.
HENRY KLEHN, Jr. has been employed by the Company since 1960. He has served
as Executive Vice President - Corporate Development since 1993. Between 1983
and 1993, he served as Chief Operating Officer and as an Executive
Vice President since 1991. He has a bachelor's degree in geological
engineering and a master's degree in engineering science from the University
of California-Berkeley.
MARK A. SNELL has served as Executive Vice President and Chief Financial
Officer of the Company since September 1996. Prior to joining the Company,
he served as Executive Director and Chief Financial Officer at the
international law firm of Latham & Watkins from 1993 to 1996, and as
Executive Vice President and Chief Financial Officer at World Oil Corporation
from 1990 to 1993. Mr. Snell, a CPA, holds a bachelor of science degree
from San Diego State University.
LESLIE S. PUGET has served as Corporate Controller of the Company since 1995.
Prior to a two-year professional sabbatical, she served as Vice President of
Finance for Cushman Realty Corporation from 1985 to 1993 and as Controller
from 1982 to 1985. Ms. Puget, a CPA, holds a bachelor of science degree
from the University of Illinois at Urbana-Champaign.
KEVIN J. FREEMAN has been employed by the Company since 1987, and has
served as Senior Vice President and Manager - Western North America Division
since 1993. He served as a director of the Company from 1993 to 1995.
Between 1990 and 1993, he served as the Company's Northwest Region General
Manager and, from 1992 to 1993 as the Department of Energy (West) Group
General Manager. Prior to 1990, he managed the Northwest Geosciences Group.
He has bachelor's and master's degrees in geology from Michigan State
University.
GLENN D. MARTIN has been employed by the Company since 1972, and has served
as Senior Vice President and Manager - Central U.S. and Latin America
Division since 1994. Between 1989 and 1994, he served as the Company's
Mid-Continent Region General Manager. Prior to 1989, he was the Chicago
office Managing Principal-in-Charge. He has a bachelor's degree in geology
from the University of Cincinnati.
PETER G. ROWLEY has been employed by the Company since 1979, and has served
as Senior Vice President and Manager - International Division since 1993.
Between 1990 and 1993, he served as the General Manager - Europe, Africa, and
Middle East Region. Between 1988 and 1990, he was the Managing Principal-
in-Charge of the Company's offices in Sydney, Melbourne and Brisbane. He has
a bachelor's degree in science and a doctorate degree in chemistry from the
University of New South Wales.
WILLIAM D. WEBB has been employed by the Company since 1968, and has served
as Senior Vice President and Manager, Eastern North America Division since
April 1996. Between April 1995 and March 1996, he served as Regional
Manager - Southern California and Nevada, and between 1988 and March 1995,
he served as Manager of Design and Construction Services - Western North
America Division. He has a bachelor of science degree in civil engineering
from the University of Missouri-Rolla.
RICHARD C. TUCKER has been employed by the Company since 1974. He has
served as a director since 1992 and as Senior Vice President and Manager -
Government Services Division since 1994. Between 1990 and March 1994, he
served as the Company's Middle Atlantic Region and Government Services
(East) Group General Manager. Prior to 1990, he was the Washington, D.C.
office Managing Principal-in-Charge. He has bachelor's and master's degrees
in civil engineering from the Georgia Institute of Technology.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The Company's common stock is traded on the New York Stock Exchange under
the symbol DM. As of June 2, 1997, the Company's common stock was held by
366 holders of record. The following table reflects the high and low sales
prices and cash dividends per share for fiscal years 1997 and 1996:
<TABLE>
<CAPTION>
High Low Dividends
<S> <C> <C> <C>
1997
Fourth quarter $14 3/4 $11 5/8 $0.03
Third quarter 15 1/8 12 3/8 0.03
Second quarter 13 10 5/8 0.03
First quarter 12 7/8 10 7/8 0.03
1996
Fourth quarter $13 1/8 $10 1/2 $0.03
Third quarter 16 11 7/8 0.03
Second quarter 16 12 1/4 0.03
First quarter 13 1/8 11 1/2 0.03
</TABLE>
The Company expects to continue its policy of paying regular quarterly cash
dividends, subject to the right of the Board of Directors to change the
policy depending on future earnings and financial condition of the Company,
capital requirements and other factors.
On April 1, 1996, the Company issued from its treasury 5,340 shares of its
common stock to its non-employee directors. A portion of the directors' fees
and meeting fees, in the amount of $25,813, and cash of $33,595 was the
consideration for this purchase. The securities were exempt from
registration under Section 4(2) of the Securities Act of 1933 because they
were offered and sold in a transaction that did not involve a public offering.
On May 17, 1996, the Company issued from its treasury 800,000 shares of its
common stock as part of the consideration for its acquisition of all of the
issued and outstanding shares of BRW Group, Inc. The securities were
exempt from registration under Section 4(2) of the Securities Act of 1933
because they were offered and sold in a transaction that did not involve a
public offering.
Item 6. Selected Financial Data
The following table sets forth selected financial data for the Company (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------
March 28, March 29, March 31, March 25, March 26,
1997 1996 1995 1994 1993
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Earnings data:
Gross revenues $653,378 $556,763 $382,681 $370,646 $343,768
Net revenues 455,258 397,682 268,969 253,817 251,910
Earnings from operations 36,861 36,901 28,797 33,956 36,588
Net earnings 18,540 22,098 17,879 21,878 23,134
Net earnings per share $ 0.91 $ 0.98 $ 0.79 $ 0.97 $ 1.03
Cash dividends per share 0.12 0.12 0.12 0.12 0.12
Weighted average number
of shares 20,418 22,541 22,593 22,561 22,523
Financial position data:
Current assets $208,254 $216,191 $155,338 $154,702 $145,838
Current liabilities 92,864 70,377 59,115 34,398 35,729
Net working capital 115,390 145,814 96,223 120,304 110,109
Total assets 358,282 317,279 224,627 180,119 161,401
Long-term debt 128,542 75,000 2,336 - -
Shareholders' equity 131,623 167,947 161,630 144,650 125,394
Backlog: $290,000 $252,000 $120,100 $116,356 $112,509
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in thousands)
From time to time, the Company or its representatives may make forward-
looking statements in this report or elsewhere relating to such matters as
anticipated financial performance, including projections of revenues,
expenses, earnings, liquidity, capital resources or other financial items;
business plans, objectives and prospects; technological developments; and
similar matters. Forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 frequently are identified by
the use of terms such as "expect", "believe", "estimate", "may", "should",
"will" or similar expressions.
The Private Securities Litigation Reform Act of 1995 provides a safe harbor
for forward-looking statements. In order to comply with the terms of the
safe harbor, the Company notes that a variety of factors could cause the
Company's actual results and experiences to differ materially from the
anticipated results or other expectations expressed in the forward-looking
statements made by the Company or its representatives. The risks and
uncertainties that may affect the operations, performance, development and
results of the Company's business include the following, among other factors:
(a) the ability to attract and retain qualified professional personnel; (b)
potential liability for consulting services relating to toxic and hazardous
materials and the ability to insure such risks; (c) dependence on
environmental regulation including decreased revenues that may result from a
reduction in laws, regulations and programs related to environmental issues
or from changes in governmental policies regarding the funding,
implementation or enforcement of such laws, regulations and programs; (d)
increasing competition faced by the Company in its service areas; and (e)
periodic fluctuations in general business conditions and in demand for the
types of services provided by the Company.
Acquisitions and Operations
The Company continued to implement its strategy of growth and diversification
through acquisition during fiscal 1997. Two acquisitions were completed
early in the fiscal year. Acquisitions completed in fiscal 1996 and in
prior years were more fully integrated into the operations of the Dames &
Moore Group of affiliated companies.
The most significant events affecting the comparability of fiscal 1997
results with those of the prior year were the acquisition of BRW Group (BRW)
and DecisionQuest, Inc. (DQ). BRW provides project planning, design and
construction-phase engineering services for transportation and infrastructure
projects. DQ specializes in litigation support services for corporate
clients and individuals, including strategy consulting, development of case
themes, juror analysis and selection, preparation of demonstrative trial
graphics, and witness preparation. These two acquisitions serve unique
markets and, in combination with other group companies, will facilitate
further access to both public sector and private sector markets served by the
Company. In fiscal 1997, the combined revenues of BRW and DQ represented
approximately 9% and other smaller acquisitions approximately 1% of the
Company's total net revenues.
O'Brien Kreitzberg (OK) and Walk Haydel (WH) were acquired by the Company
near the beginning of fiscal 1996, and completed their second year of
operations in fiscal 1997. OK, which provides project and construction
management services, experienced stable revenues but profitability was
negatively impacted by overstaffing due to delayed start-up on certain
major projects. In fiscal 1997, the Company initiated a restructuring which
reduced OK staff levels and closed offices that are not actively involved in
projects. WH, which provides process engineering and design services, took
advantage of increased activity in the oil and gas, petrochemical, and pulp
and paper industries, to substantially increase its revenue base and
profitability. Together, OK and WH produced approximately 27% of the
Company's fiscal 1997 total net revenues.
The business units of the Company, which account for the remaining 63% of
fiscal 1997 revenues, provide environmental and specialized engineering
services through a worldwide network of offices. These business units
continued to be affected by constraints on environmental expenditures by both
private sector clients and government agencies in the United States. While
business volume continued at essentially the same level as in the previous
two fiscal years, two trends affecting the Company's business also continued.
Environmental laws, regulations and enforcement policies remained essentially
unchanged during fiscal 1997, including further deferral of congressional
reauthorization of the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (Superfund Act). The outlook for congressional
action on Superfund legislation in fiscal 1998 remains unclear. A second
factor was the continued modest decline in the percentage of revenues derived
from U.S. Government projects. As a percentage of the Company's total
business, net revenues attributable to U.S. Government projects were 13.9% in
fiscal 1997, 15.9% in fiscal 1996, and 20.0% in fiscal 1995. A portion of
the decline was attributable to three newly acquired companies, OK, BRW and
DQ, whose U.S. Government revenues are relatively minor.
Offsetting these trends in domestic markets, the Company's international
revenues grew by approximately 14% in fiscal 1997, continuing the strong
growth of the previous two years. This sustained growth trend reflects
increased worldwide demand for engineering and environmental services related
to major capital investment projects, as well as increased opportunities in
developing countries. The Company's partially owned international affiliates
generally performed well. One such affiliate, an agricultural consulting
group in Australia, became totally owned through the Company's acquisition
of the majority owners' shareholdings. In spite of the growth in business
volume, the profitability of international operations declined due to the
inability to efficiently match staffing levels with project staffing needs
in certain international venues. In fiscal 1997, the Company initiated a
restructuring which included employee reductions to bring staff levels in
line with current project requirements. The restructuring also included the
closing of a small number of international offices.
As a means of diversifying its business interests while drawing upon the
skills of the core business, the Company established a new subsidiary in
fiscal 1997. Dames & Moore Ventures (DMV) was formed to make equity
investments related to the Company's areas of expertise. One of DMV's
interests is a 50% interest in Dames & Moore/Brookhill L.L.C. (DMB), which
was formed with the intent of identifying environmentally distressed
properties, acquiring an equity position in selected properties, undertaking
on-site remediation, and developing or selling the remediated properties.
DMB acquired a portfolio of contaminated real estate consisting of 24 assets
located throughout the United States. Dames & Moore expects to remediate the
properties, after which they will be offered for resale. The purchase of
the contaminated properties was financed through a credit facility available
to DMB. The Company intends to pursue further activities of this type in
fiscal 1998 and beyond. DMV's other activity was its minority equity
participation in Glencoe Insurance, Ltd., a company formed to offer
earthquake insurance in California. DMV revenues were insignificant in
fiscal 1997.
On March 24, 1997, the Company acquired the bank debt of Cleveland Wrecking
Company (CWC), a demolition contractor. It is the Company's intent to
foreclose on the assets of CWC and to combine the operations of CWC with
its own demolition contracting unit AECI (previously known as Aman
Environmental Construction, Inc.) to provide site demolition,
decommissioning, cleanup, closure and redevelopment services on a nationwide
basis. In calendar year 1996, the gross revenues of CWC were approximately
$50 million.
The Company believes that it has continued to position itself to address
existing and emerging markets. Its continuing investment in strategic growth
initiatives, combined with the complementary services offered by recently
acquired companies, future acquisitions, new ventures, and limited
restructuring should produce increased earnings in fiscal 1998 and the years
ahead. However, the ultimate demand for the Company's services will be
dependent on a continuation of economic growth, private and public sector
investment, enforcement of environmental regulations, and the Company's
ability to meet the competitive demands of the market for full-service
engineering, environmental, construction management, and litigation support
services.
Dames & Moore has a worldwide network of 197 offices located in 28 countries.
The Company is staffed by over 5,700 employees.
New Accounting Pronouncement
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share," which
establishes standards for computing and presenting "basic" and "diluted"
earnings per share. This statement simplifies the standards for computing
earnings per share (as currently required by Accounting Principles
Board Opinion No. 15) and makes them comparable to international standards.
Implementation of this statement is required for the Company's interim
statements for the quarterly period ended December 26, 1997; earlier
application is not permitted. No significant impact on earnings per share is
expected.
Results of Operations
The Company uses a 52-53 week fiscal year ending the last Friday in March.
The fiscal years were comprised of 52 weeks in 1997, 52 weeks in 1996 and 53
weeks in 1995. The following discussion of operating results does not
normalize or adjust results to account for this difference unless noted.
In performing its services, the Company routinely incurs direct project
costs for services subcontracted to third parties, equipment purchases for
its clients and travel expenses. The Company is generally reimbursed by its
clients for a handling fee plus the direct project costs. In accordance
with traditional practices of the engineering and consulting industry, the
Company deducts these costs from gross revenues to arrive at net revenues.
The Company believes net revenues are a more accurate measure of revenues
derived directly from the Company's services.
<TABLE>
<CAPTION>
1997 Increase 1996 Increase 1995
<S> <C> <C> <C> <C> <C>
Net Revenues $455,258 14.5% $397,682 47.9% $268,969
</TABLE>
The increase in net revenues in fiscal 1997 as compared to fiscal 1996 was
primarily a result of acquisitions during the year, which contributed $48,219
of the increase, or 12.1%. The remaining increase of $9,357, or 2.4%,
represents growth from the Company's existing lines of business.
The 47.9% increase in net revenues in fiscal 1996 as compared to fiscal 1995
was principally a result of the Company's acquisition of OK and WH, which
contributed $111,380 for the year, representing a 41.4% increase from fiscal
1995. Other acquisitions increased net revenues by $16,131, or 6.0%.
Adjusting fiscal 1995's net revenues to a 52-week year results in core
business growth of $6,277, or 2.4%, in fiscal 1996.
<TABLE>
<CAPTION>
1997 Increase 1996 Increase 1995
<S> <C> <C> <C> <C> <C>
Salaries and
Related Costs $315,267 13% $278,946 58.1% $176,479
</TABLE>
Salaries and related costs increased by 13% in fiscal 1997 as compared to
fiscal 1996. Acquisitions accounted for $31,429 of the increase, or 11.3%.
The remaining increase of $4,892, or 1.7%, consists of increased hiring in
our international operations and annual salary increases, which were offset
by lower profit-sharing contributions and incentive bonuses. Salaries and
related costs represent 69.3% of net revenues.
Of the 58.1% increase in salaries and related costs in fiscal 1996, the
acquisitions of OK and WH accounted for $85,915, or 48.7%, with $11,862, or
6.7%, from other acquisitions. The remaining increase relates to additional
project hiring by the Company's construction unit and 4.0% salary raises
granted at the beginning of the Company's 1996 fiscal year. Excluding the
Company's acquisitions, salaries and related costs represent 67.1% of net
revenues. For the acquisitions, salaries and related costs represent 76.7%
of their net revenues.
<TABLE>
<CAPTION>
1997 Increase 1996 Increase 1995
<S> <C> <C> <C> <C> <C>
General Expenses $87,754 21.3% $72,344 25.3% $57,729
</TABLE>
General expenses in fiscal 1997 increased by 21.3%; of this amount $10,873,
or 15%, was due to new acquisitions. Expansion of business development
activities, new offices and one-time costs for an image program and
consultant fees all contributed to increased costs. As a percentage of net
revenues, general expenses represent 19.3% in fiscal 1997.
The increase in fiscal 1996 in general expenses is entirely attributable to
the acquisitions and has been minimized by savings achieved through sharing
of costs. As a percentage of net revenues, general expenses represent 18.2%
in fiscal 1996, a reduction from 21.5% in fiscal 1995.
<TABLE>
<CAPTION>
1997 Increase 1996 Increase 1995
<S> <C> <C> <C> <C> <C>
Depreciation and
Amortization $8,832 41.2% $6,257 28.2% $4,881
</TABLE>
New acquisitions were responsible for $1,455, or 23%, of the increase in
depreciation and amortization in fiscal 1997. The balance of the increase is
due to new purchases of office equipment, computer equipment and leasehold
improvements, mostly for companies acquired in fiscal 1996 and 1995.
Depreciation and amortization represents 1.9% of net revenues for fiscal 1997.
Substantially all of the increase in depreciation and amortization from
fiscal 1995 to fiscal 1996 relates to acquisitions completed in fiscal 1996.
Depreciation and amortization represents 1.6% of net revenues for fiscal 1996.
<TABLE>
<CAPTION>
1997 Increase 1996 Increase 1995
<S> <C> <C> <C> <C> <C>
Amortization of
Goodwill $3,893 20.4% $3,234 198.6% $1,083
</TABLE>
Amortization of goodwill increased in both fiscal 1997 and 1996 due to the
Company's acquisitions. Any future acquisitions will continue this trend.
<TABLE>
<CAPTION>
1997 Decrease 1996 Increase 1995
<S> <C> <C> <C> <C> <C>
Earnings from
Operations $36,861 (.11)% $36,901 28.2% $28,797
</TABLE>
The Company's operating margin as a percentage of net revenues was 8.1% for
fiscal 1997, 9.3% for fiscal 1996, and 10.7% for fiscal 1995. The
restructuring charge to eliminate staffing that does not match project
needs, closure of certain offices and losses on assets primarily in its Dames
& Moore core business International Division and at OK, and the staffing
imbalance that developed during the year, adversely impacted the operating
margin in fiscal 1997. Other previously mentioned administrative charges
also contributed to the decline. The Company's operating margin as a
percentage of net revenues would have been 8.7% without the restructuring
charge. The decline in operating margin for fiscal 1996 was attributable to
lower margins from OK and WH.
<TABLE>
<CAPTION>
1997 Decrease 1996 Increase 1995
<S> <C> <C> <C> <C> <C>
Investment and
Other Income $2,014 (38.5%) $3,274 4.8% $3,124
</TABLE>
The decline in investment and other income is a result of the Company's
liquidation of the captive insurance subsidiary's equity portfolio during
fiscal 1997 and the subsequent reinvestment in less volatile but lower
yielding investments.
<TABLE>
<CAPTION>
1997 Increase 1996 Increase 1995
<S> <C> <C> <C> <C> <C>
Interest Expense $7,386 159.7% $2,844 1,808.0% $149
</TABLE>
The Company has utilized borrowings to fund acquisitions, related business
ventures and purchases of treasury stock, including the 3,700,000 shares from
Hochtief. Accordingly, interest expense has increased, and it is
anticipated that it will continue to increase. See Liquidity and Capital
Resources.
<TABLE>
<CAPTION>
1997 Decrease 1996 Increase 1995
<S> <C> <C> <C> <C> <C>
Income Taxes $12,949 (15)% $15,233 16.3% $13,098
</TABLE>
Income tax expense as a percentage of earnings before income taxes and the
cumulative effect of accounting changes was 41.1% in fiscal 1997, 40.8% in
fiscal 1996, and 41.2% in fiscal 1995.
<TABLE>
<CAPTION>
1997 Decrease 1996 Increase 1995
<S> <C> <C> <C> <C> <C>
Net Earnings $18,540 (16.1)% $22,098 23.6% $17,879
</TABLE>
Net earnings as a percentage of net revenues was 4.1% in fiscal 1997, 5.6%
in fiscal 1996 and 6.65% in fiscal 1995. The decrease in fiscal 1997 is a
result of the restructuring charge, administrative charges previously
mentioned, increased interest costs and reduced income from the Company's
captive insurance investment portfolio.
Liquidity and Capital Resources:
Cash and cash equivalents totaled $12,726 at March 28, 1997, compared to
$55,351 at March 29, 1996. Working capital at March 28, 1997 was $115,390 as
compared to $145,814 at March 29, 1996. The primary sources of cash in
fiscal 1997 consisted of funds from operations of $5,780 and proceeds from
issuance of debt of $62,551. The primary uses of cash in fiscal 1997
consisted of acquisitions totaling $22,118, investments and other ventures
of $18,630, repurchases of common stock totaling $58,675 (including $51,158
for the Hochtief shares) and capital expenditures of $9,524.
The changes in the balance sheet accounts are primarily due to the inclusion
of the newly acquired companies. The increase in accounts receivable is
also due to increased business activity at two of the Company's subsidiaries
and the Company's international operations. The increase in other assets is
attributable to the classification of $5,503 of U.S. Government securities
with a maturity beyond one year and a note purchased by the Company for
$5.4 million due from Cleveland Wrecking.
Accrued expenses and other liabilities increased due to the accrual of interest
due on the debt, the restructuring charge taken and several client advances
received. Long-term liabilities reflect an increase in the Company's
deferred income taxes.
For information regarding the Company's long-term debt and purchase of
stock from Hochtief, see Notes 6 and 15 to the Consolidated Financial
Statements.
The Company's annual plan for fiscal 1998 includes a budget for capital
expenditures of approximately $9,900.
While the Company anticipates continuing capital requirements to support
growth and diversification of services, fund acquisitions and new ventures,
management believes that cash generated from operations and existing lines
of credit will be sufficient to meet requirements for the foreseeable future.
Impact of Inflation:
The Company's operations have not been and are not expected to be materially
affected by inflation or changing prices in the foreseeable future.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
Page
Index to Consolidated Financial Statements
and Financial Statement Schedules
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . 19
Consolidated Statements of Financial Position as of
March 28, 1997 and March 29, 1996 . . . . . . . . . . . . . . . . . 20
Consolidated Statements of Earnings for the Years Ended
March 28, 1997, March 29, 1996 and March 31, 1995 . . . . . . . . . 21
Consolidated Statements of Changes in Shareholders'
Equity for the Years Ended March 28, 1997, March 29,
1996 and March 31, 1995 . . . . . . . . . . . . . . . . . . . . . . 22
Consolidated Statements of Cash Flows for the Years Ended
March 28, 1997, March 29, 1996 and March 31, 1995 . . . . . . . . . 23
Notes to Consolidated Financial Statements . . . . . . . . . . . . . 24
Supplementary Financial Information - Selected Quarterly
Financial Data (Unaudited). . . . . . . . . . . . . . . . . . . . . 38
Schedule II -- Valuation and Qualifying Accounts . . . . . . . . . . 44
All other schedules are omitted because they are not required, are not
applicable or because the information is included in the Company's
Consolidated Financial Statements or the Notes thereto.
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
Dames & Moore, Inc.
We have audited the consolidated financial statements of Dames & Moore, Inc.
and subsidiaries as listed in the accompanying index. In connection with
our audits of the consolidated financial statements, we have also audited the
financial statement schedule listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Dames &
Moore, Inc. and subsidiaries as of March 28, 1997 and March 29, 1996 and
the results of their operations and their cash flows for each of the years
in the three-year period ended March 28, 1997 in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
As discussed in Note 1 to the consolidated financial statements, the Company
adopted the provisions of Statement of Financial Accounting Standard No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," effective
March 26, 1994.
KPMG Peat Marwick LLP
Los Angeles, California
May 15, 1997
<TABLE>
DAMES & MOORE
Consolidated Statements of Financial Position
(In thousands, except share and per share amounts)
<CAPTION>
March 28, March 29,
Assets 1997 1996
- ------ --------- ---------
<S> <C> <C>
Current
Cash and cash equivalents $ 12,726 $ 55,351
Marketable securities 5,984 14,936
Billed accounts receivable, net of
allowance for doubtful accounts
of: 1997-$3,001 and 1996-$1,886 114,126 84,616
Billed contract retentions 5,095 7,295
Unbilled 56,491 43,813
Total accounts receivable 175,712 135,724
Deferred income taxes 4,135 -
Prepaid expenses and other assets 9,697 10,180
Total current assets 208,254 216,191
Property and equipment, net 19,594 14,871
Goodwill of acquired business, net of
accumulated amortization of:
1997-$8,907 and 1996-$5,014 109,626 84,294
Investments in affiliates 9,270 1,394
Other assets 11,538 529
$358,282 $317,279
Liabilities and shareholders' equity
Current:
Current portion of long-term debt $ 11,560 $ -
Accounts payable 23,021 20,162
Accrued payroll and employee benefits 24,784 26,733
Current income taxes payable 3,145 2,800
Accrued expenses and other liabilities 30,354 20,682
Total current liabilities 92,864 70,377
Long-term debt 128,542 75,000
Other long-term liabilities 5,253 3,955
Contingencies
Shareholders' equity:
Preferred stock, $0.01 par value,
shares authorized: 1,000,000
shares issued: none - -
Common stock and capital in excess of $0.01
par value, shares authorized: 27,000,000
shares issued: 1997-22,726,000;
1996-22,686,000 107,242 106,804
Retained earnings 87,979 75,295
Treasury stock: 1997-4,714,000; 1996-
1,150,000 shares (63,070) (13,859)
Other shareholders' equity (528) (293)
Total shareholders' equity 131,623 167,947
$358,282 $317,279
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<TABLE>
DAMES & MOORE
Consolidated Statements of Earnings
(In thousands, except per share amounts)
<CAPTION>
March 28, March 29, March 31,
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Gross revenues $653,378 $556,763 $382,681
Direct costs of outside services 198,120 159,081 113,712
Net revenues 455,258 397,682 268,969
Operating expenses:
Salaries and related costs 315,267 278,946 176,479
General expenses 87,754 72,344 57,729
Depreciation and amortization 8,832 6,257 4,881
Amortization of goodwill 3,893 3,234 1,083
Restructuring costs 2,651 - -
418,397 360,781 240,172
Earnings from operations 36,861 36,901 28,797
Investment and other income 2,014 3,274 3,124
Interest expense (7,386) (2,844) (149)
Earnings before income taxes and cumulative
effect of accounting change 31,489 37,331 31,772
Income taxes 12,949 15,233 13,098
Earnings before cumulative effect of
accounting change 18,540 22,098 18,674
Cumulative effect of accounting change - - (795)
Net earnings $ 18,540 $ 22,098 $ 17,879
Earnings per share:
Earnings before cumulative effect of
accounting change $ 0.91 $ 0.98 $ 0.83
Cumulative effect of accounting change - - (0.04)
Net earnings $ 0.91 $ 0.98 $ 0.79
Cash dividends declared per share $ 0.12 $ 0.12 $ 0.12
Weighted average number of shares 20,418 22,541 22,593
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<TABLE>
DAMES & MOORE
Consolidated Statements of Changes in Shareholders' Equity
(In thousands)
<CAPTION>
Cumulative Unrealized
Common Stock Retained Translation Treasury Loss on Deferred
Shares Amount Earnings Adjustment Stock Investments Compensation
<S> <C> <C> <C> <C> <C> <C>
Balances at March 25, 1994 22,578 $105,381 $40,749 $ - $ - (1,169) $ (311)
Restricted shares issued to
employees 34 660 - - - - (220)
Restricted shares repurchased (4) (80) - - - - 40
Net earnings - - 17,879 - - -
Cash dividends - - (2,713) - - - -
Change in unrealized loss - - - - - 1,169 -
Amortization of deferred
compensation - - - - - - 245
Balances at March 31, 1995 22,608 $105,961 $55,915 - $ - $ - $(246)
Restricted shares issued to
employees 90 1,080 - - - - (360)
Restricted shares repurchased (12) (237) - - - - 81
Net earnings - - 22,098 - - - -
Cash dividends - - (2,718) - - - -
Treasury stock acquired-1,150 - - - - (13,859) - -
Amortization of deferred
compensation - - - - - - 232
Balances at March 29, 1996 22,686 $106,804 $75,295 - $(13,859) $ - $(293)
Restricted shares issued to
employees 38 420 - - - - (140)
Exercise of stock options 2 18 - - - - -
Net earnings - - 18,540 - - - -
Cash dividends - - (2,366) - - - -
Treasury stock acquired - 4,369 - - - - (58,675) - -
Treasury stock issued - 805 - - (3,490) - 9,464 - -
Amortization of deferred
compensation - - - - - - 218
Foreign currency translation - - - (313) - - -
Balances at March 28, 1997 22,726 $107,242 $87,979 $(313) $(63,070) $ - $(215)
</TABLE>
The accompanying notes are an integral part of the consolidated
financial
statements.
<TABLE>
DAMES & MOORE
Consolidated Statements of Cash Flows
(In thousands)
<CAPTION>
Fiscal Year Ended
March 28, March 29, March 31,
1997 1996 1995
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $18,540 $22,098 $ 17,879
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 12,943 9,723 6,209
Unrealized loss (gain) on marketable
securities - (1,424) (401)
Earnings of equity investments (80) (47) (200)
Deferred income taxes (2,437) 5,461 (2,107)
Cumulative effect of accounting change - - 795
Change in assets and liabilities net
of effects of purchases of businesses:
Marketable securities 8,952 487 17,717
Accounts receivable (24,297) (4,162) (4,640)
Prepaid expenses and other assets 1,285 (1,578) (624)
Income tax receivable 121 (1,122) -
Accounts payable and accrued expenses (9,247) 2,398 11,507
Net cash provided by operating activities 5,780 31,834 46,135
Cash flows from investing activities:
Purchases of businesses, net of cash
acquired (22,118) (37,127) (58,135)
Purchases of property and equipment (9,524) (7,344) (4,946)
Investments, net (7,690) 204 44
Other assets (10,940) - -
Net cash (used in) investing activities (50,272) (44,267) (63,037)
Cash flows from financing activities:
Net repayments on current portion of
long-term debt - (1,638) -
Debt issuance costs - (529) -
Proceeds from issuance of debt 62,551 118,347 2,628
Principal payments on debt - (45,683) -
Issuance of common stock 298 720 440
Treasury stock issued 59 - -
Restricted stock repurchased - (156) (40)
Treasury stock purchased (58,675) (13,859) -
Dividends paid (2,366) (2,718) (2,713)
Net cash provided by financing activities 1,867 54,484 315
Net (decrease) increase in cash and cash
equivalents (42,625) 42,051 (16,587)
Cash and cash equivalents, beginning of year 55,351 13,300 29,887
Cash and cash equivalents, end of year $12,726 $55,351 $ 13,300
Supplemental disclosures of cash flow
information:
Interest paid $ 3,263 $ 2,844 $ 150
Income taxes paid 14,810 16,405 12,438
Non cash investing activities-business
acquisitions 9,879 2,595 -
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
DAMES & MOORE
Notes to Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies:
Basis of Presentation:
The consolidated financial statements include the accounts of all
majority-owned domestic and foreign subsidiaries. Investments in
companies in which Dames & Moore, Inc. (the "Company") does not
have control, but has the ability to exercise significant influence
over operating and financial policies are accounted for by the
equity method. Other investments are accounted for by the cost
method. All significant intercompany transactions and balances have
been eliminated. Certain items in the prior years' financial
statements have been reclassified to be consistent with the
1997 presentation.
Cash and Cash Equivalents:
Cash and cash equivalents consist of unrestricted deposits with
banks and highly liquid investments with an original maturity of
three months or less.
Marketable Securities:
Marketable securities consist of equity and debt securities that
are considered either available-for-sale or trading securities as
defined by Statement of Financial Accounting Standard (SFAS) No.
115. Debt securities with maturity dates beyond a year are
classified as Other Assets. Marketable securities are recorded
at fair market value. Changes in unrealized gains and losses for
trading securities are included in earnings; for available-for-
sale securities, they are charged or credited to shareholders'
equity, net of tax. A decline in the fair value of an available-
for-sale security below cost that is deemed other than temporary is
charged to earnings. Management determines the appropriate
classifications of investments at the time of purchase and
reevaluates such designations as of each balance sheet date.
Effective March 26, 1994 the Company adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities."
Under the new standard the Company classified all of its marketable
securities as trading securities or available-for-sale. Prior to
1995, the Company's marketable securities were carried at fair
value, with unrealized gains and losses reported as a separate
component of shareholders' equity. The adoption of SFAS No.
115 resulted in a one-time charge for the cumulative effect of a
change in accounting principle, net of tax benefit, of $795,000.
Recognition of Revenue:
The Company recognizes revenue generally at the time services are
performed. On fixed price contracts, revenue is recognized on the
basis of the estimated percentage of completion of services
rendered. On cost reimbursement contracts, revenue is recognized
as costs are incurred and includes applicable fees earned
essentially in the proportion that costs incurred bear to total
estimated final costs. Materials and subcontract costs reimbursed
by clients are included in gross revenues. Anticipated losses are
recognized when the losses are reasonably determinable.
Substantially all unbilled receivables are expected to be
collected within the next 12 months and retentions at the close of
the respective project.
Under a major portion of contracts with the United States
Government, all contract costs are subject to audit and
adjustment. Revenue has been recorded in amounts expected
to be realized on final settlement. Included in accounts
receivable are revenues from claims where recovery is probable in
the opinion of management. At March 28, 1997, the Company has
$3,700,000 of claims receivable.
Income Taxes:
The Company accounts for income taxes in accordance with SFAS No.
109, "Accounting for Income Taxes." Tax provisions are recorded at
statutory rates for taxable items included in the consolidated
statements of earnings regardless of the period such items are
reported for tax purposes. Deferred income taxes are recognized for
temporary differences between financial statement and income tax
bases of assets and liabilities for which income tax effects will
be realized in future years.
Foreign Currency Translation:
The Company's foreign subsidiaries and branches have been using
the U.S. dollar as their functional currency. The Company has
determined, that due to growth and expansion in certain countries,
the majority of these entities have become self-contained and are
integrated within the countries' economic environment.
Accordingly, effective during the fiscal year ending March 28,
1997, the functional currencies for these certain entities are
their respective local currency. In these circumstances assets
and liabilities are translated into U.S. dollars using exchange
rates in effect at period end. Revenue and expenses are translated
at the average rates of exchange prevailing during the period. The
resulting translation adjustments are reported as a separate
component of shareholders' equity. In situations where the
functional currency remains the U.S. dollar, translation
adjustments are included in earnings.
The Company enters into forward foreign currency exchange contracts
to reduce the impact of foreign currency fluctuations on certain
project revenues and costs and the asset and liability positions
of foreign subsidiaries. The terms of the currency derivatives are
generally one year or less. Commencing in fiscal 1997 the gains
or losses from these contracts are generally also reported as a
separate component of shareholders' equity; previously they were
included in earnings.
Depreciation:
Property and equipment are depreciated on a straight-line basis over
estimated useful lives ranging from 3 to 10 years or, in the case
of leasehold improvements, over the lesser of estimated useful
lives or the term of the lease.
Goodwill of Acquired Businesses:
The goodwill of acquired businesses represents the difference
between the purchase cost and the fair value of the net assets of
acquired businesses, and is being amortized on a straight-line
basis over 3 to 40 years. The Company annually evaluates
the realizability of goodwill based upon undiscounted forecasted
operating earnings over the remaining amortization period for
each investment having a significant goodwill balance. If an
impairment in the value of the goodwill were to occur, the Company
would reflect the impairment through a reduction in the carrying
value of the goodwill based upon the estimated fair value of the
investment. Based upon its most recent analysis, the Company
believes that there is no impairment of goodwill.
Stock-Based Compensation:
Prior to March 30, 1996, the Company accounted for its stock
option plan in accordance with the provisions of Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees," "and related interpretations. As such,
compensation expense would be recorded on the date of grant only if
the current market price of the underlying stock exceeded the
exercise price. On March 30, 1996, the Company adopted SFAS No.
123, "Accounting for Stock-Based Compensation," which permits
entities to recognize as expense over the vesting period the fair
value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to
apply the provisions of APB Opinion No. 25 and provide pro forma
net income and pro forma earnings per share disclosures for
employee stock option grants made in fiscal 1996 and future years
as if the fair-value-based method defined in SFAS No. 123 had been
applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma
disclosure provisions of SFAS No. 123.
Use of Estimates in the Preparation of Consolidated Financial
Statements:
The preparation of the consolidated financial statements, in
conformity with generally accepted accounting principles, requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during
the reporting period. Actual results may differ from the estimates
and assumptions used in preparing the consolidated financial
statements.
Earnings Per Share:
Earnings per share are computed based on the weighted average
number of common shares outstanding during each period presented.
Outstanding stock options considered to be common stock equivalents
have not been included because the effect would be immaterial.
Fiscal Year:
The Company uses a 52-53 week fiscal year ending the last Friday
in March. The fiscal years were comprised of 52 weeks in 1997, 52
weeks in 1996 and 53 weeks in 1995.
Note 2 - Acquisitions:
During fiscal 1997, the Company acquired two new companies that
will operate through newly formed, wholly owned subsidiaries.
DecisionQuest, Inc., acquired on May 3, 1996, is a company engaged
in the business of providing trial strategy, consultation, jury
research, graphic presentations, and other litigation support
services to minimize adverse findings or financial loss in
litigation or other legal proceedings. DecisionQuest, Inc., was
acquired for cash plus additional future payments contingent on
future earnings. BRW Group, Inc., acquired on May 17, 1996, is a
company that provides project planning, design and construction-
phase services for transportation and infrastructure projects.
BRW Group, Inc., was acquired with a combination of cash, 800,000
shares of the Company's treasury stock and an additional payment
contingent on future earnings. The combined purchase costs
total $25,284,000. The purchase cost in excess of book value of
the net assets acquired including contingent payments earned to
date is classified as goodwill and is being amortized over 40 years.
The following schedule summarizes the unaudited pro forma results
of operations as if the acquisitions of DecisionQuest, Inc., and
BRW Group, Inc., had occurred at the beginning of fiscal 1996.
Certain adjustments, such as amortization of goodwill, increased
interest expense and income tax have been reflected. (In thousands
except per share amounts)
<TABLE>
<CAPTION>
1996
<S> <C>
Net revenues $438,964
Net earnings 22,193
Earnings per share $ 0.98
</TABLE>
The pro forma information is intended to show how the acquisitions
might have affected historical results of operations if the
transactions had occurred at an earlier time. The pro forma
results are not necessarily indicative of the periods presented or
to be expected in the future.
The Company also completed several smaller acquisitions during
fiscal 1997 for $7,237,000 plus future payments contingent on
future earnings. The total costs in excess of net tangible
assets acquired are being amortized over the period of expected
benefit, generally 15 to 40 years.
The Company acquired Walk, Haydel & Associates, Inc., a process
engineering and design company, on April 6, 1995, for a purchase
price of $33,870,000. Additional payments are due during each of
the three twelve-month periods following the acquisition based
on 50% of its pre-tax earnings, as defined. The purchase price
in excess of the net assets acquired is being amortized over 40
years.
On March 31, 1995, the Company, through a newly formed, wholly
owned subsidiary, O'Brien-Kreitzberg, Inc., acquired substantially
all the assets and assumed substantially all the liabilities of
O'Brien-Kreitzberg & Associates, Inc., a project and construction
management company. The purchase price included cash payments
of $40,428,000 plus the assumption of certain liabilities of
$22,383,000. The purchase price in excess of the net assets
acquired is being amortized over 40 years.
During fiscal 1996, the Company also purchased two small firms
for $2,339,000, and for one, additional payments contingent on
future earnings. The total costs in excess of net tangible
assets acquired are being amortized over periods of expected
benefit, generally 4 to 8 years.
All acquisitions have been accounted for as purchases. Results of
operations for all acquisitions have been included in the
consolidated financial statements from the date of the respective
acquisition.
Note 3 - Investments in Debt and Equity Securities:
The cost and estimated fair value of equity and debt securities
by classification and major category follow. Approximately,
$5,503,000 of the available-for-sale securities have a maturity
greater than 1 year but within 5 years, and are classified as
other assets (in thousands):
<TABLE>
<CAPTION>
Estimated
Cost Fair Value
At March 28, 1997:
<S> <C> <C>
Available-for-sale:
Securities of the U.S. Government $11,487 $11,487
At March 29, 1996:
Trading securities:
Equity securities $12,879 $14,936
</TABLE>
Note 4 - Investments in Affiliates:
The Company through its subsidiary Dames & Moore Ventures has a 50%
interest in Dames & Moore/Brookhill L.L.C. (DMB) and affiliated
companies. DMB was formed to acquire environmentally impaired
properties and to remediate; to develop, redevelop, or reposition;
and to maintain, operate and lease such properties until their
disposition. During March 1997, DMB acquired an interest in 24
assets by purchasing either a fee interest or a property-related
mortgage note.
The acquisition was financed with senior debt of $54,082,000,
subordinated debt of $14,922,000 and cash of $3,714,000. The senior
debt bears interest at London Interbank Offshore Rate (LIBOR) plus
275 basis points, and requires monthly payments of principal and
interest. Cash flow from the properties, including sale proceeds
will generally be distributed 80% to the subordinated lender and 20%
to DMB, until the subordinated lender and DMB each receives its loan
advances or capital contributions, and a return on investment of 20%
per annum. Thereafter, cash flow will be distributed 50% to the
subordinated lender and DMB. The borrowings are all due on December
31, 1999, but may be extended under certain terms and conditions.
The Company accounts for its investment of $2,324,000 in DMB under
the equity method of accounting. Condensed financial information
follows (in thousands):
<TABLE>
<CAPTION>
March
28, 1997
<S> <C>
Mortgage notes receivables $54,693
Property 17,156
Other assets 4,371
Total assets $76,220
Mortgages payable $69,004
Other liabilities 2,681
Shareholders' equity 4,535
Total liabilities and equity $76,220
Year ended
March 28, 1997
Revenues $ 482
Costs and expenses 1,661
Net (loss) income $(1,179)
</TABLE>
The Company also has a 9.9% interest in Glencoe Insurance Ltd., a
company formed to offer earthquake insurance in California. The
Company accounts for its investment of $5,144,000 under the equity
method of accounting. Equity investments in other unconsolidated
investments amounted to $1,802,000.
Note 5 - Composition of Certain Financial Statement Captions: (in thousands)
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Property and equipment, at cost:
Office equipment and furniture $42,809 $34,554
Technical and field equipment 9,848 9,753
Leasehold improvements 4,790 3,516
57,447 47,823
Less accumulated depreciation and
amortization 37,853 32,952
$19,594 $14,871
Accrued payroll and employee benefits:
Salaries, wages and related taxes $11,530 $13,894
Accrued vacation 11,585 10,042
Accrued pension costs 1,669 2,797
$24,784 $26,733
Accrued expenses and other liabilities:
Deferred acquisition payments $4,661 $ 5,440
Accrued insurance costs 6,909 8,462
Accrued occupancy 3,240 2,395
Accrued interest 3,973 -
Client advances 3,186 79
Deferred income 1,912 1,665
Accrued expenses 2,785 407
Other liabilities 3,688 2,234
$30,354 $20,682
</TABLE>
Note 6 - Long-Term Debt:
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Senior Notes:
6.54% Series A notes, due March 29, 2001 $ 40,000 $40,000
6.87% Series B notes, due March 29, 2003 30,000 30,000
6.92% Series C notes, due September 29, 2003 10,000 -
7.19% Series F notes, due December 16, 2004 10,000 -
7.23% Series G notes, due December 16, 2005 10,000 -
7.20% Series D notes, due March 29, 2006 5,000 5,000
7.25% Series E notes, due September 29, 2006 15,000 -
Lines of credit 18,560 -
Other notes payable, due July 1998 1,542 -
140,102 75,000
Current portion of long-term debt 11,560 -
$128,542 $75,000
</TABLE>
The Senior Notes agreement contains limitations on additional
indebtedness, sales of assets, loans and advances, as well as
minimum net worth requirements and maintenance of certain financial
ratios. All such requirements were satisfied as of March 28, 1997.
As a result of a completed interest rate hedge, the effective
interest rate on the Senior Notes will be 6.78% through 2001, then
6.94% through 2003, 7.07% in 2004, 7.09% in 2005, 7.04% in
2006 and 7.25% in 2007.
The Company has $79,903,000 available for borrowing in U.S. dollars,
offshore foreign currencies or foreign domestic currencies, and for
the issuance of letters of credit and purchase of foreign currency
exchange contracts. Interest is charged under several options,
including the bank's reference rates or at LIBOR plus a spread, at
the Company's option. The weighted-average interest rate on
short-term borrowings was 6.2% at March 28, 1997. The agreements
contain limitations on additional indebtedness, sales of assets,
acquisitions and capital expenditures, as well as maintenance of
certain financial ratios and minimum net worth requirements. Such
requirements were satisfied as of March 28, 1997. As of March 28,
1997, under these lines, the Company had borrowings of $18,560,000,
and standby letters of credit totaling $15,565,000 principally for
project performance, advance payment guarantees and the Company's
domestic insurance program. The lines of credit mature as follows:
$5,093,000 in February 1998, $14,810,00 in March 1998, and
$60,000,000 in January 1999. The fair value of the Company's
long-term debt approximates carrying value based on current rates
offered to the Company for debt of the same remaining maturities.
Annual maturities of long-term debt over the next five fiscal years
are as follows: 1998-$11,560,000, 1999-$8,542,000, 2000-none, 2001-
$40,000,000, and 2002-none.
Note 7 - Foreign Currency Contracts:
The Company has entered into foreign exchange forward contracts, all
having maturities of less than one year. The notional amounts noted
below serve solely as a basis for the calculation of payment streams
to be exchanged. The Company is exposed to credit loss in the
event of nonperformance by counter parties for these contracts.
The Company selects major international banks and financial
institutions as counter parties to manage this credit risk.
Transaction gains and losses including the effect of foreign
currency contracts and currency exchange rate conversion were a
loss of $222,000 in 1997, a loss of $433,000 in 1996, and a gain
of $500,000 in 1995. (Foreign currency amounts in thousands.)
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Australian dollar 3,000 1,000
British pound 2,000 -
Canadian dollar - 2,000
</TABLE>
Note 8 - Fair Values of Financial Instruments:
The carrying amount of marketable securities are based on quoted
market prices at the reporting date for those investments and as
such equal fair value. The fair value of the Company's long-
term debt is estimated based on current rates offered to the
Company for debt of the same remaining maturities, which
approximates carrying value. All other financial instruments bear
relatively short-term maturities, and accordingly, the carrying
amount of these investments approximates fair value.
Note 9 - Income Taxes: (in thousands)
Income taxes consist of the following:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
U.S. Federal taxes:
Current $11,761 $11,126 $11,433
Deferred (1,736) (529) (1,939)
10,025 10,597 9,494
State and local taxes:
Current 1,841 2,053 2,524
Deferred (166) (97) (168)
1,675 1,956 2,356
Non-U.S. taxes:
Current 1,249 2,680 1,248
$12,949 $15,233 $13,098
</TABLE>
The sources of earnings before income taxes consist of the following:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
U.S. earnings before income taxes $31,178 $35,146 $29,174
Non-U.S. earnings before income taxes 311 2,185 2,598
Earnings before income taxes $31,489 $37,331 $31,772
</TABLE>
Income taxes differ from amounts computed by applying the statutory
U.S. Federal income tax rate of 35% to earnings before income
taxes as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Statutory U.S. Federal income tax $11,021 $13,066 $11,120
State income taxes, net of Federal
benefit 1,089 1,271 1,531
Other 839 896 447
Total income taxes $12,949 $15,233 $13,098
</TABLE>
Deferred income taxes result from temporary differences in the timing
of the recognition of revenues and expenses for financial statement
and tax return purposes. Management believes that it is more
likely than not, that the results of future operations will
generate sufficient taxable income to realize the deferred tax
assets. The significant components of deferred taxes were as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Deferred tax assets:
Compensation expense $ 3,698 $1,942
Litigation reserve 718 1,339
Accrued expenses 960 -
Allowance for doubtful accounts 558 200
Other 344 185
Total current deferred tax assets$ 6,278 $3,666
Deferred tax liabilities:
Cash to accrual adjustments from
acquisitions $ 1,993 $3,038
Unrealized gains - 841
Other 150 -
Total current deferred tax
liabilities 2,143 3,879
Noncurrent:
Depreciation and amortization 1,840 494
Total deferred tax liabilities $ 3,983 $4,373
</TABLE>
Note 10 - Lease Commitments:
The Company is obligated under various noncancelable leases for
office facilities, furniture and equipment. Certain leases contain
renewal options, escalation clauses and certain other operating
expenses of the properties. In the normal course of business,
leases that expire are expected to be renewed or replaced by leases
for other properties.
The following is a schedule by year of future rental payments
required under operating leases that have initial or remaining
noncancelable lease terms in excess of one year as of March 28,
1997 (in thousands):
<TABLE>
<CAPTION>
Fiscal Year(s) Total
<C> <C>
1998 $18,136
1999 14,803
2000 11,888
2001 8,907
2002 5,484
Thereafter 10,233
Total minimum lease payments $69,451
</TABLE>
The following schedule shows the composition of total rental
expenses for all operating leases (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Total rental expense $23,617 $20,189 $15,807
Less sublease rentals 324 232 110
$23,293 $19,957 $15,697
</TABLE>
Note 11 - Contingencies
The Company in the ordinary course of business is a defendant in
various lawsuits involving claims typically filed against the
engineering and consulting professions, primarily alleging
professional errors or omissions. The Company through a wholly
owned subsidiary insures the Company's risks for professional
liability, workers compensation, and general and automobile claims
up to certain policy limits. Claims in excess of these limits are
covered by unrelated insurance carriers. Management makes
estimates and assumptions that affect the reported amount of
liability and the disclosure of contingent liabilities. As claims
develop, it is possible that the ultimate results of these claims
may differ from management's estimates. In the opinion of
management, based upon information it presently possesses, the
resolution of these claims will not have a material adverse effect
on the Company's consolidated financial position or result of
operations.
During the year the Company reached an agreement to settle with a
townhome association an action filed in 1994 alleging settlement
problems with the foundation of the townhomes. The developers of
the townhomes have indicated that they do not intend to pursue any
other claims against the Company. There was no earnings impact
in the current year resulting from this settlement.
At March 28, 1997, the Company was contingently liable as guarantor
for $407,000 of borrowings by various individual officers.
Note 12 - Stock Option Plans:
Long-Term Incentive Plan
The Company's Amended and Restated 1991 Long-Term Incentive Plan
(the "Plan"), which provides for the granting of stock options and
the sale of restricted stock to officers and key employees of the
Company, has authorized and reserved a total of 2,500,000 shares of
common stock for issuance under this Plan. Stock options granted
or restricted stock sold under the Plan may be granted or sold at
a price and for such terms as determined by the Compensation
Committee of the Board of Directors.
Restricted stock sales are offered to newly elected officers and
are subject to restrictions on transfer and risk of forfeiture
until earned by continued employment. Should employment terminate
before ownership vests, shares are repurchased by the Company at
the lesser of the price originally paid for the stock or its
market value on the date of termination. During the restriction
period, holders have the rights of shareholders, including the
right to vote and receive dividends, but cannot transfer ownership.
Restricted stock is generally being issued at 67% of market value
on the date of issuance and vests 3 years after the issue date.
These restricted stock sales give rise to unearned compensation
that is amortized over the vesting period. Through March 28, 1997,
223,808 shares of restricted stock have been issued under the Plan.
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Restricted stock issued 37,751 90,000 33,836
Weighted-average fair $11.125 $12.00 $19.50
value of restricted stock
granted during the year
</TABLE>
Non-qualified stock options are granted at fair value at the date
of grant and vest 25% per year commencing on the first anniversary
after the grant date. Options expire 10 years after the grant
date, and all awards need to be made by May 22, 2005.
<TABLE>
<CAPTION>
1997 1996 1995
----------------------- ------------------------ -------------------------
Weighted-Average Weighted-Average Weighted-Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning 1,517,823 $16.87 1,619,874 $17.03 1,176,941 $ 19.48
of the year
Granted 276,554 11.24 40,000 12.625 532,045 12.00
Exercised (2,737) 12.00 - -
Canceled (112,784) 14.83 (142,051) 17.48 (89,112) 19.39
Outstanding at the end
of the year 1,678,856 $16.09 1,517,823 $16.87 1,619,874 $17.03
Exercisable at year-end 970,941 $18.58 705,678 $19.47 502,829 $19.44
Weighted-average fair $ 4.40 $ 5.05 $ 4.94
value of options granted
during the year
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Block-Scholes option pricing model with the following
weighted-average assumptions used for grants in 1995, 1996 and 1997,
respectively: expected volatility of 27.58%, 26.59% and 27.15%; risk-
free interest rates of 7.13%, 6.04%, and 6.24%; expected lives
of 5.5, 6 and 5.6 years and no dividends.
Directors' Stock Option Plan
The Company's amended and restated 1995 Stock Option Plan for Non-
Employee Directors of the Company (the "Plan") has 50,000 shares of
common stock authorized for issuance under the Plan. Shares of common
stock awarded under this Plan are non-qualified stock options, are
granted at fair value at the date the option is granted, vest and
become exercisable in three equal annual installments commencing on
the first anniversary after the grant date. Options expire 10 years
after the grant date.
<TABLE>
<CAPTION>
1997 1996
------------------------- ------------------------
Weighted-Average Weighted-Average
Shares Exercise Price Shares Exercise Price
<S> <C> <C> <C>
Outstanding at beginning
of the year 15,000 $13.625 -
Granted 8,000 11.75 15,000 $13.625
Exercised - -
Outstanding at the end of
the year 23,000 $12.97 15,000 $13.625
Exercisable at year-end 4,998 $13.625 None
Weighted-average fair $ 4.90 $ 5.60
value of options granted
during the year
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Block-Scholes option pricing model with the following
weighted-average assumptions used for grants in 1996 and 1997,
respectively: expected volatility of 26.87% and 27.97%; risk-free
interest rates of 6.44% and 6.4%; expected lives of 6 years and no
dividends.
The following table summarizes both stock option plans' information
on stock options outstanding at March 28, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------------- ---------------------------------
Number Weighted-Avg. Number
Range of Outstanding Remaining Weighted-Avg. Exercisable at Weighted-Avg.
Exercise Prices at 3/28/97 Contractual Life Exercise Price 3/28/97 Exercise Price
<C> <S><C> <C> <C> <C> <C> <C>
$11.125 to $13.625 755,786 8.4 $11.76 116,978 $12.07
$16.65 to $19.50 660,996 6.5 18.98 573,887 18.90
$20.00 to $21.75 285,074 5.0 20.59 285,074 20.59
</TABLE>
Pro-Forma Disclosure
The Company continues to apply APB Opinion 25 in accounting for both
of its stock-based compensation plans. Accordingly, no compensation
cost has been recognized for the stock option plans. There was no
material difference in the Company's earnings or earnings per share
had the stock option plans determined compensation cost based on the
fair value at the grant dates consistent with the method of SFAS No.
123.
Note 13 - Employee Retirement Plans:
The Company and its domestic subsidiaries have several defined
contribution retirement plans covering substantially all of the
Company's U.S. employees with a minimum service requirement.
Depending upon the Plan, eligible employees can invest from 12% to
15% of their earnings; certain plans will match by an equal amount
from the Company generally up to the first 3% of the employee's
contribution. Employer matching contributions for fiscal years
1997, 1996 and 1995 were $3,315,000, $2,957,000 and $2,134,000,
respectively. In addition, the largest of the plans has a profit-
sharing contribution that was computed in accordance with a formula
(set forth in the Plan) to provide for an annual contribution of 6%
of pre-tax earnings, as defined; during the year this was modified
to be discretionary. Profit-sharing contributions to the other
plans are discretionary. The contributions for 1997, 1996 and 1995
were $1,684,000, $2,553,000 and $1,927,000, respectively.
Certain of the Company's foreign subsidiaries have trusteed
retirement plans covering substantially all of their employees.
These pension plans are not required to report to government
agencies pursuant to ERISA and do not otherwise determine the
actuarial value of accumulated benefits or net assets available
for benefits. The aggregate pension expense for these plans for
fiscal years 1997, 1996 and 1995 were $1,719,000, $1,369,000 and
$783,000, respectively.
Note 14 - Segment Information:
The Company is a worldwide provider of comprehensive engineering,
consulting and construction management services. The Company
serves a broad range of clients in both the private and public
sectors. Net revenues from all agencies and departments of the
United States Government were approximately $63,183,000,
$63,313,000 and $53,794,000 during fiscal years 1997, 1996 and
1995, respectively.
Selected geographic information is summarized as follows (in
thousands):
<TABLE>
<CAPTION>
United Other Executive
States Countries Office Total
<S> <C> <C> <C> <C> <C>
Net revenues 1997 $389,521 $65,737 $ - $455,258
1996 341,315 56,367 - 397,682
1995 232,899 36,070 - 268,969
Earnings from
Operations 1997 $ 49,493 $ 2,330 $(14,962) $ 36,861
1996 45,519 4,480 (13,098) 36,901
1995 38,223 3,756 (13,182) 28,797
Identifiable
Assets 1997 $268,236 $53,435 $36,611 $358,282
1996 216,510 37,233 63,536 317,279
1995 166,200 33,195 25,232 224,627
</TABLE>
Note 15 - Stock Repurchases:
The Company's Board of Directors authorized the Company to purchase
up to 2,500,000 shares of its common stock on the open market.
During fiscal 1997 the Company repurchased 668,700 shares for a
total of 1,819,000 shares through March 28, 1997. The Company may
continue to purchase shares on the open market.
On November 19, 1996, the Company acquired all 3,700,000 shares of
the Company's common stock owned by Hochtief Aktiengesellschaft
vorm. Gebr. Helfmann (Hochtief AG). The Company may use the
reacquired shares to facilitate acquisitions or remarket them if
market conditions permit.
Note 16 - Common and Preferred Stock:
The Company adopted a Shareholder's Rights Agreement on March 28,
1997 granting, for each outstanding share of common stock, one
stock purchase right ("Right"). Each Right entitles the common
stockholder to purchase, in certain circumstances generally
relating to a change in control of the Company, one two-hundredth
of a share of the Company's Series A Junior Participating Preferred
Stock, par value $0.01 per share (the "Series A Preferred Stock")
at the exercise price of $65 per share, subject to adjustment.
Alternatively, the Right holder may purchase common stock of the
Company having a market value equal to two times the exercise
price, or may purchase shares of common stock of the acquiring
corporation having a market value equal to two times the
exercise price.
The Series A Preferred Stock confers to its holders rights as to
dividends, voting and liquidation that are in preference to common
stockholders. The Rights are nonvoting, are not presently
exercisable and currently trade in tandem with the common shares.
The Rights may be redeemed at $0.01 per Right by the Company in
accordance with the Rights Agreement. The Rights will expire on
March 28, 2007, unless earlier exchanged or redeemed.
Note 17- Restructuring Costs
In the fourth quarter the Company determined it was necessary to
restructure its international operations, and construction and
project management subsidiary. Included in the restructuring cost
are employee severance and termination costs, costs associated with
office closures, losses on work in progress where there was extensive
employee turnover and losses on other current assets, all of which
impact the Company's working capital. The remaining balance
represents losses on long-term assets. At March 28, 1997,
approximately $2.3 million remains to be expended to complete the
restructuring.
DAMES & MOORE
Supplementary Financial Information
Selected Quarterly Financial Data (Unaudited) (In thousands, except
per share amounts):
<TABLE>
<CAPTION>
First Second Third Fourth
1997: Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Gross revenues $154,839 $163,110 $168,350 $167,079
Net revenues 108,116 115,373 114,709 117,060
Earnings from operations 9,209 11,528 10,800 5,324
Net earnings 4,981 6,022 5,636 1,901
Earnings per share $ 0.23 $ 0.28 $ 0.28 $ 0.11
Weighted average number of
shares 21,597 21,823 20,188 18,061
1996:
Gross revenues $141,856 $141,786 $139,969 $133,152
Net revenues 100,654 100,492 97,840 98,696
Earnings from operations 9,607 9,477 9,605 8,212
Net earnings 5,727 5,803 5,335 5,233
Earnings per share $ 0.25 $ 0.26 $ 0.24 $ 0.24
Weighted average number of
shares 22,681 22,662 22,660 22,154
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant*
Item 11. Executive Compensation*
Item 12. Security Ownership of Certain Beneficial Owners and Management*
Item 13. Certain Relationships and Related Transactions*
* Information regarding the Executive Officers of the Company is included in
Part I of this Annual Report on Form 10-K. For other information called
for by Items 10-13, reference is made to the Company's definitive proxy
statement for its annual meeting of shareholders, to be held on August 11,
1997, which will be filed with the Securities and Exchange Commission
within 120 days after March 28, 1997, and which is incorporated herein by
reference, except that the information included under the captions "Report
of the Compensation Committee on Executive Compensation" and "Stock
Performance Graph" is not incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial Statements and Financial Statement Schedules
Financial statements and financial statement schedules that are
filed as part of this Annual Report on Form 10-K are listed in Item 8
hereof.
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated March 24, 1997
reporting under Item 5 the adoption of a Rights Agreement. No
financial statements were filed.
(c) Exhibits
The following exhibits are filed as part of this Annual Report on
Form 10-K or are incorporated by reference herein:
Exhibit
Number Description
2.1 Asset Purchase Agreement dated March 31, 1995 among O'Brien-
Kreitzberg Inc., O'Brien-Kreitzberg & Associates, Inc., Fred C.
Kreitzberg, The Kreitzberg 1994 Revocable Trust, and Richard
Sklar (incorporated herein by reference to Exhibit 2.1 of the
Company's Current Report on Form 8-K [File No. 1-11075] filed
on April 6, 1995).
2.2 Purchase Agreement dated April 6, 1995 for the purchase of
shares of Walk, Haydel & Associates, Inc. (incorporated herein
by reference to Exhibit 2.1 of the Company's Current Report on
Form 8-K [File No. 1-11075] filed on April 11, 1995).
2.3 Stock Purchase Agreement dated November 5, 1996 for the
purchase of shares of DM Investors, Inc., (Hochtief)
(incorporated herein by reference to Exhibit 2.1 of the
Company's Current Report on Form 8-K [File No. 1-11075]
filed on November 19, 1996).
3.1 Restated Certificate of Incorporation of Dames & Moore, Inc.
dated December 7, 1993 (incorporated herein by reference to
Exhibit 3.1 of the Company's Quarterly Report on Form 10-Q
[File No. 1-11075] for the quarter ended December 24, 1993).
3.2 Restated Bylaws of Dames & Moore, Inc. (incorporated herein by
reference to Exhibit 3.2 of Amendment No. 3 to the Company's
Registration Statement on Form S-1 [File No. 33-42220], filed
on February 7, 1992).
4.1 Note Purchase Agreement dated as of March 15, 1996 between the
Company and the Noteholders (incorporated herein by reference
to Exhibit 4.1 of the Company's Annual Report on Form 10-K
[File No. 1-11075] for the year ended March 29, 1996).
4.2 First Amendment dated as of April 15, 1996, to the Note
Purchase Agreement dated as of March 15, 1996.
4.3 Second Amendment dated as of November 18, 1996 to the Note
Purchase Agreement dated as of March 15, 1996.
4.4 Note Purchase Agreement dated as of December 16, 1996 between
the Company and the Noteholders.
4.5 Third Amendment dated as of December 16, 1996, to the Note
Purchase Agreement dated as of March 15, 1996.
4.6 Rights Agreement, dated as of March 28, 1997 between Dames &
Moore, Inc. and ChaseMellon Shareholder Services LLC, which
includes the form of Certificate of Designations of Series A
Junior Participating Preferred Stock of Dames & Moore, Inc. as
Exhibit A, the form of Right Certificate as Exhibit B and the
Summary of Share Purchase Rights Plans as Exhibit C.
(Incorporated by reference to Exhibit 4.1 to the Company's
Current Report on Form 8-K filed with the Securities and
Exchange Commission on March 24, 1997 [Commission File No.
1-11075]).
10.1 Dames & Moore, Inc. Deferred Compensation Plan dated December
4, 1993 (incorporated herein by reference to Exhibit 10.1 of
the Company's Quarterly Report on Form 10-Q [File No. 1-11075]
for the quarter ended December 24, 1993).
10.2 Trust Agreement for the Deferred Compensation Plan dated
December 4, 1993 (incorporated herein by reference to
Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q
[File No. 1-11075] for the quarter ended December 24, 1993).
10.3 First Amended and Restated Credit Agreement dated as of May 24,
1996 between Bank of America National Trust and Savings
Association and the Company (incorporated herein by reference
to Exhibit 10.6 of the Company's Annual Report on Form 10-K
[File No. 1-11075] for the year ended March 29, 1996).
10.4 Dames & Moore, Inc. Amended and Restated 1991 Long-Term
Incentive Plan.
10.5 Dames & Moore, Inc. 1995 Stock Option Plan for Non-Employee
Directors.
10.6 Amendment No. 1 to Dames & Moore, Inc. Deferred Compensation
Plan.
10.7 First Amendment to First Amended and Restated Credit Amendment,
between Bank of America National Trust and Savings Association
and the Company.
10.8 Second Amendment to First Amended and Restated Credit
Agreement, between Bank of America National Trust and Savings
Association and the Company.
10.9 Employment Agreement dated April 1, 1997 between Dames & Moore,
Inc. and Arthur C. Darrow.
10.10 Agreement Regarding Severance Payments dated April 1, 1997
by and between Dames & Moore, Inc. and Mark A. Snell.
10.11 Senior Loan Agreement between DMB/Remediation LLC as Borrower
and PPA Funding Corp., as Senior Lender dated March 11, 1997.
10.12 Greenfields Funding Corp. and DMB/Remediation LLC Subordinated
Loan Agreement dated March 11, 1997.
21.1 List of Subsidiaries of the Company.
23.1 Consent of KPMG Peat Marwick LLP, independent certified public
accountants.
27.1 Financial Data Schedule (included only in the electronic filing).
Exhibits filed herewith or incorporated by reference herein will be furnished
to shareholders of the Company upon written request and for a fee of $.20 per
page, payable in advance. This fee covers only the Company's reasonable
expenses in furnishing such exhibits. Written requests should be addressed
to:
Dames & Moore, Inc.
Investor Relations Department
911 Wilshire Boulevard, Suite 700
Los Angeles, California 90017<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
DAMES & MOORE, INC.
Date: June 16, 1997 By ARTHUR C. DARROW
------------------------------
Arthur C. Darrow
President and
Chief Executive Officer
Date: June 16, 1997 By MARK A. SNELL
------------------------------
Mark A. Snell
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Company and in the capacities indicated on June 16, 1997.
By ARTHUR C. DARROW
-------------------------------
Arthur C. Darrow
Director
President and
Chief Executive Officer
(Principal Executive Officer)
By MARK A. SNELL
------------------------------
Mark A. Snell
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
By LESLIE S. PUGET
------------------------------
Leslie S. Puget
Corporate Controller
(Principal Accounting Officer)
By GEORGE D. LEAL
------------------------------
George D. Leal, Director
By ROBERT M. PERRY
------------------------------
Robert M. Perry, Director
By RICHARD C. TUCKER
------------------------------
Richard C. Tucker, Director
By HARALD PEIPERS
------------------------------
Harald Peipers, Director
By MICHAEL R. PEEVEY
------------------------------
Michael R. Peevey, Director
By JOHN P. TRUDINGER
------------------------------
John P. Trudinger, Director
By ANTHONY R. MOORE
------------------------------
Anthony R. Moore, Director
DAMES & MOORE
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Fiscal Years Ended March 28, 1997, March 29, 1996 and March 31, 1995
<TABLE>
<CAPTION>
Additions
------------------------
Balance at Charged to Charged to Balance at
beginning costs and other end of
Description year expenses accounts Deductions year
Year Ended March 28, 1997
Allowance for doubtful
<S> <C> <C> <C> <C> <C>
accounts $1,886,000 $1,208,000 $465,000(1) $(558,000) $3,001,000
Year Ended March 29, 1996
Allowance for doubtful
accounts $1,701,000 $ 378,000 $350,000(1) $(543,000) $1,886,000
Year Ended March 31, 1995
Allowance for doubtful
accounts $ 957,000 $ 264,000 $593,000(1) $(113,000) $1,701,000
</TABLE>
(1) Amount recorded on books of acquired entities at date of acquisition.
DAMES & MOORE
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Exhibit
Number Description Page
<S> <C> <C>
2.1 Asset Purchase Agreement dated March 31, 1995
among O'Brien-Kreitzberg Inc., O'Brien-Kreitzberg
& Associates, Inc., Fred C. Kreitzberg, The
Kreitzberg 1994 Revocable Trust, and Richard Sklar
(incorporated herein by reference to Exhibit 2.1 of
the Company's Current Report on Form 8-K [File No.
1-11075] filed on April 6, 1995).
2.2 Purchase Agreement dated April 6, 1995 for the
purchase of shares of Walk, Haydel & Associates,
Inc. (incorporated herein by reference to Exhibit 2.1
of the Company's Current Report on Form 8-K [File No.
1-11075] filed on April 11, 1995).
2.3 Stock Purchase Agreement dated November 5, 1996 for
the purchase of shares of DM Investors, Inc.,
(Hochtief) (incorporated herein by reference to Exhibit
2.1 of the Company's Current Report on Form 8-K [File
No. 1-11075] filed on November 19, 1996).
3.1 Restated Certificate of Incorporation of Dames & Moore,
Inc. dated December 7, 1993 (incorporated herein by
reference to Exhibit 3.1 of the Company's Quarterly
Report on Form 10-Q [File No. 1-11075] for the quarter
ended December 24, 1993).
3.2 Restated Bylaws of Dames & Moore, Inc. (incorporated
herein by reference to Exhibit 3.2 of Amendment No. 3
to the Company's Registration Statement on Form S-1
[File No. 33-42220], filed on February 7, 1992).
4.1 Note Purchase Agreement dated as of March 15, 1996
between the Company and the Noteholders (incorporated
herein by reference to Exhibit 4.1 of the Company's
Annual Report on Form 10-K [File No. 1-11075] for
the year ended March 29, 1996).
4.2 First Amendment dated as of April 15, 1996, to the Filed
Note Purchase Agreement dated as of March 15, 1996. Electronically
4.3 Second Amendment dated as of November 18, 1996 to Filed
the Note Purchase Agreement dated as of March 15, Electronically
1996.
4.4 Note Purchase Agreement dated as of December 16, Filed
1996 between the Company and the Noteholders. Electronically
4.5 Third Amendment dated as of December 16, 1996, to the
Note Purchase Agreement dated as of March 15, 1996.
4.6 Rights Agreement, dated as of March 28, 1997 between
Dames & Moore, Inc. and ChaseMellon Shareholder
Services LLC, which includes the form of Certificate
of Designations of Series A Junior Participating
Preferred Stock of Dames & Moore, Inc. as Exhibit A,
the form of Right Certificate as Exhibit B and the
Summary of Share Purchase Rights Plans as Exhibit C.
(Incorporated by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K filed with the
Securities and Exchange Commission on March 24, 1997
[Commission File No. 1-11075]).
10.1 Dames & Moore, Inc. Deferred Compensation Plan dated
December 4, 1993 (incorporated herein by reference
to Exhibit 10.1 of the Company's Quarterly Report on
Form 10-Q [File No. 1-11075] for the quarter ended
December 24, 1993).
10.2 Trust Agreement for the Deferred Compensation
Plan dated December 4, 1993 (incorporated
herein by reference to Exhibit 10.2 of the
Company's Quarterly Report on Form 10-Q [File
No. 1-11075] for the quarter ended December
24, 1993).
10.3 First Amended and Restated Credit Agreement
dated as of May 24, 1996 between Bank of
America National Trust and Savings
Association and the Company (incorporated
herein by reference to Exhibit 10.6 of the
Company's Annual Report on Form 10-K
[File No. 1-11075] for the year ended March
29, 1996).
10.4 Dames & Moore, Inc. Amended and Restated Filed
1991 Long-Term Incentive Plan. Electronically
10.5 Dames & Moore, Inc. 1995 Stock Option Plan for Filed
Non-Employee Directors. Electronically
10.6 Amendment No. 1 to Dames & Moore, Inc. Deferred Filed
Compensation Plan. Electronically
10.7 First Amendment to First Amended and Restated Filed
Credit Amendment, between Bank of America National Electronically
Trust and Savings Association and the Company.
10.8 Second Amendment to First Amended and Restated Filed
Credit Agreement, between Bank of America National Electronically
Trust and Savings Association and the Company.
10.9 Employment Agreement dated April 1, 1997 between Filed
Dames & Moore, Inc. and Arthur C. Darrow. Electronically
10.10 Agreement Regarding Severence Payments dated Filed
April 1, 1997 by and between Dames & Moore, Electronically
Inc. and Mark A. Snell.
10.11 Senior Loan Agreement between DMB/Remediation Filed
LLC as Borrower and PPA Funding Corp., as Senior Electronically
Lender dated March 11, 1997.
10.12 Greenfields Funding Corp. and DMB/Remediation Filed
LLC Subordinated Loan Agreement dated March 11, Electronically
1997.
21.1 List of Subsidiaries of the Company. Filed
Electronically
23.1 Consent of KPMG Peat Marwick LLP, independent Filed
certified public accountants. Electronically
27.1 Financial Data Schedule. Filed
Electronically
</TABLE>
Dames & Moore, Inc.
First Amendment
Dated as of April 15, 1996
To
Note Purchase Agreements
Dated as of March 15, 1996
Re: $40,000,000 6.54% Senior Notes, Series A,
Due March 29, 2001,
$30,000,000 6.87% Senior Notes, Series B,
Due March 29, 2003,
$10,000,000 6.92% Senior Notes, Series C,
Due September 29, 2003,
$5,000,000 7.20% Senior Notes, Series D,
Due March 29, 2006
and
$15,000,000 7.25% Senior Notes, Series E,
Due September 29, 2006
FIRST AMENDMENT TO NOTE AGREEMENT
THIS FIRST AMENDMENT to Note Purchase Agreements dated as of April 15,
1996 (this "First Amendment"), is entered into between Dames & Moore, Inc., a
Delaware corporation (the "Company"), and Teachers Insurance and Annuity
Association of America, Principal Mutual Life Insurance Company, MML Pension
Insurance Company, Massachusetts Mutual Life Insurance Company, Allstate Life
Insurance Company, American General Life Insurance Company, United of Omaha
Life Insurance Company, American Republic Insurance Company, Aid Association
for Lutherans, The Canada Life Assurance Company, Canada Life Insurance
Company of America, Canada Life Insurance Company of New York, Provident
Mutual Life Insurance Company, and Indianapolis Life Insurance Company (each
a "Noteholder" and collectively, the "Noteholders").
RECITALS:
A. The Company and the Noteholders, respectively, have heretofore
entered into separate Note Purchase Agreements each dated as of March 15,
1996 (as amended, the "Note Purchase Agreements").
B. The Company and the Noteholders now desire to amend certain of the
terms of the Note Purchase Agreements.
C. Capitalized terms used herein shall have the respective meanings
ascribed thereto in the Note Purchase Agreements unless herein defined or the
context shall otherwise require.
D. All requirements of law have been fully complied with and all other
acts and things necessary to make this First Amendment a valid, legal and
binding instrument according to its terms for the purposes herein expressed
have been done or performed.
NOW, THEREFORE, the Company and the Noteholders, in consideration of good
and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, do hereby agree as follows:
SECTION 1. AMENDMENT.
Section 1.1. Section 3 of the Note Purchase Agreements shall be and is
hereby amended in its entirety to read as follows:
"The sale and purchase of the Notes to be purchased by you and the
Other Purchasers shall occur at the offices of Chapman and Cutler, 111
West Monroe Street, Chicago, Illinois 60603, at 10:00 a.m. Chicago time,
at a closing on the dates set forth opposite your name on Schedule A
hereto, the first of which shall occur on March 29, 1996 or on such later
date (not later than April 5, 1996) as shall be agreed upon by the
Company, you and the Other Purchasers (the "first Closing"), the closing
with respect to all, but not less than all, of the Series C Notes shall
occur on such date (not later than September 30, 1996) as shall be
agreed upon by the Company and Teachers Insurance and Annuity Association
of America (the "Series C Closing") and the closing with respect to all,
but not less than all, of the Series E Notes shall occur on such date
(not later than September 30, 1996) as shall be agreed upon by the Company
and Teachers Insurance and Annuity Association of America (the "Series
E Closing"; the first Closing, the Series C Closing and the Series E
Closing are each referred to as a "Closing" and the first Closing, the
Series C Closing and the Series E Closing are collectively referred to as
the "Closings"); provided, that in the case of the Series C Closing
and the Series E Closing the Company shall provide Teachers Insurance and
Annuity Association of America with written notice as provided in Section
18 of its desire to consummate each such Closing not less than 14 days
prior to the date of each such Closing; and provided further, that it is
understood and agreed by the Company and Teachers Insurance and Annuity
Association of America that the Series C Closing and the Series E
Closing may occur on the same date, in which event, the parties' document
delivery requirements for each of the Series C Closing and the Series E
Closing shall be combined to the extent practicable. At each Closing the
Company will deliver to you the Notes of the series to be purchased by
you in the form of a single Note (or such greater number of Notes in
denominations of at least $1,000,000, or such lesser amount as shall
constitute your entire commitment, as you may request) dated the date of
the Closing and registered in your name (or in the name of your nominee),
against delivery by you to the Company or its order of immediately
available funds in the amount of the purchase price therefor by wire
transfer of immediately available funds for the account of the Company to
account number 0491-12465 at Sanwa Bank California, 601 South Figueroa
St., Los Angeles, California 90017, ABA No. 122003516. If at the Closing
at which you are to purchase Notes the Company shall fail to tender such
Notes to you as provided above in this Section 3, or any of the conditions
specified in Section 4 shall not have been fulfilled to your satisfaction,
you shall, at your election, be relieved of all further obligations under
this Agreement, without thereby waiving any rights you may have by reason
of such failure or such nonfulfillment."
Section 1.2. Section 4.1 of the Note Purchase Agreements shall be and
is hereby amended in its entirety to read as follows:
"Section 4.1. Representations and Warranties. The representations and
warranties of the Company in this Agreement shall be correct when made and at
the time of each Closing; provided that the Schedules to the representations
and warranties set forth in Sections 5.4 and 5.15 may be revised to reflect
any changes that have occurred between the first Closing and each subsequent
Closing so long as such occurrences do not individually or in the aggregate
have a Material Adverse Effect."
Section 1.3. Section 17.1 of the Note Purchase Agreements shall be and
is hereby amended in its entirety to read as follows:
"Section 17.1. Requirements. This Agreement and the Notes may be
amended, and the observance of any term hereof or of the Notes may be waived
(either retroactively or prospectively), with (and only with) the written
consent of the Company and the Required Holders, except that (a) no amendment
or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof,
or any defined term (as it is used therein), will be effective as to you
unless consented to by you in writing, and (b) no such amendment or waiver
may, without the written consent of the holder of each Note at the time
outstanding affected thereby, (i) subject to the provisions of Section 12
relating to acceleration or rescission, change the amount or time of any
prepayment or payment of principal of, or reduce the rate or change the time
of payment or method of computation of interest or of the Make-Whole
Amount on, the Notes, (ii) change the percentage of the principal amount of
the Notes the holders of which are required to consent to any such amendment
or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20; and
provided that, anything contained in this Section 17.1 and 17.2 to the
contrary notwithstanding, if for any reason whatsoever it becomes necessary
or appropriate to enter into any amendment of this Agreement or any waiver
with respect to compliance herewith by the Company during the period from and
including the first Closing through and including the later of the date of
the Series C Closing and of the Series E Closing (the "Series C and Series E
Note Cut-Off Date"): (1) notwithstanding the aggregate principal amount of
Notes then actually outstanding, Teachers Insurance and Annuity Association
of America shall be deemed to be the holder of $10,000,000 aggregate
principal amount of outstanding Series C Notes and $15,000,000 aggregate
principal amount of outstanding Series E Notes (i) for purposes of any
determination of the percentage of holders of the Notes required to grant or
deny such requested amendment or waiver and (ii) for purposes of any
determination of any payment of remuneration, whether by way of supplemental
or additional interest, fee or otherwise pursuant to Section 17.2,
notwithstanding that the issuance, sale and delivery of the Series C Notes at
the Series C Closing or the Series E Notes at the Series E Closing, as the
case may be, has not been consummated at the time such amendment or waiver is
requested or such payment of remuneration is determined pursuant to Section
17.2, and (2) if for any reason whatsoever, the Notes to be issued to Teachers
Insurance and Annuity Association of America are not issued on or prior to
the Series C and Series E Note Cut-Off Date, any such amendment or waiver
entered into as contemplated by the foregoing clause (1)(i) of this Section
17.1 shall, at the option of the Required Holders of the then outstanding
Notes, be deemed null and void."
Section 1.4. The first sentence of Section 19 of the Note Purchase
Agreement shall be and is hereby amended in its entirety to read as follows:
"This Agreement and all documents relating thereto, including,
without limitation, (a) consents, waivers and modifications that may
hereafter be executed, (b) documents received by you at any Closing
(except the Notes themselves), and (c) financial statements, certificates
and other information previously or hereinafter furnished to you, may be
reproduced by you by any photographic, photostatic, microfilm, microcard,
miniature photographic or other similar process and you may destroy any
original documents so reproduced."
Section 1.5. Schedule A of the Note Purchase Agreements shall be and is
hereby amended as follows:
(a) the reference to the "Second Closing" on page A of Schedule A
is hereby replaced with "Series C Closing"; and
(b) the reference to the "Second Closing" on page A-3 of Schedule A
is hereby replaced with "Series E Closing"
Section 1.6. The reference to the "Second Closing Date" on Schedule 5.14
of the Note Purchase Agreements is hereby replaced with: "the later of the
date of the Series C Closing and of the Series E Closing."
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Section 2.1. To induce the Noteholders to execute and deliver this First
Amendment, the Company represents and warrants to the Noteholders (which
representations shall survive the execution and delivery of this First
Amendment) that:
(a) this First Amendment has been duly authorized, executed and
delivered by it and this First Amendment constitutes the legal, valid and
binding obligation, contract and agreement of the Company enforceable
against it in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws or equitable principles relating to or limiting creditors' rights
generally;
(b) the Note Purchase Agreements, as amended by this First Amendment,
constitute the legal, valid and binding obligations, contracts and
agreements of the Company enforceable against it in accordance with their
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles
relating to or limiting creditors' rights generally;
(c) the execution, delivery and performance by the Company of this
First Amendment (1) has been duly authorized by all requisite corporate
action and, if required, shareholder action, (2) does not require the
consent or approval of any governmental or regulatory body or agency, and
(3) will not (i) violate (A) any provision of law, statute, rule or
regulation or its certificate of incorporation or bylaws, (B) any order
of any court or any rule, regulation or order of any other agency or
government binding upon it, or (C) any provision of any material
indenture, agreement or other instrument to which it is a party or by
which its properties or assets are or may be bound, or (ii) result in a
breach or constitute (alone or with due notice or lapse of time or both)
a default under any indenture, agreement or other instrument referred to
in clause (3)(i)(C) of this Section 2.1(c); and
(d) as of the date hereof and after giving effect to this First
Amendment, no Default or Event of Default has occurred which is continuing.
SECTION 3. MISCELLANEOUS.
Section 3.1. This First Amendment shall become effective and binding
upon the Company and the Noteholders on the date hereof upon the acceptance
hereof by the Noteholders in the space below.
Section 3.2. Except as modified and expressly amended by this First
Amendment, the Note Purchase Agreements are in all respects ratified,
confirmed and approved and all of the terms, provisions and conditions
thereof shall be and remain in full force and effect.
Section 3.3. The Company agrees to pay all reasonable fees and expenses
of the Noteholders and their special counsel in connection with the
preparation of this First Amendment.
Section 3.4. Any and all notices, requests, certificates and other
instruments executed and delivered after the execution and delivery of this
First Amendment may refer to the Note Purchase Agreements without making
specific reference to this First Amendment but nevertheless all such
references shall include this First Amendment unless the context otherwise
requires.
Section 3.5. This First Amendment shall be governed by and construed in
accordance with the laws of the State of New York.
Section 3.6. This First Amendment may be executed and delivered in any
number of counterparts, each of such counterparts constituting an original,
but all together only one First Amendment.
IN WITNESS WHEREOF, the Company and the Noteholders have caused this
instrument to be executed, all as of the day and year first above written.
DAMES & MOORE, INC.
By Robert M. Perry
______________________________
Its CFO
Accepted and Agreed to:
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By Gregory W. MacCordy
______________________________
Its Director - Private Placement
Accepted and Agreed to:
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By Karen A. Pearston
______________________________
Its Counsel
By Shabnam B. Miglani
______________________________
Its Counsel
Accepted and Agreed to:
UNICARE LIFE & HEALTH
INSURANCE COMPANY BY
MASSACHUSETTS MUTUAL
LIFE INSURANCE COMPANY
Its Investment Adviser
By Mark A. Ahmed
______________________________
Its Managing Director
Accepted and Agreed to:
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By Mark A. Ahmed
_______________________________
Its Managing Director
Accepted and Agreed to:
ALLSTATE LIFE INSURANCE COMPANY
By Patricia Wilson
_________________________________
Its
By Judith P. Greffin
_________________________________
Its
Accepted and Agreed to:
AMERICAN GENERAL LIFE INSURANCE COMPANY
By Julie S. Tucker
_________________________________
Its Investment Officer
Accepted and Agreed to:
UNITED OF OMAHA LIFE INSURANCE COMPANY
By Richard A. Witt
________________________________
Its Senior Vice President
Accepted and Agreed to:
AMERICAN REPUBLIC INSURANCE COMPANY
By G.F. Sheldon
_________________________________
Its Senior Vice President, Investments
By__________________________________
Its
Accepted and Agreed to:
AID ASSOCIATION FOR LUTHERANS
By James A. Bitz
________________________________
Its Vice President - Securities
Accepted and Agreed to:
THE CANADA LIFE ASSURANCE COMPANY
By Brian J. Lynch
________________________________
Its Associate Treasurer
Accepted and Agreed to:
CANADA LIFE INSURANCE COMPANY OF AMERICA
By Brian J. Lynch
________________________________
Its Assistant Treasurer
Accepted and Agreed to:
CANADA LIFE INSURANCE COMPANY OF NEW YORK
By Brian J. Lynch
________________________________
Its Assistant Treasurer
Accepted and Agreed to:
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
By James D. Kestner
_______________________________
Its Vice President
Accepted and Agreed to:
INDIANAPOLIS LIFE INSURANCE COMPANY
By Gene E. Trueblood
_______________________________
Its Vice President, CIO and Treasurer
Dames & Moore, Inc.
Second Amendment
Dated as of November 18, 1996
To
Note Purchase Agreements
Dated as of March 15, 1996
Re: $40,000,000 6.54% Senior Notes, Series A,
Due March 29, 2001,
$30,000,000 6.87% Senior Notes, Series B,
Due March 29, 2003,
$10,000,000 6.92% Senior Notes, Series C,
Due September 29, 2003,
$5,000,000 7.20% Senior Notes, Series D,
Due March 29, 2006
and
$15,000,000 7.25% Senior Notes, Series E,
Due September 29, 2006
Second Amendment to Note Purchase Agreements
This Second Amendment to Note Purchase Agreements dated as of
November 18, 1996 (this "Second Amendment"), is entered into between Dames
& Moore, Inc., a Delaware corporation (the "Company"), and Teachers Insurance
and Annuity Association of America, Principal Mutual Life Insurance Company,
American General Life Insurance Company, United of Omaha Life Insurance
Company, American Republic Insurance Company, Aid Association for Lutherans,
Provident Mutual Life Insurance Company, and Indianapolis Life Insurance
Company (each a "Noteholder" and collectively, the "Noteholders").
Recitals:
A. The Company and the Noteholders, together with Unicare
Life & Health Insurance Company (as successor MML Pension Insurance Company),
Massachusetts Mutual Life Insurance Company, The Canada Life Assurance
Company, Canada Life Insurance Company of America, Canada Life Insurance
Company of New York and Allstate Life Insurance Company (together with the
Noteholders, the "Original Purchasers"), respectively, have heretofore
entered into separate Note Purchase Agreements, each dated as of March 15,
1996 and the First Amendment to Note Purchase Agreements dated as of April
15, 1996 (as amended, the "Note Purchase Agreements").
B. On or about November 18, 1996, the Company will
consummate the acquisition of approximately 3,700,000 shares of its common
stock held by DM Investors, Inc., a Delaware corporation and wholly-owned
Subsidiary of Hochtief AG, a corporation organized under the laws of Germany
("Hochtief"), upon the terms and conditions and all as contemplated by that
certain Stock Purchase Agreement, dated as of November 5, 1996 among the
Company, DM Investors, Inc. and Hochtief (the "Stock Acquisition").
C. The consummation of the Stock Acquisition would result in
a violation of the terms of the Note Purchase Agreements and in consequence
thereof, the Company has requested the Noteholders to enter into a second
amendment to the Note Purchase Agreements for the purpose of amending such of
the terms of the Note Purchase Agreements as would be necessary in order to
permit the Stock Acquisition.
D. Pursuant to Section 17 of the Note Purchase Agreements,
the Company has requested that the holders of at least 51% in principal of
the Notes consent to the amendment of certain of the terms of the Note
Purchase Agreements.
E. The Company and the Noteholders now desire to amend,
effective on the date on which the conditions specified in Section 3 hereof
are satisfied, certain of the terms of the Note Purchase Agreements in order
to permit the Stock Acquisition and to cause the Company to be, after giving
effect to the Stock Acquisition and on an ongoing basis, within the
limitations of the Note Agreement.
F. Capitalized terms used herein shall have the respective
meanings ascribed thereto in the Note Purchase Agreements unless herein
defined or the context shall otherwise require.
G. All requirements of law have been fully complied with and
all other acts and things necessary to make this Second Amendment a valid,
legal and binding instrument according to its terms for the purposes herein
expressed have been done or performed.
Now, therefore, the Company and the Noteholders, in consideration
of good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged, do hereby agree as follows:
Section 1. Amendment.
Section 1.1. Section 10.3 of the Note Purchase Agreements
shall be and is hereby amended in its entirety to read as follows:
Section 10.3. Consolidated Net Worth. From and after
November 18, 1996 until the Net Worth Reset Date the Company will not at
any time permit Consolidated Net Worth to be an amount less than the
sum of (a) $118,000,000 plus (b) 40% of Consolidated Net Income computed
on a cumulative basis for each of the elapsed fiscal quarters beginning
after December 27, 1996; provided that notwithstanding that Consolidated
Net Income for any elapsed fiscal quarter may be a deficit figure, no
reduction as a result thereof shall be made in the sum to be maintained
pursuant hereto. From and after the Net Worth Reset Date, the Company
will not at any time permit Consolidated Net Worth to be an amount less
than the sum of (y) the Reset Net Worth Amount plus (z) 25% of
Consolidated Net Income computed on a cumulative basis for each of the
elapsed fiscal quarters beginning after the Net Worth Reset Date; provided
that notwithstanding that Consolidated Net Income for any elapsed fiscal
quarter may be a deficit figure, no reduction as a result thereof shall
be made in the sum to be maintained pursuant hereto." As used in this
Section 10.3, "Net Worth Reset Date" shall mean the last day of the
fiscal quarter in which the minimum level of Consolidated Net Worth
required to be maintained pursuant to first sentence of this Section
10.3 equals or exceeds $135,000,000 and "Reset Net Worth Amount" shall
mean the minimum level of Consolidated Net Worth required to be
maintained pursuant to the first sentence of this Section 10.3 on the
Net Worth Reset Date.
Section 1.2. Section 10.5(iv)(1) of the Note Purchase Agreements
shall be and is hereby amended in its entirety to read as follows:
"(1) Consolidated Funded Debt, shall not exceed
the applicable percentage of Consolidated Total Capitalization set
forth below opposite the period during which such additional Funded
Debt is to be created, issued, assumed, guaranteed or incurred:
Percent of Consolidated
For The Period Total Capitalization
______________ ____________________
From September 27, 1996 to and including March 28, 1997 56%
From March 29, 1997 to and including September 26, 1997 55%
From September 27, 1997 to and including March 27, 1998 54%
From March 28, 1998 to and including September 25, 1998 52%
From September 26, 1998 and thereafter 50%
Section 2. Representations and Warranties of the Company.
Section 2.1. To induce the Noteholders to execute and deliver
this Second Amendment, the Company represents and warrants to the Noteholders
(which representations shall survive the execution and delivery of this
Second Amendment) that:
(a) this Second Amendment has been duly authorized, executed
and delivered by it and this Second Amendment constitutes the legal,
valid and binding obligation, contract and agreement of the Company
enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles relating to or
limiting creditors' rights generally;
(b) the Note Purchase Agreements, as amended by this Second
Amendment, constitute the legal, valid and binding obligations,
contracts and agreements of the Company enforceable against it in
accordance with their terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles relating to or limiting creditors' rights generally;
(c) the execution, delivery and performance by the Company of
this Second Amendment (1) has been duly authorized by all requisite
corporate action and, if required, shareholder action, (2) does not
require the consent or approval of any governmental or regulatory body
or agency, and (3) will not (i) violate (A) any provision of law, statute,
rule or regulation or its certificate of incorporation or bylaws, (B)
any order of any court or any rule, regulation or order of any other
agency or government binding upon it, or (C) any provision of any
material indenture, agreement or other instrument to which it is a party
or by which its properties or assets are or may be bound, or (ii) result
in a breach or constitute (alone or with due notice or lapse of time or
both) a default under any indenture, agreement or other instrument
referred to in clause (3)(i)(C) of this Section 2.1(c); and
(d) as of the date hereof and after giving effect to this
Second Amendment, no Default or Event of Default has occurred which is
continuing.
Section 3. Conditions to Effectiveness of Second Amendment.
This Second Amendment shall not become effective until, and
shall become effective when, each and every one of the following conditions
shall have been satisfied:
(a) executed counterparts of this Second Amendment, duly
executed by the Company and the Noteholders, shall have been delivered
to the Noteholders;
(b) the Noteholders shall have received a copy of the
resolutions of the Board of Directors of the Company authorizing the
execution, delivery and performance by the Company of this Second
Amendment, certified by its Secretary or an Assistant Secretary;
(c) the representations and warranties of the Company set
forth in Section 2 hereof shall be true and correct on and with respect
to the date hereof;
(d) the Noteholders shall have received evidence, in form and
substance reasonably satisfactory to the Noteholders and their special
counsel, that the Stock Acquisition shall have been consummated.
Receipt of all of the foregoing is acknowledged on the 19th day of
November, 1996 and, accordingly, this Second Amendment shall be effective on
and as of such date.
Section 4. Payment of Noteholders' Counsel Fees and Expenses.
The Company agrees to pay upon demand, the reasonable fees and
expenses of Chapman and Cutler, counsel to the Noteholders, in connection
with the negotiation, preparation, approval, execution and delivery of this
Second Amendment.
Section 5. Miscellaneous.
Section 5.1. Except as modified and expressly amended by this
Second Amendment, the Note Purchase Agreements are in all respects ratified,
confirmed and approved and all of the terms, provisions and conditions
thereof shall be and remain in full force and effect.
Section 5.2. Any and all notices, requests, certificates and
other instruments executed and delivered after the execution and delivery of
this Second Amendment may refer to the Note Purchase Agreements without
making specific reference to this Second Amendment but nevertheless all such
references shall include this Second Amendment unless the context otherwise
requires.
Section 5.3. This Second Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
Section 5.4. This Second Amendment may be executed and delivered
in any number of counterparts, each of such counterparts constituting an
original, but all together only one Second Amendment.
In Witness Whereof, the Company and the Noteholders have caused this
instrument to be executed, all as of the day and year first above written.
Dames & Moore, Inc.
By Its: MARK A. SNELL
_________________________________
Mark A. Snell
Executive Vice President and Chief
Financial Officer
Teachers Insurance and Annuity
Association of America
By Its: GREGORY W. MACCORDY
_________________________________
Gregory W. MacCordy
Director-Private Placements
Accepted and Agreed to:
Principal Mutual Life Insurance Company
By Its: AUSTIN RAMZY
_________________________________
Austin Ramzy
Assistant Director Investments Securities
By Its: SARAH J. PITTS
________________________________
Sarah J. Pitts
Counsel
Accepted and Agreed to:
American General Life Insurance Company
By Its: JULIA S. TUCKER
_______________________________
Julia S. Tucker
Investment Officer
Accepted and Agreed to:
United of Omaha Life Insurance Company
By Its: CURT CALDWELL
______________________________
Curt Caldwell
First Vice President
Accepted and Agreed to:
American Republic Insurance Company
By Its: S.F. SHELDON
_____________________________
S.F. Sheldon
Senior Vice President, Investments
Accepted and Agreed to:
Aid Association for Lutherans
By Its: JAMES ABITZ
_____________________________
James Abitz
Vice President - Securities
By Its: R. JERRY SCHEEL
----------------------------
R. Jerry Scheel
Second Vice President - Securities
Accepted and Agreed to:
Provident Mutual Life Insurance Company
By Its: JAMES D. KESTNER
_____________________________
James D. Kestner
Vice President
Accepted and Agreed to:
Indianapolis Life Insurance Company
By Its: GENE E. TRUEBLOOD
____________________________
Gene E. Trueblood
Vice President, C.I.O. and Treasurer
DAMES & MOORE, INC.
$10,000,000 7.19% Senior Notes, Series F,
Due December 16, 2004,
and
$10,000,000 7.23% Senior Notes, Series G,
Due December 16, 2005
______________
NOTE PURCHASE AGREEMENT
_____________
Dated as of December 16, 1996
TABLE OF CONTENTS
(Not a part of the Agreement)
SECTION HEADING Page
SECTION 1. AUTHORIZATION OF NOTES 1
SECTION 2. SALE AND PURCHASE OF NOTES 1
SECTION 3. CLOSING 2
SECTION 4. CONDITIONS TO CLOSING 2
Section 4.1. Representations and Warranties 2
Section 4.2. Performance; No Default. 2
Section 4.3. Compliance Certificates 2
Section 4.4. Opinions of Counsel 3
Section 4.5. Purchase Permitted By Applicable Law, etc 3
Section 4.6. Payment of Special Counsel Fees. 3
Section 4.7. Private Placement Number 3
Section 4.8. Changes in Corporate Structure 3
Section 4.9. Proceedings and Documents 3
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 4
Section 5.1. Organization; Power and Authority 4
Section 5.2. Authorization, etc 4
Section 5.3. Disclosure 4
Section 5.4. Organization and Ownership of Shares of Subsidiaries;
Affiliates 4
Section 5.5. Financial Statements 5
Section 5.6. Compliance with Laws, Other Instruments, etc 5
Section 5.7. Governmental Authorizations, etc 6
Section 5.8. Litigation; Observance of Agreements, Statutes and
Orders 6
Section 5.9. Taxes 6
Section 5.10. Title to Property; Leases 6
Section 5.11. Licenses, Permits, etc 7
Section 5.12. Compliance with ERISA 7
Section 5.13. Private Offering by the Company 8
Section 5.14. Use of Proceeds; Margin Regulations 8
Section 5.15. Existing Indebtedness; Future Liens 8
Section 5.16. Foreign Assets Control Regulations, etc 8
Section 5.17. Status under Certain Statutes 9
Section 5.18. Environmental Matters 9
SECTION 6. REPRESENTATIONS OF THE PURCHASER 9
Section 6.1. Purchase for Investment 9
Section 6.2. Source of Funds 10
SECTION 7. INFORMATION AS TO COMPANY 11
Section 7.1. Financial and Business Information 11
Section 7.2. Officer's Certificate 14
Section 7.3. Inspection 15
SECTION 8. PREPAYMENT OF THE NOTES 15
Section 8.1. Required Prepayments 15
Section 8.2. Optional Prepayments with Make-Whole Amount 16
Section 8.3. Allocation of Partial Prepayments 16
Section 8.4. Maturity; Surrender, etc 16
Section 8.5. Purchase of Notes 16
Section 8.6. Make-Whole Amount 16
SECTION 9. AFFIRMATIVE COVENANTS 18
Section 9.1. Compliance with Law 18
Section 9.2. Insurance 18
Section 9.3. Maintenance of Properties 18
Section 9.4. Payment of Taxes and Claims 19
Section 9.5. Corporate Existence, etc 19
Section 9.6. Subsidiary Guaranties 19
SECTION 10. NEGATIVE COVENANTS 20
Section 10.1. Transactions with Affiliates 20
Section 10.2. Nature of Business 20
Section 10.3. Consolidated Net Worth 20
Section 10.4. Fixed Charges Coverage Ratio 20
Section 10.5. Limitations on Indebtedness 21
Section 10.6. Limitation on Liens 22
Section 10.7. Mergers, Consolidations and Sales of Assets 24
Section 10.8. Designation of Subsidiaries 28
SECTION 11. EVENTS OF DEFAULT 28
SECTION 12. REMEDIES ON DEFAULT, ETC 31
Section 12.1. Acceleration 31
Section 12.2. Other Remedies 31
Section 12.3. Rescission 31
Section 12.4. No Waivers or Election of Remedies, Expenses, etc 32
SECTION 13. REGISTRATION; EXCHANGE, SUBSTITUTION OF NOTES 32
Section 13.1. Registration of Notes 32
Section 13.2. Transfer and Exchange of Notes 32
Section 13.3. Replacement of Notes 33
SECTION 14. PAYMENTS ON NOTES 33
Section 14.1. Place of Payment 33
Section 14.2. Home Office Payment 33
SECTION 15. EXPENSES, ETC 34
Section 15.1. Transaction Expenses 34
Section 15.2. Survival 34
SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT 34
Section 17. Amendment and Waiver 35
Section 17.1. Requirements 35
Section 17.2. Solicitation of Holders of Notes 35
Section 17.3. Binding Effect, etc 35
Section 17.4. Notes Held by Company, etc 36
SECTION 18. NOTICES 36
SECTION 19. REPRODUCTION OF DOCUMENTS 36
SECTION 20. CONFIDENTIAL INFORMATION 37
SECTION 21. SUBSTITUTION OF PURCHASER 38
SECTION 22. MISCELLANEOUS 38
Section 22.1. Successors and Assigns 38
Section 22.2. Payments Due on Non-Business Days 38
Section 22.3. Severability 38
Section 22.4. Construction 39
Section 22.5. Counterparts 39
Section 22.6. Governing Law 39
Signature 40
<PAGE>
SCHEDULE A INFORMATION RELATING TO PURCHASER
SCHEDULE B DEFINED TERMS
SCHEDULE 5.4 SUBSIDIARIES OF THE COMPANY AND OWNERSHIP OF SUBSIDIARY
STOCK
SCHEDULE 5.5 FINANCIAL STATEMENTS
SCHEDULE 5.14 USE OF PROCEEDS
SCHEDULE 5.15 EXISTING INDEBTEDNESS
SCHEDULE 5.18 ENVIRONMENTAL LIABILITIES
EXHIBIT 1 FORM OF 7.19% SENIOR NOTE, SERIES F, DUE DECEMBER 16, 2004
EXHIBIT 2 FORM OF 7.23% SENIOR NOTE, SERIES G, DUE DECEMBER 16, 2005
EXHIBIT 3(a) FORM OF OPINION OF SPECIAL COUNSEL FOR THE PURCHASER
EXHIBIT 3(b) FORM OF OPINION OF SPECIAL COUNSEL FOR THE COMPANY
DAMES & MOORE, INC.
911 Wilshire Boulevard, Suite 700,
Los Angeles, California 90017
Re: $10,000,000 7.19% Senior Notes, Series F,
Due December 16, 2004,
and
$10,000,000 7.23% Senior Notes, Series G,
Due December 16, 2005
Dated as of
December 16, 1996
To the Purchaser Named in Schedule A
Hereto who is a Signatory Hereto
Ladies and Gentlemen:
Dames & Moore, Inc., a Delaware corporation (the "Company"), agrees with
you as follows:
Section 1. Authorization of Notes.
The Company will authorize the issue and sale of its 7.19% Senior
Notes, Series F, due December 16, 2004 (the "Series F Notes") in an aggregate
principal amount of $10,000,000 and its 7.23% Senior Notes, Series G, due
December 16, 2005 (the "Series G Notes") in an aggregate principal amount of
$10,000,000 (the Series F Notes and the Series G Notes are hereinafter
collectively referred to as the "Notes", such term to include any such notes
issued in substitution therefor pursuant to Section 13 of this Agreement).
The Series F Notes and the Series G Notes shall be substantially in the form
set out in Exhibits 1 and 2, respectively, with such changes therefrom, if
any, as may be approved by you and the Company. Certain capitalized terms
used in this Agreement are defined in Schedule B; references to a "Schedule"
or an "Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit
attached to this Agreement.
Section 2. Sale and Purchase of Notes.
Subject to the terms and conditions of this Agreement, the Company will
issue and sell to you and you will purchase from the Company, at the Closing
provided for in Section 3, Notes of the series and in the principal amount
specified opposite your name in Schedule A at the purchase price of 100% of
the principal amount thereof and on the date specified opposite your name in
Schedule A.
Section 3. Closing.
The sale and purchase of the Notes to be purchased by you shall occur at
the offices of Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois
60603, at 10:00 a.m. Chicago time, on December 16, 1996 or on such later date
(not later than December 18, 1996) as shall be agreed upon by the Company
and you (the "Closing"). At the Closing the Company will deliver to you the
Notes of the series to be purchased by you in the form of a single Note (or
such greater number of Notes in denominations of at least $1,000,000, or such
lesser amount as shall constitute your entire commitment, as you may request)
dated the date of the Closing and registered in your name (or in the name of
your nominee), against delivery by you to the Company or its order of
immediately available funds in the amount of the purchase price therefor by
wire transfer of immediately available funds for the account of the Company
to account number 0491-12465 at Sanwa Bank California, 601 South Figueroa
St., Los Angeles, California 90017, ABA No. 122003516. If at the Closing
the Company shall fail to tender such Notes to you as provided above in this
Section 3, or any of the conditions specified in Section 4 shall not have
been fulfilled to your satisfaction, you shall, at your election, be relieved
of all further obligations under this Agreement, without thereby waiving any
rights you may have by reason of such failure or such nonfulfillment.
Section 4. Conditions to Closing.
Your obligation to purchase and pay for the Notes to be sold to you at
the Closing is subject to the fulfillment to your satisfaction, prior to or
at the Closing, of the following conditions:
Section 4.1. Representations and Warranties. The representations
and warranties of the Company in this Agreement shall be correct when made
and at the time of the Closing.
Section 4.2. Performance; No Default. The Company shall have
performed and complied with all agreements and conditions contained in this
Agreement required to be performed or complied with by it prior to or at the
Closing, and after giving effect to the issue and sale of the Notes (and the
application of the proceeds thereof as contemplated by Schedule 5.14), no
Default or Event of Default shall have occurred and be continuing. Neither
the Company nor any Subsidiary shall have entered into any transaction since
September 27, 1996 that would have been prohibited by Sections 10.1, 10.5,
10.6 or 10.8 hereof had such Sections applied since such date.
Section 4.3. Compliance Certificates.
(a) Officer's Certificate. The Company shall have delivered
to you an Officer's Certificate, dated the date of the Closing, certifying
that the conditions specified in Sections 4.1 and 4.2 and Section 4.8, have
been fulfilled.
(b) Secretary's Certificate. The Company shall have delivered to
you a certificate certifying as to the resolutions attached thereto and other
corporate proceedings relating to the authorization, execution and delivery
of the Notes and this Agreement.
Section 4.4. Opinions of Counsel. You shall have received
opinions in form and substance satisfactory to you, dated the date of the
Closing (a) from Riordan & McKinzie, counsel for the Company, covering the
matters set forth in Exhibit 3(b) and covering such other matters incident to
the transactions contemplated hereby as you or your counsel may reasonably
request (and the Company hereby instructs its counsel to deliver such opinion
to you) and (b) from Chapman and Cutler, your special counsel in connection
with such transactions, substantially in the form set forth in Exhibit 3(a)
and covering such other matters incident to such transactions as you may
reasonably request.
Section 4.5. Purchase Permitted By Applicable Law, etc. On the
date of the Closing your purchase of Notes shall (a) be permitted by the laws
and regulations of each jurisdiction to which you are subject, without
recourse to provisions (such as Section 1405(a)(8) of the New York Insurance
Law) permitting limited investments by insurance companies without
restriction as to the character of the particular investment, (b) not violate
any applicable law or regulation (including, without limitation, Regulation
G, T or X of the Board of Governors of the Federal Reserve System) and (c)
not subject you to any tax, penalty or liability under or pursuant to any
applicable law or regulation, which law or regulation was not in effect on
the date hereof. If requested by you, you shall have received an Officer's
Certificate certifying as to such matters of fact as you may reasonably
specify to enable you to determine whether such purchase is so permitted.
Section 4.6. Payment of Special Counsel Fees. Without limiting the
provisions of Section 15.1, the Company shall have paid on or before the
Closing the fees, charges and disbursements of your special counsel referred
to in Section 4.4 to the extent reflected in a statement of such counsel
rendered to the Company at least one Business Day prior to the Closing.
Section 4.7. Private Placement Number. On or prior to the
Closing, a Private Placement Number issued by Standard & Poor's CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have been obtained for each
series of Notes.
Section 4.8. Changes in Corporate Structure. As of the date of the
Closing the Company shall not have changed its jurisdiction of incorporation
or been a party to any merger or consolidation and shall not have succeeded
to all or any substantial part of the liabilities of any other entity, at any
time following the date of the most recent financial statements referred to
in Schedule 5.5.
Section 4.9. Proceedings and Documents. All corporate and other
proceedings inconnection with the transactions contemplated by this Agreement
and all documents and instruments incident to such transactions shall be
satisfactory to you and your special counsel, and you and your special
counsel shall have received all such counterpart originals or certified or
other copies of such documents as you or they may reasonably request.
Section 5. Representations and Warranties of the Company.
The Company represents and warrants to you that:
Section 5.1. Organization; Power and Authority. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation, and is duly qualified as a foreign
corporation and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which
the failure to be so qualified or in good standing could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.
The Company has the corporate power and authority to own or hold under
lease the properties it purports to own or hold under lease, to transact the
business it transacts and proposes to transact, to execute and deliver this
Agreement and the Notes and to perform the provisions hereof and thereof.
Section 5.2. Authorization, etc. This Agreement and the Notes
have been duly authorized by all necessary corporate action on the part of
the Company, and this Agreement constitutes, and upon execution and delivery
thereof each Note will constitute, a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and (ii) general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
Section 5.3. Disclosure. This Agreement, the documents,
certificates or other writings delivered to you by or on behalf of the
Company in connection with the transactions contemplated hereby and the
financial statements listed in Schedule 5.5, taken as a whole, do not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading in light of the
circumstances under which they were made. Except as disclosed in one
of the documents, certificates or other writings identified herein, or in the
financial statements listed in Schedule 5.5, since March 29, 1996, there has
been no change in the financial condition, operations, business or
properties of the Company or any Subsidiary except changes that individually
or in the aggregate could not reasonably be expected to have a Material
Adverse Effect. There is no fact known to the Company that could reasonably
be expected to have a Material Adverse Effect that has not been set forth
herein or in the other documents, certificates and other writings delivered to
you by or on behalf of the Company specifically for use in connection with
the transactions contemplated hereby.
Section 5.4. Organization and Ownership of Shares of Subsidiaries;
Affiliates.
(a) Schedule 5.4 contains (except as noted therein) complete
and correct lists (i) of the Company's Subsidiaries, showing, as to each
Subsidiary, the correct name thereof, the jurisdiction of its organization,
and the percentage of shares of each class of its capital stock or similar
equity interests outstanding owned by the Company and each other Subsidiary,
(ii) of the Company's Affiliates, other than Subsidiaries, (iii) of the
Company's Restricted Subsidiaries and (iv) of the Company's directors
and executive officers.
(b) All of the outstanding shares of capital stock or similar
equity interests of each Subsidiary shown in Schedule 5.4 as being owned by
the Company and its Subsidiaries have been validly issued, are fully paid and
nonassessable and are owned by the Company or another Subsidiary free and
clear of any Lien except as disclosed in Schedule 5.4.
(c) Each Subsidiary identified in Schedule 5.4 is a corporation
or other legal entity duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, and is duly qualified as
a foreign corporation or other legal entity and is in good standing in each
jurisdiction in which such qualification is required by law, other than those
jurisdictions as to which the failure to be so qualified or in good standing
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Each such Subsidiary has the corporate or other
power and authority to own or hold under lease the properties it purports to
own or hold under lease and to transact the business it transacts and
proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to, any
legal restriction or any agreement (other than this Agreement, the agreements
listed on Schedule 5.4 and customary limitations imposed by corporate law
statutes) restricting the ability of such Subsidiary to pay dividends out of
profits or make any other similar distributions of profits to the Company or
any of its Subsidiaries that owns outstanding shares of capital stock or
similar equity interests of such Subsidiary.
Section 5.5. Financial Statements. The Company has delivered to
you copies of the financial statements of the Company and its Subsidiaries
listed on Schedule 5.5. All of said financial statements (including in each
case the related schedules and notes) fairly present in all material respects
the consolidated financial position of the Company and its Subsidiaries as of
the respective dates specified in such financial statements and the
consolidated results of their operations and cash flows for the respective
periods so specified and have been prepared in accordance with GAAP
consistently applied throughout the periods involved except as set forth in
the notes thereto (subject, in the case of any interim financial statements,
to normal year-end adjustments and except that interim financial statements
do not contain all of the footnote disclosures required by GAAP for annual
financial statements).
Section 5.6. Compliance with Laws, Other Instruments, etc. The
execution, delivery and performance by the Company of this Agreement and the
Notes will not (a) contravene, result in any breach of, or constitute a
default under, or result in the creation of any Lien in respect of any property
of the Company or any Subsidiary under, any indenture, mortgage, deed of
trust, loan, purchase or credit agreement, lease, corporate charter or
by-laws, or any other agreement or instrument to which the Company or any
Subsidiary is bound or by which the Company or any Subsidiary or any of their
respective properties may be bound or affected, (b) conflict with or result
in a breach of any of the terms, conditions or provisions of any order,
judgment, decree, or ruling of any court, arbitrator or Governmental
Authority applicable to the Company or any Subsidiary or (c) violate any
provision of any statute or other rule or regulation of any Governmental
Authority applicable to the Company or any Subsidiary.
Section 5.7. Governmental Authorizations, etc. No consent,
approval or authorization of, or registration, filing or declaration with,
any Governmental Authority is required on the part of the Company in
connection with the execution, delivery or performance by the Company of this
Agreement or the Notes.
Section 5.8. Litigation; Observance of Agreements, Statutes and
Orders.
(a) There are no actions, suits or proceedings pending or, to the
knowledge of the Company, threatened against or affecting the Company or any
Subsidiary or any property of the Company or any Subsidiary in any court or
before any arbitrator of any kind or before or by any Governmental Authority
that, individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default
under any term of any agreement or instrument to which it is a party or by
which it is bound, or any order, judgment, decree or ruling of any court,
arbitrator or Governmental Authority or is in violation of any applicable
law, ordinance, rule or regulation (including without limitation
Environmental Laws) of any Governmental Authority, which default or
violation, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.
Section 5.9. Taxes. The Company and its Subsidiaries have filed
all tax returns that are required to have been filed in any jurisdiction, and
have paid all taxes shown to be due and payable on such returns and all other
taxes and assessments levied upon them or their properties, assets, income or
franchises, to the extent such taxes and assessments have become due and
payable and before they have become delinquent, except for any taxes and
assessments (a) the amount of which is not individually or in the aggregate
Material or (b) the amount, applicability or validity of which is currently
being contested in good faith by appropriate proceedings and with respect to
which the Company or a Subsidiary, as the case may be, has established
adequate reserves in accordance with GAAP. The Company knows of no
reasonable basis for any other tax or assessment that could reasonably be
expected to have a Material Adverse Effect. The charges, accruals and
reserves on the books of the Company and its Subsidiaries in respect of
Federal, state or other taxes for all fiscal periods are reasonable in
accordance with GAAP. The Federal income tax liabilities of the Company
and its Subsidiaries have been closed by the Internal Revenue Service and
paid for all fiscal years up to and including the fiscal year ended March 27,
1992.
Section 5.10. Title to Property; Leases. The Company and its
Subsidiaries have good and sufficient title to their respective properties
that individually or in the aggregate are Material, including all such
properties reflected in the most recent audited balance sheet referred to in
Section 5.5 or purported to have been acquired by the Company or any
Subsidiary after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens prohibited
by this Agreement. All leases that individually or in the aggregate are
Material are valid and subsisting and are in full force and effect in all
material respects.
Section 5.11. Licenses, Permits, etc.
(a) The Company and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that individually or in the
aggregate are Material, without known conflict with the rights of others.
(b) To the best knowledge of the Company, no product of the
Company infringes in any Material respect any license, permit, franchise,
authorization, patent, copyright, service mark, trademark, trade name or
other right owned by any other Person.
(c) To the best knowledge of the Company, there is no
Material violation by any Person of any right of the Company or any of its
Subsidiaries with respect to any patent, copyright, service mark, trademark,
trade name or other right owned or used by the Company or any of its
Subsidiaries.
Section 5.12. Compliance with ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except for such
instances of noncompliance as have not resulted in and could not reasonably
be expected to result in a Material Adverse Effect. Neither the Company nor
any ERISA Affiliate has incurred any liability pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to
employee benefit plans (as defined in Section 3 of ERISA), and no event,
transaction or condition has occurred or exists that could reasonably be
expected to result in the incurrence of any such liability by the Company or
any ERISA Affiliate, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate, in either case
pursuant to Title I or IV of ERISA or to such penalty or excise tax
provisions or to Section 401(a)(29) or 412 of the Code, other than such
liabilities or Liens as would not be individually or in the aggregate Material.
(b) The Company maintains no defined benefit Plans.
(c) The Company and its ERISA Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under Section 4201 or 4204 of ERISA in respect of Multiemployer
Plans that individually or in the aggregate are Material.
(d) The expected post-retirement benefit obligation
(determined as of the last day of the Company's most recently ended fiscal
year in accordance with Financial Accounting Standards Board Statement No.
106, without regard to liabilities attributable to continuation coverage
mandated by Section 4980B of the Code) of the Company and its Subsidiaries is
not Material.
(e) The execution and delivery of this Agreement and the
issuance and sale of the Notes hereunder will not involve any transaction
that is subject to the prohibitions of Section 406 of ERISA or in connection
with which a tax could be imposed pursuant to Section 4975(c)(1)(A)-(D) of the
Code. The representation by the Company in the first sentence of this
Section 5.12(e) is made in reliance upon and subject to the accuracy of your
representation in Section 6.2 as to the sources of the funds used to pay the
purchase price of the Notes to be purchased by you.
Section 5.13. Private Offering by the Company. Neither the
Company nor anyone acting on its behalf has offered the Notes or any similar
securities for sale to, or solicited any offer to buy any of the same from,
or otherwise approached or negotiated in respect thereof with, any Person
other than you who has been offered the Notes at a private sale for
investment. Neither the Company nor anyone acting on its behalf has taken,
or will take, any action that would subject the issuance or sale of the Notes
to the registration requirements of Section 5 of the Securities Act.
Section 5.14. Use of Proceeds; Margin Regulations. The Company
will apply the proceeds of the sale of the Notes as set forth in Schedule
5.14. No part of the proceeds from the sale of the Notes hereunder will be
used for the purpose of buying or carrying any margin stock within the
meaning of Regulation G of the Board of Governors of the Federal Reserve
System (12 CFR 207), or for the purpose of buying or carrying or trading in
any securities under such circumstances as to involve the Company in a
violation of Regulation X of said Board (12 CFR 224) or to involve any
broker or dealer in a violation of Regulation T of said Board (12 CFR 220).
As of September 27, 1996, margin stock (excluding treasury stock) did not
constitute more than 4.7% of the value of the consolidated assets of the
Company and its Subsidiaries and the Company does not have any present
intention that margin stock (excluding treasury stock) will constitute more
than 9.5% of the value of such assets. As used in this Section, the terms
"margin stock" and "purpose of buying or carrying" shall have the meanings
assigned to them in said Regulation G.
Section 5.15. Existing Indebtedness; Future Liens.
(a) Schedule 5.15 sets forth a complete and correct list of each
item of Indebtedness in excess of $500,000 in principal amount outstanding of
the Company and its Subsidiaries together with the aggregate amount of all
other outstanding Indebtedness of the Company and its Subsidiaries as of
December 2, 1996, since which date there has been no Material change in the
amounts, interest rates, sinking funds, installment payments or maturities of
such Indebtedness of the Company or its Subsidiaries. Neither the Company
nor any Subsidiary is in default and no waiver of default is currently in
effect, in the payment of any principal or interest on any Indebtedness of
the Company or such Subsidiary and no event or condition exists with respect
to any Indebtedness of the Company or any Subsidiary that would permit (or
that with notice or the lapse of time, or both, would permit) one or more
Persons to cause such Indebtedness to become due and payable before its
stated maturity or before its regularly scheduled dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the Company
nor any Subsidiary has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its property,
whether now owned or hereafter acquired, to be subject to a Lien not
permitted by Section 10.6.
Section 5.16. Foreign Assets Control Regulations, etc. Neither
the sale of the Notes by the Company hereunder nor its use of the proceeds
thereof will violate the Trading with the Enemy Act, as amended, or any of
the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
Section 5.17. Status under Certain Statutes. Neither the Company
nor any Subsidiary is an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended, or is
subject to regulation under the Public Utility Holding Company Act of
1935, as amended, or the Federal Power Act, as amended.
Section 5.18. Environmental Matters. Neither the Company nor any
Subsidiary has knowledge of any claim or has received any notice of any
claim, and no proceeding has been instituted raising any claim against the
Company or any of its Subsidiaries or any of their respective real properties
now or formerly owned, leased or operated by any of them or other assets,
alleging a release of Hazardous Materials to the environment in quantities or
concentrations which typically would require a cleanup or alleging a
violation of any Environmental Laws, except, in each case, such as could not
reasonably be expected to result in a Material Adverse Effect. Except as
otherwise disclosed in Schedule 5.18:
(a) neither the Company nor any Subsidiary has knowledge of
any facts which would give rise to any claim, public or private, of
violation of Environmental Laws or for a release of Hazardous Materials
emanating from, occurring on or in any way related to real properties
now or formerly owned, leased or operated by any of them or to other
assets or their use, except, in each case, such as could not reasonably
be expected to result in a Material Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has
stored any Hazardous Materials on real properties now or formerly owned,
leased or operated by any of them, or has disposed of any Hazardous
Materials, in a manner contrary to any Environmental Laws in each case
in any manner that could reasonably be expected to result in a Material
Adverse Effect; and
(c) all buildings on all real properties now owned, leased or
operated by the Company or any of its Subsidiaries are in compliance
with applicable Environmental Laws, as interpreted or administered by
courts or administrative agencies on the date hereof, except where
failure to comply could not reasonably be expected to result in a
Material Adverse Effect.
Section 6. Representations of the Purchaser.
Section 6.1. Purchase for Investment. You represent that you are
purchasing the Notes for your own account or for one or more separate
accounts maintained by you or for the account of one or more pension or trust
funds, in any such case for investment and not with a view to the
distribution thereof, provided that the disposition of your or their property
shall at all times be within your or their control. You understand that the
Notes have not been registered under the Securities Act and may be resold
only if registered pursuant to the provisions of the Securities Act or if an
exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law, and that
the Company is not required to register the Notes. You further represent
that you are an accredited investor within the meaning of Rule 501 of
Regulation D promulgated under the Securities Act.
Section 6.2. Source of Funds. You represent that at least one of
the following statements is an accurate representation as to each source of
funds (a "Source") to be used by you to pay the purchase price of the Notes
to be purchased by you hereunder:
(a) the Source is an "insurance company general account"
within the meaning of Department of Labor Prohibited Transaction
Exemption ("PTE") 95-60 (issued July 12, 1995) and there is no "employee
benefit plan", treating as a single plan, all plans maintained by the
same employer or employee organization, with respect to which the amount
of the general account reserves and liabilities for all contracts held
by or on behalf of such plan, exceed ten percent (10%) of the total
reserves and liabilities of such general account (exclusive of separate
account liabilities) plus surplus, as set forth in the NAIC Annual
Statement filed with your state of domicile; or
(b) the Source is either (i) an insurance company pooled
separate account, within the meaning of PTE 90-1 (issued January 29,
1990), or (ii) a bank collective investment fund, within the meaning of
the PTE 91-38 (issued July 12, 1991) and, except as you have disclosed
to the Company in writing pursuant to this paragraph (b), no employee
benefit plan or group of plans maintained by the same employer or
employee organization beneficially owns more than 10% of all assets
allocated to such pooled separate account or collective investment
fund; or
(c) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning of
Part V of the QPAM Exemption), no employee benefit plan's assets that
are included in such investment fund, when combined with the assets of all
other employee benefit plans established or maintained by the same
employer or by an affiliate (within the meaning of Section V(c)(1) of
the QPAM Exemption) of such employer or by the same employee
organization and managed by such QPAM, exceed 20% of the total client
assets managed by such QPAM, the conditions of Part l(c) and (g) of the
QPAM Exemption are satisfied, neither the QPAM nor a person controlling
or controlled by the QPAM (applying the definition of "control" in
Section V(e) of the QPAM Exemption) owns a 5% or more interest in the
Company and (i) the identity of such QPAM and (ii) the names of all
employee benefit plans whose assets are included in such investment fund
have been disclosed to the Company in writing pursuant to this paragraph
(c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee benefit
plans, each of which has been identified to the Company in writing
pursuant to this paragraph (e); or
(f) the Source does not include assets of any employee
benefit plan, other than a plan exempt from the coverage of ERISA.
The Company shall deliver a certificate on the date of the
Closing, with respect to you and on or prior to the date of any transfer of
the Notes, with respect to any subsequent holder of the Notes, which
certificate shall either state that (i) it is neither a "party in interest"
(as defined in Title I, Section 3(14) of ERISA) nor a "disqualified person"
(as defined in Section 4975(e)(2) of the Code) with respect to any plan
identified pursuant to paragraphs (b) or (e) above, or (ii) with respect to any
plan, identified pursuant to paragraph (c) above, neither it nor any
"affiliate" (as defined in Section V(c) of the QPAM Exemption) has at such
time, and during the immediately preceding one year, exercised the authority
to appoint or terminate said QPAM as manager of the assets of any plan
identified in writing pursuant to paragraph (c) above or to negotiate the
terms of said QPAM's management agreement on behalf of any such identified
plans.
As used in this Section 6.2, the terms "employee benefit plan",
"governmental plan", "party in interest" and "separate account" shall have
the respective meanings assigned to such terms in Section 3 of ERISA.
Section 7. Information as to Company.
Section 7.1. Financial and Business Information. The Company
shall deliver to each holder of Notes that is an Institutional Investor:
(a) Quarterly Statements within 45 days after the end of
each quarterly fiscal period in each fiscal year of the Company (other
than the last quarterly fiscal period of each such fiscal year),
duplicate copies of:
(i) a consolidated balance sheet of the Company and its
Restricted Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Restricted Subsidiaries for such quarter and (in the case of
the second and third quarters) for the portion of the fiscal
year ending with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable detail,
prepared in accordance with GAAP applicable to quarterly financial
statements generally, and certified by a Senior Financial Officer as fairly
presenting, in all material respects, the financial position of the companies
being reported on and their results of operations and cash flows, subject to
changes resulting from year-end adjustments, provided that so long as
each Subsidiary of the Company is a Restricted Subsidiary, delivery within
the time period specified above of copies of the Company's Quarterly Report
on Form 10-Q prepared in compliance with the requirements therefor and filed
with the Securities and Exchange Commission shall be deemed to satisfy
the requirements of this Section 7.1(a); provided further thatin the event
that there is any change in generally accepted accounting principles after
the Closing which affects any computation or definition under this Agreement,
the Company shall deliver a report prepared by a Senior Financial Officer
of the Company and reviewed by its independent accountants reconciling the
financial statements required to be delivered by the terms of this Section
7.1(a) with the financial statements permitted to be delivered pursuant to
the foregoing proviso which report shall show all appropriate adjustment
entries in sufficient detail in connection with such reconciliation;
(b) Annual Statements within 90 days after the end of each
fiscal year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Restricted Subsidiaries, as at the end of such year, and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Restricted Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP, and
accompanied by
(A) an opinion thereon of independent certified
public accountants of recognized national standing,
which opinion shall state that such financial statements
present fairly, in all material respects, the financial
position of the companies being reported upon and their
results of operations and cash flows and have been
prepared in conformity with GAAP, and that the
examination of such accountants in connection with such
financial statements has been made in accordance with
generally accepted auditing standards, and that such
audit provides a reasonable basis for such opinion in the
circumstances,
(B) a certificate of such accountants stating
that they have reviewed this Agreement and stating
further whether, in making their audit, they have become
aware of any condition or event that then constitutes a
Default or an Event of Default, and, if they are aware
that any such condition or event then exists, specifying
the nature and period of the existence thereof (it being
understood that such accountants shall not be liable,
directly or indirectly, for any failure to obtain
knowledge of any Default or Event of Default unless such
accountants should have obtained knowledge thereof in
making an audit in accordance with generally accepted
auditing standards or did not make such an audit), and
(C) in the event that there is any change in
generally accepted accounting principles after the
Closing which affects any computation or definition under
this Agreement, a report prepared by a Senior Financial
Officer of the Company and reviewed by its independent
accountants reconciling the financial statements required
to be delivered by the terms of this Section 7.1(b) with
the financial statements permitted to be delivered
pursuant to the following proviso which report shall show
all appropriate adjustment entries in sufficient detail
in connection with such reconciliation;
provided that so long as each Subsidiary of the Company is a Restricted
Subsidiary, delivery within the time period specified above of copies of
the Company's Annual Report on Form 10-K prepared in compliance with the
requirements therefor and filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this Section
7.1(b);
(c) SEC and Other Reports promptly, and in any event within
15 days of their becoming available or being filed, one copy of (i) each
financial statement, report, notice or proxy statement sent by the
Company or any Subsidiary to public securities holders generally,
and (ii) each regular or periodic report, each registration statement
(without exhibits except as expressly requested by such holder), and
each prospectus and all amendments thereto filed by the Company or any
Subsidiary with the Securities and Exchange Commission and of all
press releases and other statements made available generally by the
Company or any Subsidiary to the public concerning developments that are
Material;
(d) Notice of Default, Event of Default or Acceleration of
the Notes promptly, and in any event within five days after a
Responsible Officer becoming aware of (i) the existence of any Default
or Event of Default or that any Person has given any notice or taken
any action with respect to a claimed default hereunder or that any
Person has given any notice or taken any action with respect to a
claimed default of the type referred to in Section 11(f), a written
notice specifying the nature and period of existence thereof and what
action the Company is taking or proposes to take with respect thereto,
or (ii) the acceleration of any Note pursuant to Section 12.1 hereof, a
written notice setting forth the principal amount of each Note so
accelerated, the name of the holder thereof and the circumstances
surrounding such acceleration;
(e) ERISA Matters promptly, and in any event within five days
after a Responsible Officer becoming aware of any of the following, a
written notice setting forth the nature thereof and the action, if any,
that the Company or an ERISA Affiliate proposes to take with respect
thereto:
(i) with respect to any Plan, any reportable event,
as defined in Section 4043(b) of ERISA and the regulations
thereunder, for which notice thereof has not been waived
pursuant to such regulations as in effect on the date hereof; or
(ii) the taking by the PBGC of steps to institute, or
the threatening by the PBGC of the institution of, proceedings
under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the receipt
by the Company or any ERISA Affiliate of a notice from a
Multiemployer Plan that such action has been taken by the PBGC
with respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that could
result in the incurrence of any liability by the Company or
any ERISA Affiliate pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to
employee benefit plans, or in the imposition of any Lien
on any of the rights, properties or assets of the Company or
any ERISA Affiliate pursuant to Title I or IV of ERISA or such
penalty or excise tax provisions, if such liability or Lien,
taken together with any other such liabilities or Liens then
existing, could reasonably be expected to have a Material
Adverse Effect;
(f) Notices from Governmental Authority promptly, and in
any event within 30 days of receipt thereof, copies of any notice to the
Company or any Subsidiary from any Federal or state Governmental
Authority relating to any order, ruling, statute or other law or
regulation that could reasonably be expected to have a Material Adverse
Effect;
(g) Audit Reports. Promptly upon receipt thereof, one copy
of each interim or special audit made by independent accountants of the
books of the Company or any Restricted Subsidiary and any management
letter received from such accountants;
(h) Designation of Subsidiaries. Promptly after the
designation of any Unrestricted Subsidiary as a Restricted Subsidiary,
as set forth in Section 10.8, a copy of the resolution effecting such
designation duly certified by the Secretary or an Assistant Secretary
of the Company, together with a certificate of a Responsible Officer
setting forth in reasonable detail all facts and computations required
in order to establish that such designation was effective and is
permitted by the terms of this Agreement; and
(i) Requested Information with reasonable promptness, such
other data and information relating to the business, operations,
affairs, financial condition, assets or properties of the Company or any
of its Subsidiaries or relating to the ability of the Company to perform
its obligations hereunder and under the Notes as from time to time may be
reasonably requested by any such holder of Notes.
Section 7.2. Officer's Certificate. Each set of financial
statements delivered to a holder of Notes pursuant to Section 7.1(a) or
Section 7.1(b) hereof shall be accompanied by a certificate of a Senior
Financial Officer setting forth:
(a) Covenant Compliance the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Section 10.3, Section 10.4 and
Section 10.5 hereof, inclusive, during the quarterly or annual period
covered by the statements then being furnished (including with respect
to each such Section, where applicable, the calculations of the maximum
or minimum amount, ratio or percentage, as the case may be, permissible
under the terms of such Sections, and the calculation of the amount,
ratio or percentage then in existence); and
(b) Event of Default a statement that such officer has
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision, a review of the transactions and
conditions of the Company and its Subsidiaries from the beginning of the
quarterly or annual period covered by the statements then being
furnished to the date of the certificate and that such review shall not
have disclosed the existence during such period of any condition or
event that constitutes a Default or an Event of Default or, if any such
condition or event existed or exists (including, without limitation, any
such event or condition which constitutes a Default or an Event of
Default resulting from the failure of the Company or any Subsidiary to
comply with any Environmental Law), specifying the nature and period
of existence thereof and what action the Company shall have taken or
proposes to take with respect thereto.
Section 7.3. Inspection. The Company shall permit the
representatives of each holder of Notes that is an Institutional Investor
(subject to compliance with Section 20 hereof):
(a) No Default if no Default or Event of Default then exists,
at the expense of such holder and upon reasonable prior notice to the
Company, to visit the principal executive office of the Company, to
discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the Company's officers, and (with the consent of the
Company, which consent will not be unreasonably withheld) its
independent public accountants, and (with the consent of the Company,
which consent will not be unreasonably withheld) to visit the other
offices and properties of the Company and each Subsidiary, all at such
reasonable times and as often as may be reasonably requested in writing;
and
(b) Default if a Default or Event of Default then exists, at
the expense of the Company, to visit and inspect any of the offices or
properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective officers and independent
public accountants (and by this provision the Company authorizes said
accountants to discuss the affairs, finances and accounts of the Company
and its Subsidiaries, provided that any Institutional Investor
exercising its right to meet with the Company's accountants shall give
the Company at least two Business Days' advance notice of the date of
any such discussions and the Company shall have the right to be present
in connection therewith, it being understood that the failure of the
Company to attend such meeting shall not preclude the Institutional
Investors from proceeding with such meeting), all at such times and as
often as may be requested.
Section 8. Prepayment of the Notes.
Section 8.1. Required Prepayments. No prepayments shall be
required with respect to the Notes.
Section 8.2. Optional Prepayments with Make-Whole Amount. The
Company may, at its option, upon notice as provided below, prepay on any date
that is a Business Day and on which an interest payment is due all, or any
part of, the Notes, in an amount not less than 5% of the aggregate principal
amount of the Notes then outstanding in the case of a partial prepayment, at
100% of the principal amount so prepaid, together with interest accrued
thereon to the date of such prepayment, plus the Make-Whole Amount determined
for the prepayment date with respect to such principal amount. The Company
will give each holder of Notes written notice of each optional prepayment
under this Section 8.2 not less than 30 days and not more than 60 days prior
to the date fixed for such prepayment. Each such notice shall specify such
date, the aggregate principal amount of the Notes to be prepaid on such date,
the principal amount of each Note held by such holder to be prepaid
(determined in accordance with Section 8.3), and the interest to be paid on
the prepayment date with respect to such principal amount being prepaid, and
shall be accompanied by a certificate of a Senior Financial Officer as to the
estimated Make-Whole Amount due in connection with such prepayment
(calculated as if the date of such notice were the date of the prepayment),
setting forth the details of such computation. Two Business Days prior to
such prepayment, the Company shall deliver, via telefacsimile as set forth in
Section 18 hereof, to each holder of Notes a certificate of a Senior
Financial Officer specifying the calculation of such Make-Whole Amount as of
the specified prepayment date.
Section 8.3. Allocation of Partial Prepayments. All partial
prepayments of principal pursuant to Section 8.2 shall be: (a) allocated
among each of the series of Notes in proportion to the aggregate principal
amount outstanding of such series of Notes and (b) allocated pro rata among all
of the holders of each such series of Notes at the time outstanding.
Section 8.4. Maturity; Surrender, etc. In the case of each
prepayment of Notes pursuant to this Section 8, the principal amount of each
Note to be prepaid shall mature and become due and payable on the date fixed
for such prepayment, together with interest on such principal amount accrued
to such date and the applicable Make-Whole Amount, if any. From and after such
date, unless the Company shall fail to pay such principal amount when so due
and payable, together with the interest and Make-Whole Amount, if any, as
aforesaid, interest on such principal amount shall cease to accrue. Any Note
paid or prepaid in full shall be surrendered to the Company and cancelled and
shall not be reissued, and no Note shall be issued in lieu of any prepaid
principal amount of any Note.
Section 8.5. Purchase of Notes. The Company will not and will not
permit any Affiliate or Restricted Subsidiary to purchase, redeem, prepay or
otherwise acquire, directly or indirectly, any of the outstanding Notes
except upon the payment or prepayment of the Notes in accordance with
the terms of this Agreement and the Notes. The Company will promptly cancel
all Notes acquired by it or any Affiliate or Restricted Subsidiary pursuant
to any payment, prepayment or purchase of Notes pursuant to any provision of
this Agreement and no Notes may be issued in substitution or exchange for any
such Notes.
Section 8.6. Make-Whole Amount. The term "Make-Whole Amount"
means, with respect to any Note, an amount equal to the excess, if any, of
the Discounted Value of the Remaining Scheduled Payments with respect to the
Called Principal of such Note over the amount of such Called Principal,
provided that the Make-Whole Amount may in no event be less than zero. For the
purposes of determining the Make-Whole Amount, the following terms have the
following meanings:
"Called Principal" means, with respect to any Note, the principal
of such Note that is to be prepaid pursuant to Section 8.2 or has become
or is declared to be immediately due and payable pursuant to Section
12.1, as the context requires.
"Discounted Value" means, with respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a
discount factor (applied on the same periodic basis as that on which
interest on the Notes is payable) equal to the Reinvestment Yield with
respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called Principal of
any Note, 0.50% over the yield to maturity implied by (i) the yields
reported, as of 10:00 A.M. (New York City time) on the second Business
Day preceding the Settlement Date with respect to such Called Principal,
on the display designated on page "USD" of the Bloomberg Financial Markets
Services Screen (or such other display as may replace page "USD" of the
Bloomberg Financial Markets Services Screen) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining Life of
such Called Principal as of such Settlement Date, or (ii) if such yields
are not reported as of such time or the yields reported as of such time
are not ascertainable, the Treasury Constant Maturity Series Yields
reported, for the latest day for which such yields have been so reported
as of the second Business Day preceding the Settlement Date with respect
to such Called Principal, in Federal Reserve Statistical Release H.15
(519) (or any comparable successor publication) for actively traded U.S.
Treasury securities having a constant maturity equal to the Remaining
Life of such Called Principal as of such Settlement Date. Such implied
yield in (i) or (ii) above will be determined, if necessary, by (a)
converting U.S. Treasury bill quotations to bond-equivalent yields in
accordance with accepted financial practice and (b) interpolating
linearly (calculated to the nearest one-one hundredth percent) between
(1) the actively traded U.S. Treasury security with the duration closest
to and greater than the Remaining Life and (2) the actively traded U.S.
Treasury security with the duration closest to and less than the
Remaining Life.
"Remaining Life" means, with respect to any Called Principal, the
number of years (calculated to the nearest one-twelfth year) that will
elapse between the Settlement Date with respect to such Called Principal
and the scheduled due date of such Called Principal.
"Remaining Scheduled Payments" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and
interest thereon that would be due after the Settlement Date with
respect to such Called Principal if no payment of such Called Principal
were made prior to its scheduled due date, provided that if such
Settlement Date is not a date on which interest payments are due to be
made under the terms of the Notes, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount of
interest accrued to such Settlement Date and required to be paid on such
Settlement Date pursuant to Section 8.2 or 12.1.
"Settlement Date" means, with respect to the Called Principal of
any Note, the date on which such Called Principal is to be prepaid
pursuant to Section 8.2 or has become or is declared to be immediately
due and payable pursuant to Section 12.1, as the context requires.
Section 9. Affirmative Covenants.
The Company covenants that so long as any of the Notes are outstanding:
Section 9.1. Compliance with Law. The Company will, and will
cause each of its Subsidiaries to, comply with all laws, ordinances or
governmental rules or regulations to which each of them is subject,
including, without limitation, Environmental Laws, and will obtain and maintain
in effect all licenses, certificates, permits, franchises and other
governmental authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses, in each case to
the extent necessary to ensure that non-compliance with such laws, ordinances
or governmental rules or regulations or failures to obtain or maintain in
effect such licenses, certificates, permits, franchises and other governmental
authorizations could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
Section 9.2. Insurance. The Company shall maintain (in conjunction
with its self-insurance program referred to below), and shall cause each
Subsidiary to maintain (in conjunction with such self-insurance program),
with financially sound and reputable independent insurers, insurance with
respect to its properties and business against loss, damage, casualties or
contingencies, of the kinds customarily insured against by Persons of
established reputations engaged in the same or similar business, of such
types and in such amounts (including deductibles, co-insurance and
self-insurance, if adequate reserves are maintained with respect thereto) as
are customarily carried under similar circumstances by such other Persons.
Section 9.3. Maintenance of Properties. The Company will, and
will cause each of its Subsidiaries to, maintain and keep, or cause to be
maintained and kept, their respective properties in good repair, working
order and condition (other than ordinary wear and tear), so that the business
carried on in connection therewith may be properly conducted at all times,
provided that this Section shall not prevent the Company or any Subsidiary
from discontinuing the operation and the maintenance of any of its properties
if such discontinuance is desirable in the conduct of its business and the
Company has concluded that such discontinuance could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 9.4. Payment of Taxes and Claims. The Company will, and
will cause each of its Subsidiaries to, file all tax returns required to be
filed in any jurisdiction and to pay and discharge all taxes shown to be due
and payable on such returns and all other taxes, assessments, governmental
charges, or levies imposed on them or any of their properties, assets, income
or franchises, to the extent such taxes and assessments have become due and
payable and before they have become delinquent and all claims for which sums
have become due and payable that have or might become a Lien on properties or
assets of the Company or any Subsidiary (except to the extent the payment
thereof is not subject to penalty or interest), provided that neither the
Company nor any Subsidiary need pay any such tax or assessment or claim if
(i) the amount, applicability or validity thereof is contested by the Company
or such Subsidiary on a timely basis in good faith and in appropriate
proceedings, and the Company or such Subsidiary has established adequate
reserves therefor in accordance with GAAP on the books of the Company or such
Subsidiary or (ii) the nonpayment of all such taxes, assessments and claims
in the aggregate could not reasonably be expected to have a Material Adverse
Effect.
Section 9.5. Corporate Existence, etc. Subject to Section 10.7(a),
the Company will at all times preserve and keep in full force and effect its
corporate existence. Subject to Section 10.7, the Company will at all times
preserve and keep in full force and effect the corporate existence of each of
its Subsidiaries (unless merged into the Company or a Subsidiary) and all
rights and franchises of the Company and its Subsidiaries unless, in the good
faith judgment of the Company, the termination of or failure to preserve and
keep in full force and effect such corporate existence, right or franchise
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
Section 9.6. Subsidiary Guaranties. If at any time, pursuant to
the terms and conditions of any line of credit or bank, loan, note or other
credit agreement (individually, a "Credit Agreement"), any existing or newly
acquired or formed Subsidiary grants to any one or more Institutional
Investors, a guaranty of obligations owing by the Company, if any, under any
Credit Agreement, the Company shall cause such Subsidiary to execute and
deliver to the holders of the Notes a Guaranty in substantially the same form
as the agreement delivered to such Institutional Investor, or any one or more
of them, and the Company shall deliver, or shall cause to be delivered, to
the holders of the Notes (a) an intercreditor agreement in form and substance
reasonably satisfactory to the Required Holders which will be entered into by
any such Institutional Investor or Investors which has or have received any
such subsidiary Guaranty and the holders of the Notes, pursuant to which each
of the parties thereto shall agree that each of such Institutional Investors
and the holders of the Notes shall share the proceeds from the enforcement of
each such subsidiary Guaranty on an equal and ratable basis, (b) all such
certificates, resolutions, legal opinions and other related items in
substantially the same forms as those delivered to and accepted by such
Institutional Investor or Investors which have received the benefit of any
such subsidiary Guaranty, and (c) all such amendments to this Agreement, as
may reasonably be deemed necessary by the Required Holders in order to
reflect the existence of each such subsidiary Guaranty and such intercreditor
agreement.
Section 10. Negative Covenants.
The Company covenants that so long as any of the Notes are outstanding:
Section 10.1. Transactions with Affiliates. The Company will not,
and will not permit any Restricted Subsidiary to, enter into any material
transaction with any Affiliate (other than transactions with the Company or
any other Restricted Subsidiary) on terms less favorable to the Company or
such Restricted Subsidiary than those available in a comparable arms-length
transaction; provided that the foregoing shall not apply to legitimate
business transactions with Affiliates designed to protect, maintain or
enhance the value of the Company's or any Wholly-owned Restricted Subsidiary's
business or investments. Notwithstanding the foregoing, the Company may (i)
make loans or advances in the ordinary course of business to executive
officers of the Company, including reasonable relocation expenses and (ii)
make loans or advances to executive officers of the Company related to the
Company's Stock Purchase Programs; provided that the aggregate amount of any
such loans or advances made pursuant to the forgoing clauses (i) and (ii)
shall not exceed $5,000,000 in the aggregate at any one time outstanding.
Section 10.2. Nature of Business. The Company will not, and will
not permit any Restricted Subsidiary to, engage in any business if, as a
result, the general nature of the business which would then be engaged in by
the Company and its Restricted Subsidiaries on a consolidated basis would be
substantially changed from the general nature of the business engaged in or
proposed to be engaged in by the Company and its Restricted Subsidiaries as
described in the Private Placement Memorandum, dated February, 1996 prepared
by B.A. Securities, Inc. and Oppenheimer & Co., Inc. relating to the issue by
the Company of its senior notes, due 2001 to 2006.
Section 10.3. Consolidated Net Worth. From and after the date of
the Closing until the Net Worth Reset Date the Company will not at any time
permit Consolidated Net Worth to be an amount less than the sum of (a)
$118,000,000 plus (b) 40% of Consolidated Net Income computed on a cumulative
basis for each of the elapsed fiscal quarters beginning after December 27,
1996; provided that notwithstanding that Consolidated Net Income for any
elapsed fiscal quarter may be a deficit figure, no reduction as a result
thereof shall be made in the sum to be maintained pursuant hereto. From and
after the Net Worth Reset Date, the Company will not at any time permit
Consolidated Net Worth to be an amount less than the sum of (y) the Reset Net
Worth Amount plus (z) 25% of Consolidated Net Income computed on a cumulative
basis for each of the elapsed fiscal quarters beginning after the Net Worth
Reset Date; provided that notwithstanding that Consolidated Net Income for
any elapsed fiscal quarter may be a deficit figure, no reduction as a result
thereof shall be made in the sum to be maintained pursuant hereto.
Section 10.4. Fixed Charges Coverage Ratio. The Company will not
permit, as calculated on the last day of each fiscal quarter, the ratio of
(a) Consolidated Modified EBITDA for the four fiscal quarter period ending on
such date to (b) Consolidated Fixed Charges for such four fiscal quarter
period to be less than 1.75 to 1.00.
Section 10.5. Limitations on Indebtedness.
(a) The Company will not, and will not permit any Restricted
Subsidiary to, create, issue, assume, guarantee or otherwise incur any
Indebtedness, except:
(i) Funded Debt evidenced by the Notes;
(ii) Funded Debt of the Company and its Restricted
Subsidiaries outstanding as of the Closing and described on Schedule
5.15 hereto;
(iii) Funded Debt of a Restricted Subsidiary owed to the
Company or to a Wholly-owned Restricted Subsidiary;
(iv) Funded Debt of the Company and its Restricted
Subsidiaries, provided that at the time of creation, issuance,
assumption, guarantee or incurrence thereof and after giving
effect thereto and to the application of the proceeds thereof:
(1) Consolidated Funded Debt shall not exceed the
applicable percentage of Consolidated Capitalization set forth
below opposite the period during which such additional Funded
Debt is to be created, issued, assumed, guaranteed or incurred:
For the Period Percent of Consolidated
Capitalization
From September 27, 1996 to and 56%
including March 28, 1997
From March 29, 1997 to and
including September 26, 1997 55%
From September 27, 1997 to and
including March 27, 1998 54%
From March 28, 1998 to and including
September 25, 1998 52%
From September 26, 1998 and thereafter 50%
(2) Consolidated Indebtedness shall not exceed 60% of
Consolidated Total Capitalization, and
(3) in the case of the issuance of any Funded Debt of the
Company or any of its Restricted Subsidiaries secured by Liens
permitted by Section 10.6(h) and any Funded Debt of a
Restricted Subsidiary (other than Funded Debt incurred under
clause (iii) above), the sum of (A) the aggregate amount of
all Indebtedness secured by Liens permitted by Section 10.6(h)
plus (B) the aggregate amount of all Indebtedness of
Restricted Subsidiaries (other than Funded Debt incurred under
clause (iii) above), shall not exceed 15% of Consolidated Net
Worth; and
(v) Current Debt of the Company or any Restricted Subsidiary,
provided that
(1) during the twelve-month period immediately preceding
the date of any determination hereunder, there shall have been
a period of 28 consecutive days during which Consolidated
Indebtedness did not exceed 50% of Consolidated Capitalization
on each day of such 28-day period and which Current Debt shall
during each day of such 28-day period be deemed to constitute
outstanding Funded Debt for purposes of any determination of
additional Funded Debt to be issued or incurred within the
limitations of Section 10.5(a)(iv)(1);
(2) in the case of the issuance of any Current Debt of
the Company or any of its Restricted Subsidiaries secured by
Liens permitted by Section 10.6(h) and any Current Debt of a
Restricted Subsidiary, the sum of (A) the aggregate amount of
all Indebtedness secured by Liens permitted by Section 10.6(h)
plus (B) the aggregate amount of all Indebtedness of
Restricted Subsidiaries, shall not exceed 15% of Consolidated
Net Worth; and
(3) at the time of creation, issuance, assumption,
guarantee or incurrence thereof and after giving effect
thereto and to the application of the proceeds thereof,
Consolidated Indebtedness shall not exceed 60% of Consolidated
Total Capitalization.
(b) The renewal, extension or refunding of any Indebtedness issued,
incurred or outstanding pursuant to Section 10.5(a) shall constitute the
issuance of additional Indebtedness which is, in turn, subject to the
limitations of the applicable provisions of this Section 10.5.
(c) Any Person that becomes a Restricted Subsidiary after the date
hereof shall for all purposes of this Section 10.5 shall be deemed to
have created, assumed or incurred at the time it becomes a Restricted
Subsidiary all Indebtedness of such Person existing immediately after it
becomes a Restricted Subsidiary.
Section 10.6. Limitation on Liens. The Company will not, and will
not permit any of its Restricted Subsidiaries to, create or incur, or suffer
to be incurred or to exist, any Lien on its or their property or assets,
whether now owned or hereafter acquired, or upon any income or profits
therefrom, or transfer any property for the purpose of subjecting the same
to the payment of obligations in priority to the payment of its or their
general creditors, or acquire or agree to acquire, or permit any of its
Restricted Subsidiaries to acquire, any property or assets upon conditional
sales agreements or other title retention devices, except:
(a) Liens for property taxes and assessments or governmental
charges or levies and Liens securing claims or demands of mechanics and
materialmen, provided that payment thereof is not at the time required
by Section 9.4;
(b) Liens of or resulting from any litigation or legal proceeding
which are currently being contested in good faith by appropriate
proceedings and for which the Company or the relevant Restricted
Subsidiary shall have set aside on its books reserves in accordance with
GAAP; provided that the Company or such Restricted Subsidiary need not
so contest any such litigation or legal proceeding as long as, and only
as long as, all judgments against the Company and its Restricted
Subsidiaries which are not stayed, bonded or discharged do not, at any
one time, exceed $1,000,000 in the aggregate;
(c) Liens incidental to the conduct of business or the ownership
of properties and assets (including Liens in connection with worker's
compensation, unemployment insurance and other like laws, warehousemen's
and attorneys' liens and statutory landlords' liens) and Liens to secure
the performance of bids, tenders or trade contracts, or to secure
statutory obligations, indemnity, surety or appeal bonds or other Liens
of like general nature, in any such case not incurred in connection with
the borrowing of money, which in any such case would not have a Material
Adverse Effect, provided in each case, the obligation secured is not
overdue or, if overdue, is being contested in good faith by appropriate
actions or proceedings;
(d) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other
similar purposes, or zoning or other restrictions as to the use of real
properties, which do not in any event materially impair their use in the
operation of the business of the Company and its Restricted Subsidiaries;
(e) (i) Liens securing Indebtedness of a Restricted Subsidiary to
the Company and (ii) Liens constituting a lease on property owned by the
Company and its Subsidiaries entered into in the ordinary course of
business pursuant to which the Company or its Subsidiaries is the lessor
so long as such lease is not entered into in connection with the
borrowing of money by the Company or its Subsidiaries;
(f) Liens existing as of the date of the Closing and described on
Schedule 5.15 hereto;
(g) Liens created or incurred after the date of the Closing given
to secure the payment of the purchase price or financing incurred in
connection with the acquisition, purchase or improvement of fixed
assets, useful and intended to be used in carrying on the business of
the Company or any of its Restricted Subsidiaries, provided that (i) the
Lien shall attach solely to the fixed assets acquired, purchased or
improved, (ii) such Lien shall have been created or incurred within 90
days after the date of acquisition, purchase or improvement, (iii) at
the time of the imposition of the Lien, the aggregate amount remaining
unpaid on all Indebtedness secured by Liens on such fixed assets
(whether or not assumed by the Company or any of its Restricted
Subsidiaries) shall not exceed an amount equal to the total acquisition
or purchase price or the price of such improvements, and (iv) all
such Indebtedness shall have been incurred within the limitations
provided in Section 10.5(a)(iv) or (a)(v), as the case may be; and
(h) Liens created or incurred after the Closing given to secure
Indebtedness of the Company or any of its Restricted Subsidiaries, in
addition to the Liens permitted by the preceding clauses (a) through (g)
hereof, provided that all Indebtedness secured by such Liens shall have
been incurred within the limitations provided in Section 10.5 (a)(iv) or
(a)(v), as the case may be.
Section 10.7. Mergers, Consolidations and Sales of Assets.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, consolidate with or be a party to a merger with any
other Person, or sell, lease, convey or transfer all or substantially all
of its assets; provided that:
(i) any Restricted Subsidiary may merge or consolidate with
or into the Company or any Wholly-owned Restricted Subsidiary so long as
in any merger or consolidation involving the Company, the Company shall
be the surviving or continuing corporation;
(ii) the assets and the equity Securities of any Restricted
Subsidiary may be sold, leased, conveyed or otherwise transferred within
the limitations of Sections 10.7(b) or (c), as applicable;
(iii) the Company may consolidate or merge with or into any
other Person if (1) the Person which results from such consolidation or
merger (the "surviving corporation") is a corporation organized under
the laws of any state of the United States or the District of Columbia,
(2) the due and punctual payment of the principal of and premium, if any,
and interest on all of the Notes, according to their tenor, and the due
and punctual performance and observation of all of the covenants in the
Notes and this Agreement to be performed or observed by the Company are
expressly assumed in writing by the surviving corporation and the
surviving corporation shall furnish to the holders of the Notes an
opinion of counsel satisfactory to such holders to the effect that the
instrument of assumption has been duly authorized, executed and
delivered and constitutes the legal, valid and binding contract and
agreement of the surviving corporation enforceable in accordance with
its terms, except as enforcement of such terms may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles, and (3) at the time of such consolidation or
merger and immediately after giving effect thereto, (A) no Default or
Event of Default would exist and (B) the surviving corporation would be
permitted by the provisions of Section 10.5(a)(iv) to incur at least
$1.00 of additional Funded Debt; and
(iv) the Company may sell, convey or otherwise transfer all or
substantially all of its assets (other than stock of a Restricted
Subsidiary, which may only be sold or otherwise disposed of pursuant to
Section 10.7(c)) to any Person for consideration which represents the
fair market value of such assets (as determined in good faith by the
Board of Directors of the Company) at the time of such sale or other
disposition if (1) the acquiring Person (the "acquiring corporation") is
a corporation organized under the laws of any state of the United States
or the District of Columbia, (2) the due and punctual payment of the
principal of and premium, if any, and interest on all of the Notes,
according to their tenor, and the due and punctual performance and
observation of all of the covenants in the Notes and this Agreement to be
performed or observed by the Company are expressly assumed in writing by
the acquiring corporation and the acquiring corporation shall furnish to
the holders of the Notes an opinion of counsel satisfactory to such
holders to the effect that the instrument of assumption has been duly
authorized, executed and delivered and constitutes the legal, valid
and binding contract and agreement of the acquiring corporation
enforceable in accordance with its terms, except as enforcement of such
terms may be limited by bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles, and (3) at the time of
such acquisition and immediately after giving effect thereto, (A) no
Default or Event of Default would exist and (B) the acquiring corporation
would be permitted by the provisions of Section 10.5(a)(iv) to incur at
least $1.00 of additional Funded Debt.
(b) The Company will not, and will not permit any of its
Restricted Subsidiaries to, sell, lease, transfer, or convey assets
(except assets sold in the ordinary course of business and except as
provided in Section 10.7(a)(iv)); provided that the foregoing
restrictions do not apply to:
(i) the sale, lease, transfer or conveyance of assets of a
Restricted Subsidiary to the Company or a Wholly-owned Restricted
Subsidiary; or
(ii) the sale of assets of the Company or a Restricted
Subsidiary, provided that (1) the same such assets are leased by the
Company or a Restricted Subsidiary, in any such case as lessee, within
180 days of the date of acquisition or completion of construction of such
assets by the Company or such Restricted Subsidiary (an "Exempted Sale
and Leaseback Transaction"), (2) immediately after the consummation of
such sale and after giving effect thereto, no Default or Event of
Default would exist, (3) immediately after the consummation of such sale
and after giving effect thereto, the Company would be permitted by the
provisions of Section 10.5(a)(iv) to incur at least $1.00 of additional
Funded Debt and (4) the proceeds were or are applied within 180 days of
such date of consummation to either (A) the acquisition of fixed assets
useful and intended to be used in the operation of the business of
the Company and its Restricted Subsidiaries as described in Section 10.2
and having a fair market value (as determined in good faith by the
Company) at least equal to that of the assets so disposed of and/or (B)
the prepayment at any applicable prepayment premium, on a pro rata basis,
of Senior Indebtedness of the Company, provided that without regard to
such requirement of application on a pro rata basis (y) in the event such
assets were acquired by the Company or any Restricted Subsidiary with
Indebtedness incurred under a revolving Credit Agreement, proceeds from
the sale of all such assets so acquired, together with proceeds from the
sale of assets within the limitations of Section 10.7(b)(iii) and (c)
(iii), in an aggregate amount not exceeding $5,000,000 may be applied to
the repayment of the Company's obligations under a revolving Credit
Agreement under which such Indebtedness was borrowed and (z) in the
event such assets were secured by a Lien against the Company or any
Restricted Subsidiary, the proceeds may be applied to the repayment of
the Company's or such Restricted Subsidiary's obligations in respect of
the Indebtedness secured by such Lien; or
(iii) the sale of such assets for cash or other property to a
Person or Persons if all of the following conditions are met:
(1) such assets (valued at net book value) do not,
together with all other assets of the Company and its
Restricted Subsidiaries previously sold, conveyed or otherwise
transferred during the same fiscal year (other than in the
ordinary course of business), exceed 15% of Consolidated Total
Assets determined as of the end of the immediately preceding
fiscal year;
(2) in the case of a sale of assets the proceeds of which
exceed $1,000,000, in the opinion of the Board of Directors of
the Company, the sale is for fair value and is in the best
interests of the Company; and
(3) immediately after the consummation of the transaction
and after giving effect thereto, (A) no Default or Event of
Default would exist, and (B) the Company would be permitted by
the provisions of Section 10.5(a)(iv) to incur at least $1.00 of
additional Funded Debt;
provided, however, that for purposes of the calculation in accordance
with clause (iii)(1) above, there shall not be included any assets the
proceeds of which were or are applied within 180 days of the date of
sale of such assets to either (y) the acquisition of fixed assets useful
and intended to be used in the operation of the business of the Company
and its Restricted Subsidiaries as described in Section 10.2 and having
a fair market value (as determined in good faith by the Company) at
least equal to that of the assets so disposed of and/or (z) the
prepayment at any applicable prepayment premium, on a pro rata basis, of
Senior Indebtedness of the Company, provided that, without regard to
such requirement of application on a pro rata basis (yy) in the event
such assets were acquired by the Company or any Restricted Subsidiary
with Indebtedness incurred under a revolving Credit Agreement, proceeds
from the sale of all such assets so acquired, together with proceeds
from the sale of assets within the limitations of Section 10.7(b)(ii)
and (c)(iii), in an aggregate amount not exceeding $5,000,000 may be
applied to the repayment of the Company's obligations under a revolving
Credit Agreement under which such Indebtedness was borrowed and (zz) in
the event such assets were secured by a Lien against the Company or any
Restricted Subsidiary, the proceeds may be applied to the repayment of
the Company's or such Restricted Subsidiary's obligations in respect of
the Indebtedness secured by such Lien.
It is understood and agreed by the Company that any optional prepayment
of the Notes as hereinabove provided shall be made pursuant to and to the
extent provided in Section 8.2. Computations pursuant to this Section 10.7(b)
shall include dispositions made pursuant to Section 10.7(c) and computations
pursuant to Section 10.7(c) shall include dispositions made pursuant to
this Section 10.7(b).
(c) The Company will not, and will not permit any Restricted
Subsidiary to, sell, pledge, transfer or convey any equity Securities
(including as "equity Securities" for the purposes of this Section any
shares of capital stock, options or warrants to purchase equity
Securities or other Securities exchangeable for or convertible into
equity Securities or any other form of equity or voting interest) of a
Restricted Subsidiary (said stock, options, warrants and other Securities
herein called "Subsidiary Equity Securities") nor will any Restricted
Subsidiary issue, sell, pledge, transfer or convey any its own Subsidiary
Equity Securities, provided that the foregoing restrictions do not apply
to:
(i) the issue of Regulatory Shares; or
(ii) the issue of Subsidiary Equity Securities to the Company
or another Wholly-owned Restricted Subsidiary; or
(iii) the sale, transfer or conveyance at any one time to a
Person (other than directly or indirectly to an Affiliate) of the entire
Investment of the Company and its Restricted Subsidiaries in any
Restricted Subsidiary if all of the following conditions are met:
(1) such assets (valued at net book value) do not,
together with all other assets of the Company and its
Restricted Subsidiaries previously sold, conveyed or
otherwise transferred during the same fiscal year (other than
in the ordinary course of business), exceed 15% of Consolidated
Total Assets determined as of the end of the immediately
preceding fiscal year;
(2) in the case of a sale of assets the proceeds of
which exceed $1,000,000, in the opinion of the Board of
Directors of the Company, the sale is for fair value and is in
the best interests of the Company;
(3) immediately after the consummation of the
transaction and after giving effect thereto, such Restricted
Subsidiary shall have no Indebtedness of or continuing
Investment in the equity Securities of the Company or of any
of its respective Restricted Subsidiaries and any such
Indebtedness or Investment shall have been discharged or
acquired, as the case may be, by the Company or any of its
Restricted Subsidiaries; and
(4) immediately after the consummation of the
transaction and after giving effect thereto, (A) no Default or
Event of Default would exist, and (B) the Company would be
permitted by the provisions of Section 10.5(a)(iv) to incur at
least $1.00 of additional Funded Debt;
provided, however, that for purposes of the calculation in accordance
with clause (iii)(1) above, there shall not be included any assets the
proceeds of which were or are applied within 180 days of the date of
sale of such assets to either (y) the acquisition of fixed assets useful
and intended to be used in the operation of the business of the Company
and its Restricted Subsidiaries as described in Section 10.2 and having
a fair market value (as determined in good faith by the Company) at
least equal to that of the assets so disposed of and/or (z) the
prepayment at any applicable prepayment premium, on a pro rata basis, of
Senior Indebtedness of the Company, provided that, without regard to
such requirement of application on a pro rata basis (yy) in the event
such assets were acquired by the Company or any Restricted Subsidiary
with Indebtedness incurred under a revolving Credit Agreement, proceeds
from the sale of all such assets so acquired, together with proceeds from
the sale of assets within the limitations of Section 10.7(b)(ii) and (b)
(iii), in an aggregate amount not exceeding $5,000,000 may be applied to
the repayment of the Company's obligations under a revolving Credit
Agreement under which such Indebtedness was borrowed and (zz) in the
event such assets were secured by a Lien against the Company or any
Restricted Subsidiary, the proceeds may be applied to the repayment of
the Company's or such Restricted Subsidiary's obligations in respect of
the Indebtedness secured by such Lien. It is understood and agreed by
the Company that any optional prepayment of the Notes as hereinabove
provided shall be made pursuant to and to the extent provided in Section
8.2.
Computations pursuant to this Section 10.7(c) shall include dispositions
made pursuant to Section 10.7(b) and computations pursuant to Section 10.7(b)
shall include dispositions made pursuant to this Section 10.7(c).
Section 10.8. Designation of Subsidiaries. The Company may
designate any Unrestricted Subsidiary as a Restricted Subsidiary, provided
that: (a) the Company shall have given not less than 15 days prior written
notice to the holders of the Notes that the Board of Directors of the Company
has made such determination, (b) at the time of such designation and
immediately after giving effect thereto: (i) no Default or Event of Default
would exist and (ii) the Company would be permitted by the provisions of
Section 10.5(a)(iv) to incur at least $1.00 of additional Funded Debt, and (c)
such Unrestricted Subsidiary shall not at any time after the date of this
Agreement have previously been designated as a Restricted Subsidiary.
Section 11. Events of Default.
An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or
Make-Whole Amount, if any, on any Note when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise; or
(b) the Company defaults in the payment of any interest on any
Note for more than five Business Days after the same becomes due and
payable; or
(c) the Company defaults in the performance of or compliance with
any term contained in Sections 10.1 through 10.8 and Section 7.1(d); or
(d) the Company defaults in the performance of or compliance with
any term contained herein (other than those referred to in paragraphs
(a), (b) and (c) of this Section 11) and such default is not remedied
within 30 days after the earlier of (i) a Responsible Officer obtaining
actual knowledge of such default and (ii) the Company receiving written
notice of such default from any holder of a Note (any such written
notice to be identified as a "notice of default" and to refer
specifically to this paragraph (d) of Section 11); or
(e) any representation or warranty made in writing by or on
behalf of the Company or by any officer of the Company in this Agreement
or in any writing furnished in connection with the transactions
contemplated hereby proves to have been false or incorrect in any
material respect on the date as of which made; or
(f) (i) the Company or any Subsidiary is in default (as principal
or as guarantor or other surety) in the payment of any principal of or
premium or make-whole amount or interest on any Indebtedness that is
outstanding in an aggregate principal amount of at least $10,000,000
beyond any period of grace provided with respect thereto, or (ii) the
Company or any Subsidiary is in default in the performance of or
compliance with any term of any evidence of any Indebtedness in an
aggregate outstanding principal amount of at least $10,000,000 or of any
mortgage, indenture or other agreement relating thereto or any other
condition exists, and as a consequence of such default or condition such
Indebtedness has become, or has been declared (or one or more Persons are
entitled to declare such Indebtedness to be), due and payable before its
stated maturity or before its regularly scheduled dates of payment, or
(iii) as a consequence of the occurrence or continuation of any event or
condition (other than the passage of time or the right of the holder of
Indebtedness to convert such Indebtedness into equity interests), (x) the
Company or any Subsidiary has become obligated to purchase or repay
Indebtedness before its regular maturity or before its regularly
scheduled dates of payment in an aggregate outstanding principal amount
of at least $10,000,000, or (y) one or more Persons have the right to
require the Company or any Subsidiary so to purchase or repay such
Indebtedness; or
(g) the Company or any Subsidiary (i) is generally not paying, or
admits in writing its inability to pay, its debts as they become due,
(ii) files, or consents by answer or otherwise to the filing against it
of, a petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy, insolvency, reorganization, moratorium or other similar law
of any jurisdiction, (iii) makes an assignment for the benefit of its
creditors, (iv) consents to the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its property, (v) is adjudicated as
insolvent or to be liquidated, or (vi) takes corporate action for the
purpose of any of the foregoing; or
(h) a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by the Company or any of its
Subsidiaries, a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial
part of its property, or constituting an order for relief or approving a
petition for relief or reorganization or any other petition in bankruptcy
or for liquidation or to take advantage of any bankruptcy or insolvency
law of any jurisdiction, or ordering the dissolution, winding-up or
liquidation of the Company or any of its Subsidiaries, or any such
petition, order or approval shall be filed against the Company or any of
its Subsidiaries and such petition, order or approval shall not be
dismissed within 60 days; or
(i) a final judgment or judgments for the payment of money
aggregating in excess of $3,000,000 are rendered against one or more of
the Company and its Subsidiaries and which judgments are not, within 60
days after entry thereof, bonded, discharged or stayed pending appeal,
or are not discharged within 60 days after the expiration of such stay;
or
(j) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is
sought or granted under Section 412 of the Code, (ii) a notice of
intent to terminate any Plan shall have been or is reasonably expected
to be filed with the PBGC or the PBGC shall have instituted proceedings
under ERISA Section 4042 to terminate or appoint a trustee to administer
any Plan or the PBGC shall have notified the Company or any ERISA
Affiliate that a Plan may become a subject of any such proceedings,
(iii) the aggregate "amount of unfunded benefit liabilities" (within the
meaning of Section 4001(a)(18) of ERISA) under all Plans, determined in
accordance with Title IV of ERISA, shall exceed $5,000,000, (iv) the
Company or any ERISA Affiliate shall have incurred or is reasonably
expected to incur any liability pursuant to Title I or IV of ERISA or
the penalty or excise tax provisions of the Code relating to employee
benefit plans, (v) the Company or any ERISA Affiliate withdraws from any
Multiemployer Plan, or (vi) the Company or any Subsidiary establishes or
amends any employee welfare benefit plan that provides post-employment
welfare benefits in a manner that would increase the liability of the
Company or any Subsidiary thereunder; and any such event or events
described in clauses (i) through (vi) above, either individually or
together with any other such event or events, could reasonably be
expected to have a Material Adverse Effect.
As used in Section 11(j), the terms "employee benefit plan" and "employee
welfare benefit plan" shall have the respective meanings assigned to such
terms in Section 3 of ERISA.
Section 12. Remedies on Default, etc.
Section 12.1. Acceleration. If an Event of Default with respect to
the Company described in paragraph (g) or (h) of Section 11 (other than an
Event of Default described in clause (i) of paragraph (g) or described in
clause (vi) of paragraph (g) by virtue of the fact that such clause
encompasses clause (i) of paragraph (g)) has occurred, all the Notes then
outstanding shall automatically become immediately due and payable. If any
other Event of Default has occurred and is continuing, any holder or holders
of more than 33-1/3% in principal amount of the Notes at the time outstanding
may at any time at its or their option, by notice or notices to the Company,
declare all the Notes then outstanding to be immediately due and payable. If
any Event of Default described in paragraph (a) or (b) of Section 11 has
occurred and is continuing, any holder or holders of Notes at the time
outstanding affected by such Event of Default may at any time, at its or
their option, by notice or notices to the Company, declare all the Notes held
by it or them to be immediately due and payable. Upon any Note becoming due
and payable under this Section 12.1, whether automatically or by declaration,
such Note will forthwith mature and the entire unpaid principal amount of such
Note, plus (i) all accrued and unpaid interest thereon and (ii) the Make-Whole
Amount determined in respect of such principal amount (to the full extent
permitted by applicable law), shall all be immediately due and payable, in
each and every case without presentment, demand, protest or further notice,
all of which are hereby waived. The Company acknowledges, and the parties
hereto agree, that each holder of a Note has the right to maintain its
investment in the Notes free from repayment by the Company (except as herein
specifically provided for), and that the provision for payment of a Make-Whole
Amount by the Company in the event that the Notes are prepaid or are
accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under uch circumstances.
Section 12.2. Other Remedies. If any Default or Event of Default
has occurred and is continuing, and irrespective of whether any Notes have
become or have been declared immediately due and payable under Section 12.1,
the holder of any Note at the time outstanding may proceed to protect and
enforce the rights of such holder by an action at law, suit in equity or other
appropriate proceeding, whether for the specific performance of any agreement
contained herein or in any Note, or for an injunction against a violation of
any of the terms hereof or thereof, or in aid of the exercise of any power
granted hereby or thereby or by law or otherwise.
Section 12.3. Rescission. At any time after any Notes have been
declared due and payable pursuant to the second sentence of Section 12.1, the
holders of not less than 67% in principal amount of the Notes then
outstanding, by written notice to the Company, may rescind and annul any such
declaration and its consequences if (a) the Company has paid all overdue
interest on the Notes, all principal of and Make-Whole Amount, if any, on any
Notes that are due and payable and are unpaid other than by reason of such
declaration, and all interest on such overdue principal and Make-Whole
Amount, if any, and (to the extent permitted by applicable law) any overdue
interest in respect of the Notes, at the Default Rate, (b) all Events of
Default and Defaults, other than non-payment of amounts that have become due
solely by reason of such declaration, have been cured or have been waived
pursuant to Section 17, and (c) no judgment or decree has been entered for the
payment of any monies due pursuant hereto or to the Notes. No rescission and
annulment under this Section 12.3 will extend to or affect any subsequent
Event of Default or Default or impair any right consequent thereon.
Section 12.4. No Waivers or Election of Remedies, Expenses, etc.
No course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right,
power or remedy conferred by this Agreement or by any Note upon any holder
thereof shall be exclusive of any other right, power or remedy referred to
herein or therein or now or hereafter available at law, in equity, by statute
or otherwise. Without limiting the obligations of the Company under Section
15, the Company will pay to the holder of each Note on demand such further
amount as shall be sufficient to cover all costs and expenses of such holder
incurred in any enforcement or collection under this Section 12, including,
without limitation, reasonable attorneys' fees, expenses and disbursements.
Section 13. Registration; Exchange; Substitution of Notes.
Section 13.1. Registration of Notes. The Company shall keep at its
principal executive office a register for the registration and registration
of transfers of Notes. The name and address of each holder of one or more
Notes, each transfer thereof and the name and address of each transferee
of one or more Notes shall be registered in such register. Prior to due
presentment for registration of transfer, the Person in whose name any Note
shall be registered shall be deemed and treated as the owner and holder
thereof for all purposes hereof, and the Company shall not be affected by any
notice or knowledge to the contrary. The Company shall give to any holder of
a Note that is an Institutional Investor promptly upon request therefor, a
complete and correct copy of the names and addresses of all registered
holders of Notes.
Section 13.2. Transfer and Exchange of Notes. Upon surrender of
any Note at the principal executive office of the Company for registration of
transfer or exchange (and in the case of a surrender for registration of
transfer, duly endorsed or accompanied by a written instrument of transfer
duly executed by the registered holder of such Note or its attorney duly
authorized in writing and accompanied by the address for notices of each
transferee of such Note or part thereof), the Company shall execute and
deliver, at the Company's expense (except as provided below), one or
more new Notes (as requested by the holder thereof) in exchange therefor, of
the same series and in an aggregate principal amount equal to the unpaid
principal amount of the surrendered Note. Each such new Note shall be
payable to such Person as such holder may request and shall be substantially
in the form of Exhibit 1 or 2, as the case may be. Each such new Note shall
be dated and bear interest from the date to which interest shall have been
paid on the surrendered Note or dated the date of the surrendered Note if no
interest shall have been paid thereon. The Company may require payment of
a sum sufficient to cover any stamp tax or governmental charge imposed in
respect of any such transfer of Notes. Notes shall not be transferred in
denominations of less than $1,000,000, provided that if necessary to enable
the registration of transfer by a holder of its entire holding of Notes, one
Note may be in a denomination of less than $1,000,000. Any transferee of a
Note, or purchaser of a participation therein, shall, by its acceptance of
such Note be deemed to make the same representations to the Company regarding
the Note or a participation therein as you have made pursuant to Section 6.
Section 13.3. Replacement of Notes. Upon receipt by the Company of
evidence reasonably satisfactory to it of the ownership of and the loss,
theft, destruction or mutilation of any Note (which evidence shall be, in the
case of an Institutional Investor, notice from such Institutional Investor of
such ownership and such loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note
is, or is a nominee for, you or another holder of a Note with a minimum
net worth of at least $50,000,000, such Person's own unsecured
agreement of indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a
new Note of the same series, dated and bearing interest from the date to
which interest shall have been paid on such lost, stolen, destroyed or
mutilated Note or dated the date of such lost, stolen, destroyed or mutilated
Note if no interest shall have been paid thereon.
Section 14. Payments on Notes.
Section 14.1. Place of Payment. Subject to Section 14.2, payments
of principal, Make-Whole Amount, if any, and interest becoming due and
payable on the Notes shall be originated from New York, New York. The
Company may at any time, by notice to each holder of a Note, change the
place of payment of the Notes so long as such place of payment shall be
either the principal office of the Company in the United States or the
principal office of a bank or trust company in the United States.
Section 14.2. Home Office Payment. So long as you or your nominee
shall be the holder of any Note, and notwithstanding anything contained in
Section 14.1 or in such Note to the contrary, the Company will pay all sums
becoming due on such Note for principal, Make-Whole Amount, if any, and
interest by the method and at the address specified for such purpose below
your name in Schedule A, or by such other method or at such other address as
you shall have from time to time specified to the Company in writing for such
purpose, without the presentation or surrender of such Note or the making of
any notation thereon, except that upon written request of the Company made
concurrently with or reasonably promptly after payment or prepayment in full
of any Note, you shall surrender such Note for cancellation, reasonably
promptly after any such request, to the Company at its principal executive
office or at the place of payment most recently designated by the Company
pursuant to Section 14.1. The Company will make such payments in immediately
available funds, no later than 12:00 p.m. New York, New York time on the date
due. If for any reason whatsoever the Company does not make any such payment
by such 12:00 p.m. transmittal time, such payment shall be deemed to have
been made on the next following Business Day and such payment shall bear
interest at the overdue rate set forth in the Note. Prior to any sale or
other disposition of any Note held by you or your nominee you will, at your
election, either endorse thereon the amount of principal paid thereon and the
last date to which interest has been paid thereon or surrender such Note to the
Company in exchange for a new Note or Notes pursuant to Section 13.2. The
Company will afford the benefits of this Section 14.2 to any Institutional
Investor that is the direct or indirect transferee of any Note purchased by
you under this Agreement and that has made the same agreement relating
to such Note as you have made in this Section 14.2.
Section 15. Expenses, Etc.
Section 15.1. Transaction Expenses. Whether or not the transactions
contemplated hereby are consummated, the Company will pay all costs and
expenses (including reasonable attorneys' fees of one special counsel and, if
reasonably required, local or other counsel) incurred by you and each other
holder of a Note in connection with such transactions and in connection with
any amendments, waivers or consents under or in respect of this Agreement or
the Notes (whether or not such amendment, waiver or consent becomes
effective), including, without limitation: (a) the costs and expenses
incurred in enforcing or defending (or determining whether or how to enforce or
defend) any rights under this Agreement or the Notes or in responding to any
subpoena or other legal process or informal investigative demand issued in
connection with this Agreement or the Notes, or by reason of being a holder
of any Note, and (b) the costs and expenses, including financial advisors'
fees, incurred in connection with the insolvency or bankruptcy of the Company
or any Subsidiary or in connection with any work-out or restructuring of the
transactions contemplated hereby and by the Notes. The Company will pay, and
will save you and each other holder of a Note harmless from, all claims in
respect of any fees, costs or expenses, if any, of brokers and finders (other
than those retained by you).
Section 15.2. Survival. The obligations of the Company under this
Section 15 will survive the payment or transfer of any Note, the enforcement,
amendment or waiver of any provision of this Agreement or the Notes, and the
termination of this Agreement.
Section 16. Survival of Representations and Warranties; Entire Agreement.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or
transfer by you of any Note or portion thereof or interest therein and the
payment of any Note, and may be relied upon by any subsequent holder of a
Note, regardless of any investigation made at any time by or on behalf of you
or any other holder of a Note. All statements contained in any certificate
or other instrument delivered by or on behalf of the Company pursuant to this
Agreement shall be deemed representations and warranties of the Company under
this Agreement. Subject to the preceding sentence, this Agreement and the
Notes embody the entire agreement and understanding between you and the
Company and supersede all prior agreements and understandings relating to the
subject matter hereof.
Section 17. Amendment and Waiver.
Section 17.1. Requirements. This Agreement and the Notes may be
amended, and the observance of any term hereof or of the Notes may be waived
(either retroactively or prospectively), with (and only with) the written
consent of the Company and the Required Holders, except that (a) no amendment
or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof,
or any defined term (as it is used therein), will be effective as to you
unless consented to by you in writing, and (b) no such amendment or waiver
may, without the written consent of the holder of each Note at the time
outstanding affected thereby, (i) subject to the provisions of Section 12
relating to acceleration or rescission, change the amount or time of any
prepayment or payment of principal of, or reduce the rate or change the time
of payment or method of computation of interest or of the Make-Whole Amount
on, the Notes, (ii) change the percentage of the principal amount of the Notes
the holders of which are required to consent to any such amendment or waiver,
or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20.
Section 17.2. Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of
the Notes (irrespective of the amount of Notes then owned by it) with a
reasonably sufficient amount of information, with reasonable prior notice in
advance of the date a decision is required, to enable such holder to make
an informed and considered decision with respect to any proposed amendment,
waiver or consent in respect of any of the provisions hereof or of the Notes.
The Company will deliver executed or true and correct copies of each
amendment, waiver or consent effected pursuant to the provisions of this
Section 17 to each holder of outstanding Notes promptly following the date on
which it is executed and delivered by, or receives the consent or approval
of, the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay
or cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, or grant any security, to any holder
of Notes as consideration for or as an inducement to the entering into by any
holder of Notes of any waiver or amendment of any of the terms and provisions
hereof or of the Notes unless such remuneration is concurrently paid, or
security is concurrently granted, on the same terms, ratably to each holder
of Notes then outstanding whether or not such holder consented to such
waiver or amendment.
Section 17.3. Binding Effect, etc. Any amendment or waiver
consented to as provided in this Section 17 applies equally to all holders of
Notes and is binding upon them and upon each future holder of any Note and
upon the Company without regard to whether such Note has been marked to
indicate such amendment or waiver. No such amendment or waiver will extend
to or affect any obligation, covenant, agreement, Default or Event of Default
not expressly amended or waived or impair any right consequent thereon. No
course of dealing between the Company and the holder of any Note nor any
delay in exercising any rights hereunder or under any Note shall operate as a
waiver of any rights of any holder of such Note. As used herein, the term
"this Agreement" and references thereto shall mean this Agreement as it may
from time to time be amended or supplemented.
Section 17.4. Notes Held by Company, etc. Solely for the purpose
of determining whether the holders of the requisite percentage of the
aggregate principal amount of Notes then outstanding approved or consented to
any amendment, waiver or consent to be given under this Agreement or
the Notes, or have directed the taking of any action provided herein or in
the Notes to be taken upon the direction of the holders of a specified
percentage of the aggregate principal amount of Notes then outstanding, Notes
directly or indirectly owned by the Company, any of its Affiliates or any
Restricted Subsidiary shall be deemed not to be outstanding.
Section 18. Notices.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telefacsimile if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery
service (with charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address
specified for such communications in Schedule A, or at such other
address as you or it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at
such address as such other holder shall have specified to the Company in
writing, or
(iii) if to the Company, to the Company at its address set
forth at the beginning hereof to the attention of the Chief Financial
Officer, or at such other address as the Company shall have specified to
the holder of each Note in writing.
Notices under this Section 18 will be deemed given only when actually
received.
Section 19. Reproduction of Documents.
This Agreement and all documents relating thereto, including,
without limitation, (a) consents, waivers and modifications that may
hereafter be executed, (b) documents received by you at the Closing (except
the Notes themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to you, may be reproduced by
you by any photographic, photostatic, microfilm, microcard, miniature
photographic or other similar process and you may destroy any original
document so reproduced. The Company agrees and stipulates that, to the extent
permitted by applicable law, any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by you in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This Section 19 shall not prohibit the
Company or any other holder of Notes from contesting any such reproduction to
the same extent that it could contest the original, or from introducing
evidence to demonstrate the inaccuracy of any such reproduction.
Section 20. Confidential Information.
For the purposes of this Section 20, "Confidential Information"
means information delivered to you by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when received by you as
being confidential information of the Company or such Subsidiary, provided
that such term does not include information that (a) was publicly known or
otherwise known to you prior to the time of such disclosure, (b) subsequently
becomes publicly known through no act or omission by you or any Person acting
on your behalf, (c) otherwise becomes known to you other than through
disclosure by the Company or any Subsidiary from a Person who is not to your
knowledge subject to a confidentiality agreement, or (d) constitutes
financial statements delivered to you under Section 7.1 that are otherwise
publicly available. You will maintain the confidentiality of such Confidential
Information in accordance with procedures adopted by you in good faith to
protect confidential information of third parties delivered to you, provided
that you may deliver or disclose Confidential Information to (i) your
directors, trustees, officers, employees, agents, attorneys and affiliates (to
the extent such disclosure reasonably relates to the administration of the
investment represented by your Notes), (ii) your financial advisors and other
professional advisors who agree to hold confidential the Confidential
Information in accordance with the terms of this Section 20, (iii) any other
holder of any Note, (iv) any Institutional Investor to which you sell or
offer to sell such Note or any part thereof or any participation therein (if
such Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 20), (v) any Person
from which you offer to purchase any security of the Company (if such Person
has agreed in writing prior to its receipt of such Confidential Information
to be bound by the provisions of this Section 20), (vi) any federal or state
regulatory authority having jurisdiction over you, (vii) the National
Association of Insurance Commissioners or any similar organization, or any
nationally recognized rating agency that requires access to information about
your investment portfolio or (viii) any other Person to which such delivery
or disclosure may be necessary or appropriate (w) to effect compliance with
any law, rule, regulation, policy, investigation or order applicable to you,
(x) in connection with or in response to any subpoena or other legal process,
(y) in connection with any litigation to which you are a party involving this
Agreement or the Notes or in connection with the enforcement or for the
protection of your rights and remedies under the Notes and this Agreement or
(z) if an Event of Default has occurred and is continuing, to the extent you
may reasonably determine such delivery and disclosure to be necessary or
appropriate in the enforcement or for the protection of the rights and remedies
under your Notes and this Agreement. Each holder of a Note, by its acceptance
of a Note, will be deemed to have agreed to be bound by and to be entitled to
the benefits of this Section 20 as though it were a party to this Agreement.
On reasonable request by the Company in connection with the delivery to any
holder of a Note of information required to be delivered to such holder under
this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee), such holder will enter into an
agreement with the Company embodying the provisions of this Section 20.
Section 21. Substitution of Purchaser.
You shall have the right to substitute any one of your Affiliates
as the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and
such Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon
receipt of such notice, wherever the word "you" is used in this Agreement
(other than in this Section 21), such word shall be deemed to refer to such
Affiliate in lieu of you. In the event that such Affiliate is so substituted
as a purchaser hereunder and such Affiliate thereafter transfers to you all
of the Notes then held by such Affiliate, upon receipt by the Company of
notice of such transfer, wherever the word "you" is used in this Agreement,
such word shall no longer be deemed to refer to such Affiliate, but shall
refer to you, and you shall have all the rights of an original holder of the
Notes under this Agreement.
Section 22. Miscellaneous.
Section 22.1. Successors and Assigns. All covenants and other
agreements contained in this Agreement by or on behalf of any of the parties
hereto bind and inure to the benefit of their respective successors and
assigns (including, without limitation, any subsequent holder of a Note)
whether so expressed or not.
Section 22.2. Payments Due on Non-Business Days. Anything in this
Agreement or the Notes to the contrary notwithstanding, any payment of
principal of or Make-Whole Amount or interest on any Note that is due on a
date other than a Business Day shall be made on the next succeeding Business
Day without including the additional days elapsed in the computation of the
interest payable on such next succeeding Business Day.
Section 22.3. Severability. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall (to the
full extent permitted by law) not invalidate or render unenforceable such
provision in any other jurisdiction.
Section 22.4. Construction. Each covenant contained herein shall
be construed (absent express provision to the contrary) as being independent
of each other covenant contained herein, so that compliance with any one
covenant shall not (absent such an express contrary provision) be deemed to
excuse compliance with any other covenant. Where any provision herein
refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether such
action is taken directly or indirectly by such Person.
Section 22.5. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies hereof, each signed by fewer than all, but together signed
by all, of the parties hereto.
Section 22.6. Governing Law. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed
by, the law of the State of New York excluding choice-of-law principles of
the law of such State that would require the application of the laws of a
jurisdiction other than such State.
* * * * *
<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to
the Company, whereupon the foregoing shall become a binding agreement between
you and the Company.
Very truly yours,
Dames & Moore, Inc.
By Mark A. Snell
___________________________
Title: Executive Vice President and
Chief Financial Officer
The foregoing is hereby agreed
to as of the date thereof.
Accepted as of December 16, 1996:
Teachers Insurance and Annuity
Association of America
By Gregory W. MacCordy
_____________________________
Its Director-Private Placements
<PAGE>
Principal Amount
of Notes to Be Series
Name and Address Purchased of
of Purchaser at the Closing Notes
Teachers Insurance and Annuity $10,000,000 Series F
Association of America
730 Third Avenue $10,000,000 Series G
New York, New York 10017-3263
Attention: Mr. Michael Clulow, Securities Division, Private Placements
Telephone Number: (212) 916-6669 or (212) 490-9000 (general number)
Facsimile Number: (212) 916-6583
Payments
All payments on account of the Series F and Series G Notes shall be made in
immediately available funds at the opening of business on the due date by
electronic funds transfer through the Automated Clearing House System
(identifying each payment as "Dames & Moore, Inc., 7.19% Senior Notes, Series
F, Due December 16, 2004, PPN 235713 B# 0, principal, premium or interest" or
"Dames & Moore, Inc. 7.23% Senior Notes, Series G, Due December 16, 2005, PPN
235713 C* 3, principal, premium or interest", as the case may be) to:
Chase Manhattan Bank (ABA #021-000-021)
New York, New York 10015
for credit to: Teachers Insurance and Annuity Association of America
Account Number 910-2-766475
On order of: Dames & Moore, Inc.
Notices
Contemporaneous with the above electronic funds transfer, written confirmation
setting forth: (1) the full name, private placement number, interest rate and
maturity date of the Series F or Series G Notes, as the case may be; (2)
allocation of payment among principal, interest, premium and any special
payment; and (3) the name and address of the bank from which such electronic
funds transfer was sent, shall be mailed or sent by facsimile to:
Teachers Insurance and Annuity Association of America
730 Third Avenue
New York, NY 10017
Attention: Securities Accounting Division
Telephone Number: (212) 916-4188
Facsimile Number: (212) 916-6955
Schedule A
(to Note Purchase Agreement)
All other notices and communications to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 13-1624203
<PAGE>
Defined Terms
As used herein, the following terms have the respective meanings
set forth below or set forth in the Section hereof following such term:
"Affiliate" shall mean, at any time, and with respect to any Person
(other than a Wholly-owned Restricted Subsidiary), (a) any other Person that
at such time directly or indirectly through one or more intermediaries
Controls, or is Controlled by, or is under common Control with, such first
Person, (b) any Person beneficially owning or holding, directly or indirectly,
5% or more of any class of voting or equity interests of the Company or any
Subsidiary or any corporation of which the Company and its Subsidiaries
beneficially own or hold, in the aggregate, directly or indirectly, 5% or
more of any class of voting or equity interests and (c) any other Person that
is an executive officer or director of such first Person. As used in this
definition, "Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise. Unless the context otherwise clearly requires, any reference
to an "Affiliate" is a reference to an Affiliate of the Company.
"Business Day" shall mean (a) for the purposes of Section 8.6 only, any
day other than a Saturday, a Sunday or a day on which commercial banks in New
York, New York are required or authorized to be closed, and (b) for the
purposes of any other provision of this Agreement, any day other than a
Saturday, a Sunday or a day on which commercial banks in New York, New
York or Los Angeles, California are required or authorized to be closed.
"Capital Lease" or "Capitalized Lease" shall mean, at any time, a lease
with respect to which the lessee is required concurrently to recognize the
acquisition of an asset and the incurrence of a liability in accordance with
GAAP.
"Capitalized Rentals" of any Person shall mean as of the date of any
determination thereof the amount at which the aggregate Rentals due and to
become due under all Capitalized Leases under which such Person is a lessee
would be reflected as a liability on a consolidated balance sheet of such
Person.
"Closing" is defined in Section 3.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the rules and regulations promulgated thereunder from time
to time.
"Company" shall mean Dames & Moore, Inc., a Delaware corporation.
"Confidential Information" is defined in Section 20.
"Consolidated Capitalization" shall mean as of the date of any
determination thereof, the sum of (a) Consolidated Funded Debt plus (b)
Consolidated Net Worth.
Schedule B
(to Note Purchase Agreement)
"Consolidated Current Debt" shall mean all Current Debt of the Company
and its Restricted Subsidiaries, determined on a consolidated basis
eliminating intercompany items in accordance with GAAP.
"Consolidated Fixed Charges" for any period shall mean on a consolidated
basis the sum of (a) all Rentals (other than Rentals on Capitalized Leases)
payable during such period by the Company and its Restricted Subsidiaries,
and (b) all Interest Expense on all Indebtedness of the Company and its
Restricted Subsidiaries payable during such period.
"Consolidated Funded Debt" shall mean all Funded Debt of the Company and
its Restricted Subsidiaries, determined on a consolidated basis in accordance
with GAAP eliminating intercompany items.
"Consolidated Indebtedness" shall mean Indebtedness of the Company and
its Restricted Subsidiaries, determined on a consolidated basis in accordance
with GAAP eliminating intercompany items.
"Consolidated Modified EBITDA" for any period shall mean the sum of (a)
Consolidated Net Income during such period plus (to the extent deducted in
determining Consolidated Net Income), (b) all provisions for any Federal,
state or local income taxes or taxes determined by reference to income made
by the Company and its Restricted Subsidiaries during such period, (c)all
provisions for depreciation and amortization (other than amortization of debt
discount) made by the Company and its Restricted Subsidiaries during such
period, and (d) Consolidated Fixed Charges during such period.
"Consolidated Net Income" for any period shall mean the net income or
loss of the Company and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP after eliminating
earnings or losses attributable to outstanding Minority Interests, but
excluding in any event:
(a) any gains or losses (net of any tax effect) on the sale or
other disposition of fixed or capital assets other than in the ordinary
course of business, and any taxes on such excluded gains and any tax
deductions or credits on account of any such excluded losses;
(b) net earnings and losses of any Restricted Subsidiary
accrued prior to the date it became a Restricted Subsidiary;
(c) net earnings and losses of any business entity (other than
a Restricted Subsidiary), substantially all the assets of which have been
acquired in any manner by the Company or any Restricted Subsidiary,
realized by such business entity prior to the date of such acquisition;
(d) net earnings and losses of any business entity (other than
a Restricted Subsidiary) with which the Company or a Restricted Subsidiary
shall have consolidated or which shall have merged into or with the
Company or a Restricted Subsidiary prior to the date of such
consolidation or merger;
(e) net earnings of any business entity (other than a
Restricted Subsidiary) in which the Company or any Restricted Subsidiary
has an ownership interest unless such net earnings shall have actually
been received by the Company or such Restricted Subsidiary in the form
of cash distributions;
(f) any portion of the net earnings of any Restricted
Subsidiary which for any reason is unavailable for payment of dividends
to the Company or any other Restricted Subsidiary;
(g) earnings resulting from any reappraisal, revaluation or
write-up of fixed or capital assets other than in the ordinary course of
business; and
(h) any other extraordinary, unusual or non-recurring gain or
loss (net of any tax effect).
"Consolidated Net Worth" shall mean, as of the date of any determination
thereof, the difference of:
(a)(i) the amount of stockholders' equity as determined in
accordance with GAAP of the Company and its Subsidiaries, minus (ii)
the aggregate amount of all Restricted Investments held by the Company
and its Subsidiaries in Unrestricted Subsidiaries,
minus
(b) the excess, if any, of (1) the aggregate amount of all
Restricted Investments held by the Company or its Restricted
Subsidiaries (other than Restricted Investments held by the Company and
its Restricted Subsidiaries in Unrestricted Subsidiaries) over (2) 10%
of the amount described in clause (a) hereof;
all determined in accordance with GAAP.
"Consolidated Total Assets" shall mean as of the date of any determination
thereof, total assets of the Company and its Restricted Subsidiaries
determined on a consolidated basis in accordance with GAAP.
"Consolidated Total Capitalization" shall mean as of the date of any
determination thereof, the sum of (a) Consolidated Current Debt plus (b)
Consolidated Funded Debt plus (c) Consolidated Net Worth.
"Credit Agreement" is defined in Section 9.6.
"Current Debt" of any Person shall mean all Indebtedness of such Person
other than Funded Debt of such Person.
"Default" shall mean an event or condition the occurrence or existence of
which would,with the lapse of time or the giving of notice or both, become an
Event of Default.
"Default Rate" shall mean, for any series of Notes, that rate of interest
that is 2% perannum above the rate of interest stated in clause (a) of the
first paragraph of such series of Notes.
"Environmental Laws" shall mean any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the rules and regulations promulgated
thereunder from time to time in effect.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under Section 414 of the Code.
"Event of Default" is defined in Section 11.
"Funded Debt" of any Person shall mean all Indebtedness of such Person
deemed to be long-term in accordance with GAAP.
"GAAP" shall mean generally accepted accounting principles as in effect
at the date of the Closing in the United States of America.
"Governmental Authority" shall mean
(a) the government of
(i) the United States of America or any State or other
political subdivision thereof, or
(ii) any jurisdiction in which the Company or any
Subsidiary conducts all or any part of its business, or which
asserts jurisdiction over any properties of the Company or any
Subsidiary, or
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
"Guaranty" shall mean, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments
for deposit or collection) of such Person guaranteeing or in effect
guaranteeing any Indebtedness, dividend or other obligation of any other
Person in any manner, whether directly or indirectly, including (without
limitation) obligations incurred through an agreement, contingent or
otherwise, by such Person:
(a) to purchase such Indebtedness or obligation or any
property constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment
of such Indebtedness or obligation, or (ii) to maintain any working
capital or other balance sheet condition or any income statement
condition of any other Person or otherwise to advance or make available
funds for the purchase or payment of such Indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such Indebtedness or
obligation of the ability of any other Person to make payment of the
Indebtedness or obligation; or
(d) otherwise to assure the owner of such Indebtedness or
obligation against loss in respect thereof.
In any computation of the Indebtedness or other liabilities of the
obligor under any Guaranty, the Indebtedness or other obligations that are
the subject of such Guaranty shall be assumed to be direct obligations of
such obligor.
"Hazardous Material" shall mean any and all pollutants, toxic or
hazardous wastes or any other substances that might pose a hazard to health
or safety, the removal of which may be required or the generation,
manufacture, refining, production, processing, treatment, storage, handling,
transportation, transfer, use, disposal, release, discharge, spillage,
seepage, or filtration of which is or shall be restricted, prohibited or
penalized by any applicable law (including, without limitation, asbestos,
urea formaldehyde foam insulation and polychlorinated biphenyls).
"holder" shall mean, with respect to any Note, the Person in whose name
such Note is registered in the register maintained by the Company pursuant to
Section 13.1.
"Indebtedness" of any Person shall mean and include all (a) obligations
of such Person for borrowed money or obligations for the deferred purchase
price of property or assets (other than accounts payable or accrued
liabilities arising in the ordinary course of business), (b) obligations
secured by any Lien upon property or assets owned by such Person, even though
such Person has not assumed or become liable for the payment of such
obligations, (c) obligations created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
Person, notwithstanding the fact that the rights and remedies of the seller,
lender or lessor under such agreement in the event of default are limited to
repossession or sale of property, (d) Capitalized Rentals, (e) obligations of
such Person in respect of letters of credit or instruments serving a similar
function issued or accepted for its account by banks and other financial
institutions (whether or not representing obligations for borrowed money) to
the extent that any amounts have been drawn by the beneficiary thereunder and
(f) Guaranties of obligations of others of the character referred to in this
definition.
"Institutional Investor" shall mean (a) any original purchaser of a Note,
(b) any holder of a Note holding more than 2% of the aggregate principal
amount of the Notes then outstanding, and (c) any bank, trust company,
savings and loan association or other financial institution, any pension
plan, any investment company, any insurance company, any broker or dealer, or
any other similar financial institution or entity, regardless of legal form.
"Interest Expense" of the Company and its Restricted Subsidiaries for any
period shall mean all interest (including the interest component on Rentals
on Capitalized Leases) and all amortization of debt discount and expense on
any particular Indebtedness (including, without limitation, payment-in-kind,
zero coupon and other like Securities) for which such calculations are
being made, all in accordance with GAAP.
"Investments" shall mean all investments, in cash or by delivery of
property, made directly or indirectly in any property or assets or in any
Person, whether by acquisition of shares of capital stock, Indebtedness or
other obligations or Securities or by loan, advance, Guaranty, capital
contribution or otherwise; provided that "Investments" shall not mean or
include investments in property to be used or consumed in the ordinary course
of business.
"Lien" shall mean any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but
not limited to the security interest lien arising from a mortgage,
encumbrance, pledge, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. The term "Lien" shall include
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
(including, with respect to stock, stockholder agreements, voting trust
agreements, buy-back agreements and all similar arrangements) affecting
property. For the purposes of this Agreement, the Company or a Subsidiary
shall be deemed to be the owner of any property which it has acquired or
holds subject to a conditional sale agreement, Capitalized Lease or other
arrangement pursuant to which title to the property has been retained
by or vested in some other Person for security purposes and such retention or
vesting shall constitute a Lien.
"Make-Whole Amount" is defined in Section 8.6.
"Material" shall mean material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of the Company
and its Subsidiaries taken as a whole.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the business, operations, affairs, financial condition, assets or properties
of the Company and its Subsidiaries taken as a whole, or (b) the ability of
the Company to perform its obligations under this Agreement and the Notes, or
(c) the validity or enforceability of this Agreement or the Notes.
"Minority Interests" shall mean any equity or voting interest of any
class of a Restricted Subsidiary (other than Regulatory Shares) that are not
owned by the Company and/or one or more of its Restricted Subsidiaries.
Minority Interests shall be valued by valuing Minority Interests constituting
preferred shares at the voluntary or involuntary liquidating value of such
preferred shares, whichever is greater, and by valuing Minority Interests
constituting common shares at the book value of capital and surplus
applicable thereto adjusted, if necessary, to reflect any changes from the
book value of such common shares required by the foregoing method of
valuing Minority Interests in preferred shares.
"Multiemployer Plan" shall mean any Plan that is a "multiemployer plan"
(as such term is defined in Section 4001(a)(3) of ERISA).
"Net Worth Reset Date" shall mean the last day of the fiscal quarter in
which the minimum level of Consolidated Net Worth required to be maintained
pursuant to the first sentence of Section 10.3 equals or exceeds $135,000,000.
"Notes" is defined in Section 1.
"Officer's Certificate" shall mean a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend
to the subject matter of such certificate.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to
and defined in ERISA or any successor thereto.
"Person" shall mean an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"Plan" shall mean an "employee benefit plan" (as defined in Section 3(3)
of ERISA) that is or, within the preceding five years, has been established
or maintained, or to which contributions are or, within the preceding five
years, have been made or required to be made, by the Company or any ERISA
Affiliate or with respect to which the Company or any ERISA Affiliate may
have any liability.
"property" or "properties" shall mean, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible,
choate or inchoate.
"QPAM Exemption" shall mean PTE 84-14 issued by the United States
Department of Labor.
"Regulatory Shares" shall mean, with respect to any Person, shares of
such Person required to be issued as qualifying shares to directors or shares
issued to Persons other than the Company or a Wholly-owned Subsidiary in
response to regulatory requirements of foreign jurisdictions pursuant to a
resolution of the Board of Directors of such Person, so long as such
shares do not exceed 1% of the total outstanding shares of equity of such
Person and any owners of such shares irrevocably covenant with the Company to
remit to the Company or waive any dividends or distributions paid or payable
in respect of such shares.
"Rentals" shall mean and include as of the date of any determination
thereof all fixed payments (including as such all payments which the lessee
is obligated to make to the lessor on termination of the lease or surrender
of the property) payable by any Person, as lessee or sublessee under a lease
of real or personal property, but shall be exclusive of any amounts required
to be paid by such Person (whether or not designated as rents or additional
rents) on account of maintenance, repairs, insurance, taxes and similar
charges. Fixed rents under any so-called "percentage leases" shall be
computed solely on the basis of the minimum rents, if any, required to be
paid by the lessee regardless of sales volume or gross revenues.
"Required Holders" shall mean, at any time, the holders of at least 51%
in principal amount of the Notes at the time outstanding (exclusive of Notes
then owned by the Company, any of its Affiliates or any Restricted Subsidiary).
"Reset Net Worth Amount" shall mean the minimum level of Consolidated
Net Worth required to be maintained pursuant to the first sentence of Section
10.3 on the Net Worth Reset Date.
"Responsible Officer" shall mean any Senior Financial Officer and any
other officer of the Company with responsibility for the administration of
the relevant portion of this Agreement.
"Restricted Investments" shall mean all Investments of the Company and
its Restricted Subsidiaries, other than:
(a) Investments by the Company and its Restricted Subsidiaries
in and to Restricted Subsidiaries, including any Investment in a
corporation which, after giving effect to such Investment, will become a
Restricted Subsidiary;
(b) Investments of the Company and its Restricted Subsidiaries
existing as of the Closing and described on Schedule 5.4 hereto;
(c) Investments in commercial paper of corporations organized
under the laws of the United States or any state thereof maturing in 270
days or less from the date of issuance which, at the time of acquisition
by the Company or any Restricted Subsidiary, is accorded either of the
two highest ratings by Standard & Poor's Ratings Group, Moody's
Investors Service, Inc. or another nationally recognized credit rating
agency of similar standard;
(d) Investments in corporate bonds or corporate notes of
corporations organized under the laws of the United States or any state
thereof maturing in 3 years or less from the date of issuance which, in
the case of such bonds or notes which mature in 1 year or less, at the
time of acquisition by the Company or any Restricted Subsidiary, and in
the case of all other such bonds or notes, at all times, is accorded a
rating of A or better by Standard & Poor's Ratings Group or A2 or better
by Moody's Investors Service, Inc., or another nationally recognized
credit rating agency of similar standard;
(e) Investments in direct obligations of the United States
of America or any agency or instrumentality of the United States of
America, the payment or guarantee of which constitutes a full faith and
credit obligation of the United States of America, in either case,
maturing within three years from the date of acquisition thereof;
(f) Investments in certificates of deposit, Eurodollar
deposits or banker's acceptances maturing within one year from the date
of issuance thereof, either (i) issued by Bank of America NT & SA or
(ii) issued by a bank or trust company organized under the laws of the
United States or any State thereof, having capital, surplus and undivided
profits aggregating at least $100,000,000, provided that at all times,
(1) the senior unsecured long-term Indebtedness of such bank or trust
company or of the holding company of such bank or trust company is, at
the time of acquisition by the Company or any Restricted Subsidiary,
accorded either of the two highest ratings by Standard & Poor's Ratings
Group, Moody's Investors Service, Inc. or another nationally recognized
credit rating agency of similar standard or (2) such certificate of
deposit is issued by any bank or trust company organized under the laws
of the United States or any state thereof to the extent that such
Investments are fully insured by the Federal Depository Insurance
Corporation;
(g) Investments in repurchase agreements with respect to
any Security described in clause (e) of this definition entered into
with a depository institution or trust company acting as principal
described in clause (f) of this definition if such repurchase
agreements are by their terms to be performed by the repurchase obligor
and such repurchase agreements are deposited with a bank or trust
company of the type described in clause (f) of this definition;
(h) Investments in any money market fund which is classified
as a current asset in accordance with GAAP, the aggregate asset value of
which "marked to market" is at least $500,000,000 and which is managed
by a fund manager of recognized national standing, and which invests
substantially all of its assets in obligations described in clauses
(c) through (f) above;
(i) Investments in readily-marketable obligations of
Indebtedness of any State of the United States or any municipality
organized under the laws of any State of the United States or any
political subdivision thereof, which mature no later than three years
after the date of acquisition thereof and which, in the case of such
Indebtedness which matures in 1 year or less, at the time of acquisition
by the Company or any Restricted Subsidiary, and in the case of all
other such Indebtedness, at all times, is accorded either of the two
highest ratings by Standard & Poor's Ratings Group, Moody's Investors
Service, Inc. or another nationally recognized credit rating agency of
similar standard; and
(j) Investments representing loans or advances in the ordinary
course of business to executive officers of the Company, including
reasonable relocation expenses and loans or advances to executive
officers of the Company in connection with the Stock Purchase Programs
of the Company or any Restricted Subsidiary, provided that the aggregate
value of all such Investments does not exceed $5,000,000 in the aggregate
at any one time outstanding.
In valuing any Investments for the purpose of applying the limitations
set forth in the definition of Consolidated Net Worth, Investments shall be
taken at the original cost thereof, without allowance for any subsequent
write-offs or appreciation or depreciation therein, but less any amount
repaid or recovered in cash on account of capital or principal.
"Restricted Subsidiary" shall mean any Subsidiary (a) of which more than
80% (by number of votes) of the Voting Stock is beneficially owned, directly
or indirectly, by the Company or one or more Wholly-owned Restricted
Subsidiaries and (b) which is, subject to compliance with the requirements of
Section 10.7(b), designated as a Restricted Subsidiary on Schedule 5.4
or in accordance with Section 10.8.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time.
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act.
"Senior Financial Officer" shall mean the chief financial officer,
principal accounting officer, treasurer or comptroller of the Company.
"Senior Indebtedness" shall mean all Indebtedness for borrowed money of
the Company which is not expressed to be subordinated or junior in rank to
any other Indebtedness for borrowed money of the Company.
"Stock Purchase Programs" shall mean any program under which officers or
other employees of the Company purchase securities of the Company and under
which all or a portion of the consideration may be in the form of promissory
notes given by such employees or borrowed by such employees from financial
institutions and supported by guarantees of the Company, as in existence from
time to time.
"Subsidiary" shall mean, as to any Person, any corporation, association
or other business entity in which such Person or one or more of its
Subsidiaries or such Person and one or more of its Subsidiaries owns
sufficient equity or voting interests to enable it or them (as a group)
ordinarily, in the absence of contingencies, to elect a majority of the
directors (or Persons performing similar functions) of such entity, and any
partnership or joint venture if more than a 50% interest in the profits or
capital thereof is owned by such Person or one or more of its
Subsidiaries or such Person and one or more of its Subsidiaries (unless such
partnership can and does ordinarily take major business actions without the
prior approval of such Person or one or more of its Subsidiaries). Unless
the context otherwise clearly requires, any reference to a "Subsidiary" is a
reference to a Subsidiary of the Company.
"Unrestricted Subsidiary" shall mean any Subsidiary which is not
designated as a Restricted Subsidiary on Schedule 5.4 or is not designated as
a Restricted Subsidiary in accordance with Section 10.8.
"Voting Stock" shall mean Securities of any class or classes, the holders
of which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions)
of a particular business entity.
"Wholly-owned" when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding equity Securities,
whether voting or nonvoting (except Regulatory Shares) and all Indebtedness
for borrowed money shall be owned by the Company and/or one or more of its
Wholly-owned Restricted Subsidiaries.
Schedule 5.4
Subsidiaries; Affiliates; Directors and Officers.
See Attached Page
Dames & Moore, Inc.
List of Subsidiaries
The following is a list of subsidiaries of the Company. Unless
otherwise indicated, each of the subsidiaries is Wholly-Owned by the Company,
and each is hereby designated a Restricted Subsidiary, unless otherwise
indicated.
State or Other Jurisdiction
Name of Incorporation or Organization
Domestic Subsidiaries:
Aman Environmental Construction, Inc. California
Bovay Northwest, Inc. Washington
O'Brien-Kreitzberg Inc. California
Seismic Risk Insurance Services, Inc. California
Walk, Haydel & Associates, Inc. Louisiana
Dames & Moore Management Company California
Dames & Moore Servicing Company California
DQ Acquisition Company California
Dames & Moore Ventures California
Dames & Moore America, L.P.* California
BRW Group, Inc. Delaware
BRW, Inc. Wyoming
Dames & Moore Investors, Inc. (Unrestricted) Delaware
Foreign Subsidiaries:
Bureau voor Milieumanagement BV The Netherlands
Dames & Moore (BVI) Ltd. British Virgin Islands
Dames & Moore, Canada Canada
Dames & Moore Chile Ltda. Chile
Dames & Moore GmbH & Co KG Germany
Dames and Moore Iberia SA Spain
Dames & Moore International SRL Italy
Dames & Moore International SRL Venezuela
Dames & Moore (Malaysia) Sdn Bhd Malaysia
Dames & Moore Pty Ltd Australia
Dames & Moore SARL France
Dames & Moore (Singapore) Singapore
Dames & Moore (United Kingdom) United Kingdom
HDML Pty Ltd Australia
Hollingsworth Dames & Moore (PNG) Pty Ltd Papua New Guinea
Norecol, Dames & Moore, Inc. Canada
Professional Insurance Limited Bermuda
Saudi Arabian Dames & Moore Saudi Arabia
Forestry Technical Services Pty Ltd Australia
The International Agricultural Trust Australia
* Dames & Moore America, L.P. is 92% controlled by Dames & Moore Management
Company, its general partner, and 8% controlled by Professional
Insurance Limited.
Dames & Moore, Inc.
List of Affiliates
The following is a list of entities in which the Company directly or
indirectly controls between 5% and 50% of the equity interest. None is a
Subsidiary.
Name State or other
Jurisdiction of
Incorporation or
Organization
Partially-Owned Affiliates:
Dames & Moore/Brookhill, L.L.C. Delaware
Chiyoda-Dames & Moore Japan
Daines & Moore-Aguirre Y Gonzalez Uruguay
H&R Investments Pty. Ltd. Australia
H&R Mohr, Mohr-H&R Australia
HR-KHW, Hardcastle & Richards-Kvaerner Earl
and Wright Australia
HR-PCT, Hardcastle & Richards-Process Control
Technology Australia
HMA International Australia
PT HMA International Pty. Ltd. Australia
Tailings Engineering and Management Services
(TEAM)
Reverse Engineering Limited United Kingdom
Name
Joint Ventures:
O'Brien-Kreitzberg-D carne JV
O'Brien-Kreitzberg-RP Carbone JV
O'Brien-Kreitzberg-RP Carbone JV
O'Brien-Kreitzberg-RP Carbone JV
O'Brien-Kreitzberg-FR Harris JV
O'Brien-Kreitzberg-Gannett Fleming JV
O'Brien-Kreitzberg/Luster CM/GKO
O'Brien-Kreitzberg-Chu & Gassman JV
O'Brien-Kreitzberg-MCC JV
Telecu-OK JV
Todd Associates
Urban Engineers, Inc./O'Brien-Kreitzberg & Associates
Dames & Moore, Inc.
Directors
George D. Leal
Arthur C. Darrow
Robert M. Perry
John P. Trudinger
Richard C. Tucker
Norman A. Barkeley
Robert J. Lynch, Jr.
Anthony R. Moore
Michael R. Peevey
Harald Peipers
Dames & Moore, Inc.
Officers
Name
Title
George D. Leal
Chairman of the Board
Arthur C. Darrow
President
Chief Executive Officer
Mark A. Snell
Executive Vice President
Chief Financial Officer
Henry Klehn, Jr.
Executive Vice President,
Corporate Development
Robert M. Perry
Executive Vice President,
Corporate Affairs
Leslie S. Puget
Corporate Controller
Kevin J. Freeman
Senior Vice President/
Division Manager - Western
North America
William D. Webb
Senior Vice President/
Division Manager - Eastern
North America
Glenn D. Martin
Senior Vice President/
Division Manager - Central
Richard C. Tucker
Senior Vice President/
Division Manager -
Government Services
Peter G. Rowley
Senior Vice President/
Division Manager -
International
Schedule 5.5
Financial Statements Delivered
1. Audited Financial Statements and Form 10-K of the Company
for the fiscal year ended the last Friday of March 1992, 1993, 1994, 1995 and
1996.
2. Unaudited Financial Statements and Form 10-Q of the
Company for the fiscal quarters ended June 28, 1996 and September 27, 1996.
<PAGE>
Schedule 5.14
Use of Proceeds
Proceeds from the Notes will be used to repay the existing loan balance
outstanding to Bank of America set forth on Schedule 5.15 from $27,000,000 to
$7,000,000, without terminating the Credit Agreement.
<PAGE>
Schedule 5.15
Existing Indebtedness
As of December 2, 1996
Amount
Maturity
Date
Bank Loans
Bank of America
$27,000,000
5/22/97
Westpac Banking Corp. Austral
1,580,000
7/1/97
Total Loans Outstanding
28,580,000
Letters of Credit
Bank of America
7,029,540
Various
Bank of America (Westpac Guarantee)
5,165,250
8/31/97
First Interstate Bank
4,863,000
Various
Westpac Banking Corp.
113,000
Various
Total Letters of Credit
$17,170,790
Other Obligations
Reverse Engineering Ltd. Not
1,466,000
9/6/98
Company's Officers' Guaranteed Loans
527,000
Various
Hazelet & Erdal/Landmark Asso
615,000
5/31/98
Capitalized Leases (Total)
830,900
Various
Miscellaneous Notes Payable
(under $500,000) (Total)
489,000
Various
Total Obligations
$3,927,000
Senior Notes
$100,000,000
<PAGE>
Schedule 5.15
Existing Liens
1. Standard liens on leased office equipment and computer
equipment.
2. Lien in favor of Bank of America with respect to cash on
deposit pursuant to Section 10.6 of the First Amended and Restated Credit
Agreement dated as of May 24, 1996.
<PAGE>
Schedule 5.18
Environmental Matters
None
<PAGE>
[Form of Note]
Dames & Moore, Inc.
7.19% Senior Note, Series F,
Due December 16, 2004
No. FR- ___________, 1996
$[____________] PPN 235713 B# 0
For Value Received, the undersigned, Dames & Moore, Inc. (herein called
the "Company"), a corporation organized and existing under the laws of the
State of Delaware, hereby promises to pay to [________________], or registered
assigns, the principal sum of [________________] Dollars on December 16, 2004,
with interest (computed on the basis of a 360-day year of twelve 30-day
months) (a) on the unpaid balance thereof at the rate of 7.19% per annum from
the date hereof through and including the date of maturity, payable
semiannually, on the 29th day of March and September in each year, commencing
with the March 29 or September 29 next succeeding the date hereof, until the
principal hereof shall have become due and payable and at maturity, and (b) to
the extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount (as defined in the Note Purchase Agreement
referred to below), payable semiannually and at maturity as aforesaid (or, at
the option of the registered holder hereof, on demand), at the rate of 9.19%
per annum.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America and originated from New York, New York, or at such other place as the
Company shall have designated by written notice to the holder of this Note as
provided in the Note Purchase Agreement referred to below.
This Note is one of the 7.19% Senior Notes, Series F, due December 16,
2004 (the "Series F Notes") of the Company in the aggregate principal amount
of $10,000,000 which, together with the Company's $10,000,000 aggregate
principal amount of 7.23% Senior Notes, Series G, due December 16, 2005 (the
"Series G Notes", said Series G Notes together with the Series F Notes, are
hereinafter referred to collectively as the "Notes") were issued pursuant to the
Note Purchase Agreement, dated as of December 16, 1996 (as from time to time
amended, the "Note Purchase Agreement"), between the Company and the
purchaser named therein, and are entitled to the benefits thereof. Each
holder of this Note will be deemed, by its acceptance hereof, (i) to have
agreed to the confidentiality provisions set forth in Section 20 of the Note
Purchase Agreement and (ii) to have made the representations set forth in
Section 6 of the Note Purchase Agreement.
This Note is a registered Note and, as provided in the Note Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed,
by the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment
and for all other purposes, and the Company will not be affected by any notice
to the contrary.
This Note is subject to optional prepayment, in whole or from time to
time in part, at the times and on the terms specified in the Note Purchase
Agreement, but not otherwise.
If an Event of Default, as defined in the Note Purchase Agreement,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note
Purchase Agreement.
This Note shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the law of the State of New York
excluding choice-of-law principles of the law of such State that would
require the application of the laws of a jurisdiction other than such State.
Dames & Moore, Inc.
By
Title
<PAGE>
[Form of Note]
Dames & Moore, Inc.
7.23% Senior Note, Series G,
Due December 16, 2005
No. GR- ___________, 1996
$[____________] PPN 235713 C* 3
For Value Received, the undersigned, Dames & Moore, Inc. (herein called
the "Company"), a corporation organized and existing under the laws of the
State of Delaware, hereby promises to pay to [________________], or registered
assigns, the principal sum of [________________] Dollars on December 16,
2005, with interest (computed on the basis of a 360-day year of twelve 30-day
months) (a) on the unpaid balance thereof at the rate of 7.23% per annum from
the date hereof through and including the date of maturity, payable
semiannually, on the 29th day of March and September in each year, commencing
with the March 29 or September 29 next succeeding the date hereof, until the
principal hereof shall have become due and payable and at maturity, and (b)
to the extent permitted by law on any overdue payment (including any
overdue prepayment) of principal, any overdue payment of interest and any
overdue payment of any Make-Whole Amount (as defined in the Note Purchase
Agreement referred to below), payable semiannually and at maturity as
aforesaid (or, at the option of the registered holder hereof, on demand), at
the rate of 9.23% per annum.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America and originated from New York, New York, or at such other place as the
Company shall have designated by written notice to the holder of this Note as
provided in the Note Purchase Agreement referred to below.
This Note is one of the 7.23% Senior Notes, Series G, due December 16,
2005 (the "Series G Notes") of the Company in the aggregate principal amount
of $10,000,000 which, together with the Company's $10,000,000 aggregate
principal amount of 7.19% Senior Notes, Series F, due December 16, 2004 (the
"Series F Notes", said Series F Notes together with the Series G Notes are
hereinafter referred to collectively as the "Notes") were issued pursuant to
the Note Purchase Agreement, dated as of December 16, 1996 (as from time to
time amended, the "Note Purchase Agreement"), between the Company and the
purchaser named therein, and are entitled to the benefits thereof. Each
holder of this Note will be deemed, by its acceptance hereof, (i) to have
agreed to the confidentiality provisions set forth in Section 20 of the Note
Purchase Agreement and (ii) to have made the representations set forth in
Section 6 of the Note Purchase Agreement.
This Note is a registered Note and, as provided in the Note Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed,
by the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment
and for all other purposes, and the Company will not be affected by any notice
to the contrary.
This Note is subject to optional prepayment, in whole or from time to
time in part, at the times and on the terms specified in the Note Purchase
Agreement, but not otherwise.
If an Event of Default, as defined in the Note Purchase Agreement,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note
Purchase Agreement.
This Note shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the law of the State of New York
excluding choice-of-law principles of the law of such State that would
require the application of the laws of a jurisdiction other than such State.
Dames & Moore, Inc.
By
Title
<PAGE>
Form of Opinion of Special Counsel
to the Purchaser
The closing opinion of Chapman and Cutler, special counsel to you called
for by Section 4.4(b) of the Note Purchase Agreement, shall be dated the date
of the Closing and addressed to you, shall be satisfactory in form and
substance to you and shall be to the effect that:
1. The Company is a corporation, validly existing and in
good standing under the laws of the State of Delaware and has the
corporate power and the corporate authority to execute and deliver the
Note Purchase Agreement and to issue the Notes.
2. The Note Purchase Agreement has been duly authorized by
all necessary corporate action on the part of the Company, has been
duly executed and delivered by the Company and constitutes the legal,
valid and binding contract of the Company enforceable in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent conveyance or
similar laws affecting creditors' rights generally, and general
principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).
3. The Notes have been duly authorized by all necessary
corporate action on the part of the Company, have been duly executed and
delivered by the Company and constitute the legal, valid and binding
obligations of the Company enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent conveyance or similar laws
affecting creditors' rights generally, and general principles of equity
(regardless of whether the application of such principles is considered
in a proceeding in equity or at law).
4. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Note Purchase Agreement do not, under
existing law, require the registration of the Notes under the Securities
Act of 1933, as amended, or the qualification of an indenture under the
Trust Indenture Act of 1939, as amended.
The opinion of Chapman and Cutler shall also state that the opinion of
Riordan & McKinzie is satisfactory in scope and form to Chapman and Cutler
and that, in their opinion, you are justified in relying thereon.
In rendering the opinion set forth in paragraph 1 above, Chapman and
Cutler may rely solely upon an examination of the Certificate of Incorporation
certified by, and a certificate of good standing of the Company from, the
Secretary of State of the State of Delaware, the By-laws of the Company and
the general business corporation law of the State of Delaware. The opinion
of Chapman and Cutler is limited to the laws of the State of New York, the
general business corporation law of the State of Delaware and the Federal
laws of the United States.
With respect to matters of fact upon which such opinion is based,
Chapman and Cutler may rely on appropriate certificates of public officials
and officers of the Company.
<PAGE>
Form of Opinion of Special Counsel
to the Company
The closing opinion of Riordan & McKinzie, counsel for the Company,
which is called for by Section 4.4(a) of the Note Purchase Agreement, shall
be dated the date of the Closing and addressed to you, shall be satisfactory
in scope and form to you and shall be to the effect that:
1. The Company is a corporation, duly incorporated, validly
existing and in good standing under the laws of the State of Delaware,
has the corporate power and the corporate authority to execute and
perform the Note Purchase Agreement and to issue the Notes and has the
full corporate power and the corporate authority to conduct the
activities in which it is now engaged and is duly licensed or qualified
and is in good standing as a foreign corporation in each jurisdiction
in which the character of the properties owned or leased by it or the
nature of the business transacted by it makes such licensing or
qualification necessary.
2. Each Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and is duly licensed or qualified and is in good standing
in each jurisdiction in which the character of the properties owned or
leased by it or the nature of the business transacted by it makes such
licensing or qualification necessary and all of the issued and
outstanding shares of capital stock of each such Subsidiary have been
duly issued, are fully paid and non-assessable and are owned by the
Company, by one or more Subsidiaries, or by the Company and one or more
Subsidiaries.
3. The Note Purchase Agreement has been duly authorized by
all necessary corporate action on the part of the Company, has been duly
executed and delivered by the Company and constitutes the legal, valid
and binding contract of the Company enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance or
similar laws affecting creditors' rights generally, and general
principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).
4. The Notes have been duly authorized by all necessary
corporate action on the part of the Company, have been duly executed and
delivered by the Company and constitute the legal, valid and binding
obligations of the Company enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent conveyance or similar laws
affecting creditors' rights generally, and general principles of equity
(regardless of whether the application of such principles is considered
in a proceeding in equity or at law).
5. No approval, consent or withholding of objection on the
part of, or filing, registration or qualification with, any governmental
body, Federal, state or local, is necessary in connection with the
execution, delivery and performance of the Note Purchase Agreement or
the Notes.
6. The issuance and sale of the Notes and the execution,
delivery and performance by the Company of the Note Purchase Agreement
do not conflict with or result in any breach of any of the provisions
of or constitute a default under or result in the creation or imposition
of any Lien upon any of the property of the Company pursuant to
the provisions of the Restated Articles of Incorporation or By-laws of
the Company or any agreement or other instrument known to such counsel
to which the Company is a party or by which the Company may be bound.
7. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Note Purchase Agreement do not, under
existing law, require the registration of the Notes under the Securities
Act of 1933, as amended, or the qualification of an indenture under the
Trust Indenture Act of 1939, as amended.
8. The issuance of the Notes and the use of the proceeds of
the sale of the Notes in accordance with the provisions of and
contemplated by the Note Purchase Agreement do not violate or conflict
with Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System.
9. There is no litigation pending or, to the best knowledge
of such counsel, threatened which in such counsel's opinion could
reasonably be expected to have a materially adverse effect on the
Company's business or assets or which would impair the ability of the
Company to issue and deliver the Notes or to comply with the provisions
of the Note Purchase Agreement.
10. The Company is not a "investment company," or a company
"controlled" by an "investment company," under the Investment Company
Act of 1940, as amended.
11. The choice of New York as the governing law of the Note
Purchase Agreement and the Notes is valid and will be recognized and
applied by the courts of the State of New York and California.
The opinion of Riordan & McKinzie shall cover such other matters
relating to the sale of the Notes as you may reasonably request. With
respect to matters of fact on which such opinion is based, such counsel shall
be entitled to rely on appropriate certificates of public officials and
officers of the Company. The opinion of Riordan & McKinzie shall cover all
applicable laws of the States of California, all applicable Federal laws and
the general business corporation law of the State of Delaware.
Dames & Moore, Inc.
Third Amendment
Dated as of December 16, 1996
To
Note Purchase Agreements
Dated as of March 15, 1996
Re: $40,000,000 6.54% Senior Notes, Series A,
Due March 29, 2001,
$30,000,000 6.87% Senior Notes, Series B,
Due March 29, 2003,
$10,000,000 6.92% Senior Notes, Series C,
Due September 29, 2003,
$5,000,000 7.20% Senior Notes, Series D,
Due March 29, 2006
and
$15,000,000 7.25% Senior Notes, Series E,
Due September 29, 2006
<PAGE>
THIRD AMENDMENT TO NOTE PURCHASE AGREEMENTS
THIS THIRD AMENDMENT to Note Purchase Agreements dated as of December 16,
1996 (this "Third Amendment"), is entered into between Dames & Moore, Inc., a
Delaware corporation (the "Company"), and Teachers Insurance and Annuity
Association of America, Principal Mutual Life Insurance Company, American
General Life Insurance Company, United of Omaha Life Insurance Company,
American Republic Insurance Company, Aid Association for Lutherans, Provident
Mutual Life Insurance Company, and Indianapolis Life Insurance Company
(each a "Noteholder" and collectively, the "Noteholders").
RECITALS:
A. The Company and the Noteholders, together with Unicare Life &
Health Insurance Company (as successor MML Pension Insurance Company),
Massachusetts Mutual Life Insurance Company, The Canada Life Assurance
Company, Canada Life Insurance Company of America, Canada Life Insurance
Company of New York and Allstate Life Insurance Company (together with the
Noteholders, the "Original Purchasers"), respectively, have heretofore
entered into separate Note Purchase Agreements, each dated as of March 15,
1996 and the First Amendment to Note Purchase Agreements dated as of April
15, 1996 and the Company and the Noteholders have heretofore entered into the
Second Amendment to Note Purchase Agreements dated as of November 18, 1996
(collectively as amended, the "Note Purchase Agreements").
B. On or about November 18, 1996, the Company consummated the
acquisition of approximately 3,700,000 shares of its common stock held by DM
Investors, Inc., a Delaware corporation and wholly-owned Subsidiary of
Hochtief AG, a corporation organized under the laws of Germany ("Hochtief"),
upon the terms and conditions and all as contemplated by that certain Stock
Purchase Agreement, dated as of November 5, 1996 among the Company, DM
Investors, Inc. and Hochtief (the "Stock Acquisition").
C. The consummation of the Stock Acquisition would have resulted in a
violation of the terms of the Note Purchase Agreements and in consequence
thereof, the Company requested the Noteholders to enter into a second
amendment to the Note Purchase Agreements for the purpose of amending such of
the terms of the Note Purchase Agreements as would be necessary in order to
permit the Stock Acquisition.
D. Pursuant to Section 17 of the Note Purchase Agreements, the Company
and the holders of at least 51% in principal of the Notes consented to the
amendment of certain of the terms of the Note Purchase Agreements as set
forth in the Second Amendment to Note Purchase Agreements dated as of
November 18, 1996 (the "Second Amendment").
E. The Second Amendment did not accurately reflect the agreement of
the Company and the Noteholders with respect to Section 10.5 of the Note
Purchase Agreements.
F. The Company and the Noteholders now desire to amend, effective on
the date on which the conditions specified in Section 3 hereof are satisfied,
certain of the terms of the Note Purchase Agreements amended by the Second
Amendment in order to set forth correctly the agreement of the Company and
the Noteholders.
G. Capitalized terms used herein shall have the respective meanings
ascribed thereto in the Note Purchase Agreements unless herein defined or the
context shall otherwise require.
H. All requirements of law have been fully complied with and all other
acts and things necessary to make this Third Amendment a valid, legal and
binding instrument according to its terms for the purposes herein expressed
have been done or performed.
NOW, THEREFORE, the Company and the Noteholders, in consideration of good
and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, do hereby agree as follows:
SECTION 1. AMENDMENT.
Section 1.1. Section 10.5(iv)(1) of the Note Purchase Agreements shall
be and is hereby amended in its entirety to read as follows:
"(1) Consolidated Funded Debt shall not exceed the applicable
percentage of Consolidated Capitalization set forth below opposite the
period during which such additional Funded Debt is to be created,
issued, assumed, guaranteed or incurred:
Percent of Consolidated
For the Period Capitalization
From September 27, 1996 to
and including March 28, 1997 56%
From March 29, 1997 to and
including September 26, 1997 55%
From September 27, 1997 to and
including March 27, 1998 54%
From March 28, 1998 to and
including Septembe 25, 1998 52%
From September 26, 1998 and thereafter 50%"
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Section 2.1. To induce the Noteholders to execute and deliver this Third
Amendment, the Company represents and warrants to the Noteholders (which
representations shall survive the execution and delivery of this Third
Amendment) that:
(a) this Third Amendment has been duly authorized, executed
and delivered by it and this Third Amendment constitutes the legal,
valid and binding obligation, contract and agreement of the Company
enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles relating to or
limiting creditors' rights generally; and
(b) the Note Purchase Agreements, as amended by this Third
Amendment, constitute the legal, valid and binding obligations,
contracts and agreements of the Company enforceable against it in
accordance with their terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles relating to or limiting creditors' rights generally.
SECTION 3. CONDITIONS TO EFFECTIVENESS OF THIRD AMENDMENT.
This Third Amendment shall not become effective until, and shall
become effective when, each and every one of the following conditions shall
have been satisfied:
(a) executed counterparts of this Third Amendment, duly
executed by the Company and the Noteholders, shall have been delivered
to the Noteholders; and
(b) the representations and warranties of the Company set
forth in Section 2 hereof shall be true and correct on and with respect
to the date hereof.
SECTION 4. MISCELLANEOUS.
Section 4.1. Except as modified and expressly amended by this Third
Amendment, the Note Purchase Agreements are in all respects ratified,
confirmed and approved and all of the terms, provisions and conditions
thereof shall be and remain in full force and effect.
Section 4.2. Any and all notices, requests, certificates and other
instruments executed and delivered after the execution and delivery of this
Third Amendment may refer to the Note Purchase Agreements without making
specific reference to this Third Amendment but nevertheless all such
references shall include this Third Amendment unless the context otherwise
requires.
Section 4.3. This Third Amendment shall be governed by and construed in
accordance with the laws of the State of New York.
Section 4.4. This Third Amendment may be executed and delivered in any
number of counterparts, each of such counterparts constituting an original,
but all together only one Third Amendment.
<PAGE>
IN WITNESS WHEREOF, the Company and the Noteholders have caused this
instrument to be executed, all as of the day and year first above written.
Dames & Moore, Inc.
By Mark A. Snell
_______________________________
Its Executive Vice President and
Chief Financial Officer
Accepted and Agreed to:
Teachers Insurance and Annuity
Association of America
By Gregory W. MacCordy
_______________________________
Its Director - Private Placements
Accepted and Agreed to:
Principal Mutual Life Insurance
Company
By Sarah J. Pitts
_______________________________
Its Counsel
By Frederick A. Bell
________________________________
Its Second Vice President -
Securities Investment
Accepted and Agreed to:
American General Life Insurance
Company
By Julia P. Tucker
________________________________
Its Investment Officer
Accepted and Agreed to:
United of Omaha Life Insurance
Company
By Curt Caldwell
_________________________________
Its First Vice President
Accepted and Agreed to:
American Republic Insurance
Company
By G.F. Sheldon
_________________________________
Its Senior Vice President, Investments
Accepted and Agreed to:
Aid Association for Lutherans
By James Abitz
________________________________
Its Vice President - Securities
By R. Jerry Scheel
________________________________
Its Second Vice President - Securities
Accepted and Agreed to:
Provident Mutual Life Insurance
Company
By James D. Kestner
________________________________
Its Vice President
Accepted and Agreed to:
Indianapolis Life Insurance Company
By Gene E. Trueblood
_________________________________
Its Vice President, CIO and Treasurer
DAMES & MOORE, INC.
AMENDED AND RESTATED
1991 LONG-TERM INCENTIVE PLAN
ARTICLE 1
PURPOSE
The purpose of this Amended and Restated 1991 Long-Term Incentive Plan
of Dames & Moore, Inc. is to promote the interests of the Company and its
shareholders by strengthening the Company's ability to attract and retain key
officers and employees and to provide a means to encourage the stock
ownership and proprietary interest in the Company of officers and valued
employees of the Company. This Amended and Restated 1991 Long-Term Incentive
Plan is intended as a means of reinforcing the commonality of interest among
the Company's shareholders, officers and employees and as an aid in
attracting and retaining officers and key employees who are critical
to the long-term growth and profitability of the Company.
On August 10, 1992, the Company's shareholders approved the 1991
Long-Term Incentive Plan. This Amended and Restated 1991 Long-Term Incentive
Plan is intended to amend certain provisions of the 1991 Long-Term Incentive
Plan and to restate in one document said plan as so amended.
ARTICLE 2
DEFINITIONS
2.1 Award shall mean a grant of Options, Restricted Stock or any
combination thereof.
2.2 Board shall mean the Board of Directors of the Company.
2.3 Change in Control shall mean any of the following events: (a) the
dissolution or liquidation of the Company; (b) a reorganization, merger or
consolidation of the Company with one or more other corporations as a result
of which the Company is not the surviving corporation or becomes a subsidiary
of another corporation (which shall be deemed to have occurred if another
corporation shall own, directly or indirectly, eighty percent or more of the
aggregate voting power of all outstanding equity securities of the Company);
or (c) a sale of all or substantially all of the Company's assets. As used
herein or elsewhere in the Plan, the word "person" shall mean an individual,
corporation, partnership, association or other person or entity, or any two
or more of the foregoing that have agreed to act together as a group.
2.4 Code shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time.
2.5 Committee shall mean the Compensation Committee of the Board.
2.6 Common Stock shall mean the common stock of the Company, $0.01 par
value, as described in the Company's Certificate of Incorporation.
2.7 Company shall mean Dames & Moore, Inc., a Delaware corporation, or
any successor thereof.
2.8 Director shall mean a member of the Board.
2.9 Disability shall mean a physical or mental condition which prevents
an Employee from performing the normal duties of his or her Employment for a
period of at least 180 consecutive days. The Committee shall determine an
Employee's Disability. If an Employee makes application for disability
benefits under the Company's group long-term disability policy, and qualifies
for such benefits, he or she shall be presumed to qualify as totally and
permanently disabled under the Plan. The Committee may require that the
Employee submit to an examination by a competent physician or medical clinic
selected by the Committee on an annual basis to confirm Disability. On the
basis of such medical evidence, the determination of the Committee as to
whether or not a condition of Disability exists shall be conclusive.
Notwithstanding the foregoing, solely for purposes of determining the effect
of an Employment termination upon an Incentive Stock Option, an Employee
shall not be deemed to have terminated his or her Employment by reason of
Disability unless the Committee determines that such Employee is also
disabled within the meaning of Sections 22(e)(3) and 422(c)(6) of the Code.
2.10 Employee shall mean any officer or employee of the Company or any
of its Subsidiaries. For purposes of administering the Plan with respect to
an Employee whose Employment has terminated, the term "Employee" shall also
mean an individual who received an Award while he or she was an officer or
employee of the Company or a Subsidiary but whose Employment subsequently
terminated; provided, however, that an individual whose Employment has
terminated shall not be eligible to receive an Award thereafter.
2.11 Employment shall mean an Employee's employment with the Company or
any of its Subsidiaries. An Employee's Employment shall be deemed to have
terminated once he or she is no longer employed by the Company or any
Subsidiary as a "regular status employee," as such term is construed by the
Committee in accordance with Company policies. If an Employee takes a leave of
absence with the Company's approval or is employed by the Company or a
Subsidiary on a less than full-time basis with the Company's approval, his or
her Employment shall not be deemed to have terminated.
2.12 Exchange Act shall mean the Securities Exchange Act of 1934, as it
may be amended from time to time.
2.13 Fair Market Value, when used with respect to Shares, Options or
Restricted Stock, shall be determined for purposes of the Plan by reference
to the closing price of a Share on the New York Stock Exchange (or other
principal stock exchange on which Shares are then listed) or, if Shares are
not then listed on an exchange, by reference to the closing price (if a
National Market System security) or the mean between the bid and asked prices
(if an over-the-counter issue) of a Share as supplied by the National
Association of Securities Dealers, Inc. through Nasdaq (or its successor), in
each case as reported by The Wall Street Journal, for the date as of which
such value is to be determined or, if such date is not a business day, for
the business day immediately preceding such date. If no sales of Shares
occur on such date described in the preceding sentence, the Fair Market Value
on that date shall be deemed to be the closing price on the most recent
preceding date on which Shares were sold.
2.14 Incentive Stock Option shall mean an Option designated by the
Committee as an Incentive Stock Option and intended to satisfy the
requirements of Section 422 of the Code.
2.15 Non-Employee Director means a Director (i) who is a "non-employee
director" within the meaning of Rule 16b-3 promulgated by the Securities and
Exchange Commission pursuant to the Exchange Act and (ii) if the Board
determines that compliance with Section 162(m) of the Code is advisable, who
is also an "outside director" within the meaning of Section 162(m) of the
Code and the regulations promulgated thereunder.
2.16 Nonqualified Stock Option shall mean an Option that is not intended
to qualify as an Incentive Stock Option within the meaning of Section 422 of
the Code.
2.17 Option shall mean an option to acquire Shares granted under the
Plan and may refer to an Incentive Stock Option or a Nonqualified Stock
Option.
2.18 Option Agreement shall mean the agreement for an Incentive Stock
Option or a Nonqualified Stock Option which is entered into between the
Company and an Employee pursuant to Paragraph 6.3 of the Plan.
2.19 Option Termination Date shall mean the date on which an Option
terminates as specified by the Committee in the Option Agreement pursuant to
Paragraph 6.2 of the Plan.
2.20 Plan shall mean this Amended and Restated 1991 Long-Term Incentive
Plan, as it may be amended from time to time.
2.21 Restricted Stock shall mean Shares that are awarded pursuant to
Article 7 of the Plan.
2.22 Restricted Stock Agreement shall mean the agreement governing an
Award of Restricted Stock which is entered into between the Company and an
Employee pursuant to Paragraph 7.1 of the Plan.
2.23 Restriction Period shall mean the period specified by the Committee
in a Restricted Stock Agreement during which Shares shall be subject to the
restrictions provided for in Paragraph 7.3 of the Plan.
2.24 Retirement shall mean the termination of an Employee's Employment,
other than by reason of death or Disability, on or after both attaining age
fifty-five and completing at least ten Years of Service.
2.25 Securities Act shall mean the Securities Act of 1933, as it may be
amended from time to time.
2.26 Shares shall mean shares of the Company's Common Stock.
2.27 Subsidiaries shall mean all "subsidiary corporations" of the
Company as such term is defined in Section 424(f) of the Code and any and all
other affiliated entities designated by the Board as "Subsidiaries."
2.28 Years of Service shall mean an Employee's cumulative consecutive
years of continuous Employment, beginning on the date the Employee most
recently became an Employee and continuing thereafter on each anniversary
thereof.
ARTICLE 3
ADMINISTRATION AND AUTHORIZATION
3.1 Plan Administration. The Plan shall be administered by the
Committee, which shall be composed of two or more Non-Employee Directors who
are appointed by the Board. The Board may from time to time remove members
from, or add members to, the Committee. Vacancies on the Committee,
howsoever caused, shall be filled by the Board. The Committee shall select
one of its members as Chairman and shall hold meetings at such times and
places as it may determine. A majority of the authorized number of members
of the Committee shall constitute a quorum for the transaction of business.
Any act of the Committee shall be taken by majority vote of the Committee
members at a meeting at which a quorum is present or by written consent
signed by all of the members of the Committee. No member of the Committee
shall be eligible to be granted Awards under the Plan while he or she is a
member of the Committee, and each member of the Committee must in all
respects remain a Non-Employee Director during his or her service on the
Committee.
3.2 Duties and Powers. The Committee is authorized and empowered to
administer the Plan and, in connection therewith: (a) to select the
Employees to whom Awards are to be granted and to fix the number of Shares
and price per Share with respect to which Awards are to be granted to each;
(b) to determine the dates upon which Awards shall be granted and the terms
of the Awards in a manner consistent with the Plan, which terms need not
always be identical; (c) to interpret the Plan; (d) to prescribe, amend and
rescind rules and regulations relating to the Plan; (e) to determine the
rights and obligations of Employees under the Plan; (f) to make Awards of
Restricted Stock, Incentive Stock Options and Nonqualified Stock Options and
to amend the terms of such Awards consistent with the provisions of the Plan;
(g) to direct the Company to execute Option Agreements, Restricted Stock
Agreements and amendments thereto which set forth the terms of Awards; and (h)
to make all other determinations and to take all other actions which are
consistent with the Plan and which are necessary or appropriate for the
administration of the Plan.
3.3 Authorization. Any determination, decision or action of the
Committee in connection with the construction, interpretation, administration
or application of the Plan shall be final, binding and conclusive upon all
Employees, their transferees, beneficiaries, legal representatives, executors
and other successors and assigns and every other person claiming under or
through an Employee, unless otherwise determined by the Board. If permitted
by Rule 16b-3 under the Exchange Act and Section 162(m) of the Code and the
regulations thereunder, and if so determined by the Board, any determination,
decision or action of the Committee provided for in the Plan may be made or
taken by action of the Board (or by action of an officer or officers of the
Company duly authorized and directed by the Board), with the same force and
effect as if such determination, decision or action had been made or taken by
the Committee. No member of the Committee or of the Board, and no other
person acting upon the authorization and direction of the Committee or the
Board, shall be liable for any determination, decision or action made in good
faith with respect to the Plan or an Award granted under the Plan.
The Company shall indemnify and hold harmless the members of the
Committee and the Board, and other persons who are acting upon the
authorization and direction of the Committee or the Board, from and against
any and all liabilities, costs and expenses incurred by such persons as a
result of any act or omission in connection with the performance of such
persons' duties, responsibilities and obligations under the Plan, other than
such liabilities, costs and expenses as may result from the bad faith,
willful misconduct or criminal acts of such persons.
ARTICLE 4
STOCK SUBJECT TO THE PLAN
The stock to be issued under the Plan upon the exercise of Options or
the grant of Restricted Stock shall be the Company's Common Stock, which
shall be made available, at the discretion of the Board or the Committee,
from (i) authorized but unissued Common Stock, (ii) Common Stock reacquired
by the Company (including Shares purchased in the open market) and held in the
Company's treasury, or (iii) a combination of such unissued Common Stock and
reacquired Common Stock. Notwithstanding the terms of the preceding
sentence, if Restricted Stock is granted with no purchase price or with a
purchase price that is less than twenty-five percent of the Fair Market Value
of the Company's Shares on the grant date, such Restricted Stock shall be
issued only out of reacquired Common Stock that is held by the Company as
treasury stock. The aggregate number of Shares that may be issued under the
Plan through Option exercises and grants of Restricted Stock shall not exceed
2,500,000. The limitation established by the preceding sentence shall be
subject to adjustment as provided in Paragraph 8.3 of the Plan.
In the event that any outstanding Award under the Plan expires, lapses,
is terminated or is forfeited for any reason, the unissued Shares that are
allocable to the unexercised portion of such Award shall again become
available for award under the Plan.
ARTICLE 5
ELIGIBILITY AND PARTICIPATION
Only persons who are officers or employees of the Company or its
Subsidiaries shall be eligible to receive Awards under the Plan. The
Committee shall determine the Employees to whom Options, Restricted Stock or
any combination thereof shall be granted, the time or times at which
such Awards shall be granted and the number of Shares to be subject to each
Award. An Employee may be granted Incentive Stock Options, Nonqualified
Stock Options, Restricted Stock or any combination thereof; provided,
however, that the grant of Incentive Stock Options and Nonqualified Stock
Options to an Employee shall be awarded pursuant to separate Option
Agreements, and each Award of Incentive Stock Options and Nonqualified Stock
Options shall be specifically designated as such.
The aggregate Fair Market Value of the Shares (determined at the time
the Option is granted) with respect to which Incentive Stock Options
(whenever granted) are exercisable for the first time by an Employee during
any calendar year (under all plans of the Company and its Subsidiaries) shall
not exceed $100,000.
Within any calendar year, the maximum number of Shares with respect to
which Options may be granted to any Employee is 100,000, subject to the
adjustment provisions of Paragraph 8.3 of the Plan. Within any calendar
year, the maximum number of Shares of Restricted Stock which may be granted
to any Employee is 50,000, subject to the adjustment provisions of Paragraph
8.3 of the Plan.
ARTICLE 6
OPTIONS
6.1 Purchase Price. The purchase price of each Share covered by an
Option shall be established by the Committee and set forth in the applicable
Option Agreement; provided, however, that such price for an Incentive Stock
Option shall not be less than 100% of the Fair Market Value of such Shares on
the date of grant and, if at the time an Incentive Stock Option is granted the
Employee owns more than 10% of the total combined voting power of all classes
of stock of the Company, the purchase price of the Shares covered by such
Incentive Stock Option shall not be less than 110% of the Fair Market Value
of such Shares on the date the Incentive Stock Option is granted and such
Incentive Stock Option by its terms shall not be exercisable after the
expiration of 5 years from the date it is granted.
6.2 Option Term. The term of any Option shall be determined by the
Committee. If the Committee does not specify the Option Termination Date in
the Option Agreement, the Option Termination Date shall be ten years after
the date the Option is granted. In no event shall the Option Termination Date
applicable to an Incentive Stock Option be later than ten years from the date
such Option is granted. Notwithstanding the foregoing, the Committee may,
subsequent to granting any Nonqualified Stock Option or Incentive Stock
Option, extend the term thereof so long as the maximum term specified above
for an Incentive Stock Option is not exceeded. Furthermore, the Option
Termination Date shall be subject to earlier acceleration or termination as
provided in Paragraphs 8.3 and 8.6 of the Plan.
6.3 Option Agreement. Each Option granted under the Plan shall be
evidenced by an Option Agreement in such form as the Committee may from time
to time approve. Each Option Agreement shall contain such terms as the
Committee may deem necessary or appropriate and which are not inconsistent
with the provisions of the Plan.
6.4 Option Exercise. An Employee may purchase fewer than the total
number of Shares covered by an Option, provided that a partial exercise of
an Option may not be for less than 100 Shares unless fewer than 100 Shares
remain unexercised, in which case the entire remaining Option must be
exercised at one time. An Option shall not be exercisable with respect to a
fraction of a Share.
An Option may be exercised, in whole or in part, by giving written
notice of exercise to the Company, which notice shall specify the number of
Shares to be purchased and, unless otherwise determined by the Committee,
shall be accompanied by payment in full of the purchase price in accordance
with the provisions of Paragraph 6.6 of the Plan. An Option shall be deemed
exercised when such written notice of exercise has been received by the
Company. No Shares shall be issued until full payment has been made and the
Employee has satisfied the requirements of Paragraph 8.2 of the Plan and such
other conditions as may be required by the Plan, applicable laws, rules or
regulations or by the Committee in an Option Agreement.
Until the issuance of a stock certificate to the Employee, no right to
vote or receive dividends or any other rights as a shareholder shall exist
with respect to Shares covered by an Option notwithstanding the exercise of
the Option. No adjustment shall be made for a dividend or other rights for
which the record date is prior to the date the stock certificate is issued,
except as provided in Paragraph 8.3 of the Plan.
6.5 Vesting of Options. Subject to the other provisions of this
Article 6 and to Paragraph 8.3 of the Plan (relating to adjustments in the
event of a Change in Control) and Paragraph 8.6 of the Plan (relating to the
termination of an Option upon a termination of Employment), each Option shall
vest and become exercisable at such times and in such installments as the
Committee shall provide in each Option Agreement, provided that no Option
shall vest or become exercisable less than six months after the date of
grant. Notwithstanding the foregoing, the Committee may, at any time,
accelerate the time at which an Option or any installment thereof may be
exercised if such acceleration does not conflict with the requirements of
Rule 16b-3 under the Exchange Act. Unless otherwise provided in the Plan or
the Option Agreement, an Option may be exercised when vested and at any time
thereafter until, and including, the day before the Option Termination Date.
6.6 Payment of the Purchase Price. Except as otherwise determined by
the Committee or as otherwise provided in this Article 6, the entire Option
exercise price for the Shares as to which an Option is exercised shall be
paid at the time the Option is exercised by cashier's check or such
other means as deemed acceptable by the Committee. In the discretion of the
Committee or if so provided in the Option Agreement, an Employee may elect to
pay for some or all of the Shares covered by an Option with Shares that are
already owned at the time of exercise by the Employee, subject to all
restrictions and limitations of applicable laws, rules and regulations, and
subject to the satisfaction of any conditions the Committee may impose,
including, without limitation, the making of such representations and
warranties and the providing of such other assurances that the Committee
may require with respect to the Employee's title to the Shares used for
payment of the exercise price. Such payment shall be made by delivery of
certificates representing the Shares, duly endorsed or with a duly signed
stock power attached, and such Shares shall be valued at their Fair Market
Value as of the date immediately preceding the date of their delivery to the
Company.
The Committee may permit an Option to be exercised pursuant to a
cashless exercise procedure involving a simultaneous exercise of an Option and
sale of the underlying Shares and based upon such requirements as the
Committee may establish, including, without limitation, the delivery of
instructions from the Employee to the Company that, upon receipt of the
purchase price from the Employee's broker in payment for any Shares purchased
pursuant to the exercise of an Option, the Company shall issue such Shares
directly to the broker designated by the Employee.
ARTICLE 7
RESTRICTED STOCK
7.1 Grants of Restricted Stock. Each Award of Restricted Stock under
the Plan shall be evidenced by a Restricted Stock Agreement in such form as
the Committee may from time to time approve. Each Restricted Stock Agreement
shall contain such terms as the Committee may deem necessary or appropriate
and which are not inconsistent with the provisions of the Plan. Each
certificate for Restricted Stock shall be registered in the name of the
Employee to whom the Restricted Stock is awarded and, if requested by the
Committee, shall be deposited with the Company by the Employee, together with
a stock power endorsed in blank.
7.2 Purchase Price. The Committee shall have discretion to determine
whether or not an Employee shall be required to pay a purchase price for the
Restricted Stock which he or she receives. If a purchase price is required,
the Committee shall determine the purchase price per Share. Any such
purchase price which is required by the Committee shall be described in the
Restricted Stock Agreement and shall be payable on the terms specified in the
Restricted Stock Agreement.
7.3 Restrictions. At the time of the Award of Restricted Stock, there
shall be established for the Employee a Restriction Period of such length as
shall be determined by the Committee, provided that the Restriction Period
shall in all cases be at least six months if required by Rule 16b-3
under the Exchange Act. If the Committee fails to specify a Restriction
Period, the Restriction Period shall be five years from the date of grant.
Except for the restriction on transferability during the Restriction Period
described in Paragraph 8.1 of the Plan and the additional restrictions under
Paragraph 8.4 of the Plan (relating to collection and withholding of taxes)
and Paragraph 8.6 of the Plan (relating to the repurchase of Restricted Stock
on an Employee's termination of Employment), the Employee shall have the
rights of a shareholder of the Company with respect to such Restricted
Stock, including, without limitation, the right to vote such Restricted Stock
and to receive any dividends thereon which are declared and paid by the
Company.
At the expiration of the Restriction Period, all restrictions imposed on
the Employee's Shares of Restricted Stock shall lapse (except as provided in
Paragraph 8.4 with respect to withholding taxes), and the Company shall
return to the Employee (or the Employee's legal representative or
beneficiary) any stock certificates and stock powers previously deposited
with the Company pursuant to Paragraph 7.1 of the Plan. Notwithstanding the
foregoing, the Committee may, at any time, reduce or eliminate the
Restriction Period which is applicable to an Award of Restricted Stock if
such action does not conflict with the requirements of Rule 16b-3 under the
Exchange Act.
ARTICLE 8
ADDITIONAL PROVISIONS
8.1 Transferability of Awards. An Employee may not transfer, assign,
pledge or hypothecate any Option or Restricted Stock granted under the Plan,
either voluntarily or by operation of law, other than by will or the laws of
descent and distribution, and an Option shall be exercisable during an
Employee's lifetime only by the Employee; provided, however, that the foregoing
prohibition shall apply to Restricted Stock only during the Restriction Period.
Notwithstanding anything to the contrary in the preceding paragraph, the
Committee may grant a Nonqualified Stock Option or Restricted Stock that is
transferable by an Employee, without payment of consideration to such
Employee, (i) to immediate family members of such Employee (that is, to his
or her spouse, children or grandchildren), (ii) to trusts for the benefit of
such immediate family members, (iii) to partnerships whose only partners are
such family members, or (iv) if permitted by Rule 16b-3 under the Exchange
Act and applicable provisions of the Code and the regulations thereunder, to
any charitable institutions or other persons as may be designated by the
Committee. The Committee may also amend an outstanding Nonqualified Stock
Option or grant of Restricted Stock at any time to provide for such
transferability. A Nonqualified Stock Option or Restricted Stock shall be
transferable only if the applicable Option Agreement or Restricted Stock
Agreement, in its original form or as amended, sets forth the terms of such
transferability.
All of the terms of the Plan and of any Option Agreement or Restricted
Stock Agreement governing an Award (including, without limitation,
transferability restrictions and vesting and termination provisions that are
based upon the continuation of an Employee's Employment) shall be final,
binding and conclusive upon any transferee of an Award and upon every other
beneficiary, legal representative, executor or other successor or assign of
an Employee. Where appropriate to the context in which such term is used,
references to an Employee also shall refer to such Employee's transferees,
beneficiaries, legal representatives, executors and other successors and
assigns.
8.2 Securities Law Restrictions on the Issuance of Shares. No Options
or Shares shall be issued or delivered hereunder unless and until the
Committee determines that there has been compliance with all applicable
requirements of the Securities Act and the rules and regulations promulgated
thereunder, all applicable listing requirements of any national securities
exchange on which Shares are then listed, all applicable state and blue sky
securities laws, rules and regulations, and any other requirements of law or
of any regulatory body having jurisdiction over such issuance and delivery.
The inability of the Company to obtain any required permits, authorizations or
approvals necessary for the lawful issuance and sale of any Shares hereunder
on terms deemed reasonable by the Committee shall relieve the Company, the
Board and the Committee of any liability in respect of the nonissuance or
sale of such Shares as to which such requisite permits, authorizations
or approvals shall not have been obtained.
As a condition to the granting or exercise of any Option or the issuance
of any Restricted Stock, the Committee may require the person receiving or
exercising such Option or Restricted Stock to make any representation to the
Company as may be required or appropriate under the Securities Act or any
other applicable law, rule or regulation, including, without limitation, a
representation that such person is acquiring the Option or Shares covered by
such Option or Restricted Stock for investment and without any present
intention to sell or distribute such Option or Shares, and that such
Option or Shares will not be sold or transferred other than pursuant to an
effective registration statement under the Securities Act or pursuant to a
registration exemption such as Rule 144 under the Securities Act.
Each Option Agreement, Restricted Stock Agreement and certificate
representing Shares acquired upon exercise of an Option or grant of
Restricted Stock shall be endorsed with all legends, if any, that the
Committee determines are required or appropriate under applicable federal and
state securities laws, rules and regulations to be placed on such agreement
and/or certificate.
8.3 Option and Share Adjustments. If the Company's outstanding Shares
are increased, decreased, changed into or exchanged for a different number or
kind of Shares or other securities of the Company through reorganization,
merger, consolidation, recapitalization, reclassification, exchange of stock,
stock dividend, stock split, reverse stock split or other similar
transaction, upon authorization of the Committee an appropriate and
proportionate adjustment shall be made in the number or kind of Shares or
other securities, and the purchase price thereof, which may be issued in
the aggregate and to individual Employees under the Plan, including, without
limitation, an adjustment to outstanding but unexercised Options. However,
no such adjustment need be made if, upon the advice of counsel, the Committee
determines that such adjustment may result in the receipt of federally
taxable income to Employees who hold Options or Restricted Stock granted
hereunder.
Upon the occurrence of a Change in Control, the Plan and any then-
outstanding Awards (whether vested or not vested) shall terminate as of the
effective date of such Change in Control unless:
(a) Provision is made in writing in connection with such
transaction for the continuance of the Plan and for the assumption of
such Awards, or for the substitution for such then-outstanding Awards of
new awards covering the securities of any successor or surviving
corporation in the Change in Control or an affiliate thereof, with such
adjustments as the Committee deems appropriate with respect to the
number and kind of securities and per-share purchase price under such
substituted awards, in which event the Plan and such outstanding Awards
shall continue or be replaced, as the case may be, in the manner and
under the terms so provided; or
(b) The Committee otherwise provides in writing for such
adjustments as it deems appropriate in the terms of the then-outstanding
Awards including, without limitation, providing for the cancellation of
Awards and their automatic conversion into the right to receive the
securities or other properties which a holder of the Shares underlying
such Awards would have been entitled to receive upon the consummation of
the Change in Control had such Shares been issued and outstanding (net
of the appropriate purchase price) as of the date of the Change in
Control.
If, pursuant to the foregoing provisions of this Paragraph 8.3,
outstanding Awards will terminate upon the occurrence of a Change in Control
without provision by the Committee for any of the actions described in
subparagraphs (a) and (b) above, then any Employee holding an outstanding
Award shall be given the right, at such time prior to the consummation of the
Change in Control as the Committee shall designate, to exercise his or her
Option and to vest in any Restricted Stock to the full extent not theretofore
exercised or vested.
Except to the extent required in order to retain the qualification of
an Option as an Incentive Stock Option under Section 422 of the Code, to the
maximum extent possible any adjustments authorized by this Paragraph 8.3 with
respect to any outstanding Awards shall be made by means of appropriate and
proportionate adjustments to the number of Shares and the purchase price
therefor under the unexercised portions of such outstanding Awards but
without changing the aggregate purchase price applicable to the unexercised
portions of outstanding Awards. In all cases, the natureand extent of
adjustments under this Paragraph 8.3 shall be determined by the Committee. No
fractional shares of stock shall be issued under the Plan pursuant to any
such adjustment. All adjustments and actions described in this Paragraph
8.3 shall be subject to compliance with the requirements of Rule 16b-3 under
the Exchange Act.
8.4 Tax Withholding. The Committee shall make such provisions and
take such actions as it deems necessary or appropriate for the withholding of
any federal, state, local and other tax required by law to be withheld with
respect to the exercise or receipt of an Award or Shares under the Plan or
with respect to the lapse of restrictions on Shares of Restricted Stock,
including, without limitation, (i) deducting the amount of any such
withholding tax from any compensation or other amounts payable to an Employee
by the Company, or (ii) requiring an Employee, as a condition of exercising
or receiving an Award or Shares or as a condition to the lapse of
restrictions on Shares of Restricted Stock, to pay to the Company any amount
required to be withheld or to execute such other documents as the Committee
deems necessary or desirable in connection with the satisfaction of any
applicable withholding obligation.
Upon the exercise of an Option, the Committee shall have the authority
to withhold from issuance a number of Shares sufficient to satisfy the tax
withholding obligations described above. Such withheld Shares shall be
valued based upon the Fair Market Value of Shares as of the date of
the Employee's Option exercise.
The Company shall not be obligated to issue Shares to an Employee, or to
remove restrictions from Restricted Stock upon termination of the applicable
Restriction Period, unless and until all of the withholding and payment
obligations described above have been satisfied, and restrictions on
Restricted Stock shall not lapse until such obligations have been satisfied.
If an Employee fails to satisfy such obligations with respect to Restricted
Stock within six months after the date that the restrictions on the
Restricted Stock would otherwise lapse, such Restricted Stock shall, to the
extent permitted by law, be repurchased by the Company at the lesser of the
original purchase price or current Fair Market Value. If the Employee did
not pay any purchase price for such Restricted Stock, it shall be forfeited
to the Company without any payment being made by the Company to the Employee.
8.5 Continuation of Employment. Nothing contained in the Plan or in
any Award granted under the Plan shall confer upon any Employee any rights
with respect to continuation of Employment by the Company or its
Subsidiaries. Neither the Plan nor any Award or individual agreement issued
pursuant to the Plan shall be deemed a contract of Employment or limit the
Company's right to terminate the Employment of any Employee. Nothing in the
Plan shall be construed as giving any Employee any right to receive an Award.
8.6 Termination of Employment. If an Employee terminates his or her
Employment for any reason other than death, Disability or Retirement, any
Incentive Stock Option or Nonqualified Stock Option held by the Employee
shall terminate on the earlier of the Option Termination Date or the
ninetieth day after the date of such Employment termination, and the Option
shall be exercisable during such post-Employment period only to the extent,
if any, that it was exercisable on the date that the Employee's Employment
terminated. Notwithstanding the foregoing: (a) if the Committee determines
that an Employee's Employment was terminated by the Company or a Subsidiary by
reason of the Employee's fraud, illegal conduct or willful misconduct
(including, without limitation, a willful violation of Company policies and
procedures), such Option shall terminate on the date of the termination of
such Employee's Employment; and (b) any Option that was granted prior to August
15, 1995 to an officer or a director of the Company who is subject to the
provisions of Section 16 of the Exchange Act as of said date shall terminate
on the date of the termination of such officer's or director's Employment if
his or her Employment terminates for any reason other than death, Disability
or Retirement.
If an Employee terminates his or her Employment because of such
Employee's death, Disability or Retirement, any Nonqualified Stock Option
held by the Employee shall continue to vest in accordance with its terms and
shall terminate upon the Option Termination Date as if such Employee had
remained an Employee of the Company.
If an Employee terminates his or her Employment because of such
Employee's Retirement, any Incentive Stock Option held by the Employee shall
continue to vest in accordance with its terms and shall terminate on the
earlier of the Option Termination Date or the ninetieth day after the date
of such Employment termination.
If an Employee terminates his or her Employment because of such
Employee's death or Disability, any Incentive Stock Option held by the
Employee shall continue to vest in accordance with its terms and shall
terminate on the earlier of the Option Termination Date or one year after the
date of such Employment termination.
In the event of an Employee's death, any Incentive Stock Option or
Nonqualified Stock Option may be exercised by the Employee's legal
representative or executor or by the persons to whom the Employee's rights
under the Incentive Stock Option or Nonqualified Stock Option shall pass by
will or by the laws of descent and distribution. In the event of an
Employee's Disability, any Incentive Stock Option or Nonqualified Stock
Option may be exercised by the Employee's legal representative.
If an Employee holding Restricted Stock terminates his or her Employment
for any reason other than death, Disability or Retirement, any Restricted
Stock for which the Restriction Period has not lapsed shall be repurchased by
the Company at a price equal to the lesser of the purchase price paid by the
Employee for such Restricted Stock or the Fair Market Value of such
Restricted Stock on the date of such Employment termination. The repurchase
price for such Restricted Stock shall be paid to the Employee or his or her
legal representative. If the Employee did not pay a purchase price for any
Restricted Stock for which the Restriction Period has not lapsed, such
Restricted Stock shall be forfeited to the Company without any payment being
made by the Company to the Employee.
If an Employee holding Restricted Stock as to which the Restriction
Period has not lapsed terminates his or her Employment because of such
Employee's death, Disability or Retirement, the Employee (or legal
representative or named beneficiary of the Employee if the Employee is
legally incapacitated or deceased) shall be entitled to receive a portion of
such Restricted Stock free of the restrictions described in Paragraph 7.3 of
the Plan in an amount to be determined by the Committee. However, in no event
shall the Employee (or legal representative or beneficiary) receive less than
the total number of Shares of Restricted Stock held by such Employee on the
date of his or her Employment termination multiplied by a fraction, the
numerator of which shall be the number of months elapsed from the Award date
of such Shares and the denominator of which shall be the number of months in
the Restriction Period. If the Employee received grants of Restricted Stock
on more than one date, the calculation described in the preceding sentence
shall be made with respect to each grant of Restricted Stock. The Employee's
remaining Restricted Stock as to which the Restriction Period has not lapsed
shall be repurchased by the Company at a price equal to the lesser of the
purchase price paid by the Employee for such Restricted Stock or the Fair
Market Value of such Restricted Stock on the date of such Employment
termination. However, if the Employee did not pay a purchase price for any
such remaining Restricted Stock for which the Restriction Period has not
lapsed, such Restricted Stock shall be forfeited to the Company without any
payment being made by the Company to the Employee.
Notwithstanding the foregoing provisions of this Paragraph 8.6, to the
extent permitted by Rule 16b-3 under the Exchange Act, Section 422 of the
Code and the regulations thereunder and other applicable laws, rules and
regulations:
(a) At the time of awarding any Nonqualified Stock Option,
Incentive Stock Option or Restricted Stock, the Committee may specify in
the Option Agreement or Restricted Stock Agreement that an Employee's
termination of Employment shall result in consequences that are
different from those described above in this Paragraph 8.6;
(b) At any time subsequent to the award of any Nonqualified Stock
Option or Incentive Stock Option, the Committee may specify that such
Option shall terminate at any time up to its original Option Termination
Date after the termination of an Employee's Employment, notwithstanding
that the Option Agreement governing such Option may provide for an
earlier termination date as a result of the Employee's termination of
Employment; and
(c) At any time subsequent to the award of any Restricted Stock,
the Committee may specify that an Employee shall retain some or all of
such Restricted Stock following the termination of the Employee's
Employment, notwithstanding that the Restricted Stock Agreement may
provide that the Restricted Stock must be sold to the Company following
the termination of the Employee's Employment.
8.7 Amendment or Termination of the Plan. The Board may terminate the
Plan at any time, and either the Board or the Committee may amend the Plan at
any time. However, (i) if required by Rule 16b-3 under the Exchange Act or
any other applicable law, rule or regulation, no amendment of the Plan shall
become effective unless approved by the Company's shareholders in accordance
with the requirements of Rule 16b-3 or such other applicable law, rule or
regulation, and (ii) the Committee is authorized to amend the Plan only if
such amendment does not require the approval of the Company's shareholders
under any applicable law, rule or regulation. No amendment or termination of
the Plan shall affect in a material and adverse manner any Award granted
prior to the date of such amendment or termination without the consent of the
Employee holding such Award.
8.8 Amendments of Awards. The Committee may amend any of the terms of
any Award at any time in any manner that is consistent with the provisions of
the Plan. Unless required by applicable law, rule or regulation, no such
amendment shall affect in a material and adverse manner any Award granted
prior to the date of such amendment without the consent of the Employee holding
such Award.
8.9 Last Date for Awards. No Award shall be granted pursuant to the
Plan more than ten years after May 22, 1995, which is the date on which the
Board adopted the Plan.
8.10 Governing Law. The Plan shall be governed by, and construed and
enforced in accordance with, the laws of the State of Delaware.
8.11 Notices. Any notice required or permitted to be given to the
Company must be in writing and personally delivered, sent by United States
mail (postage prepaid) or sent by facsimile transmission, addressed to the
principal office of the Company and directed to the attention of the
Secretary of the Company; any such notice shall be effective upon actual
receipt by the Company. Any notice required or permitted to be given to an
Employee (or his legal representative or other successor or assign) must be
in writing and personally delivered, sent by United States mail (postage
prepaid) or sent by facsimile transmission, addressed to such person at his
or her last address on record with the Company; any such notice that is
mailed by the Company in the foregoing manner shall be deemed to have been
delivered three days after deposit in the mail.
8.12 Shareholder Approval Required. The Amended and Restated 1991
Long-Term Incentive Plan is subject to and contingent upon approval by the
Company's shareholders, as such approval is specified in Rule 16b-3 under the
Exchange Act and in Sections 162(m) and 422(b)(1) of the Code and the
regulations thereunder. The Amended and Restated 1991 Long-Term Incentive
Plan shall become effective on the date of approval by the Company's
shareholders. From and after the date of such shareholder approval, the
terms of the Amended and Restated 1991 Long-Term Incentive Plan shall govern
all Awards that were made prior to such approval date and all Awards that are
made subsequent to such date.
DAMES & MOORE, INC.
1995 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. Purpose.
The purpose of this 1995 Stock Option Plan for Non-Employee Directors
(the "Plan") of Dames & Moore, Inc., a Delaware corporation (the "Company"),
is to encourage ownership of the Company's common stock by outside directors
and thereby to attract and retain qualified non-employees to serve as
directors of the Company.
2. Administration.
The Plan shall be administered by a committee (the "Committee")
consisting of all of the members of the Company's Board of Directors (the
"Board") who are not eligible to participate in the Plan pursuant to the
eligibility requirements described in Section 4 of the Plan. The Committee
shall select one of its members as Chairman and shall hold meetings at such
times and places as it may determine. A majority of the members of the
Committee shall constitute a quorum for the transaction of business. Any act
of the Committee shall be taken by majority vote of the Committee members
at a meeting at which a quorum is present or by written consent signed by all
of the members of the Committee. The Committee may authorize any one or more
of its members or any officer or officers of the Company to execute and
deliver agreements and other documents on behalf of the Committee and the
Company.
Subject to the provisions of the Plan, the Committee is authorized and
directed to interpret the Plan, to establish, amend and rescind rules and
regulations relating to the Plan, to determine the rights and obligations of
participants under the Plan, to direct the Company to execute agreements
and amendments thereto setting forth the terms and conditions of awards made
under the Plan ("Option Agreements") and to make all other determinations and
to take all other actions which are consistent with the Plan and which are
necessary or appropriate for the administration of the Plan. Notwithstanding
the foregoing, the Committee shall not have the authority to make any
determination or to take any action that would cause the Plan to cease to
comply with the terms of Rule 16b-3 under the Securities Exchange Act of
1934, as amended from time to time (the "Exchange Act").
Any determination, decision or action of the Committee in connection
with the construction, interpretation, administration or application of the
Plan shall be final, binding and conclusive upon all Plan participants and
their transferees, beneficiaries, legal representatives, executors and other
successors and assigns and upon all other persons. If permitted by Rule
16b-3 under the Exchange Act and if so determined by the Committee, any
determination, decision or action of the Committee provided for in the Plan
may be made or taken by action of an officer or officers of the Company duly
authorized and directed by the Committee, with the same force and effect as
if such determination, decision or action had been made or taken by the
Committee. No member of the Committee, and no other person acting upon the
authorization and direction of the Committee, shall be liable for any
determination, decision or action made in good faith with respect to the Plan.
The Company shall indemnify and hold harmless the members of the
Committee, and other persons who are acting upon the authorization and
direction of the Committee, from and against any and all liabilities, costs
and expenses incurred by such persons as a result of any act or omission in
connection with the performance of such persons' duties, responsibilities and
obligations under the Plan, other than such liabilities, costs and expenses
as may result from the bad faith, willful misconduct or criminal acts of such
persons.
3. Stock Subject to the Plan.
The stock to be offered and sold under the Plan upon the exercise of
options granted under the Plan ("Options") shall be shares of the Company's
common stock ("Common Stock"), which shall be made available, at the
discretion of the Committee, from authorized but unissued Common Stock, from
Common Stock reacquired by the Company (including Shares purchased in the open
market) or from a combination of such unissued Common Stock and reacquired
Common Stock. The aggregate number of shares of Common Stock that may be
issued under the Plan through Option exercises shall not exceed 50,000. The
limitation established by the preceding sentence shall be subject to
adjustment as provided in Section 7 of the Plan.
In the event that any outstanding Option granted under the Plan expires,
lapses, is terminated or is forfeited for any reason, the unissued shares of
Common Stock that are allocable to the unexercised portion of such Option
shall again become available for award under the Plan.
4. Eligibility.
Each member of the Board automatically shall be eligible to participate
in the Plan if such Board member is not an officer or employee of the Company
or any of its subsidiaries. Each Board member who satisfies the eligibility
requirements described in the preceding sentence is referred to herein as a
"Non-Employee Director." No other persons shall be eligible to participate
in the Plan and, as a result of the foregoing provisions, the Committee shall
have no discretion to select the participants in the Plan. Neither the Plan
nor the granting of an Option under the Plan shall constitute or be evidence
of any agreement or understanding that any Non-Employee Director has a right to
continue as a director for any period of time or at any particular rate of
compensation.
5. Terms and Conditions of Options.
Each Option granted under the Plan shall be evidenced by an Option
Agreement in such form as the Committee shall from time to time approve.
Each Option Agreement shall comply with and be subject to the following terms
and conditions and all other provisions of the Plan:
(a) Option Grants. Beginning in 1995 and continuing each year
thereafter, an Option to purchase shares of Common Stock automatically shall
be granted to each NonEmployee Director who is elected or reelected as a
member of the Board at the annual meeting of shareholders. The Option shall
be granted on the first business day which follows the date of the conclusion
of the annual meeting. The first Option that is granted to any Non-Employee
Director shall cover 5,000 shares of Common Stock; each Option that is
subsequently granted to the same Non-Employee Director shall cover 1,000
shares of Common Stock. All Options granted under the Plan shall be
non-qualified options not intended to qualify as incentive stock options
under Section 422 of the Internal Revenue Code of 1986, as amended from time
to time (the "Code").
(b) Purchase Price. The purchase price of each share of Common Stock
that is subject to an Option shall be 100% of the Fair Market Value of such
share as of the date the Option is granted. For purposes of the Plan, the
"Fair Market Value" of a share of Common Stock shall be determined by
reference to the closing price of a share of Common Stock on the New York Stock
Exchange (or other principal stock exchange on which such shares are then
listed) or, if such shares are not then listed on an exchange, by reference
to the closing price (if a National Market System security) or the mean
between the bid and asked prices (if an over-the-counter issue) of a share as
supplied by the National Association of Securities Dealers, Inc. through
Nasdaq (or its successor), in each case as reported by The Wall Street
Journal, for the date as of which such value is to be determined or, if such
date is not a business day, for the business day immediately preceding such
date. If no sales of shares occur on such date described in the preceding
sentence, the Fair Market Value on that date shall be deemed to be the
closing price on the most recent preceding date on which shares were sold.
(c) Option Term. Except as provided in Section 5(i) of the Plan, each
Option granted under the Plan shall terminate ten years after the date of its
grant and may not be exercised after the date of its termination.
(d) Vesting of Options. Subject to the provisions of Section 7 of the
Plan, each Option shall vest and become exercisable in three equal annual
installments, as follows: (i) from and after the first anniversary of the
date of the Option grant, a Non-Employee Director shall be entitled to
purchase up to one-third of the shares of Common Stock covered by the Option;
(ii) from and after the second anniversary of the date of the Option grant,
the Non-Employee Director shall be entitled to purchase up to an additional
one-third of the shares of Common Stock covered by the Option; and (iii) from
and after the third anniversary of the date of the Option grant, the Non-
Employee Director shall be entitled to purchase all of the shares of Common
Stock covered by the Option. A vested portion of an Option shall be
exercisable at any time prior to the tenth anniversary of the date of the
Option grant.
(e) Manner of Option Exercise. A Non-Employee Director may purchase
fewer than the total number of shares of Common Stock covered by an Option,
provided that a partial exercise of an Option may not be for less than 100
shares unless fewer than 100 shares remain unexercised, in which case the
entire remaining Option must be exercised at one time. An Option may not be
exercised with respect to a fraction of a share.
An Option may be exercised, in whole or in part, by giving written
notice of exercise to the Secretary of the Company, which notice shall
specify the number of shares of Common Stock to be purchased by the Non-
Employee Director. Such exercise notice shall be accompanied by (i) cash or
a check payable to the order of the Company in the amount of the purchase
price of such shares, (ii) delivery to the Company of shares of Common Stock
already owned by the Non-Employee Director (together with certificates
evidencing such shares, duly endorsed or accompanied by duly executed
stock powers) having a Fair Market Value as of the date immediately preceding
the date of their delivery to the Company in the amount of the purchase price
of such shares, (iii) delivery of instructions from the Non-Employee Director
to the Company that, upon receipt of the purchase price for such shares from
the Non-Employee Director's broker, the Company shall issue such shares
directly to the broker (in which case the Option exercise shall be effective
upon the Company's receipt of such proceeds from the broker), or (iv)
delivery of a combination of the foregoing in the amount of the purchase
price of such shares.
(f) Tax Withholding. The Committee shall make such provisions and take
such actions as it deems necessary or appropriate for the withholding of any
federal, state, local and other tax required by law to be withheld with
respect to the grant or exercise of an Option under the Plan including,
without limitation, (i) deducting the amount of any such withholding tax from
any compensation or other amounts payable to a Non-Employee Director by the
Company, (ii) requiring a Non-Employee Director, as a condition of exercising
an Option, to pay to the Company any amount required to be withheld or to
execute such other documents as the Committee deems necessary or desirable in
connection with the satisfaction of any applicable withholding obligation, or
(iii) upon the exercise of an Option, withholding from issuance a number of
shares of Common Stock sufficient to satisfy such tax withholding obligations
described above. Such withheld shares shall be valued based upon the Fair
Market Value of a share of Common Stock as of the date of the Non-Employee
Director's Option exercise.
(g) Nontransferability of Options. A Non-Employee Director may not
transfer, assign, pledge or hypothecate any Option granted under the Plan,
either voluntarily or by operation of law, other than by will or the laws of
descent and distribution, and an Option shall be exercisable during
a Non-Employee Director's lifetime only by such director or by his or her
legal representative. Following the death of a Non-Employee Director, an
Option shall be exercisable by his or her legal representative, executor and
beneficiaries.
Notwithstanding anything to the contrary in the preceding paragraph, the
Committee may grant an Option that is transferable by a Non-Employee
Director, without payment of consideration to such director and in accordance
with the provisions of an Option Agreement, (i) to immediate family members
of such director (that is, to his or her spouse, children or grandchildren),
(ii) to trusts for the benefit of such immediate family members, (iii) to
partnerships whose only partners are such family members, or (iv) if
permitted by Rule 16b-3 under the Exchange Act and applicable provisions
of the Code and the regulations thereunder, to any charitable institutions or
other persons as may be designated by the Committee. The Committee may also
amend outstanding Option Agreements to provide for such transferability of
outstanding Options. However, transferable Options shall in no event be
permitted if the result would be to disqualify the Plan as a "formula plan"
within the meaning of Rule 16b-3 under the Exchange Act.
All of the provisions of the Plan and of any Option Agreement shall be
final, binding and conclusive upon every transferee of an Option and upon
every other beneficiary, legal representative, executor or other successor or
assign of a Non-Employee Director. Where appropriate to the context
in which such term is used, references to a Non-Employee Director also shall
refer to such person's transferees, beneficiaries, legal representatives,
executors and other successors and assigns.
(h) Shareholder Rights. Until the issuance of a stock certificate to a
Non-Employee Director, no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to shares of Common Stock
that are covered by an Option, notwithstanding the exercise of the Option.
No adjustment shall be made for a dividend or other rights for which the
record date is prior to the date the stock certificate is issued, except as
provided in Section 7 of the Plan.
(i) Termination of Service as a Director. Except as provided in the
following sentence, if a Non-Employee Director ceases for any reason to be a
director of the Company, all outstanding Options held by him or her shall
continue to vest in accordance with the terms of Section 5(d) of the
Plan, and such Options shall not terminate until the tenth anniversary of
their respective grant dates, as provided in Section 5(c) of the Plan. If a
Non-Employee Director is removed from office by the Company's shareholders
because of such director's fraud, illegal conduct or willful misconduct, all
outstanding Options held by him or her immediately shall terminate upon such
removal and shall not be exercisable thereafter. Following the termination
for any reason of his or her service as a director, a Non-Employee Director
shall cease to be eligible for additional Option grants under the Plan.
6. Securities Law Restrictions.
No Options or shares of Common Stock shall be granted, issued or
delivered hereunder unless and until the Committee determines that there has
been compliance with all applicable requirements of the Securities Act of
1933, as amended from time to time (the "Securities Act") and the rules and
regulations promulgated thereunder, all applicable listing requirements of
any national securities exchange on which shares of Common Stock are then
listed, all applicable state and blue sky securities laws, rules and
regulations, and any other requirements of law or of any regulatory body
having jurisdiction over such grant, issuance and delivery. The inability of
the Company to obtain any required permits, authorizations or approvals
necessary for the lawful issuance and sale of any shares hereunder on terms
deemed reasonable by the Committee shall relieve the Company, the Board and
the Committee of any liability in respect of the non-issuance or sale of such
shares as to which such requisite permits, authorizations or approvals shall
not have been obtained.
As a condition to the exercise of any Option, the Committee may require
the Non-Employee Director exercising such Option to make any representation
to the Company as may be required or appropriate under the Securities Act or
any other applicable law, rule or regulation, including, without limitation,
a representation that he or she is acquiring the shares covered by such
Option for investment and without any present intention to sell or distribute
such shares, and that such shares will not be sold or transferred other than
pursuant to an effective registration statement under the Securities Act or
pursuant to a registration exemption such as Rule 144 under the Securities Act.
Each Option Agreement and certificate representing shares of Common
Stock acquired upon exercise of an Option shall be endorsed with all legends,
if any, that the Committee determines are required or appropriate under
applicable federal and state securities laws, rules and regulations to be
placed on such agreement and/or certificate.
7. Adjustment Provisions.
If the outstanding shares of Common Stock are increased, decreased,
changed into or exchanged for a different number or kind of shares or
securities of the Company through reorganization, recapitalization, merger,
consolidation, reclassification, exchange of stock, stock dividend, stock
split, reverse stock split or other similar transaction, an appropriate and
proportionate adjustment shall be made in the maximum number and kind of
shares as to which Options may be granted under the Plan. A corresponding
adjustment changing the number or kind of shares allocated to unexercised
Options or portions thereof, which shall have been granted prior to any such
change, shall likewise be made. Any such adjustment shall be made without
change in the aggregate purchase price applicable to each such Option but
with a corresponding adjustment in the price for each share covered by the
Option. No fractional shares of Common Stock shall be issued under the Plan
as a result of any such adjustment, and any such adjustment shall be made
only to the extent permitted by Rule 16b-3 under the Exchange Act.
Upon a Board vote and a vote of the Company's shareholders authorizing
(i) the dissolution or liquidation of the Company, (ii) the reorganization,
merger or consolidation of the Company with one or more other corporations as
a result of which the Company will not be the surviving corporation or will
become a subsidiary of another corporation, or (iii) the sale of all or
substantially all of the Company's assets, all outstanding Options shall
immediately become exercisable in full.
8. Amendment and Termination of the Plan.
Subject to the provisions of this Section 8, the Board may amend or
terminate the Plan at any time and in any respect.
(1) No amendment of the Plan shall become effective without the
approval of the Company's shareholders if such approval is required in
order to comply with Rule 16b-3 under the Exchange Act or any other
applicable law, rule or regulation.
(2) To the extent required in order to comply with Rule 16b-3
under the Exchange Act, Plan provisions relating to the amount, price
and timing of Options shall not be amended more than once every six
months, except that the foregoing shall not preclude any amendment
to comport with changes in the Code or the Employee Retirement Income
Security Act of 1974, as amended from time to time, or the rules in
effect thereunder from time to time.
(3) Unless required by applicable law, rule or regulation, no
amendment or termination of the Plan shall affect in a material and
adverse manner any Option granted prior to the date of such amendment or
termination without the written consent of the Non-Employee Director
holding such affected Option.
9. Governing Law.
The Plan shall be governed by, and construed and enforced in accordance
with, the laws of the State of Delaware.
10. Effective Date and Duration of the Plan; Shareholder Approval.
The Plan has been approved by the Board. The Plan shall become
effective on the date of its approval by the Company's shareholders, as such
approval is specified in Rule 16b-3 under the Exchange Act, and no grants of
Options shall be made prior to such approval notwithstanding anything to the
contrary in the Plan. The Plan shall continue in effect until it is
terminated by the Board.
AMENDMENT NO. 1
TO
DAMES & MOORE, INC.
DEFERRED COMPENSATION PLAN
Dames & Moore, Inc., a Delaware corporation (the "Company"), pursuant to
the power granted to it by Section 11.2 of the Dames & Moore, Inc. Deferred
Compensation Plan (the "Plan"), hereby amends the Plan, as follows, effective
as of January 1, 1997:
1. The "Purpose" of the Plan is amended by inserting the words "and
directors" after the word "officers."
2. Section 1.4 of the Plan is amended by inserting the words "and
Director's Fees" after the words "Annual Bonus."
3. A new Section 1.16A is added as follows:
"Director" shall mean any member of the board of directors of
the Company who is not otherwise an employee of the Employer."
4. A new Section 1.16B is added as follows:
"Director's Fees" shall mean the annual fees paid by any
Employer, including retainer fees and meeting fees, as
compensation for serving on the board of directors of the
Company.
5. Section 1.22 is amended by inserting the words "or Director" after
the word "employee."
6. Section 1.28 is amended in its entirety to read as follows:
"Retirement", "Retires" or "Retired" shall mean, with respect
to an officer, severance from employment by all Employers for
any reason other than a leave of absence, death or Disability
on or after the earlier of the attainment of (a) age sixty-five
(65) or (b) age fifty-five (55) with ten (10) Years of Service;
and shall mean, with respect to a Director, ceasing to be a
Director.
7. Section 1.32 is amended in its entirety to read as follows:
"Termination of Employment" shall mean the severing of
employment of an officer by all Employers, voluntarily or
involuntarily, for any reason other than retirement,
disability, death or an authorized leave of absence.
8. Section 2.1 is amended by inserting the words "and Directors" after
each appearance of the word "Officers."
9. Section 2.2 is amended by inserting the words "or Director" after
the word "employee."
10. Section 2.3 is amended by inserting the words "or Director" after
each appearance of the word "employee."
11. Section 3.1 is amended by inserting the words "and/or Director's
Fees" after the words "Annual Bonus."
12. Section 3.2 is amended by inserting the words "and/or 100% of his or
her Director's Fees" after the words "Annual Bonus."
13. Section 3.4 is amended by inserting the words "and/or Director's
Fees" after each appearance of the words "Annual Bonus."
14. Section 8.1(b) is amended by inserting the words "and/or Director's
Fees" after the words "Annual Bonus."
15. Section 8.1(c ) is amended by inserting the words "or service as a
Director" after the word "Officer."
16. Section 8.2 is amended by inserting the words or in the service
of the Employer as a Director," after the word "employed."
The Company has caused this Amendment to be signed by its duly authorized
officer as of the date written below.
DAMES & MOORE, INC.
By: George D. Leal
____________________________
Its: Chairman
Date: March 26, 1997
FIRST AMENDMENT TO
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO FIRST AMENDED AND RESTATED
CREDIT AGREEMENT (this "First Amendment") is dated as of
September 17, 1996 and is entered into by and among DAMES &
MOORE, INC., a Delaware corporation (the "Company") the several
financial institutions from time to time party to this Agreement
(collectively, the "Banks"; individually, a "Bank"), and BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for the
Banks (the "Agent") and amends the First Amended and Restated
Credit Agreement dated as of May 24, 1996 among the Company, the
Banks and the Agent (the "Agreement").
RECITAL
The Company has requested that up to $5,000,000 in
"evergreen" Letters of Credit be allowed at any one time within
the Revolving Commitments under the Agreement, and the Banks, the
Issuing Bank and Agent are willing to amend the Agreement to
permit such evergreen Letters of Credit on the terms and
conditions set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. Terms. All capitalized terms used herein have the
same meanings as in the Agreement unless otherwise defined
herein. All references to the Agreement shall mean the Agreement
as hereby amended.
2. Amendments. The parties hereto agree that the
Agreement is amended as follows:
2.1 Section 3.1(a)(ii) of the Agreement is amended by
inserting the following at the end of the proviso therein before
the period:
" or (3) the Equivalent Amount of all L/C Obligations
with respect to 'evergreen' Letters of Credit Issued
hereunder exceeds $5,000,000 in the aggregate."
2.2 Section 3.1(b)(iii) of the Agreement is amended by
inserting "having a fixed expiry date" after "the expiry date of
any requested Letter of Credit."
2.3 Section 3.2(a)(iii) of the Agreement is amended by
inserting "or whether such Letter of Credit is an 'evergreen'
Letter of Credit" at the end thereof before the semicolon.
2.4 Section 3.8(a) of the Agreement is amended and
restated in its entirety as follows:
"(a) Each Borrower shall pay to the Agent for the
account of each of the Banks a letter of credit fee
with respect to each Letter of Credit for which it is
the account party at the applicable Letter of Credit
Fee rate per annum, payable on the average Equivalent
Amount available to be drawn under such outstanding
Letter of Credit during such quarter. Such letter of
credit fees shall be nonrefundable and shall be due and
payable in Dollars quarterly in arrears on (and
inclusive of) the last Business Day of each June,
September, December and March and on the Termination
Date (or such later date upon which the outstanding
Letters of Credit shall expire)."
3. Representations and Warranties. The Company
represents and warrants to the Banks, the Issuing Bank and the
Agent:
3.1 Authorization. The execution, delivery and
performance of this First Amendment by the Company has been duly
authorized by all necessary corporate action by the Company and
has been duly executed and delivered by the Company.
3.2 Binding Obligation. This First Amendment and the
Agreement are legal, valid and binding agreements of the Company,
enforceable in accordance with their respective terms, except to
the extent enforceability thereof may be limited by applicable
law relating to bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or limiting
creditors' rights generally or by the application of general
principles of equity.
3.3 No Legal Obstacle to Agreements. Neither the
execution of this First Amendment, the making by the Company of
any borrowings under the Agreement, as amended hereby, nor the
performance of the Agreement by the Company has constituted or
resulted in or will constitute or result in a breach of the
provisions of any material agreement, or the violation of any
law, judgment, decree or governmental order, rule or regulation
applicable to the Company, or result in the creation under any
material agreement of any security interest, lien, charge, or
encumbrance upon any of the assets of the Company. No approval
or authorization of any Governmental Person is required to be
obtained by the Company to permit the execution, delivery or
performance by the Company of this First Amendment, the Agreement
as amended hereby, or the transactions contemplated hereby or
thereby, or the making of any borrowing by the Company under the
Agreement, as amended hereby.
3.4 Incorporation of Certain Representations. The
representations and warranties set forth in Section 5 of the
Agreement are true and correct in all material respects on and as
of the date hereof as though made on and as of the date hereof
except to the extent such representations and warranties
expressly relate to an earlier date, in which case such
representations and warranties were true and correct in all
material respects on and as of such earlier date.
3.5 Default. No Default or Event of Default under the
Agreement has occurred and is continuing.
4. Conditions, Effectiveness. The effectiveness of
this First Amendment shall be subject to the compliance by the
Company with its agreements herein contained, and to the delivery
of the following to Agent in form and substance satisfactory to
Agent and the Issuing Bank:
4.1 Corporate Resolution. A copy of a resolution
or resolutions passed by the Board of Directors of the Company,
certified by the Secretary or an Assistant Secretary of the
Company as being in full force and effect on the effective date
of this First Amendment, authorizing the amendments to the
Agreement herein provided for and the execution, delivery and
performance of this First Amendment and any note or other
instrument or agreement required hereunder.
4.2 Authorized Signatories. A certificate, signed by
the Secretary or an Assistant Secretary of the Company and dated
the date of this First Amendment, as to the incumbency of the
person or persons authorized to execute and deliver this First
Amendment and any instrument or agreement required hereunder on
behalf of the Company.
4.3 Other Evidence. Such other evidence with respect
to the Company or any other person as the Agent, the Issuing Bank
or any Bank may reasonably request to establish the consummation
of the transactions contemplated hereby, the taking of all
corporate action in connection with this First Amendment and the
Agreement and the compliance with the conditions set forth
herein.
5. Miscellaneous.
5.1 Effectiveness of the Agreements. Except as hereby
amended, the Agreement shall remain in full force and effect.
5.2 Waivers. This First Amendment is specific in time
and in intent and does not constitute, nor should it be construed
as, a waiver of any other right, power or privilege under the
Agreement, or under any agreement, contract, indenture, document
or instrument mentioned in the Agreement; nor does it preclude
any exercise thereof or the exercise of any other right, power or
privilege, nor shall any future waiver of any right, power,
privilege or default hereunder, or under any agreement, contract,
indenture, document or instrument mentioned in the Agreement,
constitute a waiver of any other default of the same or of any
other term or provision.
5.3 Counterparts. This First Amendment may be
executed in any number of counterparts and all of such
counterparts taken together shall be deemed to constitute one and
the same instrument. This First Amendment shall not become
effective until the Company, the Banks, the Agent, and Issuing
bank shall have signed a copy hereof, whether the same or
counterparts, and the same shall have been delivered to the
Agent.
5.4 Jurisdiction. This First Amendment, and any
instrument or agreement required hereunder, shall be governed by
and construed under the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this
First Amendment to be duly executed and delivered by their proper
and duly authorized officers as of the day and year first above
written.
DAMES & MOORE, INC.
By: Mark A. Snell
____________________________
Name: Mark A. Snell
Title: Executive VP and CFO
O'BRIEN-KREITZBERG, INC., as a
Guarantied Subsidiary
By: Steve Bienfest
____________________________
Name: Steve Bienfest
Title: Executive VP and CFO
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By: Robert Troutman
____________________________
Name: Robert Troutman
Title: Managing Director
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Issuing Bank and a Bank
By: Robert Troutman
____________________________
Name: Robert Troutman
Title: Managing Director
SANWA BANK CALIFORNIA
By: Mary E. King
Name: Mary E. King
Title: Vice President
CERTIFICATE OF INCUMBENCY OF THE
OFFICERS OF DAMES & MOORE, INC.
I, Stephanie H. Paxton, Assistant Secretary of Dames & Moore,
Inc., a Delaware corporation, do hereby certify that the
following named individuals are the duly elected qualified and
acting officers of Dames & Moore, Inc. and hold the offices of
Dames & Moore, Inc. set forth opposite their names. I further
certify that the signatures written opposite the names and titles
of such officers are their correct signatures and that such
officers, or any one of them, are authorized to execute and
deliver the First Amended and Restated Credit Agreement dated as
of May 24, 1996, and all amendments thereto, between Dames &
Moore, Inc. and Bank of America National Trust and Savings
Association as Agent.
NAME TITLE SIGNATURE
Arthur C. Darrow President & CEO Arthur C. Darrow
_______________________
Mark A. Snell Executive VP & CFO Mark A. Snell
_______________________
Robert M. Perry Executive Vice President, Robert M. Perry
Corporate Affairs _______________________
In Witness Whereof
Name of Corporation: Dames & Moore, Inc.
By: Stephanie H. Paxton
______________________________
Name: Stephanie H. Paxton, Assistant Secretary
Date: September 17, 1996
BANK OF AMERICA AS AGENT
First Amendment to First Amended and Restated Credit Agreement
Previously, the Board of Directors granted the authority to the
President and/or Executive Vice President to execute the $50,000,000
First Amended and Restated Credit Agreement dated May 24, 1996 (the
"Agreement") with Bank of America and Sanwa Bank California (the
"Banks"). And now, Dames & Moore, Inc. has requested that up to
$5,000,000 in "evergreen" Letters of Credit be allowed at any one time
within the Revolving Commitments under the Agreement, and the Banks
are willing to amend the Agreement to permit such evergreen Letters of
Credit on the terms and conditions set forth in the "First Amendment
to First Amended and Restated Credit Agreement" (the "First Amendment")
dated as of September 17, 1996.
This will certify that the previous authority granted by the Board of
Directors also includes the execution, delivery, and performance of
amendments to the Agreement and related documents as required by the
Banks. I further certify that said resolutions are still in full
force and effect and have not been amended or revoked.
In Witness Whereof
Name of Corporation: Dames & Moore, Inc.
By: Stephanie H. Paxton
______________________________
Name: Stephanie H. Paxton, Assistant Secretary
Date: September 17, 1996
.
SECOND AMENDMENT TO
FIRST AMENDED AND CREDIT AGREEMENT
This SECOND AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT
AGREEMENT ("Second Amendment") is entered into as of November 19, 1996 by and
among DAMES & MOORE, INC., a Delaware corporation (the "Company"),
O'BRIEN-KREITZBERG, INC., as a Guarantied Subsidiary, the several financial
institutions party to the Agreement hereinafter referred to (collectively,
the "Banks" and individually, a "Bank") and BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as agent for such Banks ("Agent") and amends the
First Amended and Restated Credit Agreement dated as of May 24, 1996 among
the Company, the Banks and the Agent, as amended by a First Amendment to
First Amended and Restated Credit Agreement dated as of September 17, 1996
(as so amended, the "Agreement").
RECITAL
The Borrowers, the Banks, the Issuing Bank and the Agent desire to
increase the aggregate Revolving Commitments to $60,000,000 and to amend
other terms and conditions in the Agreement, all on the terms and conditions
set forth in this Second Amendment.
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. All terms used herein shall have the same
meaning as in the Agreement unless otherwise defined herein. All references
to the Agreement shall mean the Agreement as hereby amended.
2. Amendatory Provisions. The parties hereby agree that the
Agreement is amended as follows:
2.1 Section 2.1(a) of the Agreement is amended and restated in its
entirety as follows:
"(a) Subject to the terms and conditions hereof, each Bank
severally agrees to make revolving credit loans (each, a "Revolving
Loan" and, collectively, the "Revolving Loans") to the Borrowers
pursuant to this Section 2 on a revolving basis from time to time
from the Closing Date to the Termination Date, during which period
the Borrowers may borrow, prepay and reborrow in accordance with
the provisions hereof, provided, that:
"(i) the aggregate outstanding principal Equivalent
Amount of the Revolving Loans and L/C Obligations of each Bank
shall not exceed such Bank's Revolving Commitment at any time;
"(ii) the aggregate outstanding principal Equivalent
Amount of all Revolving Loans and L/C Obligations of all Banks
shall not exceed the combined Revolving Commitments at any time;
"(iii) the aggregate outstanding principal Equivalent
Amount of all Revolving Loans of all Banks shall not exceed
(A) $50,000,000 at any time or (B) $15,000,000 for at least 30
consecutive days in any fiscal year; and
"(iv) the aggregate outstanding principal Equivalent
Amount of all Revolving Loans made by all Banks to any
Guarantied Subsidiary and L/C Obligations owing by any
Guarantied Subsidiary to all Banks at any time shall not
exceed the Designated Sublimit for such Subsidiary Borrower.
"The Revolving Loans may be maintained, at the election of the
Borrowers made from time to time as permitted herein, as Base Rate
Loans, CD Rate Loans or Offshore Rate Loans or any combination
thereof."
2.2 Section 6.1(a) of the Agreement is amended and restated in its
entirety as follows:
"(a) Use the proceeds of the Loans for general working
capital, general corporate purposes, to repurchase shares of the
Company owned by Hochtief AG and only those acquisitions which have
been approved by the board of directors or, in the case of a stock
purchase the owners of the acquiree; and"
2.3 Section 6.3 of the Agreement is amended by deleting "and" at
the end of subsection (d), deleting the period at the end of subsection
(e) and inserting "; and" in lieu thereof and inserting a new subsection
(f) as follows:
"(f) the closing of the Company's repurchase of 3.7 million of
its shares owned by Hochtief AG, which notice shall include a
Compliance Certificate to the Agent demonstrating compliance with
the covenant levels required to be met as of December 27, 1996
under Sections 7.11, 7.12, 7.13, 7.14 and 7.15, on a pro forma
basis as of September 27, 1996, after giving effect to such
repurchase."
2.4 Section 7.11 of the Agreement is amended and restated in its
entirety as follows:
"7.11 Leverage Ratio. As to the Company as of the last day
of any fiscal quarter, permit the Leverage Ratio to be greater than
the ratio set forth in the table below (subject to the proviso
immediately following such table) opposite such fiscal quarter or
the period during which such fiscal quarter ends:
Maximum Permitted
Fiscal Quarter Ending Leverage Ratio
December 27, 1996 0.58 to 1
March 28, 1997 0.55 to 1
June 27, 1997 0.55 to 1
September 26, 1997 0.53 to 1
December 26, 1997 0.53 to 1
March 27, 1998
and thereafter 0.45 to 1
"provided, however, the maximum permitted Leverage Ratio set forth above
shall be reduced by .01 for each $5,000,000 in additional equity issued
from time to time after September 27, 1996, any such reduction to be
effective as of the end of the fiscal quarter in which such equity is
issued; provided, however, the maximum permitted Leverage Ratio
shall not be reduced to less than 0.45 to 1 at any time."
2.5 Sections 7.13, 7.14 and 7.15 of the Agreement are amended and
restated in their entirety as follows:
"7.13 Asset Coverage Ratio. As to the Company as of the last
day of any fiscal quarter, permit its Consolidated Net Funded Debt
to exceed the percentage of Net Eligible Receivables set forth
below opposite such fiscal quarter or the period during which such
fiscal quarter ends:
Maximum
Fiscal Quarter Ending Percentage
December 27, 1996 90%
March 28, 1997 85%
June 27, 1997 85%
September 26, 1997
and thereafter 80%
"7.14 Net Worth. As to the Company, permit its Net Worth
as of the end of any fiscal quarter, commencing with the fiscal
quarter ending December 27, 1996, to be less than the sum of (a)
$120,000,000 plus (b) 50% of cumulative Net Income for each fiscal
quarter, commencing with the fiscal quarter ending December 27,
1996, in which the Company and its Subsidiaries has positive
consolidated Net Income plus 75% of the aggregate net cash
proceeds received by the Company subsequent to November 1, 1996
from the issuance and sale of capital stock of the Company.
"7.15 Consolidated Net Funded Debt to Consolidated EBITDA
Ratio. As to the Company, permit, as of the last day of any fiscal
quarter, the ratio of (a) Consolidated Net Funded Debt to (b)
Consolidated EBITDA for the period of four fiscal quarters ending
on the last day of such fiscal quarter to exceed (I) 3.00 to
1.00 through and including the fiscal quarter ending March 28,
1997, (ii) 2.75 to 1.00 through and including the fiscal quarter
ending June 27, 1997, and (iii) 2.50 to 1.00 thereafter."
2.6 Schedule 2.1 to the Agreement is amended and restated in its
entirety as set forth on Schedule 2.1 hereto.
3. Representations and Warranties. The Borrowers hereby jointly
and severally represent and warrant to the Agent, the Issuing Bank and the
Banks:
3.1 Authority. Each Borrower has all necessary corporate power
and has taken all action necessary to make this Second Amendment, the
Agreement, and all other agreements and instruments executed in connection
herewith and therewith, the valid and enforceable obligations they purport to
be.
3.2 No Legal Obstacle to Agreement. Neither the execution of this
Second Amendment, the making by the Borrowers of any borrowings under the
Agreement, nor the performance of the Agreement has constituted or resulted
in or will constitute or result in a breach of the provisions of any contract
to which any Borrower is a party, or the violation of any law, judgment,
decree or governmental order, rule or regulation applicable to any Borrower,
or result in the creation under any agreement or instrument of any security
interest, lien, charge, or encumbrance upon any of the assets of any Borrower
other than in favor of the Agent, the Issuing Bank and the Banks. No
approval or authorization of any governmental authority is required to
permit the execution, delivery or performance by the Borrowers of this Second
Amendment, the Agreement, or the transactions contemplated hereby or thereby,
or the making of any borrowing by the Borrowers under the Agreement.
3.3 Incorporation of Certain Representations. The representations
and warranties set forth in Section 5 of the Agreement are true and correct
in all respects on and as of the date hereof as though made on and as of the
date hereof.
3.4 Default. No Default or Event of Default under the Agreement
has occurred and is continuing.
4. Conditions, Effectiveness. The effectiveness of this Second
Amendment shall be subject to the compliance by the Borrowers with their
respective agreements herein contained, and to the delivery of the following
to the Agent in form and substance satisfactory to the Agent:
4.1 Corporate Resolution. A copy of a resolution or resolutions
passed by the Board of Directors of each Borrower, certified by the Secretary
or an Assistant Secretary of such Borrower as being in full force and effect
on the effective date of this Second Amendment, authorizing the amendments to
the Agreement herein provided for and the execution, delivery and performance
of this Second Amendment and any note or other instrument or agreement
required hereunder.
4.2 Authorized Signatories. A certificate, signed by the
Secretary or an Assistant Secretary of each Borrower and dated the date of
this Second Amendment, as to the incumbency of the person or persons
authorized to execute and deliver this Second Amendment and any instrument or
agreement required hereunder on behalf of such Borrower.
4.3 Underwriting Fee. An underwriting fee of $25,000 payable on
the date hereof to the Agent for the benefit of the Banks in accordance with
their respective Pro Rata Shares after giving effect to this Second Amendment.
4.4 Work Fee. A work fee described in the letter dated November
14, 1996 payable on the date hereof to the Agent for the sole benefit of BofA.
4.5 Other Evidence. Such other evidence with respect to any
Borrower or any other person as Agent or the Majority Banks may reasonably
request to establish the consummation of the transactions contemplated
hereby, including the repurchase of 3.7 million of the Company's shares from
Hochtief AG, the taking of all corporate proceedings in connection with this
Second Amendment and the Agreement and the compliance with the conditions set
forth herein.
5. Miscellaneous.
5.1 Effectiveness of the Agreement. Except as hereby amended, the
Agreement shall remain in full force and effect.
5.2 Waivers. This Second Amendment is specific in time and in
intent and does not constitute, nor should be construed as, a waiver of any
other right, power or privilege under the Agreement, or under any agreement,
contract, indenture, document or instrument mentioned in the Agreement; nor
does it preclude other or further exercise hereof or the exercise of any
other right, power or privilege, nor shall any waiver of any right, power,
privilege or default hereunder, or under any agreement, contract, indenture,
document or instrument mentioned in the Agreement, constitute a waiver of any
other default of the same or of any other term or provision.
5.3 Counterparts. This Second Amendment may be executed in any
number of counterparts and all of such counterparts taken together shall be
deemed to constitute one and the same instrument. This Second Amendment
shall not become effective until the Borrowers, the Agent, the Issuing Bank
and the Banks shall have signed a copy hereof, whether the same or
counterparts, and the same shall have been delivered to the Agent.
5.4 Jurisdiction. This Second Amendment, and any instrument or
agreement required hereunder, shall be governed by and construed under the
laws of the State of California.
IN WITNESS WHEREOF, the parties have caused this Second Amendment
to the executed by their duly authorized representatives as of the day and
year first written above.
DAMES & MOORE, INC.
By: Mark A. Snell
____________________________
Title: CFO and EVP
O'BRIEN-KREITZBERG, INC., as
a Guarantied Subsidiary
By: Steve Beinfest
___________________________
Title: Executive VP and CFO
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By: Robert Troutman
___________________________
Title: Managing Director
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a
Bank and Issuing Bank
By: Robert Troutman
___________________________
Title: Managing Director
SANWA BANK CALIFORNIA
By: Mary E. King
___________________________
Title: Vice President
SCHEDULE 2.1
REVOLVING COMMITMENTS
AND PRO RATA SHARES
Pro
Revolving Rata
Bank Commitment Share
Bank of America
National Trust and
Savings Association $36,000,000 60%
Sanwa Bank California 24,000,000 40%
Total $60,000,000 100%
CERTIFICATE OF INCUMBENCY
OF THE
OFFICERS OF
DAMES & MOORE, INC.
I, Steven D. Beinfest, Assistant Secretary of O'Brien-Kreitzberg,
Inc., a California corporation, do hereby certify that the
following named individuals are the duly elected qualified and
acting officers of O'Brien-Kreitzberg Inc., and hold the offices of
Dames & Moore, Inc. set forth opposite their names. I further
certify that the signatures written opposite the names and titles
of such officers are their correct signatures and that such
officers, or any one of them, are authorized to execute and deliver
the Second Amended to the First Amended and Restated Credit
Agreement dated as of November 19, 1996, and all amendments
thereto, between O'Brien-Kreitzberg Inc. and Bank of America
National Trust and Savings Association as Agent.
NAME TITLE SIGNATURE
Fred C. Kreitzberg President & Fred C. Kreitzberg
Chief Executive Officer __________________________
Steven D. Beinfest Executive Vice President Steven D. Beinfest
& Chief Financial Officer __________________________
In Witness Whereof
Name of Corporation: O'Brien-Kreitzberg Inc.
By: Steven D. Beinfest
_________________________________
Name: Steven D. Beinfest, Assistant Secretary
Date: November 19, 1996
BANK OF AMERICA AS AGENT
Second Amendment to First Amended and Restated Credit Agreement
This will certify that the attached Resolution of the Board of Directors
of Dames & Moore, Inc. Is a true and exact copy of the Resolution of the
Board of Directors that authorizes the Second Amendment to the First
Amended and Restated Credit Agreement dated as of November 19, 1996.
This will also certify that the Board of Directors has granted the
authority to the President and/or Executive Vice President to execute and
deliver the amendments to the Agreement and related documents as required
by the Banks. I further certify that said resolutions are still in full
force and effect and have not been amended or revoked.
In Witness Whereof
Name of Corporation: Dames & Moore, Inc.
By: Stephanie H. Paxton
________________________________
Name: Stephanie H. Paxton, Assistant Secretary
Dated: November 19, 1996
CERTIFICATE OF INCUMBENCY
OF THE OFFICERS OF
DAMES & MOORE, INC.
I, Stephanie H. Paxton, Assistant Secretary of Dames & Moore, Inc., a
Delaware corporation, do hereby certify that the following named
individuals are the duly elected qualified and acting officers of Dames
& Moore, Inc., and hold the offices of Dames & Moore, Inc. set forth
opposite their names. I further certify that the signatures written
opposite the names and titles of such officers are their correct
signatures and that such officers, or any one or more of them, are
authorized to execute and deliver the Second Amended to the First Amended
and Restated Credit Agreement dated as of November 19, 1996, and all
amendments thereto, between Dames & Moore, Inc. and Bank of America
National Trust and Savings Association as Agent.
NAME TITLE SIGNATURE
Arthur C. Darrow President & Arthur C. Darrow
Chief Executive Officer ____________________________
Mark A. Snell Executive Vice President Mark A. Snell
& Chief Financial Officer ____________________________
In Witness Whereof
Name of Corporation: Dames & Moore, Inc.
By: Stephanie H. Paxton
______________________________
Name: Stephanie H. Paxton, Assistant Secretary
Date: November 19, 1996
<PAGE>
RESOLUTIONS OF
THE BOARD OF DIRECTORS OF
DAMES & MOORE, INC.
WHEREAS, there has been presented to this Board of Directors that
certain Stock Purchase Agreement, dated as of November 5, 1996 (the
"Stock Purchase Agreement"), among Dames & Moore, Inc. (the "Company")
Hochtief AG (the "Seller") and DM Investors, Inc. (formerly named
Hochtief, Inc.), a Delaware corporation (the "Subsidiary"), providing
for the sale of 1,000 shares of the Subsidiary's common stock, no par
value (the "Shares"), which Shares constitute all of the issued and
outstanding shares of capital stock of the Subsidiary;
WHEREAS, the Subsidiary owns 3,700,000 shares of common stock, par
value $0.01 per share, of the Company (the "D&M Shares");
WHEREAS, prior to the Closing Date (as defined in the Stock
Purchase Agreement, the Subsidiary will cause all of its right, title
and interest in any and all of its assets other than the D&M Shares, to
be transferred to the Seller or another subsidiary the Seller;
WHEREAS, upon the Closing Date, the Subsidiary will become a
wholly-owned subsidiary of the Company;
WHEREAS, the Board of Directors has reviewed a Certificate, dated
November 11, 1996, of the Company's Controller and Chief Accounting
Officer to the effect that the transaction contemplated by the Stock
Purchase Agreement will not result in an impairment of the Company's
capital within the meaning of the Delaware General Corporation Law; and
WHEREAS, this Board of Directors has determined that the Company's
purchase of the Shares from the Seller pursuant to the Stock Purchase
Agreement is in the best interests of the Company and its shareholders.
RESOLVED, that the Company be, and hereby is, authorized to
purchase the Shares from the Seller pursuant to, and upon the terms and
conditions set forth in, the Stock Purchase Agreement.
RESOLVED FURTHER, that the Stock Purchase Agreement, as presented
to this Board of Directors, and the execution thereof by the Executive
Vice President -- Chief Financial Officer of the Company is hereby
ratified, confirmed and approved.
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of April 1, 1997, by and
between DAMES & MOORE, INC., a Delaware corporation, (hereinafter called the
"Corporation") and ARTHUR C. DARROW, (hereinafter called the "Executive").
WITNESSETH THAT:
WHEREAS, the Corporation desires to continue to employ the Executive
as its President and Chief Executive Officer, and the Executive desires to
continue in such employment;
NOW, THEREFORE, the Corporation and the Executive, each intending to be
legally bound, hereby mutually covenant and agree as follows:
1. Employment and Term.
(a) Employment. The Corporation shall employ the Executive as the
President and Chief Executive Officer of the Corporation, and the Executive
shall so serve, for the term set forth in Paragraph 1(b).
(b) Term. The term of the Executive's employment under this
Agreement shall commence on April 1, 1997, and end on March 31, 1999, subject
to the extension of such term as hereinafter provided and subject to earlier
termination as provided in Paragraph 8. The term of this Agreement shall be
extended automatically for one (1) additional year as of April 1, 1998, April
1, 1999, and April 1, 2000, unless, no later than ninety (90) days prior to
any such renewal date, either the Board of Directors of the Corporation (the
"Board"), on behalf of the Corporation, or the Executive gives written notice
to the other, in accordance with Paragraph 13, that the term of this
Agreement shall not be so extended. In no event shall the term of Executive's
employment pursuant to this Agreement extend beyond March 31, 2001.
2. Duties.
(a) General. During the period of employment as provided in
Paragraph 1(b) hereof, the Executive shall serve as President and Chief
Executive Officer of the Corporation and have all powers and duties consistent
with such positions, subject to the reasonable direction of the Board. The
Executive shall also continue to serve as a member of the Board if elected as
such. The Executive shall devote substantially his entire time during
reasonable business hours (reasonable sick leave and vacations excepted) and
best efforts to fulfill faithfully, responsibly and to the best of his
ability his duties hereunder. The Executive shall travel to the extent
reasonably required to fulfill faithfully his duties hereunder. The
Executive shall not be permitted to serve on the board of directors of
another corporation without the prior consent of the Board, which consent
will not be withheld unreasonably.
(b) Stock Ownership. Beginning within 90 days of the commencement
of the term of this Agreement, and continuing throughout the term of this
Agreement, the Executive shall be required to own (directly or through trusts
for his benefit) a number of shares of common stock of the Corporation (to be
appropriately adjusted in the event of stock splits, stock dividends or
similar transactions) equal to (i) $1.6 million (i.e., four times the
Executive's initial base salary) divided by (ii) the closing sales price of the
Corporation's common stock for the last day of the Corporation's fiscal year
on which the shares of the Corporation's common stock are traded, as reported
in the Wall Street Journal. If Executive's base salary is increased (or
decreased) then the number of shares that Executive is required to own
pursuant to this Paragraph 2(b) shall be increased (decreased) by an amount
(to be appropriately adjusted in the event of stock splits, stock dividends
or similar transactions) equal to (i) the amount of the increase (decrease) in
base salary divided by (ii) the closing sales price of the Corporation's
common stock for the last day prior to the effectiveness of the change in
base salary on which the shares of the Corporation's common stock are traded,
as reported in the Wall Street Journal; provided, however, the Executive
shall not be required to purchase additional shares of common stock of the
Corporation until 90 days have elapsed following any such change in base
salary.
3. Salary.
(a) Base Salary. For services performed by the Executive for the
Corporation pursuant to this Agreement during the period of employment as
provided in Paragraph 1(b) hereof, the Corporation shall pay the Executive a
base salary at the rate of four hundred thousand dollars ($400,000) per year,
payable in substantially equal installments in accordance with the
Corporation's regular payroll practices. The Executive's base salary (with
any increases under paragraph (b), below) shall not be subject to reduction
without the Executive's consent. Any compensation which may be paid to the
Executive under any additional compensation or incentive plan of the
Corporation or which may be otherwise authorized from time to time by the
Board (or an appropriate committee thereof) shall be in addition to the base
salary to which the Executive shall be entitled under this Agreement.
(b) Salary Increases. During the period of employment as provided
in Paragraph 1(b) hereof, the base salary of the Executive shall be reviewed
no less frequently than annually by the Board to determine whether or not the
same should be increased in light of the duties and responsibilities of the
Executive and the performance thereof, and if it is determined that an
increase is merited, such increase shall be promptly put into effect and the
base salary of the Executive as so increased shall constitute the base salary
of the Executive for purposes of Paragraph 3(a).
4. Annual Bonuses. For each calendar year during the term of
employment, the Executive shall be eligible to receive a cash bonus based on
the Corporation's achievement of certain operating and/or financial goals,
with an annual target bonus amount to be set in accordance with the terms of
a bonus plan adopted and administered by the Board for senior executives of the
Corporation, which plan may be amended from time to time by the Board in its
discretion.
5. Equity Incentive Compensation. During the term of employment
hereunder the Executive shall be eligible to participate, in an appropriate
manner relative to other senior executives of the Corporation, in any equity-
based incentive compensation plan or program approved by the Board from time
to time, including (but not by way of limitation) any plan providing for the
granting of (a) options to purchase stock of the Corporation, (b) restricted
stock of the Corporation or (c) similar equity-based units or interests.
6. Other Benefits. In addition to the compensation described in
Paragraphs 3, 4 and 5, above, the Executive shall also be entitled to the
following:
(a) Participation in Benefit Plans. The Executive shall be
entitled to participate in all of the various retirement, welfare, fringe
benefit, executive perquisite, and expense reimbursement plans, programs and
arrangements of the Corporation to the extent the Executive is eligible for
participation under the terms of such plans, programs and arrangements.
Except as otherwise specifically provided in this Agreement, the Executive
shall also be entitled to all benefits provided to him under the practices of
the Corporation as in effect immediately prior to the effective date of this
Agreement.
(b) Vacation and Holidays. The Executive shall be entitled to
four (4) weeks of vacation during each year of this Agreement, or such
greater period as the Board may approve, and to the paid holidays given by
the Corporation to its employees generally, without reduction in salary or
other benefits.
(c) Life Insurance. The Corporation shall purchase and maintain
term life insurance for Executive throughout the Term having a face amount at
least equal to $3 million. The beneficiaries of such life insurance shall be
designated by Executive.
7. Covenants of the Executive. In order to induce the Corporation to
enter into this Agreement, the Executive hereby agrees as follows:
(a) Confidentiality. Except for and on behalf of the Corporation
with the consent of or as directed by the Board, the Executive shall keep
confidential and shall not divulge to any other person or entity, during the
term of employment or thereafter, any of the business secrets or other
confidential information regarding the Corporation and its subsidiaries which
has not otherwise become public knowledge; provided, however, that nothing in
this Agreement shall preclude the Executive from disclosing information (i) to
an appropriate extent to parties retained to perform services for the
Corporation or its subsidiaries or (ii) under any other circumstances to the
extent such disclosure is, in the reasonable judgment of the Executive,
appropriate or necessary to further the best interests of the Corporation or
its subsidiaries or (iii) as may be required by law.
(b) Records. All papers, books and records of every kind and
description relating to the business and affairs of the Corporation and its
subsidiaries, whether or not prepared by the Executive, other than personal
notes prepared by or at the direction of the Executive, shall be the sole and
exclusive property of the Corporation, and the Executive shall surrender them
to the Corporation at any time upon request by the Board.
(c) Non-Competition. The Executive hereby agrees with the
Corporation that during the term of his employment hereunder, and in certain
instances, as provided below, for a period following termination of his
employment hereunder, (i) he shall not, directly or indirectly, engage in, or
be employed by, or act as a consultant to, or be a director, officer, owner
or partner of, or acquire any interest in (other than an interest of 1% or
less in the outstanding capital stock of a publicly traded corporation), any
business activity or entity which competes with the Corporation or any of its
subsidiaries, (ii) he shall not solicit any employee of the Corporation or
any of its subsidiaries to leave the employment thereof or in any way
interfere with the relationship of such employee with the Corporation or its
subsidiaries, unless he believes in good faith at such action during the term
of his employment by the Corporation is in the best interests of the
Corporation, and (iii) he shall not induce or attempt to induce any customer
supplier, licensee or other individual, corporation or other business
organization having a business relation with the Corporation or its
subsidiaries to cease doing business with the Corporation or its subsidiaries
or in any way interfere with the relationship between any such customer,
supplier, licensee or other person and the Corporation or its subsidiaries;
provided, however, that as to the period after termination of the Executive's
employment hereunder, the restrictive covenants set forth in this paragraph
(c) shall apply only for that time period for which the Executive has
received or is receiving the severance benefits described in subparagraphs
(ii) and (iii) of Paragraph 9(b) or subparagraphs (i) and (ii) of Paragraph
9(d) of this Agreement; but provided further that at any time following the
termination of employment hereunder, the Executive shall be released from
said restrictive covenants if he waives further payment of benefits under
said subparagraphs and repays to the Corporation that portion of any
benefits already received under those subparagraphs which corresponds to any
period of time which has not yet elapsed.
(d) Enforcement. The Executive recognizes that the provisions of
this Paragraph 7 are vitally important to the continuing welfare of the
Corporation and its subsidiaries and that money damages would constitute an
inadequate remedy for any violation thereof. Accordingly, in the event of
any such violation by the Executive, the Corporation and its subsidiaries, in
addition to any other remedies they may have, shall have the right to
institute and maintain a proceeding to compel specific performance thereof or
to seek an injunction restraining any action by the Executive in violation of
this Paragraph 7.
8. Termination. Unless earlier terminated in accordance with the
following provisions of this Paragraph 8, the Corporation shall continue to
employ the Executive and the Executive shall remain employed by the
Corporation during the entire term of this Agreement as set forth in
Paragraph 1(b). Paragraph 9 hereof sets forth certain obligations of the
Corporation in the event that the Executive's employment hereunder is
terminated prior to March 31, 2001. Certain capitalized terms used in this
Paragraph 8 and in Paragraph 9 hereof are defined in Paragraph 8(d), below.
(a) Death or Disability. Except to the extent otherwise provided
in Paragraph 9 with respect to certain post-Date of Termination payment
obligations of the Corporation, this Agreement shall terminate immediately as
of the Date of Termination in the event of the Executive's death or in the
event that the Executive becomes disabled. The Executive will be deemed to
be disabled upon the earlier of (i) the end of a nine (9) consecutive month
period during which, by reason of physical or mental injury or disease,
the Executive has been unable to perform substantially all of his usual and
customary duties under this Agreement or (ii) the date that a reputable
physician selected by the Board, and as to whom the Executive has no
reasonable objection, determines in writing that the Executive will, by
reason of physical or mental injury or disease, be unable to perform
substantially all of the Executive's usual and customary duties under this
Agreement for a period of at least nine (9) consecutive months. If any
question arises as to whether the Executive is disabled, upon reasonable
request therefor by the Board, the Executive shall submit to reasonable
medical examination for the purpose of determining the existence, nature and
extent of any such disability. In accordance with Paragraph 13, the Board
shall promptly give the Executive written notice of any such determination of
the Executive's disability and of any decision of the Board to terminate the
Executive's employment by reason thereof. In the event of disability, until
the Date of Termination, the base salary payable to the Executive under
Paragraph 3 hereof shall be reduced dollar-for-dollar by the amount of
disability benefits, if any, paid to the Executive in accordance with any
disability policy or program of the Corporation.
(b) Discharge for Cause. In accordance with the procedures
hereinafter set forth, the Board may discharge the Executive from his
employment hereunder for Cause. Except to the extent otherwise provided in
Paragraph 9 with respect to certain post-Date of Termination obligations of
the Corporation, this Agreement shall terminate immediately as of the Date of
Termination in the event the Executive is discharged for Cause. Any
discharge of the Executive for Cause shall be communicated by a Notice of
Termination to the Executive given in accordance with Paragraph 13 of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of
Termination is to be other than the date of receipt of such notice, specifies
the termination date (which date shall in all events be within fifteen (15)
days after the giving of such notice). In the case of a discharge of the
Executive for Cause, the Notice of Termination shall include a copy of a
resolution duly adopted by the Board at a meeting called and held for such
purpose (after reasonable notice to the Executive and reasonable opportunity
for the Executive, together with the Executive's counsel, to be heard before
the Board prior to such vote), finding that, in the reasonable and good faith
opinion of the Board, the Executive was guilty of conduct constituting Cause.
No purported termination of the Executive's employment for Cause shall be
effective without a Notice of Termination.
(c) Termination for Other Reasons. The Corporation may discharge
the Executive without Cause by giving written notice to the Executive in
accordance with Paragraph 13 at least sixty (60) days prior to the Date of
Termination. The Executive may resign from his employment by giving written
notice to the Corporation in accordance with Paragraph 13 at least sixty (60)
days prior to the Date of Termination. Except to the extent otherwise
provided in Paragraph 9 with respect to certain post-Date of Termination
obligations of the Corporation, this Agreement shall terminate immediately as
of the Date of Termination in the event the Executive is discharged without
Cause or resigns.
(d) Definitions. For purposes of this Agreement, the following
capitalized terms shall have the meanings set forth below:
(i) "Accrued Obligations" shall mean, as of the Date of
Termination, the sum of (A) the Executive's base salary under Paragraph 3
through the Date of Termination to the extent not theretofore paid, (B) the
amount of any bonus, incentive compensation, deferred compensation and other
cash compensation accrued by the Executive as of the Date of Termination to
the extent not theretofore paid and (C) any vacation pay, expense
reimbursements and other cash entitlements accrued by the Executive as of the
Date of Termination to the extent not theretofore paid. For the purpose of
this Paragraph 8(d)(i), amounts shall be deemed to accrue ratably over the
period during which they are earned, but no discretionary compensation shall
be deemed earned or accrued until it is specifically approved by the Board in
accordance with the applicable plan, program or policy.
(ii) "Cause" shall mean (A) the Executive's continued failure
to perform substantially the duties of his employment (including the failure
to maintain stock ownership as required by Paragraph 2(b) hereof), (B) the
Executive's engaging in illegal conduct or gross misconduct which is
materially and demonstrably injurious to the Corporation, or (C) the
conviction of the Executive with respect to any crime or criminal offense
involving dishonesty or fraud, or any felony other than DUI. Notwithstanding
the foregoing, no act or omission by the Executive shall constitute Cause
pursuant to part (A) of the previous sentence unless the Corporation has
given detailed written notice thereof to the Executive, and the Executive has
failed to remedy such act or omission within a reasonable time after
receiving such notice.
(iii) "Change of Control" shall mean:
(A) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 30% or more of the combined voting power of the then
outstanding voting securities of the Corporation entitled to vote generally
in the election of directors (the "Corporation Voting Securities"); provided,
however, that (X) any acquisition by or from the Corporation or any of its
subsidiaries which is recommended or approved by the Executive, (Y) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any of its subsidiaries or (Z) any
acquisition by any corporation with respect to which, following such
acquisition, more than 70% of the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally
in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners of the Corporation Voting Securities immediately
prior to such acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition of the Corporation Voting
Securities shall not constitute a Change of Control; or
(B) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") ceasing for any reason to constitute at least
two-thirds of the Board, provided that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Corporation's shareholders, was approved by the Executive and by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the directors of the Corporation; or
(C) Approval by the shareholders of the Corporation of a
reorganization, merger or consolidation (a "Business Combination") with
respect to which all or substantially all of the individuals and entities who
were the respective beneficial owners of the then outstanding shares of
capital stock of the Corporation (the "Outstanding Corporation Capital Stock")
and Corporation Voting Securities immediately prior to such Business
Combination do not, following such Business Combination, beneficially own,
directly or indirectly, more than 70% of, respectively, the then outstanding
shares of capital stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from the Business Combination
in substantially the same proportion as their ownership immediately prior to
such Business Combination of the Outstanding Corporation Capital Stock and
Corporation Voting Securities, as the case may be; or
(D) (i) A complete liquidation or dissolution of the
Corporation or (ii) a sale or other disposition of all or substantially all
of the assets of the Corporation other than to a corporation with respect to
which, following such sale or disposition, more than 70% of, respectively,
the then outstanding shares of capital stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in the
election of directors is then owned beneficial, directly or indirectly, by
all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Corporation Capital Stock
and Corporation Voting Securities immediately prior to such sale or
disposition in substantially the same proportion as their ownership of the
Outstanding Corporation Capital Stock and Corporation Voting Securities, as
the case may be, immediately prior to such sale or disposition.
(iv) "Date of Termination" shall mean (A) in the event of a
discharge of the Executive by the Board for Cause, the date the Executive
receives a Notice of Termination, or any later date specified in such Notice
of Termination, as the case may be, (B) in the event of a discharge of the
Executive without Cause or a resignation by the Executive, the date specified
in the written notice to the Executive (in the case of discharge) or the
Corporation (in the case of resignation), which date shall be no less than
sixty (60) days from the date of such written notice, (C) in the event of the
Executive's death, the date of the Executive's death, and (D) in the event of
termination of the Executive's employment by reason of disability pursuant to
Paragraph 8(a), the date the Executive receives written notice of such
termination (or, if earlier, twelve (12) months from the date the Executive's
disability began).
(v) "Good Reason" shall mean any of the following (A) the
assignment to the Executive of any duties inconsistent in any respect with
the Executive's positions with the Corporation as set forth in this Agreement
(including status, offices, titles and reporting requirements), authority,
duties or responsibilities as contemplated by Paragraph 2, or any action by
the Corporation which results in diminution in such positions, authority,
duties or responsibilities, excluding for this purpose any isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Corporation promptly after receipt of written notice thereof
given by the Executive in accordance with Paragraph 13; or (B) the failure of
the shareholders of the Corporation to re-elect the Executive as a member of
the Board with full voting rights unless the Executive immediately thereafter
is appointed a member of the Board with full voting rights by the other
members of the Board; or (C) any failure by the Corporation to comply with
any of the provisions of this Agreement, other than any isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Corporation promptly after receipt of written notice thereof
given by the Executive in accordance with Paragraph 13; or (D) the
Corporation giving notice to the Executive in accordance with Paragraph 1(b)
that the term of this Agreement shall not be extended upon the expiration of
the then-current term; provided, however, the failure of the Agreement to be
extended beyond the March 31, 2001 expiration of the Term shall not
constitute "Good Reason".
9. Obligations of the Corporation Upon Termination. The following
provisions describe the obligations of the Corporation to the Executive under
this Agreement upon termination of his employment prior to March 31, 2001.
However, except as explicitly provided in this Agreement, nothing in this
Agreement shall limit or otherwise adversely affect any rights which the
Executive may have under applicable law, under any other agreement with the
Corporation or any of its subsidiaries, or under any compensation or
benefit plan, program, policy or practice of the Corporation or any of its
subsidiaries.
(a) Death, Disability, Discharge for Cause, or Resignation Without
Good Reason. In the event this Agreement terminates pursuant to Paragraph
8(a) prior to March 31, 2001 by reason of the death or disability of the
Executive, or pursuant to Paragraph 8(b) by reason of the discharge of the
Executive by the Corporation for Cause, or pursuant to Paragraph 8(c) by
reason of the resignation of the Executive other than for Good Reason, the
Corporation shall pay to the Executive, or his heirs or estate, in the event
of the Executive's death, all Accrued Obligations in a lump sum in cash
within thirty (30) days after the Date of Termination; provided, however,
that any portion of the Accrued Obligations which consists of bonus, deferred
compensation, or incentive compensation, shall be determined and paid in
accordance with the terms of the relevant plan as applicable to the Executive;
provided, further, this Paragraph 9(a) shall not apply to a resignation by
the Executive for any reason during the period of one (1) month which begins
twelve (12) months after the occurrence of a Change of Control.
(b) Discharge Without Cause or Resignation with Good Reason.
Subject to the limitations on payment set forth in Paragraph 9(c), in the
event that this Agreement terminates pursuant to Paragraph 8(c) prior to
March 31, 2001 by reason of the discharge of the Executive by the Corporation
other than for Cause, death or disability, by reason of the resignation of
the Executive for Good Reason or by reason of the resignation of the
Executive for any reason during the period of one (1) month which begins
twelve (12) months after the occurrence of a Change of Control:
(i) The Corporation shall pay all Accrued Obligations to the
Executive in a lump sum in cash within thirty (30) days after the Date of
Termination; provided, however, that any portion of the Accrued Obligations
which consists of bonus, deferred compensation, or incentive compensation
shall be determined and paid in accordance with the terms of the relevant
plan as applicable to the Executive;
(ii) Within thirty (30 days after the Date of Termination, the
Corporation shall pay to the Executive a lump sum equal to two (2) times the
sum of (A) the Executive's then current annual base salary and (B) the
Executive's then current target annual bonus amount;
(iii) For a period of two (2) years after the Date of
Termination, the Corporation shall continue to provide benefits to the
Executive and/or the Executive's family at least equal to those which would
have been provided to them in accordance with the plans, programs and
arrangements referred to in Paragraph 6(a) of this Agreement; provided,
however, that the Executive may elect at any time (on any one (1) or more
occasions), by written notice to the Corporation, to irrevocably surrender
any or all of such benefits and to receive in lieu thereof a cash payment in
an amount equivalent to the value of the surrendered benefits, as determined
by a nationally recognized certified public accounting firm designated by the
Executive;
(iv) All long-term incentive compensation awards to the
Executive, including (but not by way of limitation) all equity-based incentive
compensation awards (such as (A) options to purchase stock of the Corporation,
(B) restricted stock of the Corporation, or (C) similar equity-based units or
interests) shall, if not otherwise vested, vest in full upon such termination
of this Agreement; and
(v) The Corporation shall, at its sole expense, provide the
Executive with outplacement services the scope and provider of which shall be
selected by the Executive; provided, however, the aggregate amount paid by
the Corporation for such outplacement services shall not exceed 15% of the
Executive's base salary as of the Date of Termination.
(c) Limitation on Payments.
(i) Except as set forth in Paragraph 9(d), in the event that
any payment or benefit (within the meaning of Section 280G(b)(2) of the
Internal Revenue Code of 1986, as amended (the "Code")), to the Executive or
for the Executive's benefit paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise in connection with, or
arising out of, the Executive's employment with the Corporation or any of its
subsidiaries or a Change of Control (a "Payment" or "Payments"), would be
subject to the excise tax imposed by Section 4999 of the Code (the "Section
4999 Excise Tax"), then such Payments shall be reduced (but not below zero)
but only to the extent necessary that no portion thereof shall be subject to
the Section 4999 Excise Tax (the "Section 4999 Limit"). Unless the Executive
shall have given prior written notice specifying a different order to the
Corporation to effectuate the limitations described in the preceding
sentence, the Corporation shall reduce or eliminate the Payments by first
reducing or eliminating those Payments or benefits which are not payable in
cash and then by reducing or eliminating cash Payments, in each case in
reverse order beginning with payments or benefits which are to be paid the
farthest in time from the Determination (as hereinafter defined). Any notice
given by the Executive pursuant to the preceding sentence shall take
precedence over the provisions of any other plan, arrangement or agreement
governing the Executive's rights and entitlements to any benefits or
compensation.
(ii) All determinations required to be made under this
Paragraph 9(c) (each, a "Determination") shall be made, at the Corporation's
expense, by KPMG Peat Marwick (the "Accounting Firm"). In the event of a
Change of Control, if the Accounting Firm is serving as accountant or auditor
for the individual, entity or group effecting the Change of Control, the
Executive shall appoint another nationally recognized accounting firm to make
the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). The Accounting Firm shall
provide its calculations, together with detailed supporting documentation,
both to the Corporation and to the Executive within fifteen (15) calendar
days after the date on which the Executive's right to a Payment hereunder
was triggered (if requested at that time by the Corporation or the Executive)
or such other time as requested by the Corporation or the Executive (in
either case provided that the Corporation or the Executive believes in good
faith that any of the Payments may be subject to the Section 4999 Excise
Tax); provided, however, that if the Accounting Firm determines that
no Section 4999 Excise Tax is payable by the Executive with respect to a
Payment or Payments, it shall furnish the Executive with an opinion
reasonably acceptable to the Executive that no Section 4999 Excise Tax will
be imposed with respect to any such Payment or Payments. Any good faith
determination by the Accounting Firm shall be final, binding and conclusive
upon the Corporation and the Executive.
(iii) As a result of the uncertainty in the application of
Sections 4999 and 280G of the Code, it is possible that the Payments either
will have been made or will not have been made by the Corporation, in either
case in a manner inconsistent with the limitations provided in subparagraph
(i) of this Paragraph 9(c) (an "Excess Payment" or "Underpayment",
respectively). If it is established pursuant to (i) a final determination of
a court for which all appeals have been taken and finally resolved or the
time for all appeals has expired, or (ii) an Internal Revenue Service (the
"IRS") proceeding which has been finally and conclusively resolved, that an
Excess Payment has been made, such Excess Payment shall be deemed for
all purposes to be a loan to the Executive made on the date the Executive
received the Excess Payment and the Executive shall repay the Excess Payment
to the Corporation on demand, together with interest on the Excess Payment at
the applicable federal rate (as defined in Section 1274(d) of the Code) from
the date of the Executive's receipt of such Excess Payment until the date of
such repayment. If it is determined by (i) the Accounting Firm, the
Corporation (which shall include the position taken by the Corporation,
together with its consolidated group, on its federal income tax return) or
the IRS, (ii) pursuant to a determination by a court, or (iii) upon the
resolution to the Executive's satisfaction of any dispute, that an
Underpayment has occurred, the Corporation shall pay an amount equal to the
Underpayment to the Executive within ten (10) calendar days of such
determination or resolution, together with interest on such amount at the
applicable federal rate from the date such amount should have been paid to
the Executive pursuant to the terms of this Agreement or otherwise, but for
the operation of this Paragraph 9(c), until the date of payment.
(d) Termination Without Cause or For Good Reason Within Two Years of a
Change in Control. In the event that this Agreement terminates prior to
March 31, 2001 pursuant to Paragraph 8(c) by reason of the discharge of the
Executive by the Corporation other than for Cause, death or disability or by
reason of the resignation of the Executive for Good Reason, and the Date of
Termination with respect to such termination or resignation occurs within the
two year period following a Change of Control, Executive shall be entitled
to the benefits described in Paragraph 9(b) except that:
(i) The lump sum payable under Paragraph 9(b)(ii) shall be
equal to three (3) times the sum of (A) the Executive's then current annual
base salary and (B) the Executive's then current target annual bonus amount;
(ii) The period during which benefits shall be provided
pursuant to paragraph 9(b)(iii) shall be equal to three (3) years;
(iii) The limitations set forth in Paragraph 9(c) shall not
apply; and
(iv) The provisions of Paragraph 10 shall apply.
10. Certain Additional Payments by the Corporation. If, and only if,
this Agreement terminates prior to March 31, 2001 pursuant to Paragraph 8(c)
by reason of the discharge of the Executive by the Corporation other than for
Cause, death or disability or by reason of the resignation of the Executive
for Good Reason and the Date of Termination with respect to such termination
or resignation occurs within the two year period following a Change of
Control, the provisions of this Paragraph 10 shall apply.
(a) If the provisions of this Paragraph 10 apply, in the event it
shall be determined that any Payment (determined without regard to any
additional payments required under this Paragraph 10) would be subject to the
Section 4999 Excise Tax or if any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, being hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that, after payment by the
Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes (and
any interest and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payment described
above.
(b) Subject to the provisions of paragraph (c), below, all
determinations required to be made under this Paragraph 10, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such determination,
shall be made by the Accounting Firm, which shall provide detailed supporting
calculations both to the Corporation and the Executive within fifteen (15)
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Corporation. All fees
and expenses of the Accounting Firm shall be borne solely by the Corporation.
Any Gross-Up Payment, as determined pursuant to this Paragraph 10, shall be
paid by the Corporation to the Executive within five (5) days of the receipt
of the Accounting Firm's determination. If the Accounting Firm determines
that no Excise Tax is payable by the Executive, it shall furnish the Executive
with a written opinion that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any good faith determination
by the Accounting Firm shall be binding upon the Corporation and the
Executive. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been
made by the Corporation should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Corporation exhausts its remedies pursuant to paragraph (c), below, and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Corporation
to or for the benefit of the Executive.
(c) The Executive shall notify the Corporation in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Corporation of a Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than fifteen (15) business days
after the Executive is informed in writing of such claim and shall apprise
the Corporation of the nature of such claim and the date on which such claim
is requested to be paid. The Executive shall not pay such claim prior to the
expiration of the thirty (30) day period following the date on which
Executive gives such notice to the Corporation (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due). If
the Corporation notifies the Executive in writing prior to the expiration of
such period that it desires to contest such claim, the Executive shall:
(i) Give the Corporation any information reasonably requested
by the Corporation relating to such claim,
(ii) Take such action in connection with contesting such claim
as the Corporation shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Corporation,
(iii) Cooperate with the Corporation in good faith in order
effectively to contest such claim, and
(iv) Permit the Corporation to participate in any proceedings
relating to such claim;
provided, however, that the Corporation shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limiting the
foregoing provisions of this paragraph (c), the Corporation shall control all
proceedings taken in connection with such contest and, at its sole option,
may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive to pay the tax claimed
and sue for a refund or contest the claim in any permissible manner; and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Corporation shall determine; provided, however,
that if the Corporation directs the Executive to pay such claim and sue for a
refund, the Corporation shall advance the amount of such payment to the
Executive on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect
to such advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Corporation's
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced
by the Corporation pursuant to paragraph (c), above, the Executive becomes
entitled to receive any refund with respect to such claim, the Executive
shall (subject to the Corporation's complying with the requirements of said
paragraph (c)) promptly pay to the Corporation the amount of such refund
(together with any interest paid or credited thereon, after taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced by
the Corporation pursuant to said paragraph (c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim
and the Corporation does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of thirty (30) days
after such determination, then such advance shall be forgiven and shall not
be required to be repaid; and the amount of such advance shall offset, to the
extent thereof, the amount of the Gross-Up Payment required to be paid.
11. No Set-Off or Mitigation. The Corporation's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Corporation may
have against the Executive or others. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the provisions
of this Agreement and such amounts shall not be reduced whether or not the
Executive obtains other employment.
12. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the heirs and representatives of the Executive and the
successors and assigns of the Corporation. The Corporation shall require any
successor (whether direct or indirect, by purchase, merger, reorganization,
consolidation, acquisition of property or stock, liquidation, or otherwise)
to all or a substantial portion of its assets, by agreement in form and
substance reasonably satisfactory to the Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent
that the Corporation would be required to perform this Agreement if no such
succession had taken place. Regardless of whether such an agreement is
executed, this Agreement shall be binding upon any successor of the
Corporation in accordance with the operation of law, and such successor shall
be deemed the "Corporation" for purposes of this Agreement.
13. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first
class certified mail, return receipt requested, postage prepaid, addressed as
follows:
(a) If to the Board or the Corporation, to:
Dames & Moore, Inc.
911 Wilshire Boulevard, Suite 700
Los Angeles, California 90017
Attention: Chief Human Resources Officer
(b) If to the Executive, to:
Mr. Arthur C. Darrow
873 Knollwood Drive
Santa Barbara, California 93108
Such addresses may be changed by written notice sent to the other party at the
last recorded address of that party.
14. Tax Withholding. The Corporation shall provide for the withholding
of any taxes required to be withheld by federal, state, or local law with
respect to any payment in cash, shares of stock and/or other property made by
or on behalf of the Corporation to or for the benefit of the Executive under
this Agreement or otherwise. The Corporation may, at its option: (a)
withhold such taxes from any cash payments owing from the Corporation to the
Executive, (b) require the Executive to pay to the Corporation in cash such
amount as may be required to satisfy such withholding obligations and/or (c)
make other satisfactory arrangements with the Executive to satisfy such
withholding obligations.
15. Arbitration. Except as to actions described in Paragraph 7(d), any
controversy or claim arising out of or relating to this Agreement or the
breach hereof shall be settled by arbitration in Los Angeles, California in
accordance with the laws of the State of California. The arbitration shall
be conducted in accordance with the rules of the American Arbitration
Association. The costs and expenses of the arbitrator(s) shall be borne
equally by the Corporation and the Executive. The award of the arbitrator(s)
shall be binding upon the parties. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction.
16. No Assignment. Except as otherwise expressly provided herein, this
Agreement is not assignable by any party and no payment to be made hereunder
shall be subject to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or other charge.
17. Execution in Counterparts. This Agreement may be executed by the
parties hereto in two (2) or more counterparts, each of which shall be deemed
to be an original, but all such counterparts shall constitute one and the
same instrument, and all signatures need not appear on any one counterpart.
18. Jurisdiction and Governing Law. Except as provided in Paragraph 15,
jurisdiction over disputes with regard to this Agreement shall be exclusively
in the courts of the State of California located in the county of Los
Angeles, and this Agreement shall be construed and interpreted in accordance
with and governed by the laws of the State of California, other than the
conflict of laws provisions of such laws. Each party agrees that venue will
be proper in the courts described in the previous sentence and waives any
objection based upon forum non conveniens. The choice of forum set forth in
this Paragraph shall not be deemed to preclude the enforcement of any
judgment so obtained in any other forum.
19. Severability. If any provision of this Agreement shall be adjudged
by any court of competent jurisdiction to be invalid or unenforceable for any
reason, such judgment shall not affect, impair or invalidate the remainder of
this Agreement. Furthermore, if the scope of any restriction or requirement
contained in this Agreement is too broad to permit enforcement of such
restriction or requirement to its full extent, then such restriction or
requirement shall be enforced to the maximum extent permitted by law, and the
Executive consents and agrees that any court of competent jurisdiction may so
modify such scope in any proceeding brought to enforce such restriction or
requirement.
20. Prior Understandings. This Agreement embodies the entire
understanding of the parties hereto and supersedes all other oral or written
agreements or understandings between them regarding the subject matter hereof.
No change, alteration or modification hereof may be made except in a writing,
signed by each of the parties hereto. The headings in this Agreement are for
convenience and reference only and shall not be construed as part of this
Agreement or to limit or otherwise affect the meaning hereof.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
Attest: DAMES & MOORE, INC.
Grace C. Montgomery
_____________________ By: George D. Leal
__________________________
Title: Chairman
_______________________
ARTHUR C. DARROW
Arthur C. Darrow
______________________________
AGREEMENT REGARDING SEVERANCE PAYMENTS
THIS AGREEMENT REGARDING SEVERANCE PAYMENTS (the "Agreement"), made
and entered into as of April 1, 1997, by and between DAMES & MOORE,
INC., a Delaware corporation, (hereinafter called the "Corporation") and Mark
A. Snell (hereinafter called the "Executive").
WITNESSETH THAT:
WHEREAS, the Corporation desires to provide certain severance benefits to
Executive solely if Executive's employment is terminated under certain
circumstances in connection with a Change of Control or following a
termination of the employment of Arthur Darrow;
WHEREAS, capitalized terms not otherwise defined shall have the meaning
set forth in Paragraph 7;
NOW, THEREFORE, the Corporation and the Executive, each intending to be
legally bound, hereby mutually covenant and agree as follows:
1. Severance Benefit In Connection With Certain Terminations Following a
Termination of Arthur Darrow's Employment. Subject to the limitations on
payment set forth in Paragraph 4, if (i) Executive's employment terminates
prior to March 31, 2001 by reason of the discharge of the Executive by the
Corporation other than for Cause, death or disability or by reason of the
resignation of the Executive for Good Reason, and (ii) the Date of
Termination with respect to such termination or resignation occurs within
the one year period following the termination of Arthur Darrow's employment as
President and Chief Executive Officer for any reason:
1.1 The Corporation shall pay all Accrued Obligations to the
Executive in a lump sum in cash within thirty (30) days after the Date of
Termination; provided, however, that any portion of the Accrued Obligations
which consists of bonus, deferred compensation, or incentive compensation
shall be determined and paid in accordance with the terms of the relevant
plan as applicable to the Executive;
1.2 Within thirty (30) days after the Date of Termination, the
Corporation shall pay to the Executive a lump sum equal to the sum of (A) the
Executive's then current annual base salary and (B) the Executive's then
current target annual bonus amount;
1.3 For a period of one (1) year after the Date of Termination, the
Corporation shall continue to provide benefits to the Executive and/or the
Executive's family at least equal to those which would have been provided to
them in accordance with the executive benefit plans, programs and arrangements
then in effect with respect to Executive; provided, however, that the
Executive may elect at any time, by written notice to the Corporation, to
irrevocably surrender any or all of such remaining benefits and to receive in
lieu thereof a cash payment in an amount equivalent to the value of the
surrendered benefits, as determined by a nationally recognized certified
public accounting firm designated by the Executive;
1.4 All long-term incentive compensation awards to the Executive,
including (but not by way of limitation) all equity-based incentive
compensation awards (such as (A) options to purchase stock of the Corporation,
(B) restricted stock of the Corporation, or (C) similar equity-based units or
interests) shall, if not otherwise vested, vest in full upon such termination
of employment; and
1.5 The Corporation shall, at its sole expense, provide the
Executive with outplacement services the scope and provider of which shall be
selected by the Executive; provided, however, the aggregate amount paid by
the Corporation for such outplacement services shall not exceed 15% of the
Executive's base salary as of the Date of Termination.
2. Severance Benefit In Connection With Certain Resignations
Following a Change of Control. Subject to the limitations on payment set forth
in Paragraph 4, in the event that (i) Executive's employment terminates prior
to March 31, 2001 by reason of the resignation of the Executive for any
reason (other than Good Reason) during the period of one (1) month which
begins twelve (12) months after the occurrence of a Change of Control, and
(ii) Arthur Darrow has resigned during such one (1) month period for any
reason (other than Good Reason, as defined in his employment agreement with
the Corporation dated as of April 1, 1997 (the "Darrow Agreement")) pursuant
to Paragraph 9(b) of the Darrow Agreement, Executive shall be entitled to the
benefits described in Paragraph 1 except that:
2.1 The lump sum payable under Paragraph 1.2 shall be equal to two
(2) times the sum of (A) the Executive's then current annual base salary and
(B) the Executive's then current target annual bonus amount; and
2.2 The period during which benefits shall be provided pursuant to
paragraph 1.3 shall be equal to two (2) years.
3. Severance Benefit In Connection With Certain Terminations Without
Cause or Resignations for Good Reason Following A Change of Control. In the
even that Executive's employment terminates prior to March 31, 2001 by reason
of the discharge of the Executive by the Corporation other than for Cause,
death or disability or by reason of the resignation of the Executive for Good
Reason, and the Date of Termination with respect to such termination or
resignation occurs within the two year period following a Change of Control,
Executive shall be entitled to the benefits described in Paragraph 1 (but not
the benefits described in Paragraph 2) except that:
3.1 The lump sum payable under Paragraph 1.2 shall be equal to three
(3) times the sum of (A) the Executive's then current annual base salary and
(B) the Executive's then current target annual bonus amount;
3.2 the period during which benefits shall be provided pursuant to
paragraph 1.3 shall be equal to three (3) years;
3.3 the limitations set forth in Paragraph 4 shall not apply; and
3.4 the provisions of Paragraph 5 shall apply.
4. Limitations on Payment.
4.1 Except as provided in Paragraph 3, in the event that (i) the
Executive's employment is terminated (whether by the Company or by the
Executive) and the Executive is entitled to the benefits described in
Paragraph 1 or 2, and (ii) any payment or benefit (within the meaning of
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code")), to the Executive or for the Executive's benefit paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise in connection with, or arising out of, the Executive's employment
with the Corporation or any of its subsidiaries or a Change of Control (a
"Payment" or "Payments"), would be subject to the excise tax imposed by
Section 4999 of the Code (the "Section 4999 Excise Tax"), then such Payments
shall be reduced (but not below zero) but only to the extent necessary that
no portion thereof shall be subject to the Section 4999 Excise Tax (the
"Section 4999 Limit"). Unless the Executive shall have given prior written
notice specifying a different order to the Corporation to effectuate the
limitations described in the preceding sentence, the Corporation shall reduce
or eliminate the Payments by first reducing or eliminating those Payments or
benefits which are not payable in cash and then by reducing or eliminating
cash Payments, in each case in reverse order beginning with payments or
benefits which are to be paid the farthest in time from the Determination (as
hereinafter defined). Any notice given by the Executive pursuant to the
preceding sentence shall take precedence over the provisions of any other plan,
arrangement or agreement governing the Executive's rights and entitlements to
any benefits or compensation.
4.2 All determinations required to be made under this Paragraph 4
(each, a "Determination") shall be made, at the Corporation's expense, by
KPMG Peat Marwick (the "Accounting Firm"). In the event of a Change of
Control, if the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, the Executive
shall appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). The Accounting Firm shall provide its
calculations, together with detailed supporting documentation, both to the
Corporation and to the Executive within fifteen (15) calendar days after the
date on which the Executive's right to a Payment hereunder was triggered (if
requested at that time by the Corporation or the Executive) or such other
time as requested by the Corporation or the Executive (in either case provided
that the Corporation or the Executive believes in good faith that any of the
Payments may be subject to the Section 4999 Excise Tax); provided, however,
that if the Accounting Firm determines that no Section 4999 Excise Tax is
payable by the Executive with respect to a Payment or Payments, it shall
furnish the Executive with an opinion reasonably acceptable to the Executive
that no Section 4999 Excise Tax will be imposed with respect to any such
Payment or Payments. Any good faith determination by the Accounting Firm
shall be final, binding and conclusive upon the Corporation and the Executive.
4.3 As a result of the uncertainty in the application of Sections
4999 and 280G of the Code, it is possible that the Payments either will have
been made or will not have been made by the Corporation, in either case in a
manner inconsistent with the limitations provided in Paragraph 4.1 (an
"Excess Payment" or "Underpayment", respectively). If it is established
pursuant to (i) a final determination of a court for which all appeals have
been taken and finally resolved or the time for all appeals has expired, or
(ii) an Internal Revenue Service (the "IRS") proceeding which has been finally
and conclusively resolved, that an Excess Payment has been made, such Excess
Payment shall be deemed for all purposes to be a loan to the Executive made
on the date the Executive received the Excess Payment and the Executive shall
repay the Excess Payment to the Corporation on demand, together with interest
on the Excess Payment at the applicable federal rate (as defined in Section
1274(d) of the Code) from the date of the Executive's receipt of such Excess
Payment until the date of such repayment. If it is determined by (i) the
Accounting Firm, the Corporation (which shall include the position taken
by the Corporation, together with its consolidated group, on its federal
income tax return) or the IRS, (ii) pursuant to a determination by a court,
or (iii) upon the resolution to the Executive's satisfaction of any dispute,
that an Underpayment has occurred, the Corporation shall pay an amount equal
to the Underpayment to the Executive within ten (10) calendar days of such
determination or resolution, together with interest on such amount at the
applicable federal rate from the date such amount should have been paid to
the Executive pursuant to the terms of this Agreement or otherwise, but for
the operation of this Paragraph 4, until the date of payment.
5. Certain Additional Payments by the Corporation. If, and only if,
Executive's employment terminates prior to March 31, 2001 by reason of the
discharge of the Executive by the Corporation other than for Cause, death or
disability or by reason of the resignation of the Executive for Good Reason
and the Date of Termination with respect to such termination or resignation
occurs within the two year period following a Change of Control, the
provisions of this Paragraph 5 shall apply.
5.1 If the provisions of this Paragraph 5 apply, in the event it
shall be determined that any Payment (determined without regard to any
additional payments required under this Paragraph 5) would be subject to the
Section 4999 Excise Tax or if any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, being hereinafter collectively referred to as
the "Excise Tax"), then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that, after
payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any
income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payment described above.
5.2 Subject to the provisions of paragraph 5.3, below, all
determinations required to be made under this Paragraph 5, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such determination,
shall be made by the Accounting Firm, which shall provide detailed supporting
calculations both to the Corporation and the Executive within fifteen (15)
business days of the receipt of notice from the Executive that there has been
a Payment, or such earlier time as is requested by the Corporation. All fees
and expenses of the Accounting Firm shall be borne solely by the Corporation.
Any Gross-Up Payment, as determined pursuant to this Paragraph 5, shall be
paid by the Corporation to the Executive within five (5) days of the receipt
of the Accounting Firm's determination. If the Accounting Firm determines
that no Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any good faith determination
by the Accounting Firm shall be binding upon the Corporation and the
Executive. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been
made by the Corporation should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Corporation exhausts its remedies pursuant to paragraph 5.3, below, and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Corporation
to or for the benefit of the Executive.
5.3 The Executive shall notify the Corporation in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Corporation of a Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than fifteen (15) business days
after the Executive is informed in writing of such claim and shall apprise
the Corporation of the nature of such claim and the date on which such claim
is requested to be paid. The Executive shall not pay such claim prior to the
expiration of the thirty (30) day period following the date on which
Executive gives such notice to the Corporation (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due). If
the Corporation notifies the Executive in writing prior to the expiration of
such period that it desires to contest such claim, the Executive shall:
(i) Give the Corporation any information reasonably requested
by the Corporation relating to such claim,
(ii) Take such action in connection with contesting such claim
as the Corporation shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Corporation,
(iii) Cooperate with the Corporation in good faith in order
effectively to contest such claim, and
(iv) Permit the Corporation to participate in any proceedings
relating to such claim;
provided, however, that the Corporation shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limiting the
foregoing provisions of this paragraph 5.3, the Corporation shall control all
proceedings taken in connection with such contest and, at its sole option,
may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim
and may, at its sole option, either direct the Executive to pay the tax
claimed and sue for a refund or contest the claim in any permissible manner;
and the Executive agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Corporation shall determine; provided, however,
that if the Corporation directs the Executive to pay such claim and sue for a
refund, the Corporation shall advance the amount of such payment to the
Executive on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Corporation's
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.
5.4 If, after the receipt by the Executive of an amount advanced
by the Corporation pursuant to paragraph 5.3, above, the Executive becomes
entitled to receive any refund with respect to such claim, the Executive
shall (subject to the Corporation's complying with the requirements of said
paragraph 5.3) promptly pay to the Corporation the amount of such refund
(together with any interest paid or credited thereon, after taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced by the
Corporation pursuant to said paragraph 5.3, a determination is made that the
Executive shall not be entitled to any refund with respect to such claim and
the Corporation does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of thirty (30) days
after such determination, then such advance shall be forgiven and shall not
be required to be repaid; and the amount of such advance shall offset, to the
extent thereof, the amount of the Gross-Up Payment required to be paid.
6. Covenants of the Executive. In order to induce the Corporation to
enter into this Agreement, the Executive hereby agrees as follows:
6.1 Non-Competition. The Executive hereby agrees with the
Corporation that during the term of his employment hereunder, and in certain
instances, as provided below, for a period following termination of his
employment hereunder, (i) he shall not, directly or indirectly, engage in, or
be employed by, or act as a consultant to, or be a director, officer, owner
or partner of, or acquire any interest in (other than an interest of 1% or
less in the outstanding capital stock of a publicly traded corporation),
any business activity or entity which competes with the Corporation or any of
its subsidiaries, (ii) he shall not solicit any employee of the Corporation
or any of its subsidiaries to leave the employment thereof or in any way
interfere with the relationship of such employee with the Corporation or its
subsidiaries, unless he believes in good faith that such action during the
term of his employment by the Corporation is in the best interests of the
Corporation, and (iii) he shall not induce or attempt to induce any customer,
supplier, licensee or other individual, corporation or other business
organization having a business relation with the Corporation or its
subsidiaries to cease doing business with the Corporation or its subsidiaries
or in any way interfere with the relationship between any such customer,
supplier, licensee or other person and the Corporation or its subsidiaries;
provided, however, that as to the period after termination of the Executive's
employment hereunder, the restrictive covenants set forth in this paragraph 6
shall apply only for that time period for which the Executive has received or
is receiving the severance benefits described in paragraphs 1.2 and 1.3, 3.1
and 3.2, or 2.1 and 2.2; but provided further that at any time following the
termination of employment hereunder, the Executive shall be released from
said restrictive covenants if he waives further payment of benefits under
said paragraphs and repays to the Corporation that portion of any benefits
already received under those paragraphs which corresponds to any period of time
which has not yet elapsed.
6.2 Enforcement. The Executive recognizes that the provisions of
this Paragraph 6 are vitally important to the continuing welfare of the
Corporation and its subsidiaries and that money damages would constitute an
inadequate remedy for any violation thereof. Accordingly, in the event of
any such violation by the Executive, the Corporation and its subsidiaries, in
addition to any other remedies they may have, shall have the right to
institute and maintain a proceeding to compel specific performance thereof or
to seek an injunction restraining any action by the Executive in violation of
this Paragraph 6.
7. Definitions. For purposes of this Agreement, the following
capitalized terms shall have the meanings set forth below:
7.1 "Accrued Obligations" shall mean, as of the Date of Termination,
the sum of (A) the Executive's base salary through the Date of Termination to
the extent not theretofore paid, (B) the amount of any bonus, incentive
compensation, deferred compensation and other cash compensation accrued by
the Executive as of the Date of Termination to the extent not theretofore
paid and (C) any vacation pay, expense reimbursements and other cash
entitlements accrued by the Executive as of the Date of Termination to the
extent not theretofore paid. For the purpose of this definition, amounts
shall be deemed to accrue ratably over the period during which they are earned,
but no discretionary compensation shall be deemed earned or accrued until it
is specifically approved by the board of directors of the Corporation (the
"Board") in accordance with the applicable plan, program or policy.
7.2 "Cause" shall mean (A) the Executive's continued failure to
perform substantially the duties of his employment, (B) the Executive's
engaging in illegal conduct or gross misconduct which is materially injurious
to the Corporation, or (C) the conviction of the Executive with respect to
any crime or criminal offense involving dishonesty or fraud, or any felony
other than DUI. Notwithstanding the foregoing, no act or omission by the
Executive shall constitute Cause pursuant to part (A) of the previous
sentence unless the Corporation has given detailed written notice thereof to
the Executive, and the Executive has failed to remedy such act or omission
within a reasonable time after receiving such notice.
7.3 "Change of Control" shall mean:
7.3.1 The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 30% or more of the combined voting power of the then
outstanding voting securities of the Corporation entitled to vote generally
in the election of directors (the "Corporation Voting Securities"); provided,
however, that (X) any acquisition by or from the Corporation or any of its
subsidiaries, (Y) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any of its subsidiaries
or (Z) any acquisition by any corporation with respect to which, following
such acquisition, more than 70% of the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally
in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners of the Corporation Voting Securities immediately
prior to such acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition of the Corporation Voting
Securities shall not constitute a Change of Control; or
7.3.2 Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") ceasing for any reason to constitute at least
two-thirds of the Board, provided that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Corporation's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office is
in connection with an actual or threatened election contest relating to the
election of the directors of the Corporation; or
7.3.3 Approval by the shareholders of the Corporation of a
reorganization, merger or consolidation (a "Business Combination") with
respect to which all or substantially all of the individuals and entities who
were the respective beneficial owners of the then outstanding shares of
capital stock of the Corporation (the "Outstanding Corporation Capital Stock")
and Corporation Voting Securities immediately prior to such Business
Combination do not, following such Business Combination, beneficially own,
directly or indirectly, more than 70% of, respectively, the then outstanding
shares of capital stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from the Business Combination
in substantially the same proportion as their ownership immediately prior to
such Business Combination of the Outstanding Corporation Capital Stock and
Corporation Voting Securities, as the case may be; or
7.3.4 (i) A complete liquidation or dissolution of the
Corporation or (ii) a sale or other disposition of all or substantially all
of the assets of the Corporation other than to a corporation with respect to
which, following such sale or disposition, more than 70% of, respectively,
the then outstanding shares of capital stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in the
election of directors is then owned beneficially, directly or indirectly, by
all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Corporation Capital Stock
and Corporation Voting Securities immediately prior to such sale or
disposition in substantially the same proportion as their ownership of the
Outstanding Corporation Capital Stock and Corporation Voting Securities, as
the case may be, immediately prior to such sale or disposition.
7.4 "Date of Termination" shall mean in the event of a discharge of
the Executive without Cause or a resignation by the Executive, the date
specified in the written notice to the Executive (in the case of discharge)
or the Corporation (in the case of resignation), which date shall be no less
than sixty (60) days from the date of such written notice.
7.5 "Good Reason" shall mean (i) any assignment to the Executive of
any duties inconsistent with the Executive's positions with the Corporation
as of the date of this Agreement, (ii) any action by the Corporation which
results in diminution in such positions, authority, duties or responsibilities,
or (iii) any reduction by the Corporation of Executive's base salary,
excluding for this purpose in each case any action not taken in bad faith and
which is remedied by the Corporation promptly after receipt of written
notice thereof given by the Executive in accordance with Paragraph 10.
8. No Set-Off or Mitigation. The Corporation's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Corporation
may have against the Executive or others. In no event shall the Executive
be obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement and such amounts shall not be reduced whether
or not the Executive obtains other employment.
9. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the heirs and representatives of the Executive and the successors
and assigns of the Corporation. The Corporation shall require any successor
(whether direct or indirect, by purchase, merger, reorganization,
consolidation, acquisition of property or stock, liquidation, or otherwise)
to all or a substantial portion of its assets, by agreement in form and
substance reasonably satisfactory to the Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent
that the Corporation would be required to perform this Agreement if no such
succession had taken place. Regardless of whether such an agreement is
executed, this Agreement shall be binding upon any successor of the
Corporation in accordance with the operation of law, and such successor shall
be deemed the "Corporation" for purposes of this Agreement.
10. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first
class certified mail, return receipt requested, postage prepaid, addressed as
follows:
(a) If to the Board or the Corporation, to:
Dames & Moore, Inc.
911 Wilshire Boulevard, Suite 700
Los Angeles, California 90017
Attention: Chief Human Resources Officer
(b) If to the Executive, to:
Mr. Mark A. Snell
259 Belmont Avenue
Long Beach, California 90803
If delivered by hand, a notice shall deemed to be delivered when received; if
delivered by first class certified mail as described above, a notice shall be
deemed to be delivered three (3) days following the date it was mailed. Such
addresses may be changed by written notice sent to the other party at the
last recorded address of that party.
11. Tax Withholding. The Corporation shall provide for the withholding of
any taxes required to be withheld by federal, state, or local law with
respect to any payment in cash, shares of stock and/or other property made by
or on behalf of the Corporation to or for the benefit of the Executive under
this Agreement or otherwise. The Corporation may, at its option: (a) withhold
such taxes from any cash payments owing from the Corporation to the Executive,
(b) require the Executive to pay to the Corporation in cash such amount as may
be required to satisfy such withholding obligations and/or (c) make other
satisfactory arrangements with the Executive to satisfy such withholding
obligations.
12. Arbitration. Except as to actions described in Paragraph 6.2, any
controversy or claim arising out of or relating to this Agreement or the
breach hereof shall be settled by arbitration in Los Angeles, California in
accordance with the laws of the State of California. The arbitration shall
be conducted in accordance with the rules of the American Arbitration
Association. The costs and expenses of the arbitrator(s) shall be borne
equally by the Corporation and the Executive. The award of the arbitrator(s)
shall be binding upon the parties. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction.
13. No Assignment. Except as otherwise expressly provided herein, this
Agreement is not assignable by any party and no payment to be made hereunder
shall be subject to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or other charge.
14. Execution in Counterparts. This Agreement may be executed by the
parties hereto in two (2) or more counterparts, each of which shall be deemed
to be an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
15. Jurisdiction and Governing Law. Except as provided in Paragraph 12,
jurisdiction over disputes with regard to this Agreement shall be exclusively
in the courts of the State of California located in the county of Los Angeles,
and this Agreement shall be construed and interpreted in accordance with and
governed by the laws of the State of California, other than the conflict of
laws provisions of such laws. Each party agrees that venue will be proper in
the courts described in the previous sentence and waives any objection based
upon forum non conveniens. The choice of forum set forth in this Paragraph
shall not be deemed to preclude the enforcement of any judgment so obtained
in any other forum.
16. Severability. If any provision of this Agreement shall be adjudged
by any court of competent jurisdiction to be invalid or unenforceable for any
reason, such judgment shall not affect, impair or invalidate the remainder of
this Agreement. Furthermore, if the scope of any restriction or requirement
contained in this Agreement is too broad to permit enforcement of such
restriction or requirement to its full extent, then such restriction or
requirement shall be enforced to the maximum extent permitted by law, and the
Executive consents and agrees that any court of competent jurisdiction may
so modify such scope in any proceeding brought to enforce such restriction or
requirement.
17. Other Benefits. This Agreement does not provide a pension for
Executive nor shall any payment hereunder be characterized as deferred
compensation. Except as set forth in paragraph 4, neither the provisions of
this Agreement nor the payments provided for hereunder shall reduce any
amounts otherwise payable, or in any way diminish Executive's rights as an
employee, whether existing now or hereafter, under any benefit, incentive,
retirement, stock option, stock bonus or stock purchase plan or any employment
agreement or other plan or arrangement not related to severance. Any such
other amounts or benefits payable shall be included, as necessary, for making
any of the calculations required under paragraph 4.
18. Employment Status. This Agreement does not constitute a contract
of employment or impose on Executive any obligation to remain in the employ
of the Corporation, nor does it impose on the Corporation any obligation to
retain Executive in his present or any other position, or to change the
status of Executive's employment as an employee at will. Nothing in this
Agreement shall in any way require the Corporation to provide Executive with
any severance benefits except as expressly provided herein, nor shall this
Agreement ever be construed in any way as establishing any policies or
requirements of the Corporation for the termination of Executive's employment
or the payment of severance benefits to Executive if Executive's employment
terminates except as expressly provided herein, nor shall anything in this
Agreement in any way affect the right of the Corporation in its absolute
discretion to change one or more benefit plans, including but not limited to
pension plans, dental plans, health care plans, savings plans, bonus plans,
vacation pay plans, disability plans, and the like.
19. Prior Understandings. This Agreement embodies the entire
understanding of the parties hereto and supersedes all other oral or written
agreements or understandings between them regarding the subject matter hereof.
No change, alteration or modification hereof may be made except in a writing,
signed by each of the parties hereto. The headings in this Agreement are for
convenience and reference only and shall not be construed as part of this
Agreement or to limit or otherwise affect the meaning hereof.
20. Termination. This Agreement shall terminate on March 31, 2001;
provided, however, if Executive's employment has terminated prior to such
date, the Corporation's and the Executive's rights and obligations under this
Agreement with respect to such termination (if any) shall survive the
termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
DAMES & MOORE, INC.
By: Arthur C. Darrow
__________________________
Title: Chief Executive Officer
_______________________
MARK A. SNELL
Mark A. Snell
______________________________
SENIOR LOAN AGREEMENT
BETWEEN
DMB/REMEDIATION LLC
AS BORROWER
AND
PPA FUNDING CORP.,
AS SENIOR LENDER
MARCH 11, 1997
TABLE OF CONTENTS
Page No.
ARTICLE 1
CERTAIN DEFINITIONS
Section 1.1 Certain Definitions. . . . . . . . 2
ARTICLE 2
LOAN TERMS
Section 2.1 The Loan; Advances; Not a Revolving Credit
Loan . . . . . . . . . . . . 19
Section 2.2 Interest Rate; Late Charge . . . 24
Section 2.3 Terms of Payment . . . . . . . . 24
Section 2.4 Security . . . . . . . . . . . . 27
Section 2.5 LTV Test.. . . . . . . . . . . . 28
Section 2.6 Retained Earnings Reserve. . . . 28
Section 2.7 Pool Acquisitions. . . . . . . . 29
Section 2.8 Delayed Mortgage Acquisitions. . 30
Section 2.9 Subsidiary Structuring Conditions30
ARTICLE 3
INSURANCE, CONDEMNATION, AND IMPOUNDS
Section 3.1 Insurance. . . . . . . . . . . . 32
Section 3.2 Use and Application of Insurance
Proceeds . . . . . . . . . . 34
Section 3.3 Condemnation Awards. . . . . . . 35
Section 3.4 Impounds . . . . . . . . . . . . 35
ARTICLE 4
ENVIRONMENTAL MATTERS
Section 4.1 Certain Definitions. . . . . . . 36
Section 4.2 Representations and Warranties on
Environmental Matters. . . . 37
Section 4.3 Covenants on Environmental
Matters . . . . . . . . . . . 37
Section 4.4 Allocation of Risks and
Indemnity . . . . . . . . . . 39
Section 4.5 No Waiver. . . . . . . . . . . . 40
ARTICLE 5
LEASING MATTERS
Section 5.1 Representations and Warranties
on Leases . . . . . . . . . . 40
Section 5.2 Standard Lease Form; Approval
Rights . . . . . . . . . . . 41
Section 5.3 Covenants. . . . . . . . . . . . 41
Section 5.4 Tenant Estoppel Certificates . . 42
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
Section 6.1 Organization and Power . . . . . 42
Section 6.2 Validity of Senior Loan
Documents . . . . . . . . . . 42
Section 6.3 Liabilities; Litigation. . . . . 42
Section 6.4 Taxes and Assessments. . . . . . 43
Section 6.5 Other Agreements; Defaults . . . 43
Section 6.6 Title Matters. . . . . . . . . . 43
Section 6.7 Compliance with Law; Status of
Properties . . . . . . . . . 44
Section 6.8 Location of Borrower . . . . . . 44
Section 6.9 Material Agreements. . . . . . . 44
Section 6.10 ERISA. . . . . . . . . . . . . . 45
Section 6.11 Financial Statements . . . . . . 45
Section 6.12 Usury. . . . . . . . . . . . . . 45
Section 6.13 Margin Stock . . . . . . . . . . 45
Section 6.14 Investment Company Act . . . . . 45
Section 6.15 Tax Filings. . . . . . . . . . . 46
Section 6.16 Solvency . . . . . . . . . . . . 46
Section 6.17 Full and Accurate Disclosure . . 46
Section 6.18 Opinion Authorization. . . . . . 46
ARTICLE 7
FINANCIAL REPORTING
Section 7.1 Financial Statements . . . . . . 47
Section 7.2 Accounting Principles. . . . . . 48
Section 7.3 Other Information. . . . . . . . 48
Section 7.4 Annual Budget; Modifications;
Progress Reports . . . . . . 48
Section 7.5 Audits . . . . . . . . . . . . . 48
ARTICLE 8
COVENANTS
Section 8.1 Due on Sale and Encumbrance;
Transfers of Interests . . . 48
Section 8.2 Taxes; Charges . . . . . . . . . 50
Section 8.3 Control; Management. . . . . . . 51
Section 8.4 Operation; Maintenance;
Inspection . . . . . . . . . 51
Section 8.5 Taxes on Security. . . . . . . . 51
Section 8.6 Legal Existence; Name, Etc.. . . 51
Section 8.7 Affiliate Transactions . . . . . 52
Section 8.8 Limitation on Other Debt . . . . 52
Section 8.9 Further Assurances . . . . . . . 52
Section 8.10 Estoppel Certificates. . . . . . 52
Section 8.11 Notice of Certain Events . . . . 52
Section 8.12 Indemnification. . . . . . . . . 53
Section 8.13 Limited Purpose Entities . . . . 53
Section 8.14 Conduct of Business
ARTICLE 9
EVENTS OF DEFAULT
Section 9.1 Payments . . . . . . . . . . . . 53
Section 9.2 Insurance. . . . . . . . . . . . 54
Section 9.3 Sale, Encumbrance, Etc.. . . . . 54
Section 9.4 Covenants. . . . . . . . . . . . 54
Section 9.5 Representations and Warranties . 54
Section 9.6 Other Encumbrances . . . . . . . 54
Section 9.7 Involuntary Bankruptcy or Other
Proceeding 54
Section 9.8 Voluntary Petitions, etc.. . . . 55
Section 9.9 Cleanup Contractor Default.. . . 55
Section 9.10 Subsidiary Non-Compliance. . . . 55
Section 10.1 Remedies - Insolvency Events . . 56
Section 10.2 Remedies - Other Events. . . . . 56
Section 10.3 Senior Lender's Right to Perform
the Obligations . . . . . . . 56
Section 10.4 Senior Lender's Right to Complete
Remediation . . . . . . . . . 57
ARTICLE 11
MISCELLANEOUS
Section 11.1 Notices. . . . . . . . . . . . . 57
Section 11.2 Amendments and Waivers . . . . . 59
Section 11.3 Limitation on Interest . . . . . 59
Section 11.4 Invalid Provisions . . . . . . . 59
Section 11.5 Reimbursement of Expenses. . . . 60
Section 11.6 Approvals; Third Parties;
Conditions . . . . . . . . . 60
Section 11.7 Senior Lender Not in Control; No
Partnership/Membership; Not a
Permitted Sponsor; Affiliation
with Subordinated Lender . . 60
Section 11.8 Time of the Essence. . . . . . . 61
Section 11.9 Assignment . . . . . . . . . . . 61
Section 11.10 Renewal, Extension or
Rearrangement . . . . . . . . 62
Section 11.11 Waivers. . . . . . . . . . . . . 62
Section 11.12 Cumulative Rights. . . . . . . . 62
Section 11.13 Singular and Plural. . . . . . . 62
Section 11.14 Phrases. . . . . . . . . . . . . 62
Section 11.15 Exhibits and Schedules . . . . . 63
Section 11.16 Titles of Articles, Sections and
Subsections . . . . . . . . . 63
Section 11.17 Promotional Material . . . . . . 63
Section 11.18 Survival . . . . . . . . . . . . 63
SECTION 11.19 WAIVER OF JURY TRIAL . . . . . . 63
Section 11.20 Waiver of Punitive or
Consequential Damages . . . . 64
Section 11.21 Governing Law. . . . . . . . . . 64
Section 11.22 Entire Agreement . . . . . . . . 64
Section 11.23 Counterparts . . . . . . . . . . 64
Section 11.24 Knowledge of Borrower. . . . . . 64
Exhibit A - Legal Description of Initial Property
Exhibit B -1 Contents of Initial Property Loan Application
Exhibit B -2 Initial Property Criteria
Exhibit C - Additional Property Assignment of Rents and Leases (Form)
Exhibit D - GMP Agreement (Form)
Exhibit E -1 Additional Property Mortgage (Form)
Exhibit E -2 Additional Property Deed of Trust (Form)
Exhibit F - Pledge Agreement (Form)
Exhibit G - Assignment of Contracts and Documents (Form)
Exhibit H - Collateral Assignment of Acquisition Contract and Mortgage
(Form)
Exhibit I - Pre-Acquisition Remediation Seller's Estoppel Certificate
(Form)
Exhibit J - Subsidiary Note (Form)
Exhibit K - Standard Disposition Agreement
Exhibit L - Senior Loan Joinder (Form)
Exhibit M - Environmental Insurance Policy (Form)
Exhibit N - Risk Categories
Exhibit O - Initial Property Approved Advance Conditions
SENIOR LOAN AGREEMENT
This Senior Loan Agreement (this "Agreement") is entered into as of
March 11, 1997 (the "Closing Date"), by and among PPA FUNDING CORP., a
Delaware corporation whose address is Eleven Madison Avenue, New York, New
York 10010 ("Senior Lender"), and DMB/REMEDIATION LLC, a Delaware limited
liability company, whose address is 501 Madison Avenue, 19th Floor, New
York, New York 10022 ("Borrower") and each of the subsidiaries of Borrower
that may now or hereafter execute a joinder attached hereto.
RECITALS
WHEREAS, Borrower, a wholly owned subsidiary of Dames & Moore/Brookhill,
L.L.C., a Delaware limited liability company ("DMB") was formed pursuant to
an Operating Agreement entered into as of the Closing Date for the purpose
of Acquiring (hereinafter defined), Developing (hereinafter defined),
Remediating (hereinafter defined) and disposing of environmentally
distressed commercial real estate properties and mortgages and/or other
security instruments encumbering such properties;
WHEREAS, such Acquisition, Development, Remediation and disposition
shall only be carried out by certain wholly owned subsidiaries of Borrower
to be formed from time to time by Borrower;
WHEREAS, from time to time, each Subsidiary (hereinafter defined) shall
enter into a GMP Agreement (hereinafter defined) with the Cleanup Contractor
(hereinafter defined) pursuant to which the Cleanup Contractor shall perform
on behalf of such Subsidiary certain cleanup or remediation work for the
Properties (hereinafter defined) prior to or subsequent to the acquisition
of fee title to such Properties by the applicable Subsidiary;
WHEREAS, Borrower desires to obtain (for Borrower's Subsidiaries) from
Senior Lender, and Senior Lender desires to make available to such
Subsidiaries (or, where applicable, Borrower), certain financing for the
Acquisition, Development, Remediation and disposition of the Properties and
mortgages and/or security instruments encumbering such properties, as
applicable, up to a maximum aggregate principal amount of $150,000,000 (the
"Maximum Loan Amount");
WHEREAS, the Loan (hereinafter defined) shall be secured by, among
other things, one or more deeds of trust, deeds to secure debt or mortgages
encumbering the Subsidiaries' fee estate in the Properties, or Mortgage
Hypothecation Documents, as applicable;
WHEREAS, to evidence the Loan, simultaneously with the execution of
this Agreement, Borrower shall execute and deliver to Senior Lender the
Senior Note (hereinafter defined);
WHEREAS, each Subsidiary shall execute and deliver a Subsidiary Note
(hereinafter defined) and a Senior Loan Joinder with respect to each Approved
Advance (hereinafter defined) under the Loan allocable to such Subsidiary;
and
WHEREAS, Borrower and Senior Lender desire to set forth the terms and
conditions of the Loan and of each Advance (hereinafter defined) made
hereunder;
NOW, THEREFORE, in consideration of the mutual promises contained
herein and the payment of $10 and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Senior Lender
and Borrower agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
Section 1.1 Certain Definitions. As used herein, the following terms
have the meanings indicated:
(1) "Acquiring" or "Acquisition" means, with respect
to a Property, the acquisition of fee title to such Property by a Subsidiary
pursuant to a Purchase and Sale Agreement, Pre-Acquisition Remediation
Purchase and Sale Agreement or through a Mortgage Acquisition or otherwise in
compliance with the terms of this Agreement.
(2) "Acquisition Cost" means, collectively, the sum of
(a) the purchase price for a Property (including any good faith, security or
similar deposit previously paid by Borrower or a Subsidiary pursuant to the
applicable Purchase and Sale Agreement or agreement for a Mortgage
Acquisition), (b) any items required to be paid in respect of the Property
or Mortgage Acquisition that are necessary for the Subsidiary to obtain good
and insurable title to such Property, free and clear of all liens, charges
and encumbrances but are not required to be paid by the seller of such
property under the applicable Purchase and Sale Agreement or Pre-Acquisition
Remediation Purchase and Sale Agreement, as applicable, including, without
limitation, property taxes, insurance premiums, title insurance premiums
closing adjustments, and/or (in the case of a Mortgage Acquisition) costs of
foreclosure, including legal fees, court costs, costs of advertisement, and
process and filings fees; (c) the amount necessary to establish any reserves
or escrows including reserves or escrows for taxes, capital improvements,
tenant expenses or deferred maintenance, as required by Senior Lender in
accordance with the Mortgages, (d) any items required to be paid in
connection with the filing and/or recording of the Senior Loan Documents
and (e) any other costs, fees and expenses that are necessary in connection
with the acquisition of such Property and the closing of the related
Approved Advance (including any costs associated with any Mortgage
Acquisition) and are normal, reasonable and customary or approved in writing
by Senior Lender in its sole discretion.
(3) "Additional Property" means each Property acquired
or to be acquired by a Subsidiary pursuant to the terms of this Agreement
after the Closing Date, which Properties shall meet the criteria of either
"Category II-Moderate Risk" or "Category III-Low Risk" as more particularly
set forth in Table 1 attached hereto as Exhibit N, in the substantial
majority of cases and are collectively referred to herein as the "Additional
Properties".
(4) "Additional Property Approved Advance" means, the
Approved Advance with respect to any Additional Property.
(5) "Additional Property Assignment of Rents and
Leases" means those certain assignments of rents and leases, executed by a
Subsidiary for the benefit of Senior Lender with respect to the Additional
Properties, as the same may hereafter be amended, supplemented, modified or
restated from time to time, all in the form attached hereto as Exhibit C.
(6) "Additional Property Loan Application" has the
meaning set forth in Section 2.1 hereof.
(7) "Additional Property Mortgage" means those certain
mortgages, deeds of trust, assignment of rents and leases, security agreement
and fixture filing, executed by a Subsidiary in favor of Senior Lender,
encumbering the Additional Properties, as the same may hereafter be amended,
supplemented, modified or restated from time to time, all in the form
attached hereto as Exhibit E-1 or Exhibit E-2 as applicable, but subject to
such modifications or amendments to accommodate requirements of local law,
as reasonably required by Senior Lender based on consultation with local
counsel.
(8) "Advance" means each advance of an Approved
Advance made by Senior Lender to the applicable Subsidiary (or, where
applicable, Borrower) in accordance with the applicable approved Loan
Application, including, without limitation, any advances of the Initial
Property Approved Advance and the Additional Property Approved Advances,
which advances shall not exceed in the aggregate the Maximum Loan Amount
and are collectively referred to herein as "Advances".
(9) "Advance Conditions" has the meaning set forth in
Section 2.1(3) hereof.
(10) "Affiliate" means, with respect to any Person, any
other Person (a) that owns more than 10% of the voting interests in such
Person; or (b) in which such Person owns more than 10% of the voting
interests; or (c) in which more than 10% of the voting interests are owned
by a Person that has a relationship with such Person as described in clause
"a" or "b" above or that otherwise controls, is controlled by, or is under
common control with, such Person. For purposes of this definition, the term
"controls," "is controlled by," or "is under common control with" shall mean
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a person or entity, whether
through the ownership of voting securities, by contract or otherwise.
(11) "Agreement" means this Senior Loan Agreement,
together with all Exhibits and Schedules, as the same may hereafter be
amended, supplemented, modified or restated from time to time.
(12) "Appraisal" means an appraisal, if required by
Senior Lender under this Agreement, conducted with respect to a Property or
the Properties, as applicable, prepared at the sole cost and expense of
Borrower by an Appraiser in accordance with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation and in compliance
with the requirements of Title 4 of the Financial Institutions Reform,
Recovery and Enforcement Act and utilizing customary valuation methods such
as the income, sales/market or cost approaches, as any of the same may be
updated by recertification from time to time by the Appraiser performing such
Appraisal. The costs of any Appraisal may be paid for out of the proceeds
of an Approved Advance so long as such costs are set forth in the applicable
Loan Application or operating budget approved by Senior Lender.
(13) "Appraiser" means any nationally recognized
independent MAI appraiser selected by Borrower and approved by Senior Lender
in its reasonable discretion.
(14) "Approved Advance" means, subject to the terms of
Section 2.1 hereof, with respect to any Property, seventy-five percent (75%)
of the sum of all applicable Project Costs.
(15) "Assignment of Contracts and Documents" means, with
respect to each Property, a collateral assignment of all documents, contracts
and agreements relating directly or indirectly to the development,
renovation, rehabilitation, maintenance or use of any Property including, any
applicable GMP Agreement, executed by the applicable Subsidiary for the
benefit of the Senior Lender (together with the consent of the Cleanup
Contractor thereto), all in the form attached hereto as Exhibit G.
(16) "Assignment of Rents and Leases" means collectively,
the Additional Property Assignments of Rents and Leases and the Initial
Property Assignment of Rents and Leases, executed by a Subsidiary for the
benefit of Senior Lender.
(17) "Bankruptcy Proceeding" means, with respect to any
Person, any bankruptcy, insolvency, reorganization, composition, assignment
for the benefit of creditors, appointment of trustee, or any similar action
or proceeding affecting such Person or any of its property that is either (a)
initiated by such Person or by any Affiliate of such Person or (b) if not
described in clause "a," then not dismissed within ninety (90) days after
commencement.
(18) "Borrower Party" means any and all Subsidiaries
and/or any managing member of Borrower.
(19) "Borrower Release Shortfall Obligation" has the
meaning set forth in Section 2.6(3) hereof.
(20) "Borrower's Certificate" has the meaning set forth
in Exhibit "O" attached hereto.
(21) "Business Day" means any day other than a Saturday
or Sunday and a day on which federally insured depository institutions in
the State of New York are authorized or obligated by law, governmental
decree or executive order to be closed.
(22) "Cleanup Contractor" shall mean Dames & Moore,
Inc., a Delaware corporation having an address at 911 Wilshire Boulevard,
Los Angeles, California 90017. To the extent that Borrower replaces Cleanup
Contractor with a Satisfactory Replacement Cleanup Contractor (as to any one
or more Property(ies)), such Satisfactory Replacement Cleanup Contractor
shall then constitute "Cleanup Contractor" as to the affected Properties.
(23) "Clearance" shall mean, with respect to any
Remediation, the completion of such Remediation in accordance with the
requirements of all applicable Governmental Authorities as set forth in the
applicable Loan Application (and subject to changes in Law), as evidenced by
the issuance of all applicable written confirmations, approvals, clearances,
releases, covenants not to sue, prospective purchaser agreements, and other
similar documentation, including any land use restriction agreements or
covenants required by such Governmental Authority.
(24) "Collateral Assignment of Acquisition Contract and
Mortgage" means with respect to each Property to be acquired after
Remediation is completed, a collateral assignment of the Pre-Acquisition
Remediation Purchase and Sale Agreement and Pre-Acquisition Remediation
Mortgage for such Property, all in the form attached hereto as Exhibit H.
(25) "Contract Rate" means a rate of interest equal to
two hundred and seventy-five (275) basis points in excess of the Libor Rate.
(26) "Damaged Property" has the meaning set forth in
Section 3.2 hereof.
(27) "Damages" means all damages, and includes, without
limitation, punitive damages, liabilities, costs, losses, diminutions in
value, fines, penalties, demands, claims, cost recovery actions, lawsuits,
administrative proceedings, orders, response action costs, compliance
costs, investigation expenses, consultant fees, attorneys' and paralegals'
fees and litigation expenses.
(28) "Debt" means, for any Person, without duplication:
(a) all indebtedness of such Person for borrowed money, for amounts drawn
under a letter of credit, or for the deferred purchase price of property for
which such Person or its assets is liable, (b) all unfunded amounts
under a loan agreement, letter of credit, or other credit facility for which
such Person would be liable, if such amounts were advanced under the credit
facility, (c) all amounts required to be paid by such Person as a guaranteed
payment to partners or a preferred or special dividend, including any
mandatory redemption of shares or interests, (d) all indebtedness guaranteed
by such Person, directly or indirectly, (e) all obligations under leases
that constitute capital leases for which such Person is liable, and (f) all
obligations of such Person under interest rate swaps, caps, floors,
collars and other interest hedge agreements, in each case whether such
Person is liable contingently or otherwise, as obligor, guarantor or
otherwise, or in respect of which obligations such Person otherwise assures
a creditor against loss.
(29) "Debt Service" means the aggregate interest, fixed
principal, and other payments due under the Loan, and on any other
outstanding permitted Debt relating to the Properties, if any, approved by
Senior Lender for the period of time for which calculated, but excluding
the Subordinated Debt and any payments applied to (a) reduction of principal
and (b) escrows or reserves required by Senior Lender in accordance with
the Mortgages.
(30) "Default Rate" means the lesser of (a) the maximum
rate of interest allowed by applicable law, and (b) five percent (5%) per
annum in excess of the Contract Rate.
(31) "Develop" and any derivative thereof such as
"Development" means, as to any Property, to develop, alter, renovate,
operate, and redevelop such Property, including, without limitation, site
work, the filing of any necessary applications for building permits, zoning
approval, and other permits and approvals not related to Remediation, and
any demolition of existing improvements contemplated by the applicable Loan
Application. Costs of Development shall also include reasonable and
customary carrying costs and operating losses incurred during Development.
(32) "DMB" has the meaning set forth in the recitals.
(33) "DMB Affiliated Financing" means unsecured loans
obtained from time to time by Borrower from DMB or any Affiliate of DMB,
provided that:
o Permitted Amount. The amount of any such loan
shall not exceed, and the proceeds of any such
loan shall be applied only in lieu of and
in substitution for, DMB's share of any
additional capital contribution to Borrower
required because costs of Remediation,
Development or budgeted carrying costs exceed
those set forth in the applicable Loan
Application.
o Subordination. The lender providing such loan
shall have unconditionally subordinated all of
its rights with respect to such loan (including
as to timing, right, and priority of payment)
to the prior payment in full of the Loan, all
pursuant to documentation satisfactory to
Senior Lender in its sole and absolute
discretion.
o Loan Status. No Event of Default shall have
occurred and is continuing.
o Compliance. Borrower shall have complied with
all covenants, requirements and conditions of
this Agreement with respect to such DMB
Affiliated Financing.
(34) "DMB Mortgage Proposal" has the meaning set forth
in Section 2.8 hereof.
(35) "Environmental Claims" means, with respect to any
Property, any investigation, notice, violation, demand, allegation, action,
suit, injunction, judgment, order, consent decree, penalty, fine, lien,
proceeding or claim (whether administrative, judicial or private in nature)
arising (a) pursuant to, or in connection with an actual or alleged violation
of, any Environmental Law, by Borrower, any Subsidiary, DMB, or Cleanup
Contractor, (b) in connection with any Hazardous Material or actual or
alleged Hazardous Material Activity, or (c) from any abatement, removal,
remedial, corrective or other response action in connection with a
Hazardous Material, Environmental Law or other order of a Governmental
Authority, including the actions or omissions of Cleanup Contractor,
Borrower, any Subsidiary, and DMB.
(36) "Environmental Indemnitors" means DMB and Borrower.
(37) "Environmental Insurance Policy" shall mean for
each Property one or more insurance policy(ies) (or certificates or other
evidences of insurance, issued pursuant to a master policy, with a specific
amount of coverage reserved for such Property), to be purchased by
Borrower, in substantially the form of Exhibit "M" (or as otherwise approved
by Senior Lender pursuant to a Loan Application), providing insurance
protection against all Latent Environmental Risks of such Property. Any
Environmental Insurance Policy shall contain a waiver of any right
of subrogation against all Borrower Parties, Subordinated Lender and Senior
Lender. Any Environmental Insurance Policy shall identify Senior Lender as
an additional insured and shall be issued in favor of Borrower.
(38) "Environmental Laws" has the meaning set forth in
Article 4.
(39) "Environmental Risks" means any Damages that may
be suffered by a Person as a result of any Environmental Claim relating to a
Property, or any condition or circumstance that may give rise to an
Environmental Claim, or potential Damages to any Person as a result of any
actual or potential Environmental Claim relating to or arising from a
Property. Sums payable to Cleanup Contractor to perform Remediation as
required by a GMP Agreement shall not constitute Environmental Risks.
(40) "Eurodollar Business Day" means any day on which
banks in the City of London are generally open for interbank or foreign
exchange transactions.
(41) "Event of Default" has the meaning set forth in
Article 9.
(42) "Excess Mortgage Taxes" has the meaning set forth in
Section 11.10 hereof.
(43) "Exit Date" means, as to any Property, the date
when Borrower shall have completed all Remediation and Development, and
shall have disposed, of such Property.
(44) "Exit Strategy" has the meaning set forth in Section
2.3(3) hereof.
(45) "Extended Maturity Date" has the meaning set forth
in Section 2.3(3) hereof.
(46) "Extension Notice" has the meaning set forth in
Section 2.3(3) hereof.
(47) "Extension Option" has the meaning set forth in
Section 2.3(3) hereof.
(48) "Force Majeure" means any circumstance beyond
Borrower's reasonable control, provided that, (a) such circumstance cannot
reasonably be cured by the payment of money; (b) Borrower provides Senior
Lender with reasonably prompt notice of such circumstance; and (c) Borrower
endeavors with reasonable diligence and continuity to proceed with the
performance of Borrower's obligations hereunder notwithstanding such
circumstance, to the extent reasonably possible under the circumstances.
(49) "GMP Agreement" means an agreement between Cleanup
Contractor and a Subsidiary, in the form attached hereto as Exhibit D, by
which Cleanup Contractor agrees to Remediate all Environmental Risks to the
extent provided in the Loan Application (as approved by Subordinated Lender)
for the Property affected by such GMP Agreement, which agreement and plan
shall provide for a guaranteed maximum price, a scheduled completion date
(but no liquidated damages for delay), and such other terms and conditions
as Senior Lender may reasonably require.
(50) "Good Faith Guarantor" means Mr. Ronald Bruder, an
individual having an address at 501 Madison Avenue, 18th Floor, New York,
New York 10022 and Dames & Moore, Inc., a Delaware corporation having an
address at 911 Wilshire Boulevard, Los Angeles, California 90017.
(51) "Good Faith Guaranty" means that certain so-called
"Good Faith Guaranty" dated on or about the Closing Date executed by the
Good Faith Guarantors.
(52) "Governmental Approval" means any permit, license,
variance, certificate, consent, letter, Clearance, closure, exemption,
decision or action or approval of a Governmental Authority, having proper
and full jurisdiction to issue such approval.
(53) "Governmental Authority" shall mean any applicable
international, foreign, federal, state, regional, county, local or other
person or body having governmental or quasi-governmental authority or
subdivision thereof.
(54) "Hard Costs" means all costs of on-site physical
activity in connection with Remediation or Development (as applicable),
including, without limitation, excavation, construction, site protection,
plumbing, paving, landscaping, fences, alterations, utilities, lighting,
grading and filling, and other activities on Property, including all labor
and materials in connection therewith.
(55) "Hazardous Materials" has the meaning set forth in
Article 4.
(56) "Hazardous Materials Activity" means any activity,
event or occurrence involving a Hazardous Material, including the
manufacture, possession, presence, use, generation, transportation,
treatment, storage, Hazardous Material Release, threatened Hazardous Material
Release, abatement, removal, remediation, handling of or corrective or
response action to any Hazardous Material.
(57) "Hazardous Materials Release" has the meaning set
forth in Article 4.
(58) "Identifiable Environmental Risks" means all
Environmental Risks or potential Environmental Risks (including the correct
magnitude thereof) that Cleanup Contractor or any comparable environmental
consulting organization of comparable quality and expertise, exercising
normal standards and diligence of professional environmental consulting
specialists, should have detected and should have disclosed in the
environmental assessment submitted with a Loan Application, whether or not
such Environmental Risks or potential Environmental Risks were actually so
identified and disclosed. All Identified Environmental Risks are automatically
also deemed Identifiable Environmental Risks.
(59) "Identified Environmental Risks" means any
Environmental Risks or potential Environmental Risks arising from any
environmental matter or condition affecting a Property, to the extent that
such matter or condition and its Environmental Risks and potential
Environmental Risks, were fully and accurately disclosed, with clarity and
specificity, in a Loan Application as approved by Senior Lender. Any cost
overruns incurred and payable by Cleanup Contractor under a GMP Agreement
shall not constitute Identified Environmental Risks.
(60) "Initial Property" means each Property to be
Acquired and Remediated by the applicable Initial Subsidiary with the
Initial Property Approved Advance on the Closing Date, as more particularly
set forth on Exhibit A attached hereto.
(61) "Initial Property Approved Advance" means the
Approved Advance with respect to the Initial Property.
(62) "Initial Property Assignment of Rents and Leases"
means the assignments of rents and leases, dated as of the Closing Date,
executed by the Initial Subsidiary for the benefit of Senior Lender with
respect to the applicable Initial Property.
(63) "Initial Property Loan Application" means Borrower's
written proposal to invest in Subsidiaries that would Acquire, Remediate
and/or Develop the Initial Property, which Loan Application shall set forth
the information contained in Exhibit B-1 attached hereto, and comply with
the criteria contained in Exhibit B-2 attached hereto. Where the term "Loan
Application" is used with reference to any activities or expenditures of
Borrower or a Subsidiary, or with reference to any Property or any Advance,
such term shall mean a Loan Application that has been approved in writing
by Senior Lender, together with any conditions or modifications required by
Senior Lender as a condition to such approval.
(64) "Initial Property Mortgage" means those certain
mortgages, deeds of trust, deeds to secure debt, assignments of rents and
leases, security agreements and fixture filings, dated as of the Closing
Date, executed by the Initial Subsidiary in favor of Senior Lender,
encumbering the Initial Property and securing the applicable Subsidiary
Note, as the same may hereafter be amended, supplemented, modified or
restated from time to time, all in the form attached hereto as Exhibit E-1
or Exhibit E-2, as applicable, but subject to such modifications or
amendments to accommodate requirements of local law, as reasonably required
by Senior Lender based on consultation with local counsel.
(65) "Initial Subsidiary" means each of the Subsidiaries
which shall acquire the Initial Property.
(66) "Interest Payment Date" has the meaning set forth
in Section 2.3 hereof.
(67) "Latent Environmental Risks" means: (a) any
Environmental Risks that are not Identifiable Environmental Risks; and (b)
any increase in Environmental Risks resulting from a change in Law after
the date of a Loan Application.
(68) "Law" shall mean any applicable treaty, convention,
statute, law, regulation, ordinance, Governmental Approval, injunction,
judgment, order, consent decree or other requirement of any Governmental
Authority.
(69) "Leases" means collectively, all leases, subleases,
underlettings, concession agreements, licenses and other occupancy agreements
which now or hereafter may affect any of the Properties or any portion
thereof and any and all guarantees, amendments, supplements, modifications,
renewals and extensions thereof.
(70) "Leasing Guidelines" means, for each Property, the
leasing guidelines set forth in the applicable Loan Application.
(71) "Libor Rate" means the U.S. Dollar rate (rounded
upward to the nearest one sixteenth of one percent) listed on page 3750
(i.e., the Libor page) of the Telerate News Services (or such other page
as may replace the Telerate Page on that service for purposes of displaying
London interbank offered rates of major banks) for a designated maturity of
one (1) month determined as of 11:00 a.m. London Time on the second (2nd)
full Eurodollar Business Day next preceding the first day of each month
with respect to which interest is payable under the Loan (unless such date
is not a Business Day in which event the next succeeding Eurodollar Business
Day which is also a Business Day will be used). If the Telerate News
Services (a) publishes more than one such Libor Rate, the average of such
rates shall apply, or (b) ceases to publish the Libor Rate, then the Libor
Rate shall be determined from such substitute financial reporting service as
Senior Lender in its reasonable discretion shall determine.
(72) "Lien" means any interest, or claim thereof, in
any Property securing an obligation owed to, or securing a claim by, any
Person other than the owner of such Property, whether such interest is based
on common law, statute or contract, including the lien or security interest
arising from a deed of trust, mortgage, assignment, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease, consignment
or bailment for security purposes. The term "Lien" shall include
reservations, exceptions, encroachments, easements, rights of way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting the Properties.
(73) "Loan" means the loan to be made by Senior Lender
to Borrower under this Agreement up to the Maximum Loan Amount.
(74) "Loan Application" means, collectively, the Initial
Property Loan Application and all Additional Property Loan Applications.
(75) "LTV Notice" has the meaning set forth in Section
2.5 hereof.
(76) "LTV Ratio" means as of any date of determination,
the ratio of (a) the aggregate outstanding principal balance of the Loan
allocable to a particular Property or all of the Properties, as the case may
be, to (b) the market value of a particular Property or all of the
Properties, as the case may be, as determined by an Appraisal conducted by
the Appraiser.
(77) "LTV Test" means a test that shall be satisfied if
the LTV Ratio is not greater than 80%.
(78) "Material Adverse Effect" means a material adverse
effect on any of the following: (a) the use, management, operations, value,
income or marketability of a particular Property, the Properties in the
aggregate or the business, operations, management, properties, assets or
condition (financial or otherwise) of Borrower, any Borrower Party, or
guarantor of the Senior Loan, (b) the ability of Borrower or any Borrower
Party to repay the Loan or otherwise perform its obligations under the
Senior Loan Documents, (c) the expense or scheduling of any Remediation,
Development, compliance with Law or Borrower's compliance with the applicable
Loan Application. Any matter that would or is reasonably likely to increase
the cost of, or delay any Remediation or Development, or limit or impair in
any material respect the usability, value or utility of a Property, or that
would in any material respect impair, limit or delay the effectiveness
of any Governmental Approval, shall be deemed to have a Material Adverse
Effect.
(79) "Material Agreement" means any material written or
oral agreement, contract, commitment or understanding requiring payments,
pledges, or performance executed or assumed by a Subsidiary in connection
with any Property that provides for payments by such Subsidiary over the
term of any such agreement, contract, commitment or understanding in excess
of Fifty Thousand Dollars ($50,000).
(80) "Material Lease" means any Lease that: (a) affects
more than 5,000 rentable square feet and more than ten percent (10%) of the
rentable area of the improvements constituting part of a Property; or (b) is
entered into on a form of lease that is not substantially consistent with
the standard form of lease approved by Senior Lender.
(81) "Maturity Date" means the earlier of (a) December
31, 1999, or (b) any earlier date on which the entire Loan is required to be
paid in full, by acceleration or otherwise, under this Agreement or any of
the other Senior Loan Documents, or (c) simultaneously with the occurrence
of a Payment of Loan Closing or a Borrower Buyout Closing under the Subordinated
Loan Agreement.
(82) "Maximum Loan Amount" has the meaning set forth in
the recitals.
(83) "Mortgage" means collectively, the Initial Property
Mortgages and the Additional Property Mortgages, executed by the Subsidiaries
in favor of Senior Lender, covering the Properties.
(84) "Mortgage Acquisition" means the acquisition of a
mortgage encumbering a Property in lieu of acquiring the Property itself,
and thereafter Remediating such Property and obtaining fee title to such
Property pursuant to the exercise of remedies (or acceptance of a deed
in lieu thereof) pursuant to the applicable acquired mortgage.
(85) "Mortgage Hypothecation Documents" means with
respect to any Mortgage Acquisition, a collateral assignment of the
applicable mortgage and note and all other security documents evidencing,
securing, governing or guaranteeing the indebtedness evidenced by such note,
made by a Subsidiary for the benefit of Senior Lender, all in form and
substance reasonably satisfactory to Senior Lender.
(86) "Net Cash Flow" means, for any period, the amount
by which Operating Revenues exceed the sum of (a) Operating Expenses, (b)
Debt Service and (c) any actual payment into impounds, escrows, or reserves
required by Senior Lender pursuant to the Mortgages, except to the extent
included within the definition of Operating Expenses.
(87) "Net Operating Income" means the amount by which
Operating Revenues exceed Operating Expenses.
(88) "Net Sales Proceeds" means without duplication:
(a) the sum of: (i) the net cash proceeds from all sales and other
dispositions (including sales and dispositions of a Subsidiary's or
Borrower's real property in the ordinary course of business and the proceeds
from any casualty or condemnation affecting real property), (ii) the net
cash proceeds from all sales and other dispositions of property distributed
to Borrower from any entity in which Borrower has an interest, including any
Subsidiary, and (iii) the net cash proceeds from all refinancings of property
by Borrower or any entity in which Borrower has an economic interest,
including any Subsidiary, to the extent distributed to Borrower, minus (b)
any portion thereof used to establish commercially reasonable reserves (or,
in the case of a casualty or condemnation, applied or reserved to pay for
commercially reasonable costs of adjustment, collection, and restoration).
The term "net cash proceeds" means gross proceeds less reasonable and
customary transaction costs. "Net Sales Proceeds" shall include all
principal payments received by Borrower with respect to any note or other
obligation taken back in connection with any sale or other disposition of
property. In calculating "Net Sales Proceeds" any payments payable to Senior
Lender pursuant to this Agreement on account of the particular transaction
or property being sold or refinanced (but not any payments made or payable
on account of DMB Affiliated Financing) shall be subtracted out as a
deduction.
(89) "Operating Expenses" means all reasonable,
customary and necessary expenses of operating the Properties in the ordinary
course of business (or as provided for in a budget or Loan Application
approved by Subordinated Lender) that are paid in cash by any Subsidiary and
that are directly associated with and fairly allocable to the Properties for
the applicable period, including ad valorem real estate taxes and
assessments, insurance premiums, regularly scheduled tax impounds paid to
Senior Lender, maintenance costs, third party management fees and costs not
to exceed four percent (4%) of Operating Revenues, accounting, legal, and
other professional fees, fees relating to environmental and Net Cash Flow
and Net Operating Income audits, capital expenditures approved by Senior
Lender, and other expenses incurred by Senior Lender and reimbursed by
Borrower under this Agreement and the other Senior Loan Documents, deposits
to any reserves required by Senior Lender, wages, salaries, and personnel
expenses, but excluding Debt Service, capital expenditures not approved by
Senior Lender, any of the foregoing expenses which are paid from deposits
to cash reserves previously included as Operating Expenses, any payment or
expense for which Borrower or any Subsidiary was or is to be reimbursed
from proceeds of the Loan or insurance or by any third party, and any
non-cash charges such as depreciation and amortization. Except as
otherwise expressly provided in a Loan Application, any management fee,
construction management fee, remediation fee, leasing fee or other expense
payable to Borrower or to an Affiliate of Borrower shall be included
as an Operating Expense only with Senior Lender's prior written approval.
Operating Expenses shall not include federal, state or local income taxes
or legal and other professional fees unrelated to the operation of the
Properties.
(90) "Operating Revenues" means all cash receipts from
the operation of the Properties or otherwise arising in respect of the
Properties after the date hereof which are properly allocable to the
Properties for the applicable period, including receipts from Leases and
parking agreements, concession fees and charges and other miscellaneous
operating revenues, proceeds from rental or business interruption insurance,
but excluding security deposits and earnest money deposits until they are
forfeited by the depositor, advance rentals until they are earned, proceeds
from a sale or other disposition, all Advances and advances or proceeds of any
other loan which may be permitted by Senior Lender (including the
Subordinated Debt).
(91) "Original Allocated Loan Amount" means with respect
to any Property, the portion of the applicable Approved Advance allocable
to such Property, as determined and adjusted from time to time by Senior
Lender in its sole discretion.
(92) "Original Maturity Date" has the meaning set forth
in Section 2.3(3) hereof.
(93) "Outside Financing" means Borrower's or any
Subsidiary's borrowing of any money (including purchase-money financing from
the seller of any Property and the Subordinated Debt), other than trade
payables, the Loan and DMB Affiliated Financing, which Outside Financing
shall be subject to Senior Lender's approval in its sole discretion.
(94) "Partial Release " means a release of, subject to
and in accordance with, the terms and provisions of Section 2.3(4) hereof,
a Property from the Liens granted to Senior Lender under this Agreement and
the other Senior Loan Documents.
(95) "Permitted Encumbrances" means (a) liens for taxes
or assessments or other governmental charges not yet due and payable or to
the extent that nonpayment thereof is expressly permitted by this Agreement;
and (b) such other Liens listed in the mortgagee title insurance policy
issued in connection with each Property insuring the lien status of the
related Mortgage held by Senior Lender or as shall otherwise be acceptable
to Senior Lender in its sole discretion.
(96) "Permitted Sponsor" means the Subsidiary that owns
the applicable Property or Cleanup Contractor. Neither Borrower nor DMB is
a Permitted Sponsor.
(97) "Person" means any individual, corporation,
partnership, joint venture, association, joint stock company, trust, trustee,
estate, limited liability company, unincorporated organization, real estate
investment trust, government or any agency or political subdivision thereof,
or any other form of entity.
(98) "Pledge Agreement" means, with respect to each
Subsidiary, a senior pledge agreement executed by Borrower, as pledgor, in
favor of Senior Lender of all of Borrower's right, title and interest in and
to such Subsidiary (together with the consent of the applicable Subsidiary
thereto), all in the form attached hereto as Exhibit F.
(99) "Potential Default" means the occurrence of any
event or condition which, with the giving of notice, the passage of time,
or both, would constitute an Event of Default. Where the nonexistence of a
"Potential Default" is a condition to any right or privilege of Borrower,
or obligation or duty of Senior Lender, which right, privilege, obligation
or duty relates solely to a particular Property, a "Potential Default"
shall not be deemed to include any circumstance that would otherwise
constitute a Potential Default, but that: (a) does not relate to the Property
to which such right, privilege, obligation or duty relates; (b) is not
monetary; (c) is being diligently cured by Borrower; and (d) is not material.
(100) "Pre-Acquisition Remediation Purchase and Sale
Agreement " means any agreement between a Subsidiary and a third-party
seller pursuant to which such Subsidiary is contractually obligated to
purchase after the completion of Remediation, and the seller is contractually
obligated to sell, a Property to such Subsidiary.
(101) "Pre-Acquisition Remediation Loan Documents"
means: (a) the Collateral Assignment of Acquisition Contract and Mortgage
and (b) the Pre-Acquisition Remediation Seller's Estoppel Certificate and
Agreement.
(102) "Pre-Acquisition Remediation Mortgage" means, with
respect to a Property to be acquired pursuant to a Pre-Acquisition
Remediation Purchase and Sale Agreement, a mortgage, deed of trust, deed to
secure debt, assignment of rents and leases, security agreement and fixture
filing, executed by the seller of such Property in favor of the applicable
Subsidiary, securing such seller's obligations under the Pre-Acquisition
Remediation Purchase and Sale Agreement.
(103) "Pre-Acquisition Remediation Seller's Estoppel
Certificate and Agreement" means, with respect to any Property to be
acquired pursuant to a Pre-Acquisition Remediation Purchase and Sale
Agreement, an estoppel certificate and agreement in the form of Exhibit I
attached hereto executed by the applicable seller in favor of the Senior
Lender.
(104) "Prepayment Conditions" has the meaning set forth
in Section 2.3(4) hereof.
(105) "Prepayment Notice" has the meaning set forth in
Section 2.3(4) hereof.
(106) "Project Costs" means, with respect to any
Property, the sum of (a) all Acquisition Costs, (b) costs of Remediation
and Development (including, without limitation, all Hard Costs and Soft
Costs and any necessary capital expenditures or capital repairs) and (c)
budgeted carrying costs, approved by the Senior Lender in connection with
the applicable Loan Application or otherwise.
(107) "Properties" means all real property acquired by
the Subsidiaries pursuant to the terms of this Agreement, together with the
improvements, equipment and all related facilities, amenities, fixtures,
and personal property owned by any Subsidiary now or hereafter located
thereon or used in connection therewith, all as more particularly described
in each Mortgage, including, without limitation, the Initial Property and
all Additional Properties, and the term "Property" shall mean and refer to
any of the Properties, individually.
(108) "Purchase and Sale Agreement" means any agreement
between a Subsidiary and a third-party seller pursuant to which such
Subsidiary is contractually obligated to purchase prior to completion of
Remediation, and the seller is contractually obligated to sell, a Property
to such Subsidiary.
(109) "Release" has the meaning set forth in Section
2.3(4) hereof.
(110) "Release Conditions" has the meaning set forth in
Section 2.3(4) hereof.
(111) "Release Parcel" has the meaning set forth in
Section 2.3(4) hereof.
(112) "Release Payment" has the meaning set forth in
Section 2.3(4) hereof.
(113) "Release Shortfall" has the meaning set forth in
Section 2.6 hereof.
(114) "Release Shortfall Interest" has the meaning set
forth in Section 2.6 hereof.
(115) "Remediation" shall mean environmental clean-up and
remediation of a Property by the Cleanup Contractor, acting on behalf of
the applicable Subsidiary, all in compliance with a Loan Application and
Law, including all Environmental Laws. Any reference to "completion" of
Remediation shall mean completion of Remediation to a degree such that all
Clearances contemplated by the applicable Loan Application shall have been
issued. Remediation shall include physical on-site remediation activities
and the making of all necessary filings and applications with Governmental
Authorities in connection therewith, and other activities necessary
or appropriate to obtain Clearances.
(116) "Restoration Threshold" means fifty percent (50%)
of the aggregate total Project Costs (incurred and/or projected to be
incurred, including land acquisition) with respect to the Property of which
the Damaged Property is a part.
(117) "Retained Earnings Reserve" has the meaning set
forth in Section 2.6 hereof.
(118) "Satisfactory Replacement Cleanup Contractor"
means a contractor fully qualified and licensed to perform all Remediation
that was to have been performed by Cleanup Contractor (as to all Properties
or specific Properties only), provided that Senior Lender approved such
replacement pursuant to a Loan Application, or such replacement: (a) is
reasonably satisfactory to Senior Lender; (b) is, in Senior Lender's
reasonable judgment, creditworthy and capable to the degree necessary or
appropriate to reliably perform as Cleanup Contractor; (c) has, in a manner
reasonably satisfactory to Senior Lender, entered into documentation
substantially equivalent to all those previously entered into by Cleanup
Contractor; (d) has at least the same insurance coverage as the Cleanup
Contractor as originally defined in this Agreement; and (e) does not, in
Senior Lender's judgment, impair any coverage provided by the Environmental
Insurance Policy.
(119) "Satisfactory Replacement Guarantor" means a Person
that is, in Senior Lender's sole, absolute and unreviewable discretion, an
adequate and satisfactory replacement for any Good Faith Guarantor (as
initially defined herein), provided that such Person has entered into
documentation similar (in Senior Lender's judgment) to all documentation
creating or evidencing the Good Faith Guaranty previously entered into and
delivered by the Good Faith Guarantor being replaced.
(120) "Senior Loan" means the Loan, as defined in this
Agreement.
(121) "Senior Loan Documents" means: (a) this Agreement,
(b) the Senior Note, (c) the Mortgage, (d) the Assignment of Rents and
Leases, (e) Uniform Commercial Code financing statements covering all
fixtures and personal property with respect to any Property, (f) the Pledge
Agreement, (g) the Assignment of GMP Agreement, (h) the Mortgage Hypothecation
Documents, (i) the Good Faith Guaranty, (j) the Pre-Acquisition Remediation
Loan Documents, (k) such assignments of management agreements, contracts
and other rights as may be reasonably required by Senior Lender, (l) all
other documents evidencing, securing, or guaranteeing the Loan or with
respect to the making of any Advance, or otherwise delivered to Senior
Lender from time to time relative to a request for any Advance or pursuant
to any Loan Application, and (m) all amendments, modifications, renewals,
substitutions and replacements of any of the foregoing.
(122) "Senior Loan Joinder" means the joinder in the form
attached hereto as Exhibit L to be executed by each Subsidiary with respect
to such Subsidiary's obligations to: (a) pay the portion of the Senior Loan
allocable to such Subsidiary's Property or Mortgage Acquisition; and (b)
perform the nonmonetary obligations under the Senior Loan Documents that
relate to such Subsidiary's Property or Mortgage Acquisition.
(123) "Senior Note" means the Senior Promissory Note of
even date herewith, in the stated principal amount of One Hundred Fifty
Million Dollars ($150,000,000), executed by Borrower, and payable to the
order of Senior Lender, in evidence of the Loan.
(124) "Site Assessment" means an environmental engineering
report relating to one or more Property(ies) prepared by an engineer
(including Cleanup Contractor or any of its Affiliates) engaged by Senior
Lender at Borrower's expense, and in a manner satisfactory to Senior Lender,
based upon an investigation relating to and making appropriate inquiries
concerning the existence of Hazardous Materials on or about such
Property(ies), and the past or present discharge, disposal, release or
escape of any such substances, all consistent with good customary and
commercial practice.
(125) "Soft Costs" means all costs of Remediation or
Development, including payment of real estate taxes, insurance premiums and
other carrying costs during the period of any actual Remediation or
Development; consultants' fees; legal fees; "general conditions" charges;
construction management fees; contractor's overhead and profit charges;
marketing expenses; but excluding Hard Costs, costs of acquisition, and
carrying costs except during the period of any actual Remediation or
Development.
(126) "Sponsor" means, as to any Remediation, the "owner"
and "operator" of the Property where such Remediation occurs; the "arranger"
and "transporter" in connection with such Remediation; and the Person
otherwise responsible under Environmental Laws for or with respect to such
Remediation and any related Hazardous Material Activity. Lower-case terms in
quotes used in this definition shall have the meanings set forth in
applicable Environmental Laws.
(127) "Standard Disposition Agreement" means, with respect
to any disposition of a Property, a disposition agreement in the form
attached hereto as Exhibit K or on terms more favorable to the Seller than
such attached form.
(128) "Subordinated Debt" means that certain subordinated
loan in the maximum principal amount of $40,000,000, made by Subordinated
Lender to Borrower pursuant to the Subordinated Loan Agreement.
(129) "Subordinated Lender" means Greenfields Funding
Corp., a Delaware corporation.
(130) "Subordinated Loan Agreement" means that certain
subordinated loan agreement, dated as of March 11, 1997, by and between
Subordinated Lender and Borrower.
(131) "Subordinated Pledge Agreement" means that certain
subordinated pledge agreement, dated as of March 11, 1997, made by Borrower,
as pledgor, in favor of Subordinated Lender of all of Borrower's right,
title and interest in and to each Subsidiary (together with the consent of
the applicable Subsidiary thereto), subject and subordinate to the terms
and provisions of, and the rights and security interest granted to Senior
Lender under the Pledge Agreement.
(132) "Subsidiary" shall mean a corporation, limited
partnership, or limited liability company that, at all times until the Loan
has been repaid in full: (a) is wholly owned by Borrower, which ownership
interest of Borrower shall have been pledged to Senior Lender pursuant to a
perfected security interest; (b) is a single purpose entity whose sole
purpose shall be the Acquisition, Development, Remediation and/or disposition
of a Property (and/or the making of a Mortgage Acquisition) in all cases in
conformity with a Loan Application; (c) has no assets other than the Property
(or as contemplated by a Mortgage Acquisition) and as contemplated by the
related Loan Application; (d) has no liabilities other than (i) its allocable
portion of the Loan (including its obligations under the Senior Loan
Joinder), (ii) as contemplated by the applicable Loan Application and this
Agreement and (iii) routine trade payables; (e) has agreed in writing to
hold in trust all Advances directly or indirectly received by it, to be
applied solely to the purposes for which such Advances were made; (f) has
executed and delivered to Senior Lender a Senior Loan Joinder; (g) is duly
organized, validly existing and in good standing under the laws of one of
the states of the United States of America; (h) is engaged in no other
business whatsoever other than the Acquisition (including Mortgage
Acquisition), Remediation, Development, disposition and/or operation of its
Property consistent with the applicable Loan Application; and (i) is not
itself a partner, member or other constituent or principal of any other
entity.
(133) "Subsidiary Loan Documents" shall mean,
collectively, the (a) Subsidiary Note, (b) Senior Loan Joinder, (c) Mortgage
executed by each Subsidiary securing such Subsidiary's Subsidiary Note and
Senior Loan Joinder, (d) Uniform Commercial Code financing statements
securing any of the Subsidiaries' obligations under the Subsidiary Loan
Documents, and (e) such other Senior Loan Documents as shall be executed by
Subsidiaries from time to time.
(134) "Subsidiary Note" shall mean, with respect to each
Subsidiary, the subsidiary promissory note evidencing and representing each
such Subsidiary's obligation to repay a portion of the Loan, all in the form
attached hereto as Exhibit J.
(135) "Taken Property" has the meaning set forth in
Section 3.3 hereof.
(136) "Third Party Mortgage Proposal" has the meaning
set forth in Section 2.8 hereof.
(137) "Title Insurance Policy" means with respect to
each Property, an ALTA mortgagee's title insurance policy as more
particularly described on Exhibit "O" attached hereto.
(138) "Venture II" has the meaning set forth in Section
2.6(3) hereof.
(139) "Waterfall" has the meaning set forth in the
Subordinated Loan Agreement.
ARTICLE 2
LOAN TERMS
Section 2.1 The Loan; Advances; Not a Revolving Credit Loan. (1)
Subject to the terms and conditions of this Agreement, Senior Lender agrees
to make to the applicable Subsidiaries (or, where applicable, Borrower) the
Loan, up to the Maximum Loan Amount, which Loan shall be funded in Advances
to be made from time to time by the Senior Lender and repaid in accordance
with this Agreement. Advances under the Loan shall only be used to provide
financing for the Acquisition (including a Mortgage Acquisition), Development
and Remediation of Properties (including the funding of any reserves or
escrows required to be maintained by Senior Lender in accordance with the
Mortgages). Subject to Senior Lender's approval of the applicable Loan
Application in its sole discretion, Remediation may be conducted prior to, or
subsequent to, the acquisition of title to a Property by a Subsidiary. All
Advances shall be made in accordance with the terms of this Article 2 and
Senior Lender's disbursement procedures and in no event shall the aggregate
amount of all Advances exceed the Maximum Loan Amount. Notwithstanding
anything to the contrary contained in this Agreement, the Loan is not a
revolving credit loan and Borrower is not entitled to any readvances of any
portion of the Loan which it may prepay pursuant to the provisions of Section
2.3 hereof.
(2) Initial Property Approved Advance and Subsequent Approved
Property Advances. Upon Borrower's satisfaction of all of the terms and
conditions to the Initial Property Approved Advance described in Exhibit "O"
attached hereto, Senior Lender shall make the Initial Property Approved
Advance to the applicable Subsidary as set forth in the approved Loan
Application. The proceeds of such Initial Property Approved Advance shall
be used by such Subsidiary to Acquire (including a Mortgage Acquisition),
Remediate, Develop and dispose of the Initial Property and to fund any
reserves required to be maintained by Senior Lender in its sole discretion.
Disbursements of the Initial Property Approved Advance shall be made subject
to the satisfaction of the terms and conditions of Section 2.3(3) hereof. In
order to obtain an Additional Property Approved Advance, Borrower must
complete and submit to Senior Lender for its review and approval, a loan
application containing all the information required to be provided under the
Initial Property Loan Application (the "Additional Property Loan
Application"). Within thirty (30) days after the submission of a complete
Additional Property Loan Application, together with all other documents,
certificates, information and reports as may be required by Senior Lender (or
its counsel) in its customary legal review and underwriting procedures
(including, without limitation, environmental and engineering inspections,
appraisals, financial audits of rent rolls and net operating income and cash
receipts, market analysis, legal and title review), Senior Lender shall
approve or disapprove, in its sole discretion, such Additional Property Loan
Application. Upon its approval of an Additional Property Loan Application,
Senior Lender shall specify in writing the amount of such Additional Property
Approved Advance. All Additional Property Approved Advances subsequent to the
Closing Date shall be made in accordance with, and upon Borrower's
satisfaction of the same terms and conditions required with respect to the
Initial Property Approved Advance set forth on Exhibit "O" attached hereto,
together with any other additional terms, conditions and documentation that
Senior Lender may require based on any closing conditions set forth in the
Additional Property Loan Application or imposed by Senior Lender in its
reasonable discretion, including, without limitation:
(a) the execution by Borrower or any Subsidiary, as
applicable, of any amendments, modifications or supplements to any
existing Senior Loan Documents with respect to any previously
acquired Properties, so as to address the subsequently acquired
Property(ies);
(b) Borrower shall obtain, as an Administrative Expense (as
defined in the Subordinated Loan Agreement), any endorsements,
continuations or modifications to any existing Title Insurance
Policy with respect to any previously acquired Properties as
Senior Lender or its counsel may reasonably request;
(c) Borrower shall deliver an updated Borrower's Certificate
with respect to any previously acquired Properties;
(d) Borrower shall deliver updates to any existing
certificates, environmental reports, engineering reports, opinions
of counsel, Uniform Commercial Code, title, municipal violation,
tax, judgment and bankruptcy searches, as Senior Lender or its
counsel may reasonably require in order to preserve, confirm or
secure the Liens and security granted to Senior Lender by the
Senior Loan Documents;
(e) Borrower shall deliver evidence satisfactory to Senior
Lender and its counsel that the representations and warranties
contained in this Agreement and the other Senior Loan Documents
are true and correct as of the date of the making of the Additional
Property Approved Advance; provided, however, that with respect to
any Property which has previously been Acquired by a Subsidiary
pursuant to an Approved Advance, to the extent that any
representations and warranties set forth in this Agreement relate
to events or occurrences after the date of such acquisition,
such representations and warranties shall be made without any
qualification relating to Borrower's or the applicable Subsidiary's
knowledge; and
(f) No Potential Default or Event of Default shall have
occurred or exist with respect to any Property, other than any
Potential Default that is cured by the making of such Approved
Advance.
(3) Advances of an Approved Advance. Subject to the
satisfaction of the Advance Conditions, the disbursement of the
first Advance of an Approved Advance shall take place within ten (10)
Business Days of Senior Lender's approval of the applicable Additional
Property Loan Application and shall be made to the applicable Subsidiary.
Senior Lender agrees to reasonably endeavor to disburse additional Advances
of each Approved Advance within a shorter period after such approval. The
initial Advance under the Initial Property Approved Advance shall be made
in accordance with the timing, and in the amount, set forth in the approved
Loan Application. Each Advance of an Approved Advance with respect to the
applicable Property, shall be subject to the satisfaction of the following
terms and conditions (the "Advance Conditions"), provided, that, any waiver
by Senior Lender as to any particular Advance shall not preclude Senior
Lender from requiring full compliance with a particular requirement as to any
subsequent Advances:
(a) As of the date of the request for such Advance and as of
the date of disbursement of such Advance, Borrower's
representations, warranties and covenants in this Agreement shall
be true and correct in all material respects with respect to any
Property; provided, however, that, to the extent that any
representations and warranties set forth in this Agreement relate
to events or occurrences after the date Borrower acquired the
Property in question, such representations and warranties shall
be made without any qualification relating to Borrower's or the
applicable Subsidiary's knowledge.
(b) At least ten (10) Business Days prior to the date of the
disbursement of the Advance, Senior Lender shall have received
copies of all invoices, bills, certifications and other supporting
documentation with respect to the work for which such Advance is
requested.
(c) With respect to any individual Property, a request for
the disbursement of an Advance may not be submitted more frequently
than once every thirty (30) days.
(d) All Remediation or Development work with respect to any
Advances previously made shall have been prosecuted and
accomplished in a timely and good workerlike manner.
(e) Borrower shall have provided Senior Lender with evidence
from the title insurer insuring the applicable Mortgage (including
an update of the Title Insurance Policy) that a search of the
public records does not disclose any additional matters of record
that will create an exception to such Title Policy, including,
without limitation, any conditional sales contracts, judgments,
liens, mechanics liens, outstanding taxes, assessments or water
rents, chattel mortgages, leases, financing documents or title
retention agreements, filed and/or recorded against the Borrower,
the applicable Subsidiary or the Property.
(f) Borrower shall have assigned to Senior Lender, pursuant
to documentation reasonably satisfactory to Senior Lender, any and
all contracts (to the extent that such contracts are assignable)
relating in any way to the Remediation or Development work or the
providing of materials or supplies therefor, including contracts
with any construction managers, architects, designers, consultants,
space planners, engineers and any other third party.
(g) Senior Lender shall have received copies of partial lien
waivers (to the extent of any payments made pursuant to any prior
Advances) from any contractor, subcontractor or material supplier
providing work, labor or services to be paid with any Advance, and
before the final Advance to any contractor, subcontractor or
material supplier, a copy of a general release and final waiver
of lien (upon final payment) to be delivered by such contractor,
subcontractor or material supplier, as the case may be.
(h) Borrower shall provide Senior Lender and its architects,
engineers or other consultants access to all improvements for the
purpose of inspecting the work, at Borrower's expense, to verify
and confirm that the Remediation or Development work has been
completed in a good workerlike manner and that the requirements
of this Agreement have been satisfied; provided, however, that
any costs or expenses incurred in connection with the foregoing
may be paid out of the funds from an Approved Advance so long as
such costs and expenses are set forth in the applicable Loan
Application or operating budget approved by Senior Lender.
(i) All disbursements of an Advance shall be for an amount
that is (i) except with respect to the final Advance of an
Approved Advance, not less than One Hundred Thousand Dollars
($100,000), (ii) equal to the aggregate amounts due and payable
to Borrower's and the applicable Subsidiary's contractors,
subcontractors and material suppliers and licensed architects,
designers and other consultants regarding such Remediation or
Development work (less any applicable holdback(s) pending
completion) that (A) are the subject of the request, (B) have not
been the subject of a previous Advance and (C) do not exceed, in
the aggregate with other Advances theretofore made with respect to
the component(s) of such Remediation or Development work that is
the subject of the request, the then governing budgeted amount
(considered on a line-item by line-item basis) for such
component(s) of the Remediation or Development work taking into
account any contingency funds set forth in the applicable budget
and Loan Application approved by Senior Lender and (iii) not in
excess of the then unadvanced portion of the Loan.
(j) Senior Lender is satisfied in its reasonable discretion
that the monies remaining unadvanced with respect to any Approved
Advance together with any remaining equity funds of Borrower that
are unconditionally and irrevocably funded and committed to
completion of the Remediation or Development work (such as by
having been escrowed in cash with Senior Lender or by a letter of
credit satisfactory to Senior Lender) shall equal or exceed the
amount necessary to complete such Remediation or Development work
and pay the costs for all work, labor or services performed and
materials, supplies or equipment furnished for the Property.
(k) No condemnation of all or a significant part of any
Property or adverse zoning or usage change proceedings shall have
been commenced with respect to any Property, or threatened in
writing to the applicable Subsidiary by any Governmental
Authorities having jurisdiction over such Property.
(l) From and after the date of the last disbursement of an
Advance, there shall have been no material adverse change in the
gross income, cash flow or the business or financial condition of
Borrower or any Subsidiary as determined by Senior Lender in its
reasonable discretion, which material adverse change is, in
Senior Lender's judgment, reasonably likely to impair Borrower's
ability to pay its obligations as they become due.
(m) No Property nor any furnishings, fixtures, equipment and
property of any kind and nature used in connection with or located
upon any Property shall have suffered any significant damage by
fire or other casualty that has not been repaired or is not in good
faith being repaired pursuant to the provisions of the applicable
Mortgage.
Upon the satisfaction of the Advance Conditions, Senior Lender shall disburse
such Advance to the applicable Subsidiary, and if applicable, to the
Borrower, as part of the Loan, increasing the outstanding principal amount
thereof by the amount of such Advance provided that, simultaneously with the
making of such Advance, Borrower shall (i) reimburse Senior Lender for
all reasonable costs and expense (including mortgage taxes, recording
charges, title insurance premiums and attorneys' fees and disbursements)
incurred by Senior Lender in connection with the making of such Advance,
and (ii) deliver to Senior Lender a paid endorsement to the applicable Title
Insurance Policy with respect to the Property for which such Advance is being
made (x) increasing the amount of insurance coverage of such policy by, or
provide such additional coverage in, an amount equal to the amount of such
Advance, and (y) reflecting that no lien, other encumbrance or other matter
that may adversely affect the security interest created by any or all of the
Senior Loan Documents (other than Permitted Encumbrances) shall appear of
record against such Property.
Section 2.2 Interest Rate; Late Charge. (1) The outstanding
principal balance of the Loan (including any amounts added to principal
under the Senior Loan Documents) shall bear interest at the Contract Rate.
Interest shall be computed on the basis of a fraction, the denominator of
which is three hundred sixty (360) and the numerator of which is the actual
number of days elapsed from the date of the initial Advance or the date on
which the immediately preceding payment was due. If Borrower fails to pay any
installment of interest or principal within seven (7) days after the date
on which the same is due, Borrower shall pay to Senior Lender a late charge
on such past-due amount, as liquidated damages and not as a penalty, equal
to the greater of (a) interest at the Default Rate on such past-due amount
from the date when due until paid, or (b) five percent (5%) of such
past-due amount, but not in excess of the maximum amount of interest
allowed by applicable law. While any Event of Default exists, the Loan shall
bear interest at the Default Rate.
Section 2.3 Terms of Payment. The Loan shall be payable as follows:
(1) Interest. Commencing on the first day of the first
full calendar month after the date hereof, Borrower shall pay interest in
arrears on the first day of each month (the "Interest Payment Date") until
the Maturity Date, when all amounts secured by and outstanding under the
Senior Loan Documents shall be paid in full.
(2) Principal Amortization. In addition to the payment of
interest as provided in Section 2.3(1), Borrower shall pay to Senior Lender
on an individual Property by Property basis equal monthly payments in an
amount equal to the higher of (i) the amount sufficient so as to amortize
the outstanding balance of the Loan over a twenty-five (25) year period
commencing on the date hereof, such payments to be recalculated on a monthly
basis to amortize the outstanding balance of the Loan over the remaining
amortization term and (ii) twenty-five percent (25%) of the aggregate Net
Cash Flow of the applicable Properties. Any payments made pursuant to
clause "(ii)" of the preceding sentence shall be applied pro-rata across
all Advances and shall be treated as a prepayment of principal in accordance
with this Section 2.3.
(3) Maturity. On the Maturity Date, Borrower shall pay to
Senior Lender all outstanding principal, accrued and unpaid interest, and
any other amounts due under the Senior Loan Documents. Notwithstanding the
foregoing, with respect to an Approved Advance relating to one or more
specific Property(ies) (other than any specific Property(ies) whose Loan
Applications specified an Exit Date later than December 31, 1999), Borrower
shall have the option (the "Extension Option") to the extend the Maturity
Date of the Loan from December 31, 1999 (the "Original Maturity Date"), to
June 30, 2000 (the "Extended Maturity Date"), upon Borrower's satisfaction
of each of the following conditions as to each such Property:
(i) Borrower and the applicable Subsidiary shall have provided
Senior Lender with written notice on or before August 31, 1999, of
their election to exercise the Extension Option (the "Extension
Notice");
(ii) The Extension Notice shall be accompanied by (A) Borrower's
written explanation of delays incurred in implementing any activities
described in the Loan Application for such Property; (B) Borrower's
written plan for completing the activities described in the Loan
Application for such Property, and disposing of or refinancing the
Property before the Extended Maturity Date (the "Exit Strategy");
and (C) a one-time payment (which payment shall constitute an
extension fee and shall not be applied against principal, interest,
or any other charges payable under the Senior Loan Documents)
equal to One Half of One Percent (1/2%) of the total amount of
the Approved Advance(s) for which an extension of the Maturity
Date is being requested, which payment shall be refunded by Senior
Lender to the extent that Borrower fails to qualify for such
extension;
(iii) Borrower's Exit Strategy shall be commercially
reasonable, feasible, and achievable;
(iv) Effective from and after the Original Maturity Date: (A)
the definition of "Contract Rate" shall be automatically deemed
modified by substituting for the words "two hundred and
seventy-five (275)" the words "three hundred and twenty-five
(325)"; and (B) pursuant to documentation satisfactory to Senior
Lender, all Net Cash Flow of Borrower and all Subsidiaries shall
be paid to Senior Lender to be applied to prepay the Loan until
such time as the entire Loan has been prepaid in full; and
(v) Borrower and all Borrower Parties shall execute and
deliver such documentation as Senior Lender shall reasonably
require, and reimburse all of Senior Lender's reasonable costs
and expenses (including reasonable attorneys' fees) incurred, in
connection with all of the foregoing, all of which shall constitute
a Project Cost.
(4) Prepayment. A. General Prepayments. Subject to the
satisfaction of the following conditions (collectively, the "Prepayment
Conditions"), Borrower may prepay the Loan, in whole or in part, without
the payment of any prepayment premium during the term of the Loan, provided,
however, that any such prepayment shall be accompanied by an amount
representing all accrued interest on the portion of the Loan being prepaid
and other amounts due under the Senior Loan Documents:
(i) Borrower or the applicable Subsidiary provides Senior
Lender with at least twenty (20) days prior written notice (the
"Prepayment Notice") of its intent to prepay the Loan and the
amount of such prepayment (which amount, except in the case of a
final payment of the entire remaining principal balance of
the Loan allocable to a particular Subsidiary, shall not be less
than $1,000,000);
(ii) All prepayments shall be made on a scheduled Interest
Payment Date;
(iii) Partial prepayments of the Loan may only be made in
connection with a Partial Release;
(iv) No Potential Default nor Event of Default has occurred
and is continuing on the date on which Borrower or the applicable
Subsidiary gives Senior Lender the Prepayment Notice and on the
date of prepayment, other than any Potential Default that is
cured by the making of such prepayment;
(v) In the event of a partial prepayment, the LTV Test after
giving effect to such prepayment shall have been satisfied; and
(vi) Borrower or the applicable Subsidiary shall pay for any
and all costs and expenses, including, without limitation,
reasonable attorneys' fees and disbursements, incurred by Senior
Lender in connection with or arising out of any prepayment of the
Loan.
B. Partial Releases. In the event that a Subsidiary desires to
sell or transfer a Property or desires to have any Property released (a
"Partial Release") from the Lien of the Senior Loan Documents (each a
"Release Parcel"), Senior Lender shall execute and deliver to the applicable
Subsidiary, a release or discharge (the "Release") of the applicable Mortgage
and other Senior Loan Documents with respect to such Release Parcel, provided
that, all of the following conditions are satisfied (collectively, the
"Release Conditions"):
(i) Borrower or the applicable Subsidiary provides Senior Lender
with at least twenty (20) days prior written notice (the "Partial
Release Notice") of the proposed release together with all the
material terms and conditions of such Partial Release and copies
of all documents required to be executed in connection with
such proposed release;
(ii) Senior Lender shall have approved such Partial Release
or other disposition of the Release Parcel as determined by Senior
Lender in the exercise of its reasonable judgment; provided,
however, that Senior Lender's approval shall not be withheld if
(w) the Standard Disposition Agreement is used in connection
with such Partial Release (or the terms of sale are more favorable
to the seller), (x) such disposition or refinancing shall be
entered into at arms-length, (y) if a refinancing, the same shall
be entered into on terms comparable to those which would be entered
into between unaffiliated parties for similar properties in the
same market area and (z) the sale price of the Release Parcel is
at or above the bottom of the price range set forth in the
applicable Loan Application.
(iii) Subject to the provisions of Section 2.6 hereof,
simultaneously with the delivery of the Release, Borrower or the
applicable Subsidiary pays to Senior Lender, in immediately
available funds, an amount (the "Release Payment") equal
to the outstanding principal portion of the Loan allocable to
such Release Parcel together with all accrued interest on such
portion of the Loan;
(iv) No Event of Default has occurred and is continuing on
the date on which Borrower or the applicable Subsidiary gives
Senior Lender the Partial Release Notice and on the date of
delivery of the Release;
(v) Borrower and the applicable Subsidiary shall execute and
deliver such other instruments, certificates, opinions of counsel
and documentation as Senior Lender shall reasonably request in
order to preserve, confirm or secure the Liens and security granted
to Senior Lender by the Senior Loan Documents, including, without
limitation, any amendments, modifications or supplements to
any of the Senior Loan Documents and endorsements to the existing
Title Insurance Policy; and
(vi) Borrower and the applicable Subsidiary shall pay for
any and all costs and expenses incurred in connection with any
proposed release, including, without limitation, reasonable
attorneys' fees and disbursements and all title insurance premiums
for any endorsements to any existing Title Insurance Policy
required by Senior Lender in connection with such proposed release.
(5) Application of Payments. All payments received by
Senior Lender under the Senior Loan Documents shall be applied on an
individual Property basis: first, to any fees and expenses due to Senior
Lender under the Senior Loan Documents; second, to any Default Rate
interest or late charges; third, to accrued and unpaid interest; and fourth,
to the principal sum and other amounts due under the Senior Loan Documents.
Any Release Payments received by Senior Lender shall be applied as provided
in the preceding sentence to reduce the portion of the Loan allocable to the
applicable Release Parcel.
Section 2.4 Security. The Loan and all amounts secured by and
outstanding under the Senior Loan Documents shall be secured by the Mortgages
creating a first lien on each Property, the Assignment of Rents and Leases
and the other Senior Loan Documents. With respect to each Property, the
related Mortgage and Assignment of Rents and Leases shall contain provisions
which will have the effect of cross-defaulting such Property with all the other
Properties Acquired pursuant to this Agreement.
Section 2.5 LTV Test. If, at any time during the term of the Loan,
Borrower receives written notice (the "LTV Notice") from Senior Lender that
the LTV Test has not been satisfied, Borrower shall, commencing with the
second (2nd) Business Day after Borrower receives the LTV Notice and on the
Business Day immediately preceding the last Business Day of each calendar
month thereafter, pay all Net Cash Flow from the Properties to Senior Lender
to reduce the outstanding principal balance of the Loan pro rata until such
time as the LTV Ratio is less than or equal to 75%.
Section 2.6 Retained Earnings Reserve.
(1) Required Deposits. Borrower shall deposit with Senior Lender,
simultaneously with the making of any distributions to DMB on account of
Net Property Profit under the Waterfall, an amount equal to fifty percent
(50%) of all such amounts distributable to DMB on account of Net Property
Profit under the Waterfall (all such deposits required to be made by
Borrower, together with interest accrued thereon in accordance with this
Agreement, the "Retained Earnings Reserve"). Borrower hereby pledges to
Senior Lender any and all monies now or hereafter deposited in the Retained
Earnings Reserve as additional security for the Loan. The Retained Earnings
Reserve shall be held in an interest-bearing account in Senior Lender's
name at a financial institution selected by Borrower and approved by Senior
Lender in its reasonable discretion, provided that such financial institution
shall have a rating of at least "AA" (or the equivalent thereof) by a
nationally recognized statistical rating agency with respect to its
long-term unsecured debt obligations.
(2) Investment of Retained Earnings Reserve. All funds or moneys
in the Retained Earnings Reserve, for so long as no Event of Default shall
have occurred and be continuing and no Release Shortfall shall exist, shall
be invested in (a) direct obligations of, or obligations fully guaranteed
as to payment of principal and interest by, (i) the United States or any
agency or instrumentality thereof provided such obligations are backed by
the full faith and credit of the United States of America or (ii) the
Federal National Mortgage Association, the Federal Home Loan Mortgage
Corporation, the Federal Farm Credit System or the Federal Home Loan Banks,
or (b) other comparable obligations or securities as selected by Borrower
and approved by Senior Lender in its reasonable discretion. All earnings
or interest on the Retained Earnings Reserve shall be and become part of
such Retained Earnings Reserve.
(3) Payment of Release Shortfall. If the Net Sales Proceeds with
respect to any Property are less than the required Release Payment (a
"Release Shortfall"), then Borrower shall remain obligated to pay fifty
percent (50%) of such Release Shortfall (the "Borrower Release Shortfall
Obligation") and Senior Lender shall withdraw and apply any funds or moneys
on deposit in the Retained Earnings Reserve toward the Borrower Release
Shortfall Obligation. The outstanding balance of the Release Shortfall
(after the application by Senior Lender of any funds or moneys on deposit
in the Retained Earnings Reserve and any advances made by Subordinated
Lender on account of the Release Shortfall) shall bear interest (the
"Release Shortfall Interest") at an annual rate equal to four hundred and
seventy-five (475) basis points in excess of the Libor Rate. The Release
Shortfall Interest shall be computed on the basis of a fraction, the
denominator of which is three hundred sixty (360) and the numerator of
which is the actual number of days elapsed from the date such Release
Shortfall was due and payable. If after application of the amounts on
deposit in the Retained Earnings Reserve, the Borrower Release Shortfall
Obligation has still not been paid, then Senior Lender may satisfy the
balance due on account of the Borrower Release Shortfall Obligation by,
(x) in the event that DMB and an Affiliate of Senior Lender have formed a
joint venture ("Venture II") for the acquisition, development, remediation
and disposition of environmentally distressed properties similar to the
transactions contemplated by Borrower under this Agreement pursuant to a
letter agreement entered into between DMB or its Affiliate and Senior
Lender or its Affiliate, taking title to DMB's or its Affiliate's ownership
interest in Venture II, with such ownership interest to be valued at the
lesser of DMB's or its Affiliate's cost or the fair market value of such
ownership interest as determined by an independent third party at such
time, or (y) in the event that such ownership interest is insufficient to
satisfy the remaining Borrower Release Shortfall Obligation or if Venture
II has not been formed, Borrower's paying to Senior Lender all amounts that
DMB is entitled to receive under the Waterfall (as defined in the
Subordinated Loan Agreement), or that would otherwise be deposited in the
Retained Earnings Reserve under this Agreement, until such time as the
Borrower Release Shortfall Obligation has been paid. Notwithstanding
anything to the contrary contained in this paragraph, the application by
Senior Lender of any funds or moneys toward the Release shall not relieve
Borrower of its obligation to fund the Retained Earnings Reserve.
Notwithstanding anything to the contrary contained in this paragraph,
Borrower, DMB or any of their Affiliates shall have the right to pay in full
any unpaid Release Shortfall (together with any accrued and unpaid Release
Shortfall Interest) at any time during the term of the Loan.
(4) Retained Earnings Reserve as Loan Security. Upon the
occurrence of an Event of Default, Senior Lender may apply any sums then in
the Retained Earnings Reserve to the payment of the Loan in any order in
its sole discretion. Until expended or applied as above provided, the
Retained Earnings Reserve shall constitute additional security for the Loan.
The Retained Earnings Reserve shall not constitute a trust fund and may be
commingled with any other monies held by Senior Lender with respect to any
of the Properties.
(5) Additional Payments on Account of Release Shortfall. At the
same time that Borrower actually makes any payment on account of Borrower's
Release Shortfall Obligation, or Senior Lender actually applies any funds
in the Retained Earnings Reserve on account of Borrower's Release Shortfall
Obligation, it is understood that Subordinated Lender shall contribute
toward the amount of the Release Shortfall an amount equal to the amount so
actually paid or actually applied on account of such Release Shortfall.
Section 2.7 Pool Acquisitions. A Loan Application may relate to
more than one Property. In that case, Senior Lender shall approve or
disapprove the entire Loan Application and shall not approve or disapprove
individual Properties as set forth in the Loan Application. To the extent
that Senior Lender approves a Loan Application, each Property identified
therein shall constitute a Property for all purposes of this Agreement, and
shall be acquired, Remediated, Developed, and disposed of by a separate
Subsidiary (and treated as an entirely separate Property), with separate
Advances consistent with a separate budget, except to the extent that the
Loan Application for any such multi-Property transaction provides otherwise.
Section 2.8 Delayed Mortgage Acquisitions. If (a) pursuant to a Loan
Application, a Subsidiary undertakes any Mortgage Acquisition and (b) because
of litigation or bankruptcy, such Subsidiary's activities with respect to
such Mortgage Acquisition are delayed by more than three (3) months beyond
the timeline provided for in the Loan Application, then Borrower shall,
within thirty (30) days thereafter, present to Senior Lender a complete,
detailed, specific and reasonable plan for termination and disposition of
the Mortgage Acquisition. If, after such thirty (30) day period, in Senior
Lender's sole and absolute discretion Borrower's proposed plan has not been
submitted or is not satisfactory and there still has been no disposition
pursuant to the Loan Application, then Senior Lender shall have the right
to require Borrower within thirty (30) days after Senior Lender's written
request, to (i) discontinue and terminate such Mortgage Acquisition and
dispose of such Mortgage Acquisition by sale to an outside third-party
purchaser, but not to a purchaser that is an Affiliate of Senior Lender,
in accordance with the terms and conditions of this Section 2.8, and (ii)
require Borrower to repay all Advances made for such Mortgage Acquisition,
such repayment to be in accordance with the terms and provisions of Section
2.3(4) hereof.
Within thirty (30) days after Senior Lender notifies Borrower
and DMB that Borrower's plan for disposition of the Mortgage Acquisition
is not satisfactory, DMB shall submit a proposal in writing (together with
the proposed purchase price and other material economic terms) to Senior
Lender for the purchase of such Mortgage Acquisition from the applicable
Subsidiary (the "DMB Mortgage Proposal"). Upon receipt of the DMB Mortgage
Proposal, Senior Lender shall have the option to either (A) approve such
DMB Mortgage Proposal, in which event Borrower shall sell such Mortgage
Acquisition as set forth in the DMB Mortgage Proposal, which sale shall be
consummated within thirty (30) days after Senior Lender notifies Borrower
and DMB of its approval of the DMB Mortgage Proposal, or (B) require that such
offer be kept open for a period of ninety (90) days after the date when
Senior Lender receives such DMB Mortgage Proposal and during such period
Borrower shall use its best efforts to market (in such manner as Senior
Lender shall direct) the Mortgage Acquisition in order to obtain a higher
purchase price (and more attractive terms and conditions) for such Mortgage
Acquisition than the price set forth in the DMB Mortgage Proposal. If,
during such ninety-day period, an offer is obtained from a third-party
purchaser (the "Third Party Mortgage Proposal") for such Mortgage Acquisition
on terms that are identical to, or in Senior Lender's judgment more favorable
than the DMB Mortgage Proposal, which Third Party Mortgage Proposal is approved
by Senior Lender, then Borrower shall dispose of such Mortgage Acquisition
to such third-party purchaser pursuant to the terms of such Third Party
Mortgage Proposal within thirty (30) days of receipt of Senior Lender's
notice of approval of the Third Party Mortgage Proposal.
Section 2.9 Subsidiary Structuring Conditions. As a condition to
any and all obligations of Senior Lender under this Agreement, each
Subsidiary shall at all times:
(1) Loan Obligations. Perform and comply with all obligations
under this Agreement applicable to it;
(2) Transfer Funds. By the close of the Business Day following
receipt, transfer to Borrower all Net Sales Proceeds. On the Business Day
before every Payment Date each Subsidiary shall distribute to Borrower all
other Borrower Cash (as defined in the Subordinated Loan Agreement) held by
such Subsidiary, except the Subsidiary Cash Reserve (as defined in the
Subordinated Loan Agreement);
(3) Structure. Comply with the definition of "Subsidiary" set
forth in this Agreement;
(4) Legally Separate. Remain a legally separate entity,
independent of Borrower. Without limiting the generality of the foregoing,
each Subsidiary shall take such action as shall be reasonably required in
order that:
(a) Shared Expenses. No Subsidiary shall incur any material
indirect or overhead expenses for items shared between such Subsidiary and
other Subsidiaries and/or Borrower, other than shared items of expenses
such as legal, auditing and other professional services, all of which shall
be allocated to the extent practical on the basis of actual use or the
value of services rendered, and otherwise on a basis reasonably related to
the actual use or the value of services rendered.
(b) Accounting and Management of Liabilities. Each Subsidiary
shall account for and manage its liabilities separately from those of
Borrower and every other Subsidiary, including payment of all payroll and
administrative expenses and taxes (other than taxes that are determined or
required to be determined on a consolidated or combined basis) from
its own as sets.
(c) Corporate Records. Each Subsidiary shall maintain
corporate records, books of account and stationery separate from those of
Borrower and every other Subsidiary.
(d) Assets. Each Subsidiary's assets shall be maintained in
a manner that facilitates their identification and segregation from those
of Borrower or any other Subsidiary.
(e) Transaction Terms. Any transaction between a Subsidiary
and Borrower or any other Subsidiary shall be the type of transaction that
would be entered into by a prudent Person in the position of such Subsidiary
and shall be on terms that are at least as favorable as may be obtained
from a Person that is not Borrower or any other Subsidiary (it being understood
and agreed that the transactions contemplated in the Senior Loan Documents
and approved by the Senior Lender meet the requirements of this clause).
(f) Debts. Except to the extent specified by this Agreement
and to the extent required by law, no Subsidiary shall be, nor shall it hold
itself out to be, responsible for the debts of Borrower or any other
Subsidiary.
(g) Management. No Subsidiary shall participate in
remediation, disposition, or other activity related to the management of
any other entity;
(h) Collateral. No Subsidiary shall provide any of its assets
as collateral for the benefit of any other Subsidiary or Borrower; nor shall
any Subsidiary allow any lien to be taken on any of its assets for the
benefit of any other Subsidiary or Borrower.
(5) Independent Director. Have at least one independent director,
whose affirmative vote shall be required for the Subsidiary to voluntarily
commence any Bankruptcy Proceeding;
(6) Use of Funds. Use its funds solely for its own corporate
purposes, and use only its own funds (including contributed capital and loan
proceeds) for such purposes, and maintain its own separate bank accounts
and employment relationships;
(7) Dealings With Affiliates. Deal with Borrower, DMB and
Borrower's Affiliates solely on an arm's length basis, and provide services
to and obtain services from (and transact any other business with) any such
Affiliates based only on written agreements in its own name; and
(8) Subsidiary Cash Reserve. Maintain a cash reserve equal to
the Subsidiary Cash Reserve (as defined in the Subordinated Loan Agreement).
ARTICLE 3
INSURANCE, CONDEMNATION, AND IMPOUNDS
Section 3.1 Insurance. Borrower shall maintain insurance with
respect to all the Properties as follows (except to the extent that Borrower
has demonstrated, to Senior Lender's satisfaction, that any such insurance
is not reasonably obtainable in the market upon commercially reasonable terms):
(1) Casualty; Business Interruption. Borrower shall keep
each Property insured against damage by fire and the other hazards covered
by a standard extended coverage and all-risk insurance policy for the greater
of (a) the full insurable value thereof or (b) the then full replacement
cost of all improvements and equipment located thereon (without reduction for
depreciation or co-insurance), and shall maintain such other casualty
insurance as reasonably required by Senior Lender. Borrower shall keep
each Property insured against loss by flood if the Property is located in
an area identified by the Federal Emergency Management Agency as an area
having special flood hazards and in which flood insurance has been made
available under the National Flood Insurance Act of 1968 (and any successor
act thereto) in an amount at least equal to the lesser of (i) the maximum
amount of the Loan or (ii) the maximum limit of coverage available under said
Act. Borrower shall maintain use and occupancy insurance covering, as
applicable, rental income or business interruption, with coverage in an
amount not less than twelve (12) months anticipated gross rental income or
gross business earnings, as applicable in each case, attributable to each
Property. No Borrower Party shall maintain any separate or additional
insurance which is contributing in the event of loss unless it is properly
endorsed and otherwise satisfactory to Senior Lender in all respects. The
proceeds of insurance paid on account of any damage or destruction to any
Property shall be paid to Senior Lender to be applied as provided in Section
3.2.
(2) Liability. Borrower shall maintain (a) commercial
general liability insurance with respect to each Property providing for
limits of liability of not less than $5,000,000 for both injury to or death
of a person and for property damage per occurrence, and (b) other liability
insurance as reasonably required by Senior Lender including, without
limitation, the Environmental Insurance Policy.
(3) Form and Quality. All insurance policies shall be
endorsed in form and substance acceptable to Senior Lender and shall name
Senior Lender as an additional insured, loss payee or mortgagee thereunder,
as its interest may appear, with loss payable to Senior Lender, without
contribution, under a standard New York (or local equivalent) mortgagee
clause. All such insurance policies and endorsements shall be fully paid
for and contain such provisions and expiration dates and be in such form
and issued by such insurance companies licensed to do business in the State
of New York, with a rating of "A-IX" or better as established by Best's
Rating Guide and "A" or better as established by Standard & Poor's Ratings
Services (or an equivalent rating approved in writing by Senior Lender).
Each policy shall provide that such policy may not be cancelled or materially
changed except upon thirty (30) days' prior written notice of intention of
non-renewal, cancellation or material change to Senior Lender and that no
act or thing done by Borrower shall invalidate any policy as against Senior
Lender. If Borrower fails to maintain insurance in compliance with this
Section 3.1, Senior Lender may obtain such insurance and pay the premium
therefor and Borrower shall, on demand, reimburse Senior Lender for all
expenses incurred in connection therewith. Borrower shall assign the
policies or proofs of insurance to Senior Lender, in such manner and form
that Senior Lender and its successors and assigns shall at all times have
and hold the same as security for the payment of the Loan. Borrower shall
deliver copies of all original policies certified to Senior Lender by the
insurance company or authorized agent as being true copies, together with
the endorsements required hereunder. The proceeds of insurance policies
coming into the possession of Senior Lender shall not be deemed trust funds,
and Senior Lender shall be entitled to apply such proceeds as herein provided.
(4) Adjustments. Borrower shall give immediate written notice
of any loss to the insurance carrier and to Senior Lender. Borrower hereby
irrevocably authorizes and empowers Senior Lender, as attorney-in-fact for
Borrower coupled with an interest, to make proof of loss, to adjust and
compromise any claim under insurance policies, to appear in and prosecute
any action arising from such insurance policies, to collect and receive
insurance proceeds, and to deduct therefrom Senior Lender's expenses
incurred in the collection of such proceeds. Notwithstanding anything to
the contrary contained in this paragraph, in the event of an insured casualty
that does not exceed the Restoration Threshold for the applicable Property,
may settle and adjust any insurance claim in connection therewith with the
prior consent of Senior Lender (not to be unreasonably withheld or delayed)
and may agree with the insurance company or insurance companies, as
applicable, on the amount to be paid upon such loss provided that, such
adjustment is carried out in a competent and timely manner. In such case,
Borrower is authorized to collect and receipt for any such insurance
proceeds. In the event that an insured casualty shall exceed the Restoration
Threshold for the applicable Property, then and in that event, Senior Lender
shall have the right to settle and adjust any claim without the consent of
Borrower and agree with the insurance company or insurance companies on the
amount to be paid on such loss and the proceeds of any such policy shall be
due and payable solely to Senior Lender and held by Senior Lender in
accordance with the terms of this Agreement. Nothing contained in this
Section 3.1(4), however, shall require Senior Lender to incur any expense or
take any action hereunder.
Section 3.2 Use and Application of Insurance Proceeds. Senior Lender
shall apply insurance proceeds to costs of restoring any Property or portion
thereof damaged by a casualty (a "Damaged Property") or the Loan as follows:
(1) if the loss is less than or equal to the Restoration
Threshold, Senior Lender shall apply the insurance proceeds to restoration
provided (a) no Event of Default or Potential Default exists, and (b)
Borrower or the applicable Subsidiary promptly commences and is diligently
pursuing restoration of the Damaged Property;
(2) if the loss exceeds the Restoration Threshold, Senior
Lender shall apply the insurance proceeds to restoration, provided that,
the following conditions are satisfied at all times during such restoration:
(a) no Event of Default or Potential Default exists; (b) Senior Lender
determines that there are sufficient funds available to restore and repair
the Damaged Property to a condition and value at least equal and of
substantially the same character as prior to such casualty and consistent
with the applicable Loan Application; (c) Senior Lender determines that
the Net Operating Income (including the proceeds of business or rental
interruption insurance as to which the carrier has acknowledged coverage)
of the Damaged Property during restoration will be sufficient to pay Debt
Service; (d) Senior Lender determines not later than three (3) months
after the loss or casualty, that the restoration and repair of the Damaged
Property to the condition described in the preceding clause "b" hereof,
will be completed within six (6) months after the date of such loss or
casualty and in any event at least one hundred eighty (180) days prior to the
Maturity Date; and (e) Borrower promptly commences and is diligently
pursuing restoration of the Damaged Property;
(3) if the conditions set forth above are not satisfied or
the loss exceeds the maximum amount specified in Subsection 3.2(2) above,
in Senior Lender's sole discretion, Senior Lender may apply any insurance
proceeds it may receive to the payment of the applicable Original Allocated
Loan Amount or allow all or a portion of such proceeds to be used for the
restoration of the Damaged Property; and
(4) Insurance proceeds applied to restoration will be
disbursed on receipt of satisfactory plans and specifications, contracts
and subcontracts, schedules, budgets, lien waivers and architects'
certificates, and otherwise in accordance with Senior Lender's then current
construction or restoration lending requirements as determined and applied
by Senior Lender in its reasonable discretion.
Section 3.3 Condemnation Awards. Borrower shall immediately notify
Senior Lender of the institution of any proceeding for the condemnation or
other taking of all or any portion of any Property (the "Taken Property").
Senior Lender may participate in any such proceeding and Borrower will
deliver to Senior Lender all instruments necessary or required by Senior
Lender to permit such participation. Without Senior Lender's prior
reasonable consent, No Borrower Party (1) shall agree to any compensation or
award, or (2) shall take any action or fail to take any action which would
cause the compensation to be determined. All awards and compensation for
the taking or purchase in lieu of condemnation of the Taken Property are hereby
assigned to and shall be paid to Senior Lender. Borrower authorizes Senior
Lender to collect and receive such awards and compensation, to give proper
receipts and acquittances therefor, and in Senior Lender's sole discretion
to apply the same toward the payment of the Loan, notwithstanding that the
Loan may not then be due and payable, or to the restoration of the Taken
Property; provided, however, that if Borrower requests that such proceeds be
used for either (a) non-structural site improvements (such as landscape,
driveway, walkway and parking area repairs) required to be made as a result
of such condemnation or (b) to restore, replace or rebuild the Taken
Property to the extent practicable to be of at least equal value and of
substantially the same character as prior to such condemnation or taking and
consistent with the Loan Application, all to be effected in accordance with
applicable law, then, Senior Lender shall apply the award to such restoration
in accordance with the disbursement procedures applicable to insurance
proceeds set forth in Section 3.2 above so long as (i) there exists no
Potential Default or Event of Default, (ii) such award and compensation
does not exceed the Restoration Threshold, and (iii) such restoration or
replacement shall be completed within six (6) months after such condemnation
or taking and in any event at least one hundred eighty (180) days prior to
the Maturity Date. Borrower upon request by Senior Lender, shall execute
all instruments requested to confirm the assignment of the awards and
compensation to Senior Lender, free and clear of all liens, charges or
encumbrances.
Section 3.4 Impounds. Borrower shall deposit with Senior Lender,
monthly, one-twelfth (1/12th) of the annual charges for ground or other rent,
if any, and real estate taxes, assessments and similar charges relating to
each Property. At or before the Initial Advance or an Advance for an
Additional Property, Borrower shall deposit with Senior Lender a sum of money
which, together with the monthly installments, will be sufficient to make
each of such payments, with respect to the Initial Property or such
Additional Properties, as the case may be, at least thirty (30) days prior
to the date any delinquency or penalty becomes due with respect to such
payments. Deposits shall be made on the basis of Senior Lender's estimate
from time to time of the charges for the current year (after giving effect to
any reassessment or, at Senior Lender's election, on the basis of the
charges for the prior year, with adjustments when the charges are fixed for
the then current year). All funds so deposited shall be held by Senior
Lender, without interest, and may not be commingled with Senior Lender's
general funds, excluding, however, any other funds held by Senior Lender
with respect to any of the other Properties. Borrower hereby grants to
Senior Lender a security interest in all funds so deposited with Senior
Lender for the purpose of securing the Loan. While an Event of Default
exists, the funds deposited may be applied in payment of the charges for
which such funds have been deposited, or to the payment of the Loan or any
other charges affecting the security of Senior Lender, as Senior Lender may
elect, but no such application shall be deemed to have been made by operation
of law or otherwise until actually made by Senior Lender. Borrower shall
furnish to Senior Lender bills for the charges for which such deposits are
required at least thirty (30) days prior to the date on which the charges
first become payable. Provided sufficient funds are available and allocated
to pay such charges, Senior Lender shall pay same, and shall as instructed
by Borrower take advantage of any available discounts for early payment.
If at any time the amount on deposit with Senior Lender, together with
amounts to be deposited by Borrower or any applicable Subsidiary before such
charges are payable, is insufficient to pay such charges, Borrower shall
deposit any deficiency with Senior Lender immediately upon demand. Senior
Lender shall pay such charges when the amount on deposit with Senior Lender
is sufficient to pay such charges and Senior Lender has received a bill
for such charges.
ARTICLE 4
ENVIRONMENTAL MATTERS
Section 4.1 Certain Definitions. As used herein, the following
terms have the meanings indicated:
(1) "Environmental Laws" means any current or future Law
pertaining to (a) the protection of health, safety and the indoor or outdoor
environment, (b) the conservation, management or use of natural resources
and wildlife, (c) the protection or use of surface water and groundwater,
(d) the management, manufacture, possession, presence, use, generation,
transportation, treatment, storage, disposal, Hazardous Materials Release,
threatened Hazardous Materials Release, abatement, removal, Remediation or
handling of, or exposure to, any Hazardous Material or (e) pollution.
"Environmental Law" includes, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C.
Section 9601 et seq., Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976 and Hazardous and Solid Waste
Amendments of 1984, 42 U.S.C. Section 6901 et seq., Federal Watern Pollution
Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. Section
1251 et seq., Clean Air Act of 1966, as amended, 42 U.S.C. Sectiion 7401 et
seq., Toxic Substances Control Act of 1976, 15 U.S.C. Section 2601 et seq.,
Hazardous Materials Transportation Act, 49 U.S.C. App. Section 1801 et seq.,
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. Section
651 et seq., Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.,
Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C.
Section 11001 et seq., National Environmental Policy Act of 1969, 42 U.S.C.
Section 4321 et seq., Safe Drinking Water Act of 1974, as amended, 42 U.S.C.
Section 300(f) et seq., any similar, implementing or successor law, and any
amendment, rule, regulation, order or directive issued or enacted by any
applicable Governmental Authority.
(2) "Hazardous Materials" means any substance, chemical,
compound, product, solid, gas, liquid, waste, byproduct, pollutant,
contaminant or material that is hazardous or toxic, and includes (a)
asbestos, polychlorinated biphenyls and petroleum (including crude oil or any
fraction thereof) and (b) any such material classified or regulated as
"hazardous" or "toxic" pursuant to any Environmental Law.
(3) "Hazardous Materials Release" means any release, spill,
emission, leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or outdoor environment of
Hazardous Materials (including, without limitation, the movement of
Hazardous Materials through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata).
Section 4.2 Representations and Warranties on Environmental Matters.
To Borrower's knowledge and except as set forth in the applicable Site
Assessment and Loan Application, (1) no Hazardous Material is now or was
formerly used, stored, generated, manufactured, installed, disposed of or
otherwise present at or about any Property or any property adjacent to such
Property (except for cleaning and other products currently used by the
applicable Subsidiary or any tenants in connection with the routine
maintenance or repair of any Property in full compliance with Environmental
Laws), (2) all permits, licenses, approvals and filings required by
Environmental Laws have been obtained, and the use, operation and condition
of the Property does not, and did not previously, violate any Environmental
Laws, and (3) no civil, criminal or administrative action, suit, claim,
hearing, investigation or proceeding has been brought or been threatened,
nor have any settlements been reached by or with any parties or any
liens imposed in connection with any Property concerning Hazardous Materials
or Environmental Laws.
Section 4.3 Covenants on Environmental Matters.
(1) Borrower shall consistent with the applicable Loan
Application, (a) comply strictly and in all respects with applicable
Environmental Laws; (b) other than as to those matters previously disclosed
to Senior Lender in the applicable Loan Application, notify Senior Lender
immediately upon Borrower's or any applicable Subsidiary's discovery of any
Hazardous Materials Release or presence of any Hazardous Material at, upon,
under, within, contiguous to or otherwise affecting any Property; (c)
promptly remove such Hazardous Materials and Remediate any Property in full
compliance with Environmental Laws and in accordance with the applicable
Loan Application; and (d) promptly forward to Senior Lender copies of all
orders, notices, permits, applications or other communications and reports
in connection with any Hazardous Materials Release or the presence of any
Hazardous Material or any other matters relating to the Environmental Laws
or any similar laws or regulations, as they may affect any Property or any
Borrower Party. Borrower shall simultaneously provide Senior Lender with a
copy of any written notice that would, or is likely to, have a Material
Adverse Effect, given to or received from Cleanup Contractor, any
Governmental Authority, or any third party (including the owner of any
Property as to which Remediation is occurring or contemplated or as to which
a Mortgage Acquisition has been made or is contemplated, as set forth in a
Loan Application, and including any other creditor of Borrower or any
Subsidiary), which notice relates to any Property, any Remediation or
Development, Borrower's or any Subsidiary's business, or Borrower's or any
Subsidiary's ability to perform its obligations under this Agreement.
(2) Borrower shall not cause and shall prohibit any other
Person within the control of Borrower from causing, and shall use prudent,
commercially reasonable efforts to prohibit other Persons (including tenants)
from (a) causing any Hazardous Materials Release, or the use, storage,
generation, manufacture, or installation of any Hazardous Materials at, upon,
under, within or about any Property or the transportation of any Hazardous
Materials to or from any Property (except for cleaning and other products
used in connection with routine maintenance or repair of the Property in
full compliance with Environmental Laws and except for any Remediation in
accordance with the applicable GMP Agreement and used in the ordinary course
of business by any tenant of any Property or Borrower), (b) installing any
underground storage tanks at the Property, or (c) conducting any activity
that requires a permit or other authorization under Environmental Laws,
except for any Remediation in accordance with the applicable GMP Agreement.
(3) Borrower shall provide to Senior Lender at Borrower's
expense, promptly upon the written request of Senior Lender made no more
than at a reasonable frequency (in the exercise of Senior Lender's reasonable
judgment), a Site Assessment or other environmental tests, or, if reasonably
required by Senior Lender, an update to any existing Site Assessment relating
to any Property, all in such detail and covering such matters as Senior
Lender shall from time to time request based on the written advice or
recommendations of Senior Lender's third-party consultants or advisers.
(4) Borrower shall Remediate, Develop, Acquire and/or dispose
of each Property in compliance with the applicable Loan Application and in
compliance with all Environmental Laws. Borrower shall timely obtain and
thereafter comply with and maintain in full force and effect, all
Governmental Approvals necessary or appropriate for any Remediation.
Borrower shall cause the Cleanup Contractor to prosecute all Remediation
with diligence and continuity and without material interruption or suspension
of work, except as required by Law or as a result of Force Majeure.
(5) Borrower shall diligently enforce in all material
respects, all GMP Agreements. Borrower shall diligently seek to achieve
timely and cost-effective performance by Cleanup Contractor under each GMP
Agreement. Borrower shall diligently pursue the prevailing professional
standards of quality, performance and timeliness that Cleanup Contractor would
normally deliver for its third-party clients. GMP Agreements shall be
negotiated at arms length on substantially the same terms that a
non-affiliated party would obtain. Borrower shall not waive, modify, amend,
terminate or to release Cleanup Contractor's obligations under any GMP
Agreement, or replace Cleanup Contractor, without Senior Lender's consent.
Senior Lender shall not unreasonably withhold consent to reasonable changes
necessitated by field conditions, provided that the GMP Agreement continues
to substantially comply with the applicable Loan Application and the
guaranteed maximum price is not increased. Borrower shall not terminate
Cleanup Contractor unless Cleanup Contractor is simultaneously replaced
with a Satisfactory Replacement Cleanup Contractor.
(6) If and when Borrower becomes aware of any site conditions
or other circumstances affecting any Property that will or is reasonably
likely to have a Material Adverse Effect, then Borrower shall promptly and
in any event within ten (10) days after obtaining knowledge of such site
conditions or circumstances, notify Senior Lender in writing thereof, in
reasonable detail, and thereafter provide Senior Lender with such additional
information relating thereto as Senior Lender shall reasonably request.
Borrower shall with reasonable promptness develop a written plan to respond
to such site conditions or other circumstances, and provide Senior Lender
with a copy of such written plan and any updates thereof.
Section 4.4 Allocation of Risks and Indemnity. As between Borrower
and Senior Lender, all risk of loss associated with non-compliance with
Environmental Laws, or with the presence of any Hazardous Material at,
upon, within, contiguous to or otherwise affecting any Property, shall lie
solely with Borrower and the applicable Subsidiary. Accordingly, Borrower
shall bear all risks and costs associated with any loss (including any loss
in value attributable to Hazardous Materials), damage or liability therefrom,
including all costs of removal of Hazardous Materials or other remediation
required to bring the Properties in compliance with applicable Environmental
Laws. Borrower shall indemnify, defend and hold Senior Lender and its
officers, directors, agents, shareholders and employees harmless from and
against all loss, liabilities, damages, claims, costs and expenses
(including reasonable costs of defense) arising out of or associated, in any
way, with the non-compliance with Environmental Laws, or the existence of
Hazardous Materials in, on, or about any Property, or a breach of any
representation, warranty or covenant contained in this Article 4, whether
based in contract, tort, implied or express warranty, strict liability,
criminal or civil statute or common law, including those arising from the
joint, concurrent, or comparative negligence of Senior Lender; provided,
however, that Borrower shall not be liable under such indemnification to
the extent such loss, liability, damage, claim, cost or expense results
solely from Senior Lender's or its officers', directors', agents',
shareholders' and employees' gross negligence or willful misconduct.
Borrower's obligations under this Section 4.4 shall arise upon the
discovery of the presence of any Hazardous Material, whether or not any
governmental authority has taken or threatened any action in connection
with the presence of any Hazardous Material, and whether or not the
existence of any such Hazardous Material or potential liability on
account thereof is disclosed in the Site Assessment and shall continue
notwithstanding the repayment of the Loan or any transfer or sale of any
right, title and interest in any Property (by foreclosure, deed in lieu of
foreclosure or otherwise). Notwithstanding anything to the contrary
contained in this Agreement, Senior Lender shall not be liable for its
failure to take any action or failure to exercise any of its rights or
remedies under this Article 4.
Section 4.5 No Waiver. Notwithstanding any provision in this
Article 4 or elsewhere in the Senior Loan Documents, or any rights or
remedies granted by the Senior Loan Documents, Senior Lender does not waive
and expressly reserves all rights and benefits now or hereafter accruing to
Senior Lender under the "security interest" or "secured creditor" exception
under applicable Environmental Laws, as the same may be amended. No action
taken by Senior Lender pursuant to the Senior Loan Documents shall be
deemed or construed to be a waiver or relinquishment of any such rights or
benefits under the "security interest exception."
ARTICLE 5
LEASING MATTERS
Section 5.1 Representations and Warranties on Leases. Except to
the extent otherwise expressly waived or approved by Senior Lender in the
relevant Loan Application, Borrower represents and warrants to Senior
Lender with respect to all Leases that: (1) to Borrower's knowledge, after
due inquiry, the rent roll delivered to Senior Lender is true and correct,
and the Leases are valid and in and full force and effect; (2) except as
otherwise disclosed to Senior Lender in writing prior to the Acquisition of
the applicable Property, the Leases are in writing, and neither Borrower
nor the applicable Subsidiary have entered into any oral agreements with
respect thereto; (3) to the best of Borrower's knowledge, after due inquiry
and investigation, the copies of the Leases delivered to Senior Lender are
true and complete; (4) to Borrower's knowledge, after due inquiry and
investigation, neither the landlord nor any tenant is in default under any
of the Leases; (5) Borrower has no knowledge, after due inquiry and
investigation, of any notice of termination or default with respect to any
Lease; (6) neither Borrower nor any Subsidiary has assigned or pledged any
of the Leases, the rents or any interests therein except to Senior Lender;
(7) except as set forth in the rent roll delivered to Senior Lender and, to
the best of Borrower's knowledge, after due inquiry and investigation, no
tenant or other party has an option to purchase all or any portion of any
Property; (8) to the best of Borrower's knowledge, after due inquiry and
investigation, no tenant has the right to terminate its Lease prior to
expiration of the stated term of such lease and the Borrower and the
applicable Subsidiary have not granted any tenant such right; (9) except as
set forth on a separate schedule delivered to Senior Lender, all Leases
contain provisions fully subordinating such leases and the interests of
the tenants thereunder to any existing or future mortgages or deeds of
trust in any amount and on any terms; (10) except as set forth on a
separate schedule delivered to Senior Lender, no tenant under any Lease is
claiming any right to any rent credit, set-off, recoupment, counterclaim or
defense and Borrower has not received any notice of such claim; (11) to the
best of Borrower's knowledge, after due inquiry and investigation, there
are no leasing commissions that are owing in connection with any Leases or
tenancies in effect as of the date hereof; and (12) to the best of Borrower's
knowledge, after due inquiry and investigation, no tenant has prepaid more
than one month's rent in advance (except for bona fide security deposits
not in excess of an amount equal to two month's rent, or as expressly set
forth in the Lease).
Section 5.2 Standard Lease Form; Approval Rights. With respect to
each Property, all future Leases and other rental arrangements shall comply
in all respects with the Leasing Guidelines set forth in the applicable
Loan Application. If a Lease complies with the Leasing Guidelines and is
not a Material Lease, then Senior Lender's approval of such Lease shall
not be required; otherwise Senior Lender's approval shall be required. Any
material modifications from the Leasing Guidelines in the applicable Loan
Application shall be subject to Senior Lender's prior written approval in
its discretion. Borrower shall furnish (or shall cause to be furnished to)
Senior Lender copies of all executed Leases and at least five (5) Business
Days prior written notice of all amendments, modifications, or supplements
to any and all Leases if, after giving effect to such amendment, modification
or supplement the Lease would be a Material Lease or would not comply with
the Leasing Guidelines for the particular Property. Senior Lender shall
endeavor to approve or disapprove all Leases and modifications subject to
its approval that are submitted to Senior Lender within five (5) Business
Days after receipt of all necessary documentation in connection therewith.
Senior Lender's failure to respond within such period shall be deemed
disapproval. Borrower shall hold, in trust, all tenant security deposits in a
segregated account, and, to the extent required by applicable law, shall not
commingle any such funds with any other funds of Borrower or such Subsidiary,
as applicable. Within ten (10) days after Senior Lender's request, Borrower
shall furnish to Senior Lender a statement of all tenant security deposits,
and copies of all Leases not previously delivered to Senior Lender,
certified by Borrower as being true and correct. Senior Lender agrees that
in the event that a particular existing space tenant is entitled to receive
a non-disturbance agreement, Senior Lender shall execute a subordination,
non-disturbance agreement in form reasonably acceptable to Senior Lender.
Senior Lender shall have the right to review and approve (such approval not
to be unreasonably withheld) all tenant improvement costs and allowances
proposed to be incurred by the Borrower or the applicable Subsidiary in
onnection with renewing any existing Leases or executing new Leases on any
Property, unless same are consistent with the Leasing Guidelines for
such Property. All leasing commissions incurred by Borrower with respect
to the renewal of any existing Leases or the execution of a new Lease for
any Property shall be commercially reasonable. The applicable Mortgage and
Assignment of Rents and Leases shall provide that all rents and other monies
received by the Borrower or the applicable Subsidiary with respect to any
Leases shall be subject to the Lien of such documents and shall be held by
the applicable Subsidiary in trust for the benefit of Senior Lender for use
in the payment of all sums due under the Loan allocable to such Subsidiary.
Section 5.3 Covenants. Borrower shall (1) perform the obligations
landlord is required to perform under the Leases; (2) enforce the obligations
to be performed by the tenants thereunder; (3) shall promptly furnish to
Senior Lender any notice of default or termination received by Borrower
from any tenant, and any notice of default or termination given by
Borrower to any tenant; (4) not collect any rents for more than thirty
(30) days in advance of the time when the same shall become due, except for
bona fide security deposits not in excess of an amount equal to two months
rent; (5) except as otherwise contemplated under the applicable Loan
Application, not enter into any ground lease or master lease of any part of
any Property; (6) not further assign or encumber any Lease; (7) not, except
if a tenant is in default of its monetary obligations under the Lease
beyond all applicable notice, grace and cure periods, cancel or accept
surrender or termination of any Lease; and (8) not, except with Senior
Lender's prior written consent, modify or amend any Lease (except for minor
modifications and amendments entered into in the ordinary course of
business, consistent with prudent property management practices, not
affecting the economic terms of such Lease), and any action in violation of
clauses (5), (6), (7), and (8) of this Section 5.3 shall be void at the
election of Senior Lender.
Section 5.4 Tenant Estoppel Certificates. At Senior Lender's request
and not more frequently than once per calendar year (except as otherwise
expressly permitted under this Agreement), Borrower shall obtain and furnish
(or exercise best efforts to do so, where the applicable Lease does not
obligate the tenant to cooperate) to Senior Lender, written estoppel
certificates in form and substance reasonably satisfactory to Senior Lender,
executed by tenants under Leases in any Property and confirming among other
things, the term, rent, and other material provisions and matters relating
to such Leases and such other matters as Senior Lender shall reasonably
require.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Senior Lender that:
Section 6.1 Organization and Power. Borrower and each Borrower
Party is duly organized, validly existing and in good standing under the
laws of the State of its formation or existence, and is in compliance with
legal requirements applicable to doing business in the State where the
Properties are located and has the power and authority to own and operate the
Properties, to enter into this Agreement and the other Senior Loan Documents
and to perform all of its obligations hereunder and thereunder. Borrower
and each Borrower party are not a "foreign person" within the meaning of
Section 1445(f)(3) of the Internal Revenue Code.
Section 6.2 Validity of Senior Loan Documents. The execution,
delivery and performance by Borrower and each Borrower Party of the Senior
Loan Documents: (1) are duly authorized and do not require the consent or
approval of any other party or governmental authority which has not been
obtained; and (2) will not violate any law or result in the imposition
of any lien, charge or encumbrance upon the assets of any such party, except
as contemplated by the Senior Loan Documents. The Senior Loan Documents
constitute the legal, valid and binding obligations of Borrower and each
Borrower Party, enforceable in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, or similar laws generally
affecting the enforcement of creditors' rights.
Section 6.3 Liabilities; Litigation.
(1) The financial statements delivered by Borrower and each
Borrower Party are true and correct with no significant change since the
date of preparation. Except as disclosed in such financial statements,
there are no liabilities (fixed or contingent) affecting any Property,
Borrower or any Borrower Party. Except as disclosed in such financial
information there is no litigation, administrative proceeding, investigation
or other legal action (including any proceeding under any state or federal
bankruptcy or insolvency law) pending or, to the knowledge of Borrower,
threatened, against any Property, Borrower or any Borrower Party which if
adversely determined could have a Material Adverse Effect.
(2) Neither Borrower nor any Borrower Party is contemplating
either the filing of a petition by it under state or federal bankruptcy or
insolvency laws or the liquidation of all or a major portion of its assets
or property, and neither Borrower nor any Borrower Party has knowledge of
any Person contemplating the filing of any such petition against it.
Section 6.4 Taxes and Assessments. Each Property is comprised of
one or more parcels, each of which constitutes a separate tax lot and none
of which constitutes a portion of any other tax lot. There are no pending
or, to Borrower's best knowledge, proposed, special or other assessments for
public improvements or otherwise affecting any Property, nor are there any
contemplated improvements to any Property that may result in such special or
other assessments.
Section 6.5 Other Agreements; Defaults. Neither Borrower nor any
Borrower Party is a party to any agreement or instrument or subject to any
court order, injunction, permit, or restriction which is reasonably likely
to materially adversely affect any Property or the business, operations, or
condition (financial or otherwise) of Borrower or any Borrower Party. Neither
Borrower nor any Borrower Party is in violation of any agreement which
violation would have a Material Adverse Effect.
Section 6.6 Title Matters. Except with respect to a Mortgage
Acquisition, Borrower or the applicable Subsidiary has good and marketable
title to each Property, subject only to the Permitted Encumbrances, and to
the best of Borrower's knowledge after due inquiry and investigation, no
part of any Property is subject to any security interest or Liens or any
adverse claim of any kind whatsoever except for the Permitted Encumbrances;
and Borrower or the applicable Subsidiary has full power and authority to
encumber the Properties and grant Liens and other interests provided for in
the Senior Loan Documents; and Borrower or the applicable Subsidiary has
received all assignments, waivers, consents and other documents, and duly
effected all recordings, filings and other actions necessary to establish,
protect and perfect its right, title and interest in and to all the
Properties. Neither Borrower nor any Subsidiary or their constituents owns
or holds, or is obligated under or a party to, any option, right of first
refusal or any other contractual right to purchase, acquire, sell, assign
or dispose of any of the Properties except as otherwise contemplated by the
applicable Loan Application.
Section 6.7 Compliance with Law; Status of Properties. Except as
identified in a particular Loan Application and identified in such Loan
Application as an exception to the following representations and warranties
with respect to a particular Property:
(1) Borrower and each Borrower Party have all requisite
licenses, permits, franchises, qualifications, certificates of occupancy or
other governmental authorizations to own, lease and operate each Property
and carry on its business, and except as otherwise set forth in the
applicable Loan Application, each Property is in compliance with all
applicable legal requirements and to the best of Borrower's knowledge, after
due inquiry and investigation, is free of structural defects, and all
building systems contained therein are in good working order, subject to
ordinary wear and tear. Except as otherwise set forth in the applicable
Loan Application, no Property is in violation of any zoning, building,
health, fire, traffic, environmental, wetlands, coastal or other rules,
regulations, ordinances, statute and requirements applicable thereto;
(2) No condemnation has been commenced or, to Borrower's
knowledge, is contemplated with respect to all or any portion of any
Property or for the relocation of roadways providing access to any Property;
and
(3) No portion of any Property has suffered any material
damage (i.e., damage costing in excess of $50,000 to repair) by fire or
other casualty loss which has not heretofore been completely repaired and
restored to its original (or better) condition or proceeds have been made
available or set aside for such repair and restoration. No portion of any
Property is located in a special flood hazard area as designated by any
governmental authority except as indicated on the survey for such Property
delivered to Senior Lender. Each Property has rights of access to public
ways and is served by all necessary water, sewer, sanitary sewer and storm
drain facilities. All public utilities necessary to the material use and
enjoyment of each Property are located in the public right-of-way abutting
any Property, and all such utilities are connected so as to serve each
Property without passing over other property, except to the extent such
other property is subject to a perpetual easement for such utility
benefitting such Property. All roads necessary for the utilization of each
Property for its current purpose have been completed and dedicated to public
use and accepted by all governmental authorities.
Section 6.8 Location of Borrower. Borrower's principal place of
business and chief executive offices are located at the address stated in
Section 11.1.
Section 6.9 Material Agreements. All copies of any Material
Agreements, including, without limitation, management agreements, operating
agreements, service, maintenance and union contracts and all other
agreements, contracts and arrangements, whether written or oral, to which
Borrower or any Borrower Party is a party or a successor to a party
affecting or relating to all or any part of the operations of any of the
Properties have been delivered by Borrower or the applicable Subsidiary to
Senior Lender, together with a schedule listing all such agreements and
specifically identifying any operating and service agreements which
are terminable only upon more than thirty (30) days prior notice and/or with
the payment of additional fees, damages or penalties. Each such Material
Agreement is currently in full force and effect in accordance with its
terms, with no amendments or other modifications thereto that are not listed
on the schedule described in the preceding sentence and included in the
copies delivered to Senior Lender. All payments due under each such Material
Agreement have been paid in full, and no default exists or is alleged to
exist under any such Material Agreement which would have a Material Adverse
Effect. Neither Borrower nor any Borrower Party is in default, and to
Borrower's knowledge, no third party is in default, under or with respect to
any contract, agreement, lease or other instrument to which it is a party,
except for any default which (either individually or collectively with
other defaults) would not have a Material Adverse Effect. There are no
employment, consulting or management agreements covering the management of the
Properties other than as set forth on a schedule previously delivered to
Senior Lender. There are no collective bargaining agreements or other labor
agreements covering any employees of Borrower or any Borrower Party.
Section 6.10 ERISA. Borrower has not established any pension plan for
employees which would cause Borrower to be subject to the Employee Retirement
Income Security Act of 1974, as amended.
Section 6.11 Financial Statements. All financial statements delivered
by Borrower to Senior Lender are true and correct in all material respects
and as of the respective dates of such financial statements, fairly present
the respective financial conditions and results of operations of the entities
to which they, including notes thereto, relate, as of the dates indicated
and the results of operations and changes in financial position, if any, for
the periods therein specified, and are correct and complete. All such
financial statements were prepared in accordance with proper accounting
practices. Except as disclosed in writing to Senior Lender, after the
respective dates of such financial statements and information, the applicable
party with respect to such financial statements, has not incurred any
material liabilities or obligations, direct or contingent, or entered into
any material transactions not in the ordinary course of business, nor
has there been any material adverse change, or any development involving a
prospective material adverse change, in the condition (financial or
otherwise), business prospects, net worth or results of operations of such
party.
Section 6.12 Usury. The indebtedness evidenced by the Loan, including
all interest, fees and charges provided for herein, is a business loan and
the Loan is an exempted transaction under the Truth in Lending Act, 15
U.S.C. Section 1601 et. seq. The Loan and each disbursement of an Approved
Advance pursuant to the terms and provisions hereunder does not
violate the provisions of any consumer credit laws or usury laws.
Section 6.13 Margin Stock. No part of proceeds of the Loan will be
used for purchasing or acquiring any "margin stock" within the meaning of
Regulations G, T, U or X of the Board of Governors of the Federal Reserve
System and the proceeds of the Loan will only be used for the purposes
contemplated hereunder.
Section 6.14 Investment Company Act. Borrower is not required to
register as an "investment company" under the Investment Company Act of 1940,
as amended. The making of the Loan by Senior Lender, the application of
the proceeds and repayment thereof by Borrower and the consummation of the
transactions contemplated by this Agreement and the other Senior Loan
Documents will not violate any applicable provision of such act or any
applicable rule, regulation or order issued by the Securities and Exchange
Commission thereunder which is binding on Borrower or any of its managing
members.
Section 6.15 Tax Filings. Borrower and each Borrower Party have filed
(or have obtained effective extensions for filing) all federal, state and
local tax returns required to be filed and have paid or made adequate
provision for the payment of all federal, state and local taxes, charges and
assessments payable by Borrower and each Borrower Party, respectively.
Section 6.16 Solvency. The fair saleable value of Borrower's and each
Borrower Party's assets exceeds and will, immediately following the making
of the Loan and any Advance thereunder, exceed Borrower's and each Borrower
Party's total liabilities, including, without limitation, subordinated,
unliquidated, disputed and contingent liabilities. The fair saleable value
of Borrower's and each Borrower Party's assets is and will, immediately
following the making of the Loan and any Advance thereunder, be greater
than such Borrower's or Borrower Party's, as the case may be, probable
liabilities, including the maximum amount of its contingent liabilities on
its Debts as such Debts become absolute and matured. Borrower's assets and
each Borrower Party's assets do not and, immediately following the making of
the Loan and any Advance thereunder, will not, constitute unreasonably
small capital to carry out its business as conducted or as proposed to be
conducted. Neither Borrower nor any Borrower Party intends to, and does
not believe that it will, incur Debts and liabilities (including contingent
liabilities and other commitments) beyond its ability to pay such Debts as
they mature (taking into account the timing and amounts of cash to be
received by such Borrower or Borrower Party, as applicable, and the
amounts to be payable on or in respect of obligations of such Borrower or
Borrower Party, as applicable).
Section 6.17 Full and Accurate Disclosure. No statement of fact made
by or on behalf of Borrower or any Borrower Party in this Agreement or in
any of the other Senior Loan Documents contains any untrue statement of a
material fact or omits to state any material fact necessary to make
statements contained herein or therein not misleading. There is no fact
presently known to Borrower which has not been disclosed to Senior Lender
which adversely affects, nor as far as Borrower can foresee, might adversely
affect, any Property or the business, operations or condition (financial
or otherwise) of Borrower or of any Borrower Party.
Section 6.18 Opinion Authorization. Borrower represents and warrants
that it has authorized and requested its counsel to prepare and deliver an
opinion letter to Senior Lender with respect to the matters set forth in
item nine of Exhibit "O" attached hereto or as otherwise addressed in any
such opinion letter. Borrower acknowledges that (a) the preparation of such an
opinion might be construed to be in conflict with such counsel's
representation of Borrower and that such representation might result in a
loss of confidentiality with respect to information and knowledge of or
about Borrower and (b) the consequences of any loss of confidentiality as a
result of the preparation and delivery of such an opinion have been fully
disclosed to it. Borrower hereby waives its attorney-client privilege with
respect to the limited matters set forth in such opinion letter.
ARTICLE 7
FINANCIAL REPORTING
Section 7.1 Financial Statements.
(1) Monthly Reports. Within twenty (20) days after the end
of each calendar month, Borrower shall furnish to Senior Lender with
respect to each Property and with respect to all of the Properties combined
(and with respect to each Subsidiary), a current (as of the calendar month
just ended) detailed operating statement (showing monthly activity and
year-to-date) stating Operating Revenues, Operating Expenses, operating
income and Net Cash Flow for the calendar month just ended, a general
ledger, and, as requested by Senior Lender, a written statement setting
forth any variance from the annual budget, copies of bank statements and bank
reconciliations and other documentation supporting the information disclosed
in the most recent financial statements.
(2) Quarterly Reports. Within forty-five (45) days after
the end of each calendar quarter, Borrower shall furnish to Senior Lender,
with respect to each Property and with respect to all of the Properties
combined (and with respect to each Subsidiary), a detailed operating
statement (showing quarterly activity and year-to-date) stating Operating
Revenues, Operating Expenses, operating income and Net Cash Flow for the
calendar quarter just ended, together with a balance sheet (current as of
the last day of such calendar quarter) and rent roll (current as of the last
day of such calendar quarter).
(3) Annual Reports. Within one hundred twenty (120) days
after the end of each fiscal year of the applicable Subsidiary's operation
of each Property, Borrower shall furnish to Senior Lender a current (as of
the end of such fiscal year) balance sheet, a detailed operating statement
stating Operating Revenues, Operating Expenses, operating income and Net
Cash Flow for such Subsidiary and the applicable Property and with respect
to all of the Properties combined, and, if required by Senior Lender,
prepared on a review basis and audited by an independent public accountant
satisfactory to Senior Lender.
(4) Certification; Supporting Documentation. Each such
financial statement shall be in scope and detail satisfactory to Senior
Lender and certified by the chief financial representative of Borrower or
the applicable Subsidiary.
(5) Asset Markdowns. Borrower shall provide Senior Lender
with notice of any "markdown" or adjustment in book value or carrying value
of any asset of Borrower or any Subsidiary, promptly upon taking such
markdown or adjustment.
Section 7.2 Accounting Principles. All financial statements shall
be prepared in accordance with sound accounting principles applicable to
commercial real estate, consistently applied from year to year. If the
financial statements are prepared on an accrual basis, such statements shall
be accompanied by a reconciliation to cash basis accounting principles.
Section 7.3 Other Information. Borrower shall deliver to Senior
Lender such additional information regarding Borrower, its Subsidiaries,
its business, and any Property, as reasonably requested by Senior Lender,
within thirty (30) days after Senior Lender's request therefor.
Section 7.4 Annual Budget; Modifications; Progress Reports. At least
thirty (30) days prior to the commencement of each fiscal year of Borrower
or any Subsidiary or with respect to each Property, Borrower shall provide
to Senior Lender, a copy of Borrower's and each Subsidiary's proposed
annual operating and capital improvements budget (including, without
limitation, leasing parameters) for each Property for such fiscal year for
review and approval by Senior Lender. Neither Borrower nor the applicable
Subsidiary shall materially deviate from the budgets approved by Senior
Lender without the prior written consent of Senior Lender (such consent not
to be unreasonably withheld, conditioned or delayed). If any event or
circumstance has occurred that reasonably could or would have a Material
Adverse Effect on any Remediation, Development, physical condition, or
on-site conditions affecting any Property, or Borrower's compliance with any
Loan Application, Borrower shall deliver upon request, within seven (7)
Business Days, updated budgets for the completion of any Remediation and
Development or otherwise relating to such Property. On a monthly basis,
Borrower shall keep Senior Lender informed of the status and progress of all
Remediation and Development with respect to each Property.
Section 7.5 Audits. Senior Lender shall have the right to request
that Borrower choose and appoint a certified public accountant reasonably
satisfactory to Senior Lender to perform financial audits as it deems
necessary, at Borrower's expense. Upon reasonable prior written notice,
Borrower shall permit Senior Lender or its agents to examine at the offices of
Borrower or the applicable Subsidiary at all reasonable times such records,
books and papers of Borrower or such Subsidiary, as applicable, which
reflect upon its financial condition and the income and expense relative to
any Property.
ARTICLE 8
COVENANTS
Borrower covenants and agrees with Senior Lender as follows:
Section 8.1 Due on Sale and Encumbrance; Transfers of Interests.
Except as set forth in a particular Loan Application (and identified as an
exception to the following covenants with respect to a particular Property),
or as necessary or appropriate to implement the sale of a Property in
accordance with a Loan Application, or as otherwise approved by Senior
Lender in writing, without the prior written consent of Senior Lender:
(1) Borrower shall not (a) directly or indirectly sell,
transfer, convey, mortgage, pledge, or assign any direct or indirect
interest in any Property or any part thereof (including any partnership,
member or any other ownership interest in Borrower or any Subsidiary or any
partner or member thereof); (b) further encumber, alienate, grant a Lien or
grant any other interest in any Property or any part thereof (including any
partnership or other ownership interest in Borrower or any Subsidiary),
whether voluntarily or involuntarily; or (c) enter into any easement or other
agreement granting rights in or restricting the use or development of any
Property; provided, however, that Senior Lender shall not unreasonably
withhold or delay its consent with respect to utility and other easements
and restrictive covenants which do not in Senior Lender's reasonable
judgment adversely affect any security interest or Lien granted to Senior
Lender under the Senior Loan Documents;
(2) no new general partner, member, or limited partner
having the ability to control the affairs of Borrower shall be admitted to
or created in Borrower or any Subsidiary (nor shall any existing general
partner or member or controlling limited partner withdraw from Borrower or
such Subsidiary, as applicable), and no change in Borrower's or any
Subsidiary's organizational documents relating to control over Borrower or
such Subsidiary, as applicable, and/or any Property shall be effected; and
(3) no transfer shall be permitted of the beneficial interest
in Borrower, any of its constituent members, any Subsidiary or any of the
Properties.
As used in this Section 8.1, "transfer" shall include the sale, transfer,
conveyance, mortgage, pledge, or assignment of the legal or beneficial
ownership of (a) any Property, (b) any partnership interest in any member
of Borrower that is a partnership, (c) any membership interest in any
member of Borrower that is a limited liability company, and (d) any voting
stock in any member of Borrower that is a corporation; "transfer" shall not
include (i) the leasing of individual units within any Property so long
as Borrower complies with the provisions of the Senior Loan Documents
relating to such leasing activity; or (ii) the transfers of limited partner
interests in Borrower so long as the provisions of Sections 8.1(2) and
8.1(3) are satisfied. Senior Lender shall endeavor to respond to any
written request for approval of a transfer within fifteen (15) days
of its receipt of notice of such proposed transfer together with all
documentation in connection therewith that Senior Lender may reasonably
request. Notwithstanding anything to the contrary contained in this Section
8.1, Senior Lender hereby acknowledges and consents to the execution and
delivery of the Subordinated Pledge Agreement by Borrower to Subordinated
Lender, subject and subordinate to the terms and provisions of, and the
rights and security interest granted to Senior Lender under the Pledge
Agreement.
Notwithstanding anything to the contrary contained in this Section
8.1, any holder of a direct or indirect ownership interest in Borrower as of
the date of this Agreement (an "Interest Holder") shall have the right to
transfer its direct or indirect ownership interest in Borrower without Senior
Lender's prior consent, provided, that, (A) after taking into account any
prior transfers pursuant to this paragraph and the current transfer, whether
to the proposed transferee or otherwise, no such transfer or series of
transfers shall result in (I) the proposed transferee (together with any
other transferees pursuant to this paragraph) owning (directly or indirectly,
or beneficially) more than forty-nine percent (49%) of the direct or indirect
ownership interests in Borrower, or (II) a transfer of more than forty-nine
percent (49%) of the direct or indirect ownership interests in Borrower;
(B) no Event of Default has occurred and remains uncured; (C) no change of
control shall occur as a result of such transfer; (D) such transferee shall
be a reputable entity or person of good character; (E) such transferee and
all transferees in the aggregate under this paragraph shall have no voting
rights and shall not possess the power to, directly or indirectly, direct
the management and policies of Borrower or any Subsidiary in any way, whether
through the ownership of voting securities, by contract or otherwise; (F) any
provisions in any of the organizational documents of either Borrower or any
Subsidiary that require the unanimous affirmative vote or consent of all the
holders of ownership interests in Borrower or any Subsidiary, as applicable,
or any other applicable voting threshold, shall not require or include the
vote or consent of such proposed transferee or transferees; and (G) no
transferee shall be an investment bank, securities firm, institutional
lender, or other significant competitor of Credit Suisse First Boston in
any substantial line of business of Credit Suisse First Boston, or an
officer, director, or employee of any of the foregoing.
Section 8.2 Taxes; Charges. Borrower shall pay before any fine,
penalty, interest or cost may be added thereto, and shall not enter into
any agreement to defer, any real estate taxes and assessments, franchise
taxes and charges, and other governmental charges that may become a Lien
upon any Property or become payable during the term of the Loan, and will
promptly furnish Senior Lender (or cause to be furnished to Senior Lender)
with evidence of such payment; however, Borrower's compliance with Section
3.4 of this Agreement relating to impounds for taxes and assessments shall,
with respect to payment of such taxes and assessments, be deemed compliance
with this Section 8.2. Borrower shall not consent to the joint assessment
of any Property with any other real property constituting a separate tax
lot or with any other real or personal property.
Borrower shall pay or shall cause to be paid when due all claims
and demands of mechanics, materialmen, laborers and others which, if unpaid,
might result in a Lien on any Property; however, Borrower may contest the
validity of such claims and demands so long as (a) Borrower notifies Senior
Lender that it intends to contest such claim or demand, (b) Borrower
provides Senior Lender with an indemnity, bond or other security reasonably
satisfactory to Senior Lender (including an endorsement to Senior Lender's
title insurance policy insuring against such claim or demand) assuring the
discharge of Borrower's obligations for such claims and demands, including
interest and penalties, and (c) Borrower is diligently contesting the same by
appropriate legal proceedings in good faith and at its own expense and
concludes such contest prior to the thirtieth (30th) day preceding the
earlier to occur of the Maturity Date or the date on which any Property is
scheduled to be sold for non-payment.
Section 8.3 Control; Management. There shall be no change in the
day-to-day control and management of Borrower or any Borrower Party (or the
organizational, operative or governing agreements of each) without the prior
written consent of Senior Lender. Borrower shall not terminate, replace or
appoint any property manager or terminate or amend the management agreement
for any Property without Senior Lender's prior written approval. All
management fees under any property management agreement with respect to any
Property shall be commercially reasonable. Any change in ownership or
control of the manager shall be cause for Senior Lender to re-approve such
manager and management agreement (such approval not to be unreasonably
withheld). Each manager shall hold and maintain all necessary licenses,
certifications and permits required by law. Borrower shall fully perform
all of its covenants, agreements and obligations under the management
agreement.
Section 8.4 Operation; Maintenance; Inspection. Borrower shall
observe and comply with all legal requirements applicable to the ownership,
use and operation of each Property. Borrower shall maintain each Property
in good condition consistent with prudent commercial practices and promptly
repair any damage or casualty. Borrower shall keep Senior Lender apprised,
in a timely fashion and in a format acceptable to Senior Lender, of the
status of all Properties including, but not limited to, delinquencies,
litigation, foreclosures, bankruptcies, court orders, material damage to any
of the Properties and insurance claims with respect to any of the Properties.
Borrower shall permit Senior Lender and its agents, representatives and
employees, upon reasonable prior notice to Borrower to inspect any Property
and conduct such environmental and engineering studies as Senior Lender may
require, provided such inspections and studies do not materially interfere
with the use and operation of any Property.
Section 8.5 Taxes on Security. Borrower shall pay all taxes,
charges, filing, registration and recording fees, excises and levies payable
with respect to the Senior Note or the Liens created or secured by the Senior
Loan Documents, other than income, franchise and doing business taxes imposed
on Senior Lender. If there shall be enacted any law (1) deducting the Loan
from the value of any Property for the purpose of taxation, (2) affecting
any Lien on any Property, or (3) changing existing laws of taxation of
mortgages, deeds of trust, security deeds, or debts secured by real property,
or changing the manner of collecting any such taxes, Borrower shall promptly
pay to Senior Lender, on demand, all taxes, costs and charges for which Senior
Lender is or may be liable as a result thereof; however, if such payment
would be prohibited by law or would render the Loan usurious, then instead
of collecting such payment, Senior Lender may declare all amounts owing
under the Senior Loan Documents to be due and payable within forty-five (45)
days after prior written notice thereof by Senior Lender.
Section 8.6 Legal Existence; Name, Etc. Except as otherwise
contemplated by the applicable Loan Application, Borrower, each member of
Borrower, and each Subsidiary shall preserve and keep in full force and
effect its existence as a single purpose entity, all franchises, rights and
privileges under the laws of the State of its formation, and all
qualifications, licenses and permits applicable to the ownership, use and
operation of the applicable Property. Neither Borrower nor any member of
Borrower, shall wind up, liquidate, dissolve, reorganize, merge, or
consolidate with or into, or convey, sell, assign, transfer, lease, or
otherwise dispose of all or substantially all of its assets, or acquire all
or substantially all of the assets of the business of any Person. Except as
otherwise contemplated by the applicable Loan Application, Borrower, each
member of Borrower and each Subsidiary shall conduct business only in its
own name and not change its name, identity, or organizational structure, or
the location of its chief executive office or principal place of business
unless the prior written consent of Senior Lender to such change has
been obtained and such Person has taken all actions necessary or requested
by Senior Lender to file or amend any financing statement or continuation
statement to assure perfection and continuation of perfection of security
interests under the Senior Loan Documents. Except as otherwise contemplated
by the applicable Loan Application, Borrower, each member of Borrower
and each Subsidiary shall maintain its separateness as an entity, including
maintaining separate books, records, and accounts and observing corporate,
limited liability company and partnership formalities independent of any
other entity, shall pay its obligations with its own funds and shall
not commingle funds or assets with those of any other entity.
Section 8.7 Affiliate Transactions. Except as otherwise contemplated
by this Agreement and as contemplated by a Loan Application, without the
prior written consent of Senior Lender, Borrower shall not engage in any
transaction affecting any Property with an Affiliate of Borrower.
Section 8.8 Limitation on Other Debt. Except as otherwise
contemplated by the applicable Loan Application, Borrower, each member and
each Subsidiary shall not without the prior written consent of Senior
Lender (which consent may be granted or withheld in Senior Lender's sole
discretion), incur any Debt other than the Loan, the Subordinated Debt, the DMB
Affiliated Financing and customary trade payables which are payable, and
shall be paid, within thirty (30) days of when incurred.
Section 8.9 Further Assurances. Borrower shall promptly (1) cure
any defects in the execution and delivery of the Senior Loan Documents
(including, without limitation, the payment of Net Cash Flow as provided in
Section 2.5 hereof), and (2) execute and deliver, all such other documents,
agreements and instruments as Senior Lender may reasonably request to
further evidence and more fully describe the collateral for the Loan, to
correct any errors in the Senior Loan Documents, to perfect, protect or
preserve any liens created under any of the Senior Loan Documents, or to
make any recordings, file any notices, or obtain any consents, as may be
necessary or appropriate in connection therewith.
Section 8.10 Estoppel Certificates. Borrower, within ten (10) days
after request, shall furnish to Senior Lender a written statement, duly
acknowledged, setting forth the amount due on the Loan, the terms of payment
of the Loan, the date to which interest has been paid, whether any offsets
or defenses exist against the Loan and, if any are alleged to exist, the
nature thereof in detail, and such other matters as Senior Lender reasonably
may request.
Section 8.11 Notice of Certain Events. Borrower shall promptly notify
Senior Lender of (1) any Event of Default, together with a detailed statement
of the steps being taken to cure such Event of Default; (2) any notice of
default received by Borrower under any other material obligations relating
to any Property (including, without limitation, any Leases or Material
Agreements) or which if uncured would have a Material Adverse Effect; and
(3) any material threatened, or pending legal, judicial or regulatory
proceedings, including any dispute between Borrower or any Subsidiary and
any governmental authority, affecting Borrower or any Subsidiary or any
Property.
Section 8.12 Indemnification. Borrower shall indemnify, defend and
hold Senior Lender and its directors, officers, shareholders, employees and
agents harmless from and against any and all losses, liabilities, claims,
damages, expenses, obligations, penalties, actions, judgments, suits, costs
or disbursements of any kind or nature whatsoever, including the reasonable
fees and actual expenses of Senior Lender's counsel, in connection with (1) any
inspection, review or testing of or with respect to any Property, (2) any
investigative, administrative, mediation, arbitration, or judicial
proceeding, whether or not Senior Lender is designated a party thereto,
commenced or threatened at any time (including after the repayment of
the Loan) in any way related to the execution, delivery or performance of
any of the Senior Loan Documents or any Property, (3) any proceeding
instituted by any Person claiming a Lien, (4) any brokerage commissions or
finder's fees claimed by any broker or other party in connection with
any Property, including those arising from the joint, concurrent, or
comparative negligence of Senior Lender and (5) any material breach of any
representation, warranty, covenant or agreement made by Borrower under this
Agreement, except to the extent any of the foregoing is caused by Senior
Lender's gross negligence or willful misconduct.
Section 8.13 Limited Purpose Entities. Borrower shall not Acquire,
Remediate, Develop, or otherwise invest (other than Borrower's investment in
the Subsidiaries as contemplated by Additional Property Loan Applications)
in any real or personal property other than the Properties. Borrower shall
not conduct any business of any kind other than the business contemplated by
this Agreement and the Subordinated Loan Agreement.
Section 8.14 Conduct of Business. Borrower shall not enter into
contracts relating to any Property(ies), or otherwise conduct business
relating to any Property(ies), in Borrower's name. Any such contracts shall
be entered into, and business shall be conducted, solely by the applicable
Subsidiary, and only in its own name.
ARTICLE 9
EVENTS OF DEFAULT
Each of the following shall constitute an Event of Default under the Loan:
Section 9.1 Payments. Borrower's failure to pay any regularly
scheduled installment of principal, interest or any other amount due under
the Senior Loan Documents (including, without limitation, the payment of Net
Cash Flow as provided in Section 2.5 hereof) within seven (7) days after
the date when due, or Borrower's failure to pay the Loan on the Maturity
Date, whether by acceleration or otherwise.
Section 9.2 Insurance. Borrower's failure to maintain insurance as
required under Section 3.1 of this Agreement.
Section 9.3 Sale, Encumbrance, Etc. The sale, transfer, conveyance,
pledge, mortgage or assignment of any part or all of the Properties, or any
interest therein, or of any interest in Borrower or any Subsidiary in
violation of Section 8.1 of this Agreement.
Section 9.4 Covenants. Borrower's failure to perform or observe any
of the agreements and covenants contained in this Agreement or in any of the
other Senior Loan Documents (other than timely delivery of financial
statements and information required under Section 7.1, repayments under
Section 9.1, insurance requirements under Section 9.2, and transfers and
encumbrances under Section 9.3, for all of which there shall be no grace or
cure period), and the continuance of such failure for thirty (30) days after
notice by Senior Lender to Borrower; provided, however, that subject to any
shorter period for curing any failure by Borrower as specified in any of
the other Senior Loan Documents, Borrower shall have an additional sixty (60)
days to cure such failure if (1) such failure does not involve the failure to
make payments on a monetary obligation; (2) such failure cannot reasonably
be cured within thirty (30) days; and (3) Borrower is diligently undertaking
to cure such default. The notice and cure provisions of this Section 9.4
do not apply to the Events of Default described in Section 9.5, Section 9.6,
and Section 9.7.
Section 9.5 Representations and Warranties. Any representation or
warranty made hereunder or in any other Senior Loan Document proves to be
untrue in any material respect when made or deemed made and is not cured
within ten (10) days after Borrower receives written notice from Senior
Lender of the falsity or breach of such representation or warranty.
Section 9.6 Other Encumbrances. Any material default (after the
expiration of any applicable notice, grace and cure periods) under any
document or instrument, other than the Senior Loan Documents, evidencing or
creating a Lien on any Property or any part thereof prior to the Lien granted
to Senior Lender under the applicable Mortgage and such default has a
Material Adverse Effect.
Section 9.7 Involuntary Bankruptcy or Other Proceeding. Commencement
of an involuntary case or other proceeding against Borrower, any Borrower
Party, Cleanup Contractor, or any Good Faith Guarantors and the Environmental
Indemnitors (each, a "Bankruptcy Party") that seeks liquidation,
reorganization or other relief with respect to it or its debts or other
liabilities under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeks the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any of its property,
and such involuntary case or other proceeding shall remain undismissed or
unstayed for a period of sixty (60) days; or an order for relief against a
Bankruptcy Party shall be entered in any such case under the Federal
Bankruptcy Code. Notwithstanding anything to the contrary contained in this
paragraph, the commencement of an involuntary case or other proceeding
against the Cleanup Contractor shall not constitute an Event of Default under
this Agreement, if within thirty (30) days after the commencement of such
proceeding, Borrower has procured a Satisfactory Replacement Cleanup
Contractor. Notwithstanding anything to the contrary contained in this
paragraph, the commencement of an involuntary case or other proceeding
against any Good Faith Guarantor shall not constitute an Event of Default
under this Agreement, if within forty-five (45) days after the commencement of
such proceeding, Borrower has procured a Satisfactory Replacement Guarantor.
Section 9.8 Voluntary Petitions, etc. Commencement by a Bankruptcy
Party of a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its Debts or other
liabilities under any bankruptcy, insolvency or other similar law or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official for it or any of its property, or consent by a Bankruptcy
Party to any such relief or to the appointment of or taking possession by
any such official in an involuntary case or other proceeding commenced
against it, or the making by a Bankruptcy Party of a general assignment
for the benefit of creditors, or the failure by a Bankruptcy Party, or the
admission by a Bankruptcy Party in writing of its inability, to pay its
debts generally as they become due, or any action by a Bankruptcy Party
to authorize or effect any of the foregoing.
Section 9.9 Cleanup Contractor Default. The failure of the Cleanup
Contractor to perform any obligation under a GMP Agreement, which failure
is not cured within (a) ten (10) days, in the case of any monetary default,
(b) three (3) Business Days in the case of a nonmonetary default relating
to failure to provide insurance, and (c) thirty (30) days, in the case
of any other nonmonetary defaults (other than failure to provide insurance),
which thirty-day period shall be extended by up to an additional period of
thirty (30) more days, but only so long as the party in default is, with
diligence and continuity, endeavoring to cure such nonmonetary default.
Section 9.10 Subsidiary Non-Compliance. The failure of any Subsidiary
to satisfy any conditions expressed in this Agreement, which failure is of a\
material nature and is not cured within (a) ten (10) days, in the case of
any monetary default, (b) three (3) Business Days in the case of a
nonmonetary default relating to failure to provide insurance, and (c) thirty
(30) days, in the case of any other nonmonetary defaults (other than failure
to provide insurance), which thirty-day period shall be extended by up to
an additional period of thirty (30) more days, but only so long as such
Subsidiary is, with diligence and continuity, endeavoring to cure such
nonmonetary default.
ARTICLE 10
REMEDIES
Section 10.1 Remedies - Insolvency Events. Upon the occurrence of any
Event of Default described in Section 9.7 or 9.8, the obligations of Senior
Lender to advance amounts hereunder shall immediately terminate, and all
amounts due under the Senior Loan Documents immediately shall become due
and payable, all without written notice and without presentment, demand,
protest, notice of protest or dishonor, notice of intent to accelerate the
maturity thereof, notice of acceleration of the maturity thereof, or any other
notice of default of any kind, all of which are hereby expressly waived by
Borrower; however, if the Bankruptcy Party under Section 9.7 or 9.8 is
other than Borrower, then all amounts due under the Senior Loan Documents
shall become immediately due and payable at Senior Lender's election, in Senior
Lender's sole discretion.
Section 10.2 Remedies - Other Events. Except as set forth in Section
10.1 above, while any Event of Default exists, Senior Lender may (1) by
written notice to Borrower, declare the entire Loan to be immediately due
and payable without presentment, demand, protest, notice of protest or
dishonor, notice of intent to accelerate the maturity thereof, notice of
acceleration of the maturity thereof, or other notice of default of any
kind, all of which are hereby expressly waived by Borrower, (2) terminate
the obligation, if any, of Senior Lender to advance amounts hereunder,
and/or (3) exercise all rights and remedies therefor under this Agreement and
the other Senior Loan Documents and at law or in equity, including, without
limitation, the right to receive all Net Cash Flow from each of the
Properties until such time as the Event of Default is cured.
Section 10.3 Senior Lender's Right to Perform the Obligations. If
Borrower shall fail, refuse or neglect to make any payment or perform any
act required by the Senior Loan Documents, then while any Event of Default
exists, and without notice to or demand upon Borrower and without waiving
or releasing any other right, remedy or recourse Senior Lender may have
because of such Event of Default, Senior Lender may (but shall not be
obligated to) make such payment or perform such act for the account of and
at the expense of Borrower, and shall have the right to enter upon any
Property for such purpose and to take all such action thereon and with
respect to any Property as it may deem necessary or appropriate. If Senior
Lender shall elect to pay any sum due with reference to any Property, Senior
Lender may do so in reliance on any bill, statement or assessment procured
from the appropriate governmental authority or other issuer thereof without
inquiring into the accuracy or validity thereof. Similarly, in making any
payments to protect the security intended to be created by the Senior Loan
Documents, Senior Lender shall not be bound to inquire into the validity of
any apparent or threatened adverse title, lien, encumbrance, claim or charge
before making an advance for the purpose of preventing or removing the same.
Additionally, if any Hazardous Materials affect or threaten to affect any
Property, Senior Lender may (but shall not be obligated to) give such
notices and take such actions as it deems necessary or advisable in order to
abate the discharge of any Hazardous Materials or remove the Hazardous
Materials. Borrower shall indemnify Senior Lender for all losses, expenses,
damages, claims and causes of action, including reasonable attorneys' fees,
incurred or accruing by reason of any acts performed by Senior Lender pursuant
to the provisions of this Section 10.3, including those arising from the
joint, concurrent, or comparative negligence of Senior Lender, except as a
result of Senior Lender's gross negligence or willful misconduct. All sums
paid by Senior Lender pursuant to this Section 10.3, and all other sums
expended by Senior Lender to which it shall be entitled to be indemnified,
together with interest thereon at the Default Rate from the date of such
payment or expenditure until paid, shall constitute additions to the Loan,
shall be secured by the Senior Loan Documents and shall be paid by Borrower
to Senior Lender upon demand.
Section 10.4 Senior Lender's Right to Complete Remediation. Upon the
occurrence of any Event of Default, Senior Lender shall have the right (which
right may be exercised in Senior Lender's sole discretion) to engage
third-party environmental contractor(s) to complete any Remediation not
completed, in substantially the manner contemplated by the applicable Loan
Application or in such other manner as such third-party environmental
contractor(s) shall recommend. Senior Lender may pay, settle or compromise
all existing bills and claims relating to any Remediation. Senior Lender's
third-party environmental contractor(s) may execute all applications and
certificates in the name of Borrower or any Subsidiary that may be required
by Law with respect to any Remediation. Borrower hereby grants Senior Lender
and its third-party environmental contractor(s) a power of attorney for
purposes of the foregoing. This power of attorney shall be deemed to be a
power coupled with an interest, which cannot be revoked. All sums expended
by Senior Lender pursuant to this paragraph shall be deemed expenditures made
to cure Borrower's Event of Default and shall bear interest at the Default Rate
until repaid. In the event that an Event of Default has occurred and is
subsequently cured after Senior Lender has exercised any of the remedies
provided under this paragraph, Senior Lender shall have the option in its
sole discretion to either (a) continue prosecuting any Remediation commenced
by it or any third-party contractors engaged by it or (b) terminate such
Remediation. In the event that Senior Lender elects to terminate Remediation
as provided in the preceding sentence, then Borrower shall be responsible
for completion of such Remediation in accordance with the applicable Loan
Application. Notwithstanding anything to the contrary contained in this
Section 10.4, Senior Lender shall be under no obligation to complete any
Remediation of any Property.
ARTICLE 11
MISCELLANEOUS
Section 11.1 Notices. Any notices, approvals and/or consents required
or permitted to be given under this Agreement shall be in writing and either
shall be mailed by certified mail, postage prepaid, return receipt requested,
or sent by overnight air courier service, or personally delivered to a
representative of the receiving party, or sent by telecopy (provided an
identical notice is also sent simultaneously by mail, overnight courier, or
personal delivery as otherwise provided in this Section 11.1). All such
communications shall be mailed, sent or delivered, addressed to the party for
whom it is intended at its address set forth below.
If to Borrower: DMB/Remediation LLC
501 Madison Avenue
19th Floor
New York, New York 10022
Attention: Mr. Bruce-Sean Reshen
Telecopy: (212) 486-8482
with a copy to: Graham & James
885 Third Avenue
24th Floor
New York, New York 10022
Attention: Michael Zukerman, Esq.
and Koren Blair, Esq.
Telecopy: (212) 688-2449
If to Senior Lender: PPA Funding Corp.
Eleven Madison Avenue
New York, New York 10010
Attention: Mr. Allan J. Baum and
Mr. Dean S. Benjamin
Telecopy: (212) 325-8162
with a copy to: Latham & Watkins
885 Third Avenue
New York, New York 10022
Attention: Geoffrey K. Hurley, Esq.
and Joshua Stein, Esq.
Telecopy: (212) 751-4864
Any communication so addressed and mailed shall be deemed to be given on the
earliest of (1) when actually delivered, (2) on the first Business Day after
deposit with an overnight air courier service, or (3) on the third Business
Day after deposit in the United States mail, postage prepaid, in each case
to the address of the intended addressee (except as otherwise provided in the
Mortgage), and any communication so delivered in person shall be deemed to
be given when receipted for by, or actually received by Senior Lender or
Borrower, as the case may be. If given by telecopy, a notice shall be deemed
given and received when the telecopy is transmitted to the party's telecopy
number specified above, and confirmation of complete receipt is received by
the transmitting party during normal business hours or on the next Business
Day if not confirmed during normal business hours, and an identical notice
is also sent simultaneously by mail, overnight courier, or personal delivery
as otherwise provided in this Section 11.1. Either party may designate a
change of address by written notice to the other by giving at least ten
(10) days prior written notice of such change of address.
Section 11.2 Amendments and Waivers. No amendment or waiver of any
provision of the Senior Loan Documents shall be effective unless in writing
and signed by the party against whom enforcement is sought.
Section 11.3 Limitation on Interest. It is the intention of the
parties hereto to conform strictly to applicable usury laws. Accordingly,
all agreements between Borrower and Senior Lender with respect to the Loan
are hereby expressly limited so that in no event, whether by reason of
acceleration of maturity or otherwise, shall the amount paid or agreed to be
paid to Senior Lender or charged by Senior Lender for the use, forbearance
or detention of the money to be lent hereunder or otherwise, exceed the
maximum amount allowed by law. If the Loan would be usurious under
applicable law (including the laws of the State of New York and the laws of
the United States of America), then, notwithstanding anything to the contrary
in the Senior Loan Documents: (1) the aggregate of all consideration which
constitutes interest under applicable law that is contracted for, taken,
reserved, charged or received under the Senior Loan Documents shall under
no circumstances exceed the maximum amount of interest allowed by applicable
law, and any excess shall be credited on the Senior Note by the holder
thereof (or, if the Senior Note has been paid in full, refunded to Borrower);
and (2) if maturity is accelerated by reason of an election by Senior Lender,
or in the event of any prepayment, then any consideration which constitutes
interest may never include more than the maximum amount allowed by applicable
law. In such case, excess interest, if any, provided for in the Senior
Loan Documents or otherwise, to the extent permitted by applicable law,
shall be amortized, prorated, allocated and spread from the date of advance
until payment in full so that the actual rate of interest is uniform through
the term hereof. If such amortization, proration, allocation and spreading
is not permitted under applicable law, then such excess interest shall be
cancelled automatically as of the date of such acceleration or prepayment
and, if theretofore paid, shall be credited on the Senior Note (or, if the
Senior Note has been paid in full, refunded to Borrower). The terms and
provisions of this Section 11.3 shall control and supersede every other
provision of the Senior Loan Documents. The Senior Loan Documents are
contracts made under and shall be construed in accordance with and governed by
the laws of the state of New York, except that if at any time the laws of
the United States of America permit Senior Lender to contract for, take,
reserve, charge or receive a higher rate of interest than is allowed by the
laws of the State of New York (whether such federal laws directly so provide
or refer to the law of any state), then such federal laws shall to such
extent govern as to the rate of interest which Senior Lender may contract
for, take, reserve, charge or receive under the Senior Loan Documents.
Section 11.4 Invalid Provisions. If any provision of any of the
Senior Loan Documents is held to be illegal, invalid or unenforceable, such
provision shall be fully severable; the Senior Loan Documents shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part thereof; the remaining provisions thereof shall
remain in full effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance therefrom; and in lieu of such
illegal, invalid or unenforceable provision there shall be added
automatically as a part of such Senior Loan Document a provision as similar in
terms to such illegal, invalid or unenforceable provision as may be possible
to be legal, valid and enforceable.
Section 11.5 Reimbursement of Expenses. Borrower shall pay all expenses
incurred by Senior Lender in connection with the Loan and all Advances
thereof, including title insurance premiums, reasonable fees and expenses of
Senior Lender's attorneys, environmental, engineering and other consultants,
and fees, charges or taxes for the recording or filing of Senior Loan
Documents. Borrower shall pay all reasonable expenses of Senior Lender in
connection with the administration of the Loan, including audit costs,
inspection fees, settlement of condemnation and casualty awards, and
premiums for title insurance and endorsements thereto. Borrower shall, upon
request, promptly reimburse Senior Lender for all amounts expended, advanced
or incurred by Senior Lender to collect the Senior Note, or to enforce the
rights of Senior Lender under this Agreement or any other Senior Loan
Document, or to defend or assert the rights and claims of Senior Lender
under the Senior Loan Documents or with respect to any Property (by
litigation or other proceedings), which amounts will include all court costs,
reasonable attorneys' fees and expenses, fees of auditors and accountants,
and investigation expenses as may be incurred by Senior Lender in connection
with any such matters (whether or not litigation is instituted), together
with interest at the Default Rate on each such amount from the date of
disbursement until the date of reimbursement to Senior Lender, all of which
shall constitute part of the Loan and shall be secured by the Senior Loan
Documents. Senior Lender shall upon request provide projected budgets for
Senior Lender's costs and expenses to be reimbursed pursuant to this
paragraph. Senior Lender shall not be bound by any such budgets, but to the
extent that any cost overruns arise because of overruns in Senior Lender's
costs and expenses, such overruns shall not be deemed a default by Borrower.
Nothing in this paragraph shall obligate Borrower to reimburse Senior Lender
for Senior Lender's cost of funds.
Section 11.6 Approvals; Third Parties; Conditions. All approval rights
retained or exercised by Senior Lender with respect to leases, contracts,
plans, studies and other matters are solely to facilitate Senior Lender's
credit underwriting, and shall not be deemed or construed as a determination
that Senior Lender has passed on the adequacy thereof for any other purpose
and may not be relied upon by Borrower or any other Person. This Agreement
is for the sole and exclusive use of Senior Lender and Borrower and may not
be enforced, nor relied upon, by any Person other than Senior Lender and
Borrower. All conditions of the obligations of Senior Lender hereunder,
including the obligation to make Advances, are imposed solely and exclusively
for the benefit of Senior Lender, its successors and assigns, and no other
Person shall have standing to require satisfaction of such conditions or be
entitled to assume that Senior Lender will refuse to make Advances in the
absence of strict compliance with any or all of such conditions, and no
other Person shall, under any circumstances, be deemed to be a beneficiary
of such conditions, any and all of which may be freely waived in whole or in
part by Senior Lender at any time in Senior Lender's sole discretion.
Section 11.7 Senior Lender Not in Control; No Partnership/Membership;
Not a Permitted Sponsor; Affiliation with Subordinated Lender. (a) None of
the covenants or other provisions contained in this Agreement shall, or shall
be deemed to, give Senior Lender the right or power to exercise control
over the affairs or management of Borrower, the power of Senior Lender
being limited to the rights to exercise the remedies referred to in the
Senior Loan Documents. The relationship between Borrower and Senior Lender
is, and at all times shall remain, solely that of debtor and creditor. No
covenant or provision of the Senior Loan Documents is intended, nor shall
it be deemed or construed, to create a partnership, joint venture, agency or
common interest in profits or income between Senior Lender and Borrower or
to create an equity in any Property in Senior Lender. Senior Lender neither
undertakes nor assumes any responsibility or duty to Borrower or to any
other person with respect to any Property or the Loan, except as expressly
provided in the Senior Loan Documents; and notwithstanding any other
provision of the Senior Loan Documents: (1) Senior Lender is not, and shall
not be construed as, a partner, joint venturer, alter ego, manager,
controlling person or other business associate or participant of any kind
of Borrower or its stockholders, members, or partners and Senior Lender
does not intend to ever assume such status; (2) Senior Lender shall in no
event be liable for any Debts, expenses or losses incurred or sustained by
Borrower; and (3) Senior Lender shall not be deemed responsible for or a
participant in any acts, omissions or decisions of Borrower or its
stockholders, members, or partners. Senior Lender and Borrower disclaim any
intention to create any partnership, joint venture, agency or common
interest in profits or income between Senior Lender and Borrower, or to
create an equity in any Property in Senior Lender, or any sharing of
liabilities, losses, costs or expenses.
(b) Senior Lender shall have no right or obligation to direct, manage,
control, or participate in any Remediation. At all times, Permitted
Sponsor(s) shall constitute the sponsor of, and shall control, any and all
Remediation, all in full compliance with all applicable Law. Upon request,
Borrower shall promptly cause a Permitted Sponsor to confirm in writing to
Senior Lender that such party is the Sponsor as to any Property(ies) or
Remediation designated by Senior Lender. Senior Lender shall have neither
the right nor the obligation to: (i) take any action, make any decision or
otherwise participate in management of Borrower or any Subsidiary in any way
if such action, decision or participation would or could, in Senior Lender's
judgment, cause Senior Lender to be deemed a Sponsor of any Remediation; or
(ii) exercise decisionmaking control over any environmental compliance or
hazardous substance handling or disposal. Nothing in this paragraph shall
limit any right or remedy of Senior Lender upon the occurrence of an Event
of Default.
(b) Borrower acknowledges that Subordinated Lender and Senior Lender are
Affiliates. Notwithstanding such affiliation, Senior Lender's rights,
remedies and obligations under this Agreement, and Senior Lender's exercise
and performance thereof, shall at all times be determined and interpreted
as if no affiliation existed between Subordinated Lender and Senior Lender.
The preceding shall not be deemed to impose any obligation on Senior Lender,
or to limit or restrict in any way Senior Lender's exercise of its rights
and remedies under the Senior Loan Documents.
Section 11.8 Time of the Essence. Time is of the essence with respect
to this Agreement.
Section 11.9 Assignment. This Agreement shall be binding upon and
inure to the benefit of Senior Lender and Borrower and their respective
successors and assigns of Senior Lender and Borrower, provided that neither
Borrower nor any other Borrower Party shall, without the prior written
consent of Senior Lender (which consent may be granted or withheld in
Senior Lender's sole discretion), assign any rights, duties or obligations
hereunder. Notwithstanding the foregoing, Senior Lender shall be free at any
time or from time to time to assign the Senior Loan Documents to any
assignee, whether completely or only as they relate to any specific
Property(ies) without the consent of Borrower. If Senior Lender from time
to time desires to make any such assignment, complete or partial, then
Borrower shall provide such certificates, deliveries, and other documents
as Senior Lender shall reasonably require in connection therewith, including
any amendments to the Senior Loan Documents to sever the Senior Loan
Documents as to any particular Property(ies), or as otherwise necessary or
appropriate, in Senior Lender's reasonable judgment, to facilitate any
transfer or assignment, in whole or in part, by Senior Lender.
Section 11.10 Renewal, Extension or Rearrangement. All provisions
of the Senior Loan Documents shall apply with equal effect to each and all
promissory notes and amendments thereof hereinafter executed which in whole
or in part represent a renewal, extension, increase or rearrangement of the
Loan. For portfolio management purposes, Senior Lender may elect to divide
the Loan into two or more separate loans evidenced by separate promissory
notes so long as the payment and other obligations of Borrower are not
effectively increased or otherwise modified and, provided that, if such
division results in the imposition of intangible taxes or mortgage
recording taxes in excess of the amount of such taxes that would be
due and payable absent such division (the "Excess Mortgage Taxes"), then
Senior Lender shall be responsible for the payment of such Excess Mortgage
Taxes. Borrower agrees to cooperate with Senior Lender and to execute such
documents as Senior Lender reasonably may request to effect such division
of the Loan. To the extent that any actual or potential assignee of the
Loan or an interest therein incurs any expenses (such as attorneys' and
consultants' fees, "due diligence" costs, and other transaction costs),
which expenses would not have been incurred but for such actual or potential
assignment, Borrower shall have no obligation to pay or contribute to such
expenses.
Section 11.11 Waivers. No course of dealing on the part of Senior
Lender, its officers, employees, consultants or agents, nor any failure or
delay by Senior Lender with respect to exercising any right, power or
privilege of Senior Lender under any of the Senior Loan Documents, shall
operate as a waiver thereof, it being understood that any waivers must be in
writing and executed by the party giving such waiver.
Section 11.12 Cumulative Rights. Rights and remedies of Senior Lender
under the Senior Loan Documents shall be cumulative, and the exercise or
partial exercise of any such right or remedy shall not preclude the exercise
of any other right or remedy.
Section 11.13 Singular and Plural. Words used in this Agreement and
the other Senior Loan Documents in the singular, where the context so
permits, shall be deemed to include the plural and vice versa. The
definitions of words in the singular in this Agreement and the other
Senior Loan Documents shall apply to such words when used in the plural
where the context so permits and vice versa.
Section 11.14 Phrases. When used in this Agreement and the other
Senior Loan Documents, the phrase "including" (and comparable phrases, such
as "include") shall mean "including, but not limited to," the phrase
"satisfactory to Senior Lender" shall mean "in form and substance
satisfactory to Senior Lender in all respects," the phrase "with Senior
Lender's consent" or "with Senior Lender's approval" shall mean such consent
or approval at Senior Lender's discretion, and the phrase "acceptable to
Senior Lender" shall mean "acceptable to Senior Lender at Senior Lender's
sole discretion." Wherever any party's consent is not to be unreasonably
withheld, such consent shall not be unreasonably delayed or conditioned.
Section 11.15 Exhibits and Schedules. The exhibits and schedules
attached to this Agreement are incorporated herein and shall be considered
a part of this Agreement for the purposes stated herein.
Section 11.16 Titles of Articles, Sections and Subsections. All titles
or headings to articles, sections, subsections or other divisions of this
Agreement and the other Senior Loan Documents or the exhibits hereto and
thereto are only for the convenience of the parties and shall not be
construed to have any effect or meaning with respect to the other content
of such articles, sections, subsections or other divisions, such other
content being controlling as to the agreement between the parties hereto.
Section 11.17 Promotional Material. Borrower authorizes Senior Lender to
issue press releases, advertisements and other promotional materials in
connection with Senior Lender's own promotional and marketing activities,
and describing the Loan in general terms or in detail and Senior Lender's
participation in the Loan. All references to Senior Lender contained in
any press release, advertisement or promotional material issued by Borrower
shall be approved in writing by Senior Lender in advance of issuance.
Section 11.18 Survival. All of the representations, warranties, and
indemnities hereunder (including environmental matters under Article 4),
and under the indemnification provisions of the other Senior Loan Documents
shall survive the repayment in full of the Loan and the release of the
liens evidencing or securing the Loan, and shall survive the transfer (by sale,
foreclosure, conveyance in lieu of foreclosure or otherwise) of any or all
right, title and interest in and to any Property to any party, whether or
not an Affiliate of Borrower.
SECTION 11.19 WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED
BY LAW, BORROWER AND SENIOR LENDER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER SENIOR LOAN DOCUMENT, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF
EITHER PARTY OR ANY EXERCISE BY ANY PARTY OF THEIR RESPECTIVE RIGHTS UNDER
THE SENIOR LOAN DOCUMENTS OR IN ANY WAY RELATING TO THE LOAN OR ANY
PROPERTY (INCLUDING ANY ACTION TO RESCIND OR CANCEL THIS AGREEMENT, AND
ANY CLAIM OR DEFENSE ASSERTING THAT THIS AGREEMENT WAS FRAUDULENTLY
INDUCED OR IS OTHERWISE VOID OR VOIDABLE). THIS WAIVER IS A MATERIAL
INDUCEMENT FOR SENIOR LENDER TO ENTER THIS AGREEMENT.
Section 11.20 Waiver of Punitive or Consequential Damages. Neither
Senior Lender nor Borrower shall be responsible or liable to the other or
to any other Person for any punitive, exemplary or consequential damages
which may be alleged as a result of the Loan or the transaction contemplated
hereby, including any breach or other default by any party hereto.
Section 11.21 Governing Law. The Senior Loan Documents are being
executed and delivered, and are intended to be performed, in the state of
New York and the laws of the state of New York and of the United States of
America shall govern the rights and duties of the parties hereto and the
validity, construction, enforcement and interpretation of the Senior Loan
Documents, except to the extent otherwise specified in any of the Senior
Loan Documents.
Section 11.22 Entire Agreement. This Agreement and the other Senior Loan
Documents embody the entire agreement and understanding between Senior
Lender and Borrower and supersede all prior agreements and understandings
between such parties relating to the subject matter hereof and thereof.
Accordingly, the Senior Loan Documents 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.
Section 11.23 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall constitute an original, but all of which
shall constitute one document.
Section 11.24 Knowledge of Borrower. Whenever the phrase "to Borrower's
knowledge" or "to the best of Borrower's knowledge" is used in this Agreement
such term shall mean the best of Borrower's knowledge and shall include the
knowledge of any Borrower Party.
EXECUTED as of the date and year first written above.
BORROWER:
DMB/REMEDIATION LLC, a Delaware
limited liability company
By: Bruce S. Reshen
______________________________
Name: Bruce S. Reshen
Title: President
SENIOR LENDER:
PPA FUNDING CORP., a Delaware corporation
By: Allan Baum
_______________________________
Name: Allan Baum
Title: President
GREENFIELDS FUNDING CORP.
and
DMB/REMEDIATION LLC
_______________________
SUBORDINATED LOAN AGREEMENT
_______________________
March 11, 1997
<PAGE>
TABLE OF CONTENTS
BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1 DEFINITIONS.. . . . . . . . . . . . . . . . . . . . . . . 2
2 THE LOAN; FUNDING CONDITIONS. . . . . . . . . . . . . . . 19
2.1 Approval, Advances and Funding Conditions. . . . . . 19
2.2 Amount of Subordinated Loan Advances.. . . . . . . . 19
2.3 Release Shortfall Advances.. . . . . . . . . . . . . 20
2.4 Required Equity Contribution.. . . . . . . . . . . . 20
2.5 Additional Prov. Relating to Subordinated Loan Adv . 20
2.6 Purpose of Funding Conditions. . . . . . . . . . . . 20
2.7 Repayment. . . . . . . . . . . . . . . . . . . . . . 21
2.8 Fiduciary Obligation.. . . . . . . . . . . . . . . . 21
2.9 Subordinated Loan Interest.. . . . . . . . . . . . . 21
2.10 Maturity Date.. . . . . . . . . . . . . . . . . . . 22
2.11 Effect of Upcoming Maturity.. . . . . . . . . . . . 22
2.12 Security and Priority.. . . . . . . . . . . . . . . 22
2.13 Certain Excluded Expenditures.. . . . . . . . . . . 22
3 LOAN APPLICATIONS.. . . . . . . . . . . . . . . . . . . . 23
3.1 Required Contents. . . . . . . . . . . . . . . . . . 23
3.2 Criteria to Be Satisfied.. . . . . . . . . . . . . . 24
3.3 Noncompliance. . . . . . . . . . . . . . . . . . . . 25
3.4 Time Periods and Approval. . . . . . . . . . . . . . 25
3.5 Multiple Disapprovals. . . . . . . . . . . . . . . . 26
4 COVENANTS.. . . . . . . . . . . . . . . . . . . . . . . . 26
4.1 Acquisition and Remediation. . . . . . . . . . . . . 26
4.2 Compliance with Law. . . . . . . . . . . . . . . . . 27
4.3 Site Conditions. . . . . . . . . . . . . . . . . . . 27
4.4 Delays in Mortgage Acquisitions. . . . . . . . . . . 27
4.5 GMP Agreements.. . . . . . . . . . . . . . . . . . . 28
4.6 Use of Funds.. . . . . . . . . . . . . . . . . . . . 28
4.7 Real Estate Operations.. . . . . . . . . . . . . . . 28
4.8 Leasing. . . . . . . . . . . . . . . . . . . . . . . 29
4.9 Notices. . . . . . . . . . . . . . . . . . . . . . . 29
4.10 Environmental Reports.. . . . . . . . . . . . . . . 29
4.11 Access. . . . . . . . . . . . . . . . . . . . . . . 29
4.12 Contracts.. . . . . . . . . . . . . . . . . . . . . 29
4.13 Communications. . . . . . . . . . . . . . . . . . . 30
4.14 Budgets.. . . . . . . . . . . . . . . . . . . . . . 30
4.15 Notification of Certain Events. . . . . . . . . . . 30
4.16 No Conveyance.. . . . . . . . . . . . . . . . . . . 30
4.17 Other Business of DMB.. . . . . . . . . . . . . . . 30
4.18 Administrative Expenses Budgets.. . . . . . . . . . 31
4.19 Documentation.. . . . . . . . . . . . . . . . . . . 31
4.20 Disposition Agreements. . . . . . . . . . . . . . . 31
4.21 Replace. of Cleanup Contractor or Good Faith Guar 31
4.22 DMB Affiliated Financing. . . . . . . . . . . . . . 32
4.23 Financial Statements. . . . . . . . . . . . . . . . 32
4.24 Transfers of Interests in Borrower or any Subsid. . 33
4.25 Subordinated Pledge Agreement.. . . . . . . . . . . 34
5 GMP AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . 34
5.1 Cost Overruns. . . . . . . . . . . . . . . . . . . . 34
5.2 On-Site Operations.. . . . . . . . . . . . . . . . . 34
6 OPERATING AGREEMENTS. . . . . . . . . . . . . . . . . . . 35
6.1 Operating Agreements.. . . . . . . . . . . . . . . . 35
6.2 Approvals and Consents.. . . . . . . . . . . . . . . 35
6.3 Delivery of Information. . . . . . . . . . . . . . . 35
6.4 Meetings.. . . . . . . . . . . . . . . . . . . . . . 35
6.5 Enforcement of Borrower Operating Agreement. . . . . 35
6.6 No Amendments. . . . . . . . . . . . . . . . . . . . 36
6.7 No Member Loans. . . . . . . . . . . . . . . . . . . 36
6.8 DMB's Failure to Provide Funds.. . . . . . . . . . . 36
6.9 Subordinated Lender's Failure to Provide Funds.. . . 37
6.10 Withdrawing Member. . . . . . . . . . . . . . . . . 39
6.11 Copies of Notices.. . . . . . . . . . . . . . . . . 39
6.12 Other DMB Entities. . . . . . . . . . . . . . . . . 39
7 BORROWER'S SUBSIDIARIES.. . . . . . . . . . . . . . . . . 39
7.1 Loan Obligations.. . . . . . . . . . . . . . . . . . 39
7.2 Structuring. . . . . . . . . . . . . . . . . . . . . 39
7.3 Conduct of Business. . . . . . . . . . . . . . . . . 41
8 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . 41
8.1 Loan Applications. . . . . . . . . . . . . . . . . . 41
8.2 Operating Agreements.. . . . . . . . . . . . . . . . 41
8.3 Subsidiaries.. . . . . . . . . . . . . . . . . . . . 41
8.4 Qualification, Etc.. . . . . . . . . . . . . . . . . 41
8.5 Authorization and Enforceability.. . . . . . . . . . 41
8.6 No Material Litigation.. . . . . . . . . . . . . . . 42
8.7 Compliance with Law. . . . . . . . . . . . . . . . . 42
8.8 No Conflict. . . . . . . . . . . . . . . . . . . . . 42
8.9 Ownership. . . . . . . . . . . . . . . . . . . . . . 42
8.10 Place of Business.. . . . . . . . . . . . . . . . . 42
8.11 Financial Statements. . . . . . . . . . . . . . . . 43
8.12 Accurate and Complete.. . . . . . . . . . . . . . . 43
8.13 No Fraud. . . . . . . . . . . . . . . . . . . . . . 43
8.14 ERISA.. . . . . . . . . . . . . . . . . . . . . . . 43
8.15 No Contracts. . . . . . . . . . . . . . . . . . . . 43
8.16 GMP Agreements. . . . . . . . . . . . . . . . . . . 43
8.17 Margin Regulations. . . . . . . . . . . . . . . . . 44
8.18 Taxes; Elections. . . . . . . . . . . . . . . . . . 44
8.19 Opinion(s) of Counsel.. . . . . . . . . . . . . . . 44
8.20 No Default. . . . . . . . . . . . . . . . . . . . . 44
9 REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . 44
9.1 Termination of Advances. . . . . . . . . . . . . . . 45
9.2 Default Interest.. . . . . . . . . . . . . . . . . . 45
9.3 Loan Termination Option. . . . . . . . . . . . . . . 45
9.4 Cure.. . . . . . . . . . . . . . . . . . . . . . . . 47
9.5 Completion of Remediation. . . . . . . . . . . . . . 47
9.6 Management.. . . . . . . . . . . . . . . . . . . . . 47
9.7 Costs of Collection. . . . . . . . . . . . . . . . . 47
10 EXCLUSIVITY.. . . . . . . . . . . . . . . . . . . . . . . 48
10.1 Subordinated Lender's New Loan Opportunities. . . . 48
10.2 Subordinated Lender Exclusivity.. . . . . . . . . . 48
10.3 Other Environmentally Contaminated Real Property. . 48
11 MISCELLANEOUS.. . . . . . . . . . . . . . . . . . . . . . 49
11.1 Subordinated Lender's Approval. . . . . . . . . . . 49
11.2 Status of Subordinated Lender.. . . . . . . . . . . 49
11.3 Affiliation with Senior Lender. . . . . . . . . . . 49
11.4 Borrower's Waiver of Claims . . . . . . . . . . . . 50
11.5 Subordinated Lender's Waiver of Claims. . . . . . . 50
11.6 Usury; Maximum Rate . . . . . . . . . . . . . . . . 50
11.7 Relationship of Parties . . . . . . . . . . . . . . 51
11.8 Further Assurances. . . . . . . . . . . . . . . . . 51
11.9 Separability. . . . . . . . . . . . . . . . . . . . 51
11.10 Notices. . . . . . . . . . . . . . . . . . . . . . 51
11.11 Authority of Attorneys.. . . . . . . . . . . . . . 51
11.12 Interpretation; Governing Law. . . . . . . . . . . 51
11.13 Amendments.. . . . . . . . . . . . . . . . . . . . 52
11.14 Successors and Assigns.. . . . . . . . . . . . . . 52
11.15 Assignment by Subordinated Lender. . . . . . . . . 52
11.16 Survival.. . . . . . . . . . . . . . . . . . . . . 52
11.17 Jury Trial Waiver. . . . . . . . . . . . . . . . . 52
11.18 Counterparts . . . . . . . . . . . . . . . . . . . 53
11.19 Subordinated Lender Waivers. . . . . . . . . . . . 53
INDEX OF DEFINED TERMS . . . . . . . . . . . . . . . . . . . . 56
<PAGE>
EXHIBITS
Exhibit "A" - Administrative Expenses Budget
Exhibit "B" - Description of Remediation Profiles
Exhibit "C" - Example of Percentage Adjustment
Exhibit "D" - Waterfall
Exhibit "E" - Environmental Insurance Policy
Exhibit "F" - Subordinated Pledge Agreement
<PAGE>
SUBORDINATED LOAN AGREEMENT
THIS SUBORDINATED LOAN AGREEMENT (the "Agreement") is made and
entered into as of March 11, 1997 (the "Closing Date"), by and between
GREENFIELDS FUNDING CORP., a Delaware corporation, whose address is Eleven
Madison Avenue, New York, New York 10010 ("Subordinated Lender"), and
DMB/REMEDIATION LLC, a Delaware limited liability company, whose address is
501 Madison Avenue, 19th Floor, New York, New York 10022 ("Borrower"). No
other parties, including, but not limited to, any Subsidiaries, are parties
to this Agreement. This Agreement is made solely and exclusively for the
benefit of Subordinated Lender and Borrower. Certain terms used in this
Agreement are defined on the pages in this Agreement referenced in the Index
of Defined Terms that follows the signatures. Terms can be used before they
are defined.
BACKGROUND
A. Borrower, a wholly owned subsidiary of Dames & Moore / Brookhill,
L.L.C., a Delaware limited liability company ("DMB") was formed pursuant to
an Operating Agreement entered into as of the Closing Date (the "Borrower
Operating Agreement," as amended from time to time with Subordinated
Lender's consent).
B. DMB, the only member of Borrower pursuant to the Borrower
Operating Agreement, was formed pursuant to an Operating Agreement entered
into on March 29, 1996 (the "DMB Operating Agreement").
C. On the Closing Date, Borrower and PPA FUNDING CORP., a Delaware
corporation, whose address is Eleven Madison Avenue, New York, New York
10010 ("Senior Lender") are entering into a Senior Loan Agreement (the
"Senior Loan Agreement"). To the extent that any capitalized term used in
this Agreement without definition is defined in the Senior Loan Agreement,
such definition shall also apply here.
D. Borrower desires to obtain from Subordinated Lender, and
Subordinated Lender desires to make available to Borrower, certain financing
pursuant to this Agreement (the "Loan" or the "Subordinated Loan") for the
acquisition (or Mortgage Acquisition with respect to), Remediation and/or
Development of Environmentally Contaminated real property (each such
parcel of real property, a "Property") in accordance with Loan Applications
to be submitted by Borrower pursuant to this Agreement.
NOW, THEREFORE, Borrower and Subordinated Lender agree:
1 DEFINITIONS.
The terms listed in this Article shall have the definitions set
forth below.
"Administrative Expense Disbursements" shall have the meaning set
forth in the Waterfall.
"Administrative Expenses" shall mean all reasonable fees, charges
and other expenses incurred by Subordinated Lender in connection with the
closing of the Subordinated Loan, all reasonable and necessary administrative
expenses of Borrower, such as attorneys' fees, organizational and entity
maintenance expenses, minimum franchise taxes, and all other expenses
of Borrower not attributable to any specific Approved Property, provided
that such Administrative Expenses are substantially consistent with the
Administrative Expenses Budget. Administrative Expenses shall also include
all costs and expenses for the processing of requests for Subordinated Loan
Advances and the making of Subordinated Loan Advances, including the
fees of any inspecting or supervising adviser or consultant retained by
Subordinated Lender, Subordinated Lender's legal fees, title company charges,
search charges, survey expenses, and other similar expenses, if any, and any
and all other costs and expenses of any kind incurred by Subordinated Lender
in administering the Loan or advancing funds pursuant to the Loan.
Administrative Expenses shall also include the Structuring Fee payable to
Senior Lender and any Lender's attorneys' fees including attorneys' fees
relating to the initial closing of the Loans. However, attorneys' fees
specific to any closings relating to Approved Properties shall constitute
Approved Investment as to the affected Approved Property. Administrative
Expenses shall not include any internal administrative, overhead or
out-of-pocket costs incurred by Borrower or DMB with respect to its
participation in Borrower, such as salaries and benefits of personnel, or
any fee for Borrower's or DMB's services. Administrative Expenses shall not
include any payments: (a) on account of any DMB Affiliated Financing; or (b)
made by DMB, Borrower or any of its Subsidiaries or affiliates to indemnify
Subordinated Lender as required by any Loan Documents, or otherwise.
"Administrative Expenses Budget" shall mean the budget attached as
Exhibit "A" or such modified budget as Subordinated Lender shall have approved.
"Affiliate" means, with respect to any Person, any other Person (i)
that owns more than 10% of the voting interests in such Person; or (ii) in
which such Person owns more than 10% of the voting interests; or (iii) in
which more than 10% of the voting interests are owned by a Person that has a
relationship with such Person as described in clause "i" or "ii" above or
that otherwise controls, is controlled by, or is under common control with,
such Person. For purposes of this definition, the term "controls," "is
controlled by," or "is under common control with" shall mean the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of a person or entity, whether through the ownership
of voting securities, by contract or otherwise.
"Approved Investment" means the entire amount of any expenditure by
Borrower or a Subsidiary for an Approved Property or Mortgage Acquisition,
including any expenditure for pre-acquisition Remediation, acquisition costs
(in connection with acquisition of the Approved Property or the making of a
Mortgage Acquisition by a Subsidiary), Hard Costs and Soft Costs of
Remediation and Development, Administrative Expenses, and carrying costs,
provided that each such expenditure is consistent with the Loan Application
for such Approved Property or Mortgage Acquisition, regardless of the source
from which such Approved Investment is funded.
"Approved Property" shall mean a Property as to which Subordinated
Lender has approved a Loan Application, subject in all cases to the terms,
conditions and limitations of any such Loan Application and Subordinated
Lender's approval thereof.
"Bankruptcy Proceeding" shall mean, with respect to any Person, any
bankruptcy, insolvency, reorganization, composition, assignment for the
benefit of creditors, appointment of trustee, or any similar action or
proceeding affecting such Person or any of its property that is either (a)
initiated by such Person or by any Affiliate of such Person or (b) if not
described in clause "a," then not dismissed within 90 days after commencement.
"Basic Return Disbursements" shall have the meaning set forth in
the Waterfall.
"Borrower Cash" shall mean any Cash Flow or Net Proceeds from Sales
or Refinancings of any Approved Property received or held by Borrower, or
any Subsidiary.
"Cash Equivalent" shall mean cash or its equivalent.
"Cash Flow" shall mean (either as an aggregate term or with reference
to particular approved Property(ies), as the context shall reflect) all cash
funds and Cash Equivalents derived from operations of Borrower and
Subsidiaries of Borrower (but not Net Proceeds from Sales or Refinancings of
any Approved Properties, even if in the ordinary course of business)
including but not limited to, the net cash proceeds from all renting,
leasing, or any other use of property from any entity in which Borrower or
any Subsidiary has an economic interest, less any portion thereof used to pay
or establish reasonable reserves consistent with this Agreement for future
expenses or liabilities, Senior Loan Payments, capital improvements,
replacements and contingencies, all as determined by Borrower's Board of
Managers with Subordinated Lender's approval. Cash Flow shall include all
interest payments with respect to any note or other obligation received by
Borrower in connection with sales and other dispositions of property, as
well as any Cash Equivalents of such interest payments. Cash Flow shall not
be reduced by depreciation, amortization (other than loan amortization), cost
recovery deductions, or similar allowances, but shall be increased by any
reductions of reserves previously established pursuant to the first sentence
of this paragraph, provided, however, that:
o Cash Flow shall be calculated without taking any deduction for
Administrative Expenses or for payments made or to be made on
account of the Subordinated Loan (principal or interest).
o Cash Flow shall include the receipts and disbursements of
Subsidiaries when distributed to Borrower, or when they would
have been distributed to Borrower if Borrower had complied with
this Agreement as to the making of such distributions.
o Any payments with respect to any DMB Affiliated Financing
shall not be deducted in calculating Cash Flow.
"Cash Outlay" shall mean the total amount (100%, regardless of the
source or timing of funding) of: (a) any Administrative Expense to be paid or
incurred by Borrower or a Subsidiary or (b) all amounts paid or to be paid
(previously, presently, or in the future) by Borrower or a Subsidiary on
account of an Approved Investment, as set forth in a Loan Application. Where
an Approved Investment is to be made over time or in installments, "Cash
Outlay" shall refer to the total of such installments (as opposed to "Current
Cash Outlay," which refers to each such installment).
"Cleanup Contractor" shall mean Dames & Moore, Inc., a Delaware
corporation having an address at 911 Wilshire Boulevard, Los Angeles,
California 90017. To the extent that Borrower replaces Cleanup Contractor
with a Satisfactory Replacement Cleanup Contractor (as to any one or more
Approved Property(ies)), such Satisfactory Replacement Cleanup Contractor
shall then constitute "Cleanup Contractor" as to the affected Approved
Properties.
"Clearance" shall mean, with respect to any Remediation, the
completion of such Remediation in accordance with the requirements of all
applicable Governmental Authorities as set forth in the applicable Loan
Application, (and subject to changes in Law) as evidenced by the issuance of
all applicable written confirmations, approvals, clearances, releases,
covenants not to sue, prospective purchaser agreements, and other similar
documentation, including any land use restriction agreements or covenants
required by such Governmental Authority.
"Cure Period" shall mean, with respect to any default, the
following period after written notice from Subordinated Lender: (a) ten days,
in the case of any monetary default other than failure to pay Subordinated
Loan Interest, or principal of the Subordinated Loan, when due; (b)
three business days in the case of a nonmonetary default relating to failure
to provide insurance; and (c) thirty days, in the case of any other
nonmonetary default. Such thirty-day period shall be extended as to curable
nonmonetary defaults (other than failure to provide insurance), but only so
long as the party in default is, with diligence and continuity, endeavoring
to cure such nonmonetary default. There shall be no Cure Period as to
failure to pay Subordinated Loan Interest or principal on the Subordinated
Loan if, when, and as such interest or principal may become due and payable
pursuant to this Agreement from time to time, to the extent that the amount
required to be paid has been determined.
"Current Cash Outlay" shall mean only the amount of any Cash Outlay
presently due and payable by Borrower or a Subsidiary at a particular time.
"Damages" shall mean all damages, and includes punitive damages,
liabilities, costs, losses, diminutions in value, fines, penalties, demands,
claims, cost recovery actions, lawsuits, administrative proceedings, orders,
response action costs, compliance costs, investigation expenses, consultant
fees, attorneys' and paralegals' fees and litigation expenses.
"Default Interest" shall mean interest at the rate of twenty-four
percent (24%) per annum.
"Develop," and any derivative thereof such as Development, as to
any real property, shall mean without limitation develop, alter, operate,
renovate and redevelop such real property, including site work, filing of any
necessary applications for building permits, zoning approvals, and other
permits and approvals not related to Remediation, and any demolition of
existing improvements contemplated by a Loan Application. Costs of
Development shall also include reasonable and customary carrying costs and
operating losses incurred during Development.
"Disbursement Request" shall mean Borrower's written request that
Subordinated Lender make a Subordinated Loan Advance, which request shall be
in such form, and be accompanied by such documentation and deliveries, as
Subordinated Lender shall reasonably request.
"DMB Affiliated Financing" shall mean unsecured loans obtained from
time to time by Borrower from DMB or any Affiliate of DMB, provided that:
o Permitted Amount. The amount of any such loan shall not
exceed, and the proceeds of any such loan shall be applied
only in lieu of and in substitution for, DMB's share of any
additional Capital Contribution to Borrower required because
costs of Remediation or Development exceed those set forth in a
Loan Application.
o Subordination. The lender providing such loan shall have
unconditionally subordinated all of its rights with respect to
such loan (including as to timing, right, and priority of
payment) to the prior payment in full of the Subordinated
Loan, all pursuant to documentation satisfactory to
Subordinated Lender in its sole and absolute discretion.
o Loan Status. No Event of Default shall have occurred and is
continuing.
o Compliance. Borrower shall have complied with all covenants,
requirements and conditions of this Agreement with respect to
such DMB Affiliated Financing.
"DMB Parties" shall mean Borrower, DMB, all Subsidiaries, and the
Good Faith Guarantors.
"Environmental Claim" shall mean, with respect to any Approved
Property, any investigation, notice, violation, demand, allegation, action,
suit, injunction, judgment, order, consent decree, penalty, fine, lien,
proceeding or claim (whether administrative, judicial or private in nature),
arising (a) pursuant to, or in connection with an actual or alleged
violation of, any Environmental Law, by Borrower, any Subsidiary, DMB, or
Cleanup Contractor, (b) in connection with any Hazardous Material or actual
or alleged Hazardous Material Activity, or (c) from any abatement, removal,
remedial, corrective or other response action in connection with a
Hazardous Material, Environmental Law or other order of a Governmental
Authority, including the actions or omissions of Cleanup Contractor,
Borrower, any Subsidiary, and DMB.
"Environmental Insurance Policy" shall mean for each Approved
Property one or more insurance policy(ies) (or certificates or other
evidences of insurance, issued pursuant to a master policy, with a specific
amount of coverage reserved for such Approved Property), to be purchased
by Borrower, in substantially the form of Exhibit "E" (or as otherwise
approved by Subordinated Lender pursuant to a Loan Application), providing
insurance protection against all Latent Environmental Risks of such Property.
Any Environmental Insurance Policy shall contain a waiver of any right of
subrogation against all DMB Parties and Subordinated Lender. Any
Environmental Insurance Policy shall identify Subordinated Lender as an
additional insured and shall be issued in favor of Borrower.
"Environmental Indemnitors" shall mean DMB and Borrower.
"Environmental Law" shall mean any Law pertaining to (a) the
protection of health, safety and the indoor or outdoor environment, (b) the
conservation, management or use of natural resources and wildlife, (c) the
protection or use of surface water and groundwater, (d) the management,
manufacture, possession, presence, use, generation, transportation, treatment,
storage, disposal, Hazardous Material Release, threatened Hazardous Material
Release, abatement, removal, Remediation or handling of, or exposure to, any
Hazardous Material or (e) pollution. "Environmental Law" includes the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act of 1986, 42
U.S.C. Section 9601 et seq., Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976 and Hazardous and Solid Waste
Amendments of 1984, 42 U.S.C. Section 6901 et seq., Federal Water Pollution
Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. Section
1251 et seq., Clean Air Act of 1966, as amended, 42 U.S.C. Section 7401 et
seq., Toxic Substances Control Act of 1976, 15 U.S.C. Section 2601 et seq.,
Hazardous Materials Transportation Act, 49 U.S.C. App. Section 1801 et seq.,
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. Section
651 et seq., Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.,
Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C.
Section 11001 et seq., National Environmental Policy Act of 1969, 42 U.S.C.
Section 4321 et seq., Safe Drinking Water Act of 1974, as amended, 42 U.S.C.
Section 300(f) et seq., any similar, implementing or successor law, and any
amendment, rule, regulation, order or directive issued or enacted by any
applicable Governmental Authority.
"Environmental Risks" shall mean any Damages suffered that may be
suffered by a Person as a result of any Environmental Claim, relating to an
Approved Property, or any condition or circumstance that may give rise to an
Environmental Claim, or potential Damages to any Person as a result of any
actual or potential Environmental Claim relating to or arising from an Approved
Property. Sums payable to Cleanup Contractor to perform Remediation as
required by a GMP Agreement shall not constitute Environmental Risks.
"Environmentally Contaminated," as to any real property, means that
the projected cost of Remediation of such real property equals or exceeds 10%
of the combined projected cost of acquisition, Remediation and Development
of such real property.
"Event of Default" shall mean the occurrence of any of the
following, including the passage of only such notice or cure periods as may
be provided for below.
o Failure of Borrower to pay Subordinated Loan Interest, or
principal of the Subordinated Loan, when and as required by
this Agreement, to the extent that the amount payable shall
have been determined.
o Failure of Borrower or any Subsidiary to perform and comply
with any other covenant or obligation under this Agreement,
which failure: (a) either (i) relates solely to one Approved
Property and would have a Material Adverse Effect as to
such Approved Property or (ii) relates to more than one
Approved Property, whether or not it has a Material Adverse
Effect; and (b) in all cases (regardless of the number of
Approved Properties affected, if any), is not cured within the
Cure Period.
o The making by any member of Borrower or DMB of any transfer of
its membership interest in Borrower or DMB, or the admission
of any new member of Borrower or DMB, without prior written
consent by Subordinated Lender, except as expressly permitted
pursuant to this Agreement.
o The inaccuracy of any warranty or representation in this
Agreement when made or deemed made, which inaccuracy has a
Material Adverse Effect and is either not curable or is not
cured within thirty (30) days after written notice from
Subordinated Lender.
o DMB's withdrawal of any capital, or the taking of any loan,
from Borrower, except for distributions made to DMB in
compliance with the Waterfall.
o A Bankruptcy Proceeding in which any DMB Party is debtor.
o A Bankruptcy Proceeding in which Cleanup Contractor is debtor
unless within thirty days after the initial commencement
(whether voluntary or involuntary, and without regard to the
90-day period provided for in the definition of Bankruptcy
Proceeding) of such Bankruptcy Proceeding, Borrower has procured
a Satisfactory Replacement Cleanup Contractor.
o A Bankruptcy Proceeding in which a Good Faith Guarantor is
debtor, unless within forty-five (45) days after the initial
commencement (whether voluntary or involuntary, and without
regard to the 90-day period provided for in the definition
of Bankruptcy Proceeding) of such Bankruptcy Proceeding,
Borrower has procured a Satisfactory Good Faith Guarantor.
o The assertion, in writing, against Borrower or DMB, of any
Environmental Claim affecting an Approved Property and arising
from the acts or omissions of any Subsidiary, unless within
thirty days after the assertion of such claim: (a) such
claim has been withdrawn as against Borrower and DMB; or (b)
an insurance carrier has confirmed in writing that such carrier
without qualification or limitation is obligated to and shall
defend and pay such claim; or (c) Borrower has obtained
and delivered to Subordinated Lender a bond or other security
or indemnity satisfactory to Subordinated Lender with respect
to such Environmental Claim; or (d) Borrower has commenced to
(and shall thereafter continue at all times to) actively and
diligently contest such Environmental Claim provided that, in
Subordinated Lender's discretion, such contest and the
prosecution thereof shall not have a Material Adverse Effect.
o Failure of Cleanup Contractor to perform any obligation under
a GMP Agreement, which failure is reasonably likely (in
Subordinated Lender's reasonable judgment) to have a Material
Adverse Effect and is not cured within the Cure Period.
o If any Good Faith Guarantor fails to perform any obligation
under the Good Faith Guaranty and fails to cure such
nonperformance within the Cure Period; asserts in writing that
the Good Faith Guaranty is unenforceable or invalid in whole or
in part, which assertion is not withdrawn in writing within ten
days after written notice from Subordinated Lender; or seeks
in writing to revoke, limit, or terminate such Person's
liability, in whole or in part, under the Good Faith Guaranty.
o If any DMB Party or any Affiliate of a DMB Party enters into an
agreement, or takes any other action(s), in pursuance of a New
Loan Opportunity without complying with the applicable
requirements of this Agreement.
o If Borrower or any Subsidiary incurs any Outside Financing in
violation of this Agreement.
o If a Subsidiary misapplies the proceeds of any Subordinated
Loan Advance and, provided that such misapplication was
unintentional, fails to correct same within five business days
after written notice from Subordinated Lender.
"Exit Date" shall mean, as to any Approved Property, the date when
Borrower shall have completed all Remediation and Development, and shall
have disposed, of such Approved Property.
"Force Majeure" shall mean any circumstance beyond Borrower's
reasonable control, provided that:
o Such circumstance cannot reasonably be cured by the payment of
money;
o Borrower provides Subordinated Lender with reasonably prompt
notice of such circumstance; and
o Borrower endeavors with reasonable diligence and continuity to
proceed with the performance of Borrower's obligations
hereunder notwithstanding such circumstance, to the extent
reasonably possible under the circumstances.
"Funding Certificate" shall mean a certificate to be issued by the
Subordinated Lender confirming that subject to the requirements of this
Agreement, including but not limited to satisfaction of the Funding
Conditions, Subordinated Lender has approved a Loan Application and is
prepared, ready, willing and able to make, Subordinated Loan Advances as
contemplated by such Loan Application and this Agreement.
"Funding Conditions," as to any Subordinated Loan Advance, shall
mean the Initial Funding Conditions and/or the General Funding Conditions,
as applicable.
"General Funding Conditions" shall mean the satisfaction and/or
continued satisfaction of the following conditions, all of which are
cumulative, prior to or simultaneously with the making of any Subordinated
Loan Advance (whether an Initial Property Funding or a Subsequent Property
Funding or on account of Administrative Expenses):
o Maximum Amount. The maximum total amount of Subordinated Loan
Advances in the aggregate shall not exceed Forty Million
Dollars ($40,000,000). For purposes of calculating the
aggregate Subordinated Loan Advances in the preceding sentence,
except to the extent that Subordinated Lender may agree
otherwise in writing: (a) any repayments of principal of the
Subordinated Loan shall not be subtracted; (b) sums repaid on
account of the Subordinated Loan may not be reborrowed; and (c)
the Subordinated Loan shall not be a revolving loan.
o Defaults, Etc. No uncured Event of Default exists under any
Loan Document.
o Potential Defaults. No event has occurred that would, with the
passage of time or the giving of notice, constitute an Event of
Default, unless such event: (a) does not relate to the Approved
Property for which the Subordinated Loan Advance is being
requested; (b) is not monetary; (c) is being diligently cured
by Borrower; and (d) is not material.
o Loan Application. Each Current Cash Outlay for an Approved
Property shall be consistent with the Loan Application as
approved, including as to Clearances, cost (subject to
contingencies included in the Loan Application), and timing.
o Senior Loan Approval and Commitment. If and only if the Cash
Outlay relates to an Approved Investment in an Approved
Property, then at the same time that Subordinated Lender makes
the Subordinated Loan Advance, and with respect to the same
Cash Outlay, Senior Lender shall have confirmed in writing
that Senior Lender shall advance to or for the benefit of
Borrower an amount equal to 75% of the entire amount of such
Cash Outlay, provided only that (i) DMB shall have contributed
to Borrower 5% of the Cash Outlay, and (ii) other normal and
customary funding conditions in the Senior Loan Documents shall
have been satisfied. This Funding Condition shall not apply to
the extent that Senior Lender is not obligated to advance funds
only because (a) the Senior Loan is Out of Balance or (b) the
Current Cash Outlay relates to expenditures of a type as to
which Senior Lender otherwise is categorically (because of
circumstances not relating to Borrower's default) not obligated
to make Senior Loan Advances or (c) Borrower has, with
Subordinated Lender's consent (including consent to Outside
Financing pursuant to Subordinated Lender's approval of a Loan
Application), determined not to seek funds from Senior Lender.
o Representations and Warranties. All representations and
warranties made by Borrower in all Loan Documents are true and
correct in all material respects.
o Environmental Insurance Policy. If provided for in the Loan
Application, Borrower shall have obtained a fully paid
Environmental Insurance Policy.
o Disbursement Request. Borrower shall have submitted to
Subordinated Lender a Disbursement Request.
o Application of Prior Advances. Borrower shall have delivered
to Subordinated Lender documentation, satisfactory to
Subordinated Lender, demonstrating the proper application and
disbursement of all previous Subordinated Loan Advances.
o Approval of Administrative Expense. If the Cash Outlay relates
to an Administrative Expense, then such Administrative Expense
shall have been approved by Subordinated Lender, including
pursuant to approval of a budget (including the Administrative
Expenses Budget annexed hereto as Exhibit "A"), revised budget,
or Loan Application.
o No Material Adverse Event. No fact or circumstance (except as
disclosed in the Loan Application) shall exist that would have
a Material Adverse Effect.
"GMP Agreement" shall mean an agreement between Cleanup Contractor
and a Subsidiary by which Cleanup Contractor agrees to Remediate all
Environmental Risks to the extent provided in the Loan Application (as
approved by Subordinated Lender) for the Property affected by such GMP
Agreement, and specifically agrees to Remediate all Identified Environmental
Risks (to the extent such Remediation is necessary to obtain Clearances), as
provided for in the Loan Application, which agreement and plan provide for a
guaranteed maximum price, a scheduled completion date (but no liquidated
damages for delay), and other terms and conditions approved by Subordinated
Lender, and is in substantially the form annexed to the Borrower Operating
Agreement.
"Good Faith Guarantors" shall mean Mr. Ronald Bruder, an individual
having an address at 501 Madison Avenue, 18th Floor, New York, New York
10022 and Dames & Moore, Inc., a Delaware corporation having an address at
911 Wilshire Boulevard, Los Angeles, California 90017.
"Good Faith Guaranty" shall mean that certain so-called "Good Faith
Guaranty" dated on or about the Closing Date executed by the Good Faith
Guarantors.
"Governmental Approval" shall mean any permit, license, variance,
certificate, consent, letter, Clearance, closure, exemption, decision or
action or approval of a Governmental Authority, having proper and full
jurisdiction to issue such approval.
"Governmental Authority" shall mean any federal, state, regional,
county, local or other person or body having governmental or quasi-
governmental authority or subdivision thereof, including a court.
"Hard Costs" shall mean all costs of on-site physical activity in
connection with Remediation or Development (as applicable), including without
limitation excavation, construction, site protection, plumbing, paving,
landscaping, fences, alterations, utilities, lighting, grading and filling,
and other activities on an Approved Property, including all labor and
materials in connection therewith.
"Hazardous Material" shall mean any substance, chemical, compound,
product, solid, gas, liquid, waste, byproduct, pollutant, contaminant or
material that is hazardous or toxic, and includes (a) asbestos,
polychlorinated biphenyls and petroleum (including crude oil or any fraction
thereof) and (b) any such material classified or regulated as "hazardous" or
"toxic" pursuant to any Environmental Law.
"Hazardous Material Activity" shall mean any activity, event or
occurrence involving a Hazardous Material, including the manufacture,
possession, presence, use, generation, transportation, treatment, storage,
disposal, Hazardous Material Release, threatened Hazardous Material Release,
abatement, removal, Remediation, handling of or corrective or response action
to any Hazardous Material.
"Hazardous Material Release" means any release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment of Hazardous
Material (including, without limitation, the movement of Hazardous Material
through ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata).
"Highest Lawful Rate" shall mean 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, between parties of the character of
Borrower and Subordinated Lender, with respect to the Subordinated Loan (a)
under the laws of any jurisdiction whose laws shall apply mandatorily,
notwithstanding other provisions of the Subordinated Loan Documents, (b)
under applicable federal laws that are presently in effect, or (c) to the
extent that law allows, under such applicable federal or state law as may
allow a higher maximum nonusurious interest rate than under clause "a," in
any case after taking into account, to the extent that applicable law
permits, any and all relevant payments or charges under the Subordinated Loan
Documents.
"Identifiable Environmental Risks" shall mean all Environmental
Risks or potential Environmental Risks (including the correct magnitude
thereof) that Cleanup Contractor or any comparable environmental consulting
organization of comparable quality and expertise, exercising normal standards
and diligence of professional environmental consulting specialists, should have
detected and should have disclosed in the environmental assessment submitted
with a Loan Application, whether or not such Environmental Risks or potential
Environmental Risks were actually so identified and disclosed. All
Identified Environmental Risks are automatically also deemed Identifiable
Environmental Risks.
"Identified Environmental Risks" shall mean any Environmental
Risks or potential Environmental Risks arising from any environmental matter
or condition affecting an Approved Property, to the extent that such matter
or condition and its Environmental Risks and potential Environmental Risks,
were fully and accurately disclosed, with clarity and specificity, in a Loan
Application as approved by Subordinated Lender. Any cost overruns incurred
and payable by Cleanup Contractor under a GMP Agreement shall not constitute
Identified Environmental Risks.
"Initial Property Funding" shall mean for each Approved Property the
first Subordinated Loan Advance as to such Approved Property.
"Initial Property Funding Conditions" shall mean satisfaction of
the following conditions (all of which are cumulative) as to a particular
Approved Property, prior to or simultaneously with Subordinated Lender's
making the Initial Property Funding for a particular Approved Property, all
to the reasonable satisfaction of Subordinated Lender:
o Loan Application. Subordinated Lender shall have approved the
Loan Application.
o GMP Agreement. Cleanup Contractor and the applicable
Subsidiary shall have entered into a GMP Agreement consistent
with the Loan Application.
o Governmental Approvals. To the extent reasonably obtainable at
the time, a PPA shall have been obtained and issued, and shall
be in full force and effect and shall not have been revoked,
nor shall any Governmental Authority have given any notice of
revocation or withdrawal of any PPA, in whole or in part, or in
the alternative, all necessary or appropriate Governmental
Approvals with respect to commencement or continuation of
Remediation shall have been obtained and issued, and shall be
in full force and effect and shall not have been revoked, nor
shall any Governmental Authority have given any notice of
revocation or withdrawal of any Governmental Approval, in whole
or in part.
o Subsidiary Formation. Borrower shall have duly formed the
Subsidiary for such Approved Property.
o Subsidiary Capitalization. After Senior Lender and
Subordinated Lender have committed to making advances but
before they have made advances, Borrower shall contribute to
the capital of the Subsidiary an amount equal to Twenty-Five
Percent (25%) of the total amount to be advanced by
Subordinated Lender (i.e., 5% of the total Cash Outlay) for the
Approved Property. Upon receiving each Subordinated Loan
Advance, Borrower shall contribute the entire proceeds of
such Subordinated Loan Advance to the capital of such Subsidiary.
o Ownership of Approved Property. If the Loan Application
contemplates that a Subsidiary shall own the Approved Property
at the time of such Approved Investment, then such Subsidiary
shall have acquired the Approved Property and Borrower shall
have provided Subordinated Lender with a copy of the Subsidiary's
policy of title insurance or marked commitment (as to which all
title premiums or commitment fees have been paid) evidencing
such ownership, or an update thereof, subject in each case only
to exceptions to title satisfactory to Borrower and
Subordinated Lender.
o Remediation Before Acquisition of Approved Property. If the
Loan Application contemplates that a Subsidiary shall commence
Remediation before acquiring title (including pursuant to a
Mortgage Acquisition), then such Subsidiary shall have entered
into contracts with respect to the Remediation and acquisition
and obtained security (e.g., a mortgage securing the
obligations of the seller), all as set forth in the Loan
Application.
o Property-Related Information. Borrower shall have provided
Subordinated Lender with such title, survey, ownership, copies
of leases and service contracts, third-party reports, and other
property-related documentation as Subordinated Lender shall
have requested.
o Opinion of Counsel. Borrower shall have delivered to
Subordinated Lender an opinion of Local Counsel, directed to
Subordinated Lender, confirming such matters as Subordinated
Lender shall require, including status of the Subsidiary;
nonviolation of usury law; Subordinated Lender's compliance
with local licensing requirements; and similar matters of local
law. (To the extent that under the circumstances such opinion
is not obtainable because of particular requirements of
local law, the parties shall reasonably consider such measures
as Local Counsel may recommend. Neither party shall be
obligated to agree to any such measures. If no such agreement
is reached, than the condition in this paragraph shall be
deemed to have not been satisfied.)
"Interest Rate" shall mean a rate of interest equal to Twenty
Percent (20%) per annum, calculated by Subordinated Lender based on actual
days elapsed divided by 360, and compounded monthly.
"Latent Environmental Risks" shall mean: (a) any Environmental Risks
that are not Identifiable Environmental Risks; and (b) any increase in
Environmental Risks resulting from a change in Law after the date of a Loan
Application.
"Law" shall mean any current or future treaty, convention, statute,
law, regulation, ordinance, Governmental Approval, injunction, judgment,
order, consent decree or other requirement of any Governmental Authority.
"Leasing Guidelines" shall mean the guidelines (including economic
terms) for leasing of any vacant space that may exist from time to time at a
Property, as set forth in the Loan Application for such Property.
"Lender" shall mean Subordinated Lender and/or Senior Lender, as
applicable.
"Liquidating Event" shall mean a "Liquidating Event" as defined in
the Borrower Operating Agreement.
"Loan Agreements" shall mean the Senior Loan Agreement and the
Subordinated Loan Agreement.
"Loan Application" shall mean Borrower's written proposal to invest
in a Subsidiary that would acquire, Remediate and/or Develop a specific
Property or undertake a Mortgage Acquisition, which Loan Application shall
contain all Required Information and satisfy all Loan Criteria. Where the
term "Loan Application" is used with reference to any activities or
expenditures of a Subsidiary or Borrower, Cash Outlay, Approved Property,
Approved Investment, or Subordinated Loan Advance, such term shall mean a
Loan Application that Subordinated Lender has approved in writing, together
with any conditions or modifications required by Subordinated Lender in
connection with such approval.
"Loan Documents" shall mean the Senior Loan Documents and the
Subordinated Loan Documents.
"Loan Recovery Shortfall" shall mean the sum of the following from
time to time: (a) the extent to which, upon disposition(s) of Approved
Property(ies), Borrower Cash from such disposition(s) has been and is in the
aggregate insufficient to pay Basic Subordinated Loan Interest or principal
of the Subordinated Loan remaining unpaid on Subordinated Loan Advances
relating to such Approved Property(ies); (b) the principal amount of any
Release Shortfall Advances made by Subordinated Lender; plus (c) interest on
the foregoing at the Interest Rate.
"Local Counsel" shall mean counsel licensed to practice in the state
where an Approved Property is located and approved by Subordinated Lender in
Lender's sole and absolute discretion.
"Material Adverse Effect" as to any matter shall mean that in
Subordinated Lender's reasonable judgment such matter is reasonably likely to
materially adversely affect Borrower, Subordinated Lender, any Property, the
expense or scheduling of any Remediation, Development, compliance with any
Law, or Borrower's compliance with any Loan Application or Loan Document.
Any matter that would or is reasonably likely to materially increase the cost
of, or delay, any Remediation or Development, or limit or impair in any
material respect the usability, value, or utility of an Approved Property, or
that would materially impair, limit or delay the effectiveness of any
Governmental Approval, shall be deemed to have a Material Adverse Effect.
"Maturity Date" shall mean, with respect to the portion of the Loan
allocable to each Approved Property, the latest of (a) December 31, 1999; (b)
as to Subordinated Loan Advances for individual Approved Properties, the
Maturity Date applicable to such individual Approved Properties under the
Senior Loan; and (c) as to Subordinated Loan Advances for individual
Approved Properties, the Exit Date set forth in the Loan Application for
such Approved Property.
"Member" shall mean a member of Borrower. As of the Closing Date,
the only Member of Borrower is DMB.
"Mortgage Acquisition" shall mean the acquisition of a mortgage
encumbering a Property in lieu of acquiring the Property itself, and
thereafter Remediating such Property and obtaining title to such Property
pursuant to exercise of remedies (or acceptance of a deed in lieu thereof)
pursuant to the acquired mortgage, all in accordance with a Loan Application.
"Net Property Profit" shall have the meaning set forth in the
Waterfall.
"Net Proceeds from Sales or Refinancings" shall mean without
duplication (i) the sum of: (a) the net cash proceeds from all sales and
other dispositions (including sales and dispositions of a Subsidiary's or
Borrower's real property in the ordinary course of business and the proceeds
from any casualty or condemnation affecting real property), (b) the net cash
proceeds from all sales and other dispositions of property distributed to
Borrower from any entity in which Borrower has an interest, including any
Subsidiary, and (c) the net cash proceeds from all refinancings of property
by Borrower or any entity in which Borrower has an economic interest,
including any Subsidiary, to the extent distributed to Borrower, minus (ii)
any portion thereof used to establish commercially reasonable reserves (or,
in the case of a casualty or condemnation, applied or reserved to pay for
commercially reasonable costs of adjustment, collection, and restoration),
all as determined by Borrower's Board of Managers with Subordinated Lender's
consent. The term "net cash proceeds" means gross proceeds less reasonable
and customary transaction costs. "Net Proceeds from Sales or Refinancings"
shall include all principal payments received by Borrower with respect to any
note or other obligation taken back in connection with any sale or other
disposition of property. In calculating "Net Proceeds from Sales or
Refinancings," any Senior Loan Payments payable on account of the particular
transaction or property being sold or refinanced (but not any payments made
or payable on account of DMB Affiliated Financing) shall be subtracted out as
a deduction.
"New Loan Opportunity" shall mean any opportunity to acquire or
invest in any real property (or make any Mortgage Acquisition affecting real
property) that is Environmentally Contaminated, which opportunity may be
appropriate for Borrower to pursue, whether or not such opportunity complies
with the Loan Criteria. The term "New Loan Opportunity" shall not include
any opportunity: (a) of DMB or any Affiliate of DMB to Remediate real
property on a bona-fide fee-for-service basis for a third-party client, or
(b) of any party to participate in Development of, or otherwise acquire or
invest in, any real property that is not Environmentally Contaminated.
"Operating Agreements" shall mean, together, the Borrower Operating
Agreement and the DMB Operating Agreement.
"Out of Balance" shall mean, with respect to the Senior Loan, that
at the time of determination, Senior Lender is not obligated to make a
further Senior Loan Advance for a particular Approved Property because if
Senior Lender were to make such Senior Loan Advance the resulting amount of
the Senior Loan would fail to comply with an applicable ratio or financial
test set forth in the Senior Loan Agreement.
"Outside Financing" shall mean a Subsidiary's or Borrower's
borrowing of any money (including purchase-money financing from the seller of
any Approved Property), other than trade payables, the Loans, and DMB
Affiliated Financing.
"Payment Date" shall mean the last business day of each calendar month.
"Permitted Sponsor" shall mean the Subsidiary that owns the
applicable Approved Property or Cleanup Contractor. Neither Borrower nor
DMB is a Permitted Sponsor.
"Person" shall mean any natural person or legal entity.
"PPA" shall mean a "Prospective Purchase Agreement" issued by the
United States Environmental Protection Agency or comparable agreement issued
by a state Governmental Authority.
"Release Shortfall" shall mean the "Release Shortfall" as determined
pursuant to the Senior Loan Agreement.
"Remediation" shall mean environmental clean-up and remediation of
an Approved Property by Cleanup Contractor, acting on behalf of the
applicable Subsidiary, all in compliance with a Loan Application and Law,
including Environmental Law. Any reference to "completion" of Remediation
shall mean completion of Remediation to a degree such that all Clearances
contemplated by the applicable Loan Application shall have been issued.
Remediation shall include physical on-site Remediation activities and the
making of all necessary filings and applications with Governmental
Authorities in connection therewith, and all other activities necessary or
appropriate to obtain Clearances.
"Retained Earnings Reserve" shall mean the "Retained Earnings
Reserve" provided for under the Senior Loan Agreement.
"Satisfactory Replacement Cleanup Contractor" shall mean a
contractor fully qualified and licensed to perform all Remediation that was
to have been performed by Cleanup Contractor (as to all Approved Properties
or specific Approved Properties only), provided that Senior Lender approved
such replacement pursuant to a Loan Application, or such replacement: (a) is
reasonably satisfactory to Subordinated Lender; (b) is, in Subordinated
Lender's reasonable judgment, creditworthy and capable to the degree
necessary or appropriate to reliably perform as Cleanup Contractor; (c) has,
in a manner reasonably satisfactory to Subordinated Lender, entered into
documentation substantially equivalent to all those previously entered into
by Cleanup Contractor; (d) has at least the same insurance coverage as the
Cleanup Contractor as originally defined in this Agreement; and (e) does not,
in Senior Lender's judgment, impair any coverage provided by the
Environmental Insurance Policy.
"Satisfactory Replacement Guarantor" shall mean a Person that is,
in Subordinated Lender's sole, absolute and unreviewable discretion, an
adequate and satisfactory replacement for any Good Faith Guarantor (as
initially defined herein), provided that such Person has entered into
documentation similar to all documentation creating or evidencing the Good
Faith Guaranty previously entered into and delivered by the Good Faith
Guarantor being replaced.
"Senior Loan Advance" shall mean an advance of funds by Senior
Lender to or for the benefit of Borrower, made pursuant to the Senior Loan
Agreement.
"Senior Loan Documents" shall mean the Senior Loan Agreement, the
Senior Note, that certain Structuring Fee Letter dated the Closing Date
between Borrower and Senior Lender, and any and all other documents delivered
to Senior Lender by or on behalf of any DMB Party from time to time in
connection with the foregoing or the making of any Senior Loan Advances.
"Senior Loan Payments" shall mean all payments actually made by
Borrower on account of the Senior Loan, whether for principal, interest,
escrow deposits (to the extent required by the Senior Loan Documents), other
charges, or reimbursement of Senior Lender's expenses (including attorneys'
fees, appraisal costs, and other costs incurred by Senior Lender and
reimbursable by Borrower pursuant to the Senior Loan Documents).
"Soft Costs" shall mean all costs of Remediation or Development,
including payment of real estate taxes, insurance premiums and other
carrying costs during the period of any actual Remediation or Development;
consultants' fees; legal fees; "general conditions" charges; construction
management fees; contractor's overhead and profit charges; marketing
expenses; but excluding Hard Costs, costs of acquisition, and carrying costs
except during the period of any actual Remediation or Development.
"Sponsor" shall mean, as to any Remediation, the "owner" and
"operator" of the Approved Property where such Remediation occurs; the
"arranger" and "transporter" in connection with such Remediation; and the
Person otherwise responsible under Environmental Laws for or with respect to
such Remediation and any related Hazardous Material Activity. Lower-case
terms in quotes used in this definition shall have the meanings set forth in
applicable Environmental Laws.
"Subordinated Loan Advance" shall mean an advance of funds by
Subordinated Lender to or for the benefit of Borrower, made pursuant to this
Agreement.
"Subordinated Loan Documents" shall mean the Subordinated Loan
Agreement, the Subordinated Note, the Good Faith Guaranty, the Subordinated
Pledge Agreement and any other documents delivered to Subordinated Lender by
or on behalf of any DMB Party from time to time to evidence, secure or
guarantee the foregoing or relating to the making of any Subordinated
Loan Advance.
"Subordinated Note" shall mean that certain Subordinated Promissory
Note being executed and delivered by Borrower to Subordinated Lender on the
Closing Date, evidencing Borrower's obligation to repay the Subordinated Loan
Advances together with Subordinated Loan Interest.
"Subordinated Pledge Agreement" shall mean, subject and subordinate
to the terms and provisions of, and the rights and security interest granted
to Senior Lender under the Pledge Agreement, a subordinated pledge agreement
with respect to each Subsidiary executed by Borrower, as pledgor, in favor of
Subordinated Lender, of all of Borrower's right, title and interest in and to
such Subsidiary (together with the consent of the applicable Subsidiary
thereto), all in the form attached hereto as Exhibit "F."
"Subsequent Property Funding" shall mean for each Approved Property
any Subordinated Loan Advance after the Initial Property Funding.
"Subsidiary" shall mean a corporation, limited partnership, or
limited liability company that, at all times until the Subordinated Loan has
been repaid in full: (a) is wholly owned by Borrower; (b) is a single-purpose
entity whose sole purpose shall be acquisition, Remediation, Development,
and/or disposition, of an Approved Property (and/or the making of a Mortgage
Acquisition) in all cases in conformity with a Loan Application; (c) has no
assets other than its Approved Property (or as contemplated by a Mortgage
Acquisition) and as contemplated by the related Loan Application; (d) has
no liabilities other than (i) its allocable portion of the Senior Loan, (ii)
as contemplated by the applicable Loan Application and (iii) routine trade
payables; (e) is duly organized, validly existing and in good standing under
the laws of one of the states of the United States of America; (e) is
engaged in no business whatsoever other than its Approved Investment in its
Approved Property (or Mortgage Acquisition), consistent with the applicable
Loan Application; (h) is not itself a partner, member or other constituent
or principal of any other entity; and (i) is an entity legally separate and
distinct from Borrower.
"Subsidiary Cash Reserve" shall mean (unless the parties agree
otherwise in a Loan Application as to a particular Subsidiary) a cash
reserve, to be retained by a Subsidiary, in an amount equal to the product of
(a) Five Percent (5%) times (b) the total remaining projected Cash Outlay for
such Subsidiary's Approved Property. The term "Subsidiary Cash Reserve"
shall also include, as to each Subsidiary, any further reserves provided for
pursuant to the applicable Loan Application.
"Supplemental Return Disbursements" shall have the meaning set
forth in the Waterfall.
"Waterfall" shall mean the priorities, procedures, covenants, and
obligations of Borrower relating to the application of Borrower Cash set
forth in Exhibit "D."
2 THE LOAN; FUNDING CONDITIONS.
2.1 Approval, Advances and Funding Conditions. Subordinated Lender
agrees to make the Subordinated Loan to Borrower, provided in each case that
all applicable Loan Criteria, Funding Conditions, and other requirements of
this Agreement are satisfied. Subordinated Lender agrees to make the Initial
Property Funding for each Approved Property provided in each case that all
General Funding Conditions and all Initial Property Funding Conditions for
such Approved Property shall have been or simultaneously are satisfied.
Subordinated Lender agrees to make Subsequent Property Fundings for each
Approved Property, and Subordinated Loan Advances to pay for Administrative
Expenses, provided in each case that all General Funding Conditions shall
have been or simultaneously are satisfied.
2.2 Amount of Subordinated Loan Advances. Total Subordinated Loan
Advances with respect to any Cash Outlay (other than for Administrative
Expenses) shall equal twenty percent (20%) of such Cash Outlay. Total
Subordinated Loan Advances with respect to any Cash Outlay for Administrative
Expenses shall equal eighty percent (80%) of such Administrative Expenses.
Subordinated Lender shall have no obligation to make Subordinated Loan
Advances other than on account of a Loan Application or an Administrative
Expense, in each case approved by Subordinated Lender, including pursuant to
Subordinated Lender's approval of a budget submitted by Borrower or attached
as an exhibit to this Agreement.
2.3 Release Shortfall Advances. Provided that no Event of Default
shall have occurred and be continuing, at the same time that Borrower makes
any payment to Senior Lender on account of Borrower's Release Shortfall
Obligation, or Senior Lender applies any funds in the Retained Earnings
Reserve on account of Borrower's Release Shortfall Obligation, Subordinated
Lender shall make a Subordinated Loan Advance (a "Release Shortfall
Advance"), directly to Senior Lender, in an amount equal to such payment or
application of funds by or on behalf of Borrower. Each Release Shortfall
Advance shall automatically be added to the Loan Recovery Shortfall when made.
2.4 Required Equity Contribution. For each Approved Investment,
Borrower shall contribute to the equity of the applicable Subsidiary at
least Five Percent (5%) of the Cash Outlay for such Approved Investment
before Subordinated Lender shall be obligated to make the Initial Property
Funding for such Approved Investment. Thereafter, assuming Borrower
continues to comply with the applicable Loan Application, further funds for
such Approved Investment are anticipated to be provided: (a) Five Percent
(5%) by application from time to time of Borrower's equity contribution to
the affected Subsidiary; (b) Twenty Percent (20%) from Subordinated Loan
Advances; and (c) Seventy Five Percent (75%) from Senior Loan Advances.
2.5 Additional Provisions Relating to Subordinated Loan Advances.
All requests for Subordinated Loan Advances shall be made in writing and,
notwithstanding any other provision of this Agreement, be provided to
Subordinated Lender at least 10 days before the proposed date of such
Subordinated Loan Advance. Each request for a Subordinated Loan Advance
shall contain Borrower's representation and warranty that all Funding
Conditions regarding the Property for which such Subordinated Loan Advance is
requested have been fully satisfied. If a Funding Condition cannot be
satisfied except simultaneously with the Subordinated Loan Advance, the
request for Subordinated Loan Advance shall specify such conditions and
Borrower shall represent and warrant that such conditions shall be satisfied
simultaneously with the Subordinated Loan Advance being made. If
Subordinated Lender waives any Funding Condition as to any Subordinated Loan
Advance, then such waiver shall apply only to such Subordinated Loan
Advance, and not to any future Subordinated Loan Advances. Borrower shall
apply all Subordinated Loan Advances solely to (a) pay Administrative
Expenses consistent with Borrower's requisition; or (b) make a contribution
to the capital of the applicable Subsidiary. In the latter case, Borrower
shall apply the proceeds of such capital contribution solely on account of
the Current Cash Outlay for which the Subordinated Loan Advance was
requisitioned.
2.6 Purpose of Funding Conditions. All Funding Conditions are
imposed solely and exclusively for Subordinated Lender's benefit. No other
person shall have standing to require satisfaction of any Funding Conditions
or be entitled to assume that Subordinated Lender shall refuse to make
Subordinated Loan Advances without strict compliance with any or all Funding
Conditions. No person other than Borrower and Subordinated Lender,
including, but not limited to, any Subsidiary, shall, under any
circumstances, be deemed to be a beneficiary of any Funding Conditions, any
or all of which may be freely waived in whole or in part by Subordinated Lender
at any time if in its sole discretion it deems it advisable to do so.
Subordinated Lender is under no obligation to waive any Funding Conditions or
other requirements of this Agreement.
2.7 Repayment. Borrower shall repay the Subordinated Loan Advances
pursuant to the Waterfall and, upon occurrence of an Event of Default, as
provided for in this Agreement. Subordinated Loan Interest is intended to
compensate Subordinated Lender for making and holding the Subordinated Loan,
and shall not be credited against principal. Borrower shall have no right or
option to prepay any portion of the Subordinated Loan, other than by
application of Net Proceeds from Sales or Refinancings in accordance with the
Waterfall.
2.8 Fiduciary Obligation. To the extent that Borrower or any
Subsidiary from time to time receives any Borrower Cash, Borrower or such
Subsidiary shall hold such Borrower Cash in trust, to be applied (after any
payments on account of the Senior Loan) to the extent required by the
Waterfall, first to the payment of any Subordinated Loan Interest and then
to other sums payable to Subordinated Lender.
2.9 Subordinated Loan Interest. Borrower shall pay interest on
the Subordinated Loan (the "Subordinated Loan Interest") as follows.
2.9.1 Basic Subordinated Loan Interest. Basic interest shall
accrue monthly on the principal balance of the Subordinated Loan outstanding
from time to time, at the Interest Rate ("Basic Subordinated Loan Interest"),
but payable only in accordance with the priorities and procedures set forth
in the Waterfall. Borrower shall pay Basic Subordinated Loan Interest
monthly on each Payment Date, when, as, and to the extent provided for in
the Waterfall. If them amount of any Basic Subordinated Loan Interest is
disputed in good faith, Borrower shall not be obligated to pay the disputed
portion of the Basic Subordinated Loan Interest until the actual amount owed
has been determined; Borrower shall, however, on the Payment Date pay the
undisputed amount of the Basic Subordinated Loan Interest, as to which
Borrower shall not be entitled to any Cure Period. Any dispute as to the
amount of Subordinated Loan Interest owing shall be resolved by expedited
arbitration in accordance with the expedited arbitration rules of the
American Arbitration Association. TO THE FULLEST EXTENT PERMITTED BY LAW,
SUBORDINATED LENDER AND BORROWER HEREBY IRREVOCABLY WAIVE A
TRIAL BY JURY AS TO ANY DISPUTE ARISING FROM THIS PARAGRAPH OR
ANY OTHER PROVISION OF THIS AGREEMENT.
2.9.2 Accrual of Basic Interest. To the extent that the
Waterfall does not require Borrower to currently pay Basic Subordinated Loan
Interest, such failure to pay shall not constitute a default or give rise to
an Event of Default under this Agreement. The unpaid Basic Subordinated Loan
Interest shall accrue and be compounded annually every January 1 and shall
continue to be payable when and as provided for in the Waterfall.
2.9.3 Loan Recovery Shortfalls. To the extent that a
Subsidiary disposes of an Approved Property and the Borrower Cash from such
Approved Property has been and is in the aggregate insufficient to provide
Borrower with a sufficient amount to pay any Basic Subordinated Loan Interest
or principal of the Subordinated Loan remaining unpaid as to Subordinated
Loan Advances relating to that Approved Property (the "Property Shortfall"),
Borrower's failure to pay the Property Shortfall shall not constitute a
default or Event of Default under this Agreement. The Loan Recovery
Shortfall shall be increased by an amount equal to the Property Shortfall.
2.9.4 Contingent Interest. Borrower shall pay Subordinated
Lender contingent interest in an amount equal to Fifty Percent (50%) of Net
Property Profit, payable when and as provided for in the Waterfall (the
"Contingent Subordinated Loan Interest").
2.10 Maturity Date. Borrower shall repay the entire Subordinated
Loan on the Maturity Date, except to the extent that, as to Subordinated Loan
Advances relating to individual Approved Property(ies): (a) Subordinated
Lender has agreed in writing, in its sole and absolute discretion, to extend
the Maturity Date; or (b) the Maturity Date under the Senior Loan has been
extended in accordance with the terms of the Senior Loan Documents.
2.11 Effect of Upcoming Maturity. If, as of October 1, 1999,
Borrower holds any Approved Property(ies) with respect to which: (a) Senior
Lender has not approved Borrower's exercise of the Extension Option; and (b)
in Subordinated Lender's reasonable judgment, Borrower will more likely than
not fail to achieve an Exit Date on or before December 31, 1999, then without
thereby limiting any other rights or remedies of Subordinated Lender,
Subordinated Lender may deliver a Hypothetical Liquidation Notice to Borrower
and the parties shall thereupon have the same rights and remedies as if
Subordinated Lender had delivered a Hypothetical Liquidation Notice to
Borrower upon occurrence of an Event of Default.
2.12 Security and Priority. Subject to the Senior Lender's rights
under the Pledge Agreement, the Subordinated Loan shall be secured solely by
the Subordinated Pledge Agreement. The Subordinated Loan shall be at all
times subordinate and junior, as to timing and priority of payment, to the
Senior Loan.
2.13 Certain Excluded Expenditures. Notwithstanding anything to
the contrary in this Agreement, and without limiting any other restriction on
Subordinated Loan Advances, Subordinated Lender shall have no obligation to
contribute to, or to make any Subordinated Loan Advances to pay (in whole or
in part), any Cash Outlays arising from:
2.13.1 Unapproved Items. Any Cash Outlay that has not been
approved by Subordinated Lender, or that arises from any matter not approved
by Subordinated Lender;
2.13.2 Cleanup Contractor's Costs. Any costs, including cost
overruns, incurred by Cleanup Contractor, but this shall not limit the
availability of Subordinated Loan Advances on account of payments required
under GMP Agreements;
2.13.3 Unapproved Loan Applications. Any costs and expenses
(including preparation, staff time, administrative, and out-of-pocket costs)
incurred in connection with any Loan Application not approved by Subordinated
Lender; or
2.13.4 DMB Affiliated Financing. Any payments due on account
of any DMB Affiliated Financing.
3 LOAN APPLICATIONS.
3.1 Required Contents. Borrower shall provide the following
information in each Loan Application with respect to the affected Property
and its Remediation and/or Development (the "Required Information").
3.1.1 Property; Overall Strategy. Identification of Property
or mortgage to be acquired, Remediated, and/or Developed, and overall
strategy for same.
3.1.2 Environmental Concerns. All Identified Environmental
Risks.
3.1.3 Valuation. Written estimates of value, prepared on
such basis as Subordinated Lender shall require (including, if so required
by Senior Lender, as a full Financial Institutions Reform, Recovery and
Enforcement Act (FIRREA) appraisal prepared by a third-party appraiser
satisfactory to Subordinated Lender) both "as contaminated" and "as cleaned
up."
3.1.4 Plan. An acquisition, Remediation, Development, and
disposition plan with a reasonably detailed budget (including a "contingency"
of 10% [or such higher percentage as Subordinated Lender shall approve in its
sole and absolute discretion] as to all Hard Costs and Soft Costs of
Remediation and Development) and timeline, for the Remediation of all
Identified Environmental Risks and all Development.
3.1.5 GMP Agreement. A GMP Agreement that requires Cleanup
Contractor to Remediate all Identified Environmental Risks.
3.1.6 Clearances. All Clearances that may be necessary or
appropriate with respect to Remediation, and when, how, and whether such
Subsidiary will obtain each such Clearance.
3.1.7 Projections. Reasonable financial projections regarding
acquisition, Remediation, Development and disposition.
3.1.8 Existing Owners/Sellers. All contracts and security
arrangements existing or contemplated with existing owners or sellers.
3.1.9 Outside Financing. Any Outside Financing that any
Subsidiary or Borrower proposes to obtain, and the arrangements, including
interest rate adjustments, that such Subsidiary or Borrower proposes to make
with the Lenders as a result of such Outside Financing (it being understood,
however, that Subordinated Lender is under no obligation to agree to or
approve any Outside Financing).
3.1.10 Leasing Guidelines. Proposed Leasing Guidelines for
the Property.
3.1.11 Disposition Strategy. Borrower's proposed strategy
for disposition of the Property, including a projected selling price or
range of projected selling prices.
3.1.12 Environmental Insurance. All environmental insurance
coverage, including, but not limited to the Environmental Insurance Policy
(including amount of maximum cap being proposed thereunder), as well as all
other environmental insurance, anticipated to be purchased both before and
after Remediation, and the cost of such insurance (which cost shall be
included in the Property budget).
3.1.13 Environmental Assessment. Full written environmental
assessment (Phase I and Phase II as applicable) addressed to Subordinated
Lender, prepared by Cleanup Contractor.
3.1.14 Indemnifications. Any indemnifications in place from
any Person or Governmental Authority.
3.1.15 Property Problems. Description of: (a) any real
property problems, such as pending condemnation, access problems, survey
issues, flood hazards, or lack of any utility service(s), and (b) any other
matters that may have a Material Adverse Effect.
3.1.16 Other. All other material terms and conditions of the
proposed transaction.
3.2 Criteria to Be Satisfied. Each Loan Application made by
Borrower shall satisfy the following criteria as to the proposed Property
and its Remediation and Development (the "Loan Criteria").
3.2.1 Projected Return. Projections should demonstrate that
Borrower should achieve a leveraged return on its Approved Investment of at
least 25% per annum on the amounts advanced under the Subordinated Loan
Agreement, unless otherwise expressly approved in writing by Subordinated
Lender.
3.2.2 Total Costs. Total acquisition, Remediation,
Development and disposition costs of between $2,500,000 and $20,000,000.
3.2.3 Risk Profile. The proposed Property in the substantial
majority of cases shall meet the criteria of either "Category II - Moderate
Risk" or "Category III - Low Risk" as defined in "Table 1" (the "PROPERTY
TARGETING CRITERIA") attached to that certain "Business Plan for Dames &
Moore/Brookhill, LLC," a copy of which table is attached as Exhibit "B."
3.2.4 Timing. The Loan Application shall reasonably project
that Remediation shall commence, or acquisition shall close, on or before
September 1, 1998, with the Exit Date reasonably projected to occur by
December 31, 1999. (Borrower may propose in a Loan Application an Exit Date
later than December 31, 1999 as to the affected Property. If Subordinated
Lender disapproves such Loan Application solely because such Exit Date is later
than December 31, 1999, then such Loan Application shall, though disapproved,
nevertheless be deemed to have complied with the Loan Criteria for purposes
of a New Loan Termination.)
3.2.5 GMP Agreement. Each GMP Agreement shall provide for
Remediation of all Identified Environmental Risks. Each GMP Agreement shall
require Cleanup Contractor to provide a warranty and indemnity as to such
Remediation to: (a) the applicable Subsidiary, Borrower, and Subordinated
Lender; and (b) where possible without incurring substantial additional
expense, the first purchaser of the Approved Property from the applicable
Subsidiary. (Borrower may propose in a Loan Application a Satisfactory
Replacement Cleanup Contractor as to the affected Property. If Subordinated
Lender disapproves such Loan Application solely because Subordinated Lender
disapproves the proposed Satisfactory Replacement Cleanup Contractor, then
such Loan Application shall, though disapproved, nevertheless be deemed to
have complied with the Loan Criteria for purposes of a New Loan Termination.)
3.2.6 Acquisition of Title. A Subsidiary shall not acquire
title unless either (a) Remediation has been completed; or (b) before
Remediation commences, such Subsidiary has obtained a conditional or actual
Clearance acceptable to Subordinated Lender pursuant to Federal CERCLA or a
state law that provides "PPA" or similar mechanisms to issue conditional
Clearances (a "brownfields" state). Such Clearance may be subject to the
completion of Remediation in the manner, and to the extent, described in the
Loan Application.
3.2.7 Security Arrangements. For pre-acquisition Remediation,
Subsidiary shall obtain reasonable security arrangements with existing
Property owners or sellers.
3.3 Noncompliance. To the extent that any Loan Application fails
to include any Required Information or comply with the Loan Criteria,
Subsidiary shall identify and describe such nonconformity in the Loan
Application. If Subordinated Lender nevertheless approves the Loan
Application, then Subordinated Lender shall be deemed to have waived such
nonconformity for all purposes of the Subordinated Loan Documents.
3.4 Time Periods and Approval. Subordinated Lender shall reasonably
endeavor to consider and respond to Loan Applications within fifteen days
after receipt. If Subordinated Lender has failed to respond to a Loan
Application within such period, then such Subsidiary shall so notify
Subordinated Lender in writing (a "Reminder Notice"). Subordinated Lender
shall then, within five business days, do any one of the following as
determined by Subordinated Lender (in Subordinated Lender's sole and absolute
discretion): (a) approve the Loan Application; (b) disapprove the Loan
Application; (c) reasonably request additional information regarding the
Loan Application; or (d) extend by up to ten more days Subordinated Lender's
period in which to respond to the Reminder Notice. If Subordinated Lender
reasonably requests additional information, then Borrower shall promptly
provide it. When Subordinated Lender has received such additional information,
such delivery shall be deemed to constitute another Reminder Notice, except
that Subordinated Lender's options shall be limited to "a," "b," and "c." If
Subordinated Lender fails to respond to a Reminder Notice within the period
available to Subordinated Lender pursuant to this paragraph, then
Subordinated Lender shall be deemed to have disapproved the applicable Loan
Application. Under no circumstance shall Subordinated Lender be deemed to
have approved any Loan Application unless Subordinated Lender has actually
approved such Loan Application in writing. Upon any such approval,
Subordinated Lender shall issue a Funding Certificate to Borrower. If
Subordinated Lender approves a Loan Application but subject only to
material additional conditions that are inconsistent with material economic
terms in this Agreement (and after reasonable efforts the parties cannot
resolve such additional conditions), then such conditional approval shall be
deemed disapproval.
3.5 Multiple Disapprovals. If Subordinated Lender disapproves (or
is deemed to have disapproved) three consecutive Loan Applications that
contain all Required Information and comply with all Loan Criteria, then at
any time until Subordinated Lender has approved a subsequently submitted Loan
Application, either Borrower or Subordinated Lender shall have the right to
unilaterally notify the other that such party elects to require the following
to occur (a "New Loan Termination"):
3.5.1 No New Loan Applications. Borrower shall not be
required to submit any further Loan Applications to Subordinated Lender.
3.5.2 Completion of Existing Projects. Borrower shall, with
diligence and continuity, continue to perform all of Borrower's obligations
with respect to Loan Applications previously approved. Borrower shall
continue, and DMB shall cause Cleanup Contractor to continue, to allocate
to such activities at least the same level of staffing and other resources
(as determined by Subordinated Lender in Subordinated Lender's reasonable
judgment) as were allocated thereto before the New Loan Termination.
Subordinated Lender shall continue to make Subordinated Loan Advances
pursuant to Loan Applications previously approved, in accordance with the
terms and conditions of this Agreement.
3.5.3 No Exclusivity. To the extent that this Agreement
requires any DMB Party or Subordinated Lender to submit to one another any
possible Property(ies) (including possible Mortgage Acquisitions) before
engaging in any transaction with a third party relating to such
Property(ies), or to refrain from conducting other specified business
activities, such restrictions and obligations shall be terminated and of no
force or effect.
4 COVENANTS.
4.1 Acquisition and Remediation. Borrower shall acquire,
Remediate, Develop and/or dispose of each Approved Property only in
compliance with the applicable Loan Application. Borrower shall not acquire,
Remediate, Develop, or otherwise invest (other than Borrower's investment in
Subsidiaries as contemplated by Loan Applications) in any real or personal
property. Borrower shall cause Cleanup Contractor to prosecute all
Remediation with diligence and continuity and without material interruption
or suspension of work, except as required by Law or as a result of Force
Majeure. Neither Borrower nor any Subsidiary shall conduct any business of
any kind other than the business contemplated by this Agreement.
4.2 Compliance with Law. Borrower shall at all times comply with
all applicable Law. Borrower shall perform all Remediation in compliance
with all Environmental Law. Borrower shall timely obtain, and thereafter
comply with and maintain in full force and effect, all Governmental Approvals
necessary or appropriate for such Remediation.
4.3 Site Conditions. If and when Borrower or any Subsidiary
becomes aware of any site condition or other circumstance affecting any
Approved Property that will or is reasonably likely to have a Material
Adverse Effect, then Borrower shall promptly notify Subordinated Lender
thereof, in reasonable detail, and thereafter provide Subordinated Lender
with such additional information relating thereto as Subordinated Lender
shall reasonably request. Borrower shall with reasonable promptness develop
a written plan to respond to such site condition or other circumstance, and
provide Subordinated Lender with a copy of such written plan and any updates
thereof.
4.4 Delays in Mortgage Acquisitions.
4.4.1 Initial Disposition Plan. If (a) pursuant to a Loan
Application, a Subsidiary undertakes any Mortgage Acquisition and (b) because
of litigation or bankruptcy, such Subsidiary's activities with respect to
such Mortgage Acquisition are delayed by more than three (3) months beyond
the timeline provided for in the Loan Application, then Borrower shall have
thirty (30) days within which to present to Subordinated Lender a complete,
detailed, specific and reasonable plan for disposition of the Mortgage
Acquisition.
4.4.2 Discontinuation of Mortgage Acquisition. If, after such
thirty (30) day period, in Subordinated Lender's sole and absolute discretion
the plan is not satisfactory and there still has been no disposition pursuant
to the Loan Application, Subordinated Lender shall have the right to require
Borrower, within thirty (30) days after Subordinated Lender's written
request, to (i) discontinue and terminate such Mortgage Acquisition and
dispose of such Mortgage Acquisition by sale to an outside third-party
purchaser, but not to a purchaser that is an Affiliate of Subordinated
Lender, in accordance with the terms and conditions of this Section 4.4, and
(ii) require Borrower to repay all Subordinated Loan Advances made for such
Mortgage Acquisition. Borrower shall repay such Subordinated Loan Advances
with, and only to the extent of, Borrower Cash realized from the disposition
and termination of such Mortgage Acquisition. To the extent that Borrower
Cash realized from such disposition and termination has been and is in
the aggregate insufficient to repay all Subordinated Loan Advances made for
such Mortgage Acquisition, the amount of such insufficiency shall be added to
the Loan Recovery Shortfall.
4.4.3 Required Purchase Plan. Within thirty (30) days after
Subordinated Lender notifies Borrower and DMB that Borrower's plan for
disposition of the Mortgage Acquisition is not satisfactory, DMB shall
submit a proposal in writing (together with the proposed purchase price and
other material economic terms) to Subordinated Lender for the purchase of such
Mortgage Acquisition from the applicable Subsidiary (the "DMB Mortgage
Proposal"). Upon receipt of the DMB Mortgage Proposal, Subordinated Lender
shall have the option to either (A) approve such DMB Mortgage Proposal, in
which event Borrower shall sell such Mortgage Acquisition as set forth in the
DMB Mortgage Proposal, which sale shall be consummated within thirty (30)
days after Subordinated Lender notifies Borrower and DMB of its approval of
the DMB Mortgage Proposal, or (B) require that such offer be kept open for a
period of ninety (90) days after the date when Subordinated Lender receives
such DMB Mortgage Proposal and during such period Borrower shall use its best
efforts to market (in such manner as Subordinated Lender shall direct) the
Mortgage Acquisition in order to obtain a higher purchase price (and more
attractive terms and conditions) for such Mortgage Acquisition than the price
set forth in the DMB Mortgage Proposal. If, during such ninety-day period,
an offer is obtained from a third-party purchaser (the "Third Party Mortgage
Proposal") for such Mortgage Acquisition on terms that are identical to, or
in Subordinated Lender's judgment more favorable than the DMB Mortgage
Proposal, which Third Party Mortgage Proposal is approved by Subordinated
Lender, then Borrower shall dispose of such Mortgage Acquisition to such
third-party purchaser pursuant to the terms of such Third Party Mortgage
Proposal within thirty (30) days of receipt of Subordinated Lender's notice
of approval of the Third Party Mortgage Proposal.
4.5 GMP Agreements. Borrower shall diligently enforce, in all
material respects, all GMP Agreements. Borrower shall diligently seek to
achieve timely and cost-effective performance by Cleanup Contractor under
each GMP Agreement. Borrower shall diligently pursue the prevailing
professional standards of quality, performance and timeliness that Cleanup
Contractor would normally deliver for its third-party clients. GMP
Agreements shall be negotiated at arm's length on substantially the same
terms that a non-affiliated party would obtain. Borrower shall not waive,
modify, amend, terminate or release Cleanup Contractor's obligations under
any GMP Agreement, or to replace Cleanup Contractor, without Subordinated
Lender's consent. Subordinated Lender shall not unreasonably withhold
consent to reasonable changes necessitated by field conditions, provided that
the GMP Agreement continues to substantially comply with the applicable Loan
Application and the guaranteed maximum price is not increased. Borrower shall
not terminate Cleanup Contractor unless Cleanup Contractor is simultaneously
replaced with a Satisfactory Replacement Cleanup Contractor.
4.6 Use of Funds. Borrower and each Subsidiary shall hold in
trust all Loan Advances and Borrower Cash, and shall apply same first to pay
Borrower's third-party obligations consistent with Loan Applications and
Administrative Expenses Budgets, and shall thereafter apply all Borrower Cash
in accordance with the Waterfall.
4.7 Real Estate Operations. So long as a Subsidiary owns an
Approved Property, Borrower shall: (a) cause such Approved Property to be
maintained in good repair and safe condition and in compliance with all
applicable Law (except as to noncompliance expected to be corrected through
Remediation); and (b) provide and maintain for it all insurance required by the
Senior Loan Documents and such additional insurance as Subordinated Lender
may reasonably require. Subordinated Lender shall not require environmental
insurance beyond that provided for in the affected Loan Application. In the
event of a casualty or condemnation affecting an Approved Property, any
determination of Borrower to restore the improvements located on such
Approved Property shall require Subordinated Lender's prior written approval.
4.8 Leasing. With respect to each Approved Property, all leases
and other rental arrangements, and all modifications thereof, shall comply in
all respects with the Leasing Guidelines set forth in the applicable Loan
Application. If a lease complies with the Leasing Guidelines, then
Subordinated Lender's approval of such lease shall not be required; otherwise
Subordinate Lender's approval shall be required. Any modifications from the
Leasing Guidelines in the applicable Loan Application shall be subject to
Subordinate Lender's prior written approval in its sole and absolute
discretion. Subordinate Lender shall endeavor to approve or disapprove
all Leases and modifications subject to its approval that are submitted to
Subordinate Lender within five (5) Business Days after receipt of all
necessary documentation in connection therewith. Subordinate Lender's
failure to respond within such period shall be deemed disapproval.
4.9 Notices. Borrower and DMB shall simultaneously provide
Subordinated Lender with a copy of any written notice regarding any matter(s)
that would, or is/are reasonably likely to, have a Material Adverse Effect,
given to or received from Cleanup Contractor, any Governmental Authority, or
any third party (including the owner of any Property as to which Remediation is
occurring or contemplated or as to which a Mortgage Acquisition has been
made or is contemplated, and including any other creditor of Borrower or any
Subsidiary, other than a Lender), which notice relates to any Approved
Property, any Remediation or Development, Borrower's business or Borrower's
ability to perform its obligations under this Agreement.
4.10 Environmental Reports. Upon Subordinated Lender's reasonable
request, made no more than at a reasonable frequency (in the exercise of
Subordinated Lender's reasonable business judgment), Borrower shall provide
Subordinated Lender with updated environmental assessments and tests relating
to the Approved Properties, all in such detail and covering such matters as
Subordinated Lender shall from time to time request based on the written
advice or recommendations of Subordinated Lender's third-party consultants or
advisers.
4.11 Access. Subordinated Lender and any of its officers,
employees and/or agents shall have the right, subject to the rights of
tenants, to inspect any Approved Property(ies) as frequently as Subordinated
Lender determines to be appropriate, (i) at any time without notice if
(x) an Event of Default exists, (y) there may be an imminent material
violation of this Agreement (which violation could have a Material Adverse
Effect) relating to the Approved Property to be inspected, in Subordinated
Lender's reasonable judgment, or (z) there is an emergency currently
existing at the Approved Property to be inspected, in Subordinated Lender's
judgment, and (ii) during normal business hours (or at such other times as
may reasonably be requested by Subordinated Lender) upon reasonable notice,
otherwise.
4.12 Contracts. Borrower shall deliver to Subordinated Lender, on
demand, copies (certified by Borrower as being true and correct) of those
specified contracts, bills of sale, statements, or receipted vouchers or
agreements under which Cleanup Contractor or any Subsidiary has contracted
for any services or purchased any materials with respect to, otherwise
relating to, any Remediation or Development.
4.13 Communications. Borrower, on its own behalf, authorizes
Subordinated Lender to communicate directly with Cleanup Contractor and, if
either (a) an uncured Event of Default has occurred or (b) Subordinated
Lender has notified Borrower that Subordinated Lender is not satisfied with
Borrower's responsiveness to Subordinated Lender's inquiries to Borrower,
then any contractor, subcontractor, Governmental Authorities, any tenant(s)
of an Approved Property, and any other person having a substantial interest
in an Approved Property or any Remediation or Development. So long as no
continuing Event of Default has occurred and no emergency exists,
Subordinated Lender shall give Borrower reasonable prior notice (which may
be oral or telephonic) of any such communication and shall provide Borrower
with an opportunity to participate in any meetings. Borrower has requested,
and Subordinated Lender agrees, that Subordinated Lender shall reasonably
endeavor to conduct any communications with third parties in a manner that
will minimize any disruption or confusion with respect to Borrower's existing
lines of communications with third parties.
4.14 Budgets. Borrower shall deliver to Subordinated Lender copies
of its respective annual budgets and all Subsidiaries' annual budgets, as
they shall be updated from time to time. If any event or circumstance has
occurred that would or is reasonably likely to have a Material Adverse Effect
on any Remediation, Development, physical condition, or on-site conditions
affecting any Approved Property, or any Subsidiary's or Borrower's compliance
with any Loan Application, Borrower shall upon request deliver within ten
(10) Business Days updated budgets for the completion of any Remediation and
Development or otherwise relating to such Approved Property.
4.15 Notification of Certain Events. Borrower shall, within ten
(10) calendar days, notify Subordinated Lender in writing of and provide any
reasonably requested documents upon receiving notice of any of the following
affecting any Approved Property: (1) any material liability or potential
liability of Borrower or any Subsidiary for response or corrective action,
natural resource damage or other harm pursuant to any Environmental Law; (2)
any Environmental Claim; (3) any violation of an Environmental Law or
material Hazardous Material Release, threatened Hazardous Material Release or
disposal of a Hazardous Material; or (4) the existence of any other condition
or circumstance that is reasonably likely to have a Material Adverse Effect.
4.16 No Conveyance. Except as contemplated in an approved Loan
Application, neither Borrower nor any Subsidiary shall under any
circumstances convey, transfer or grant any Approved Property, or any
interest therein, to Subordinated Lender or to any Affiliate of Subordinated
Lender, or to any other Person, without Subordinated Lender's prior written
consent. Compliance with the preceding sentence is guarantied by the Good
Faith Guarantors pursuant to the Good Faith Guaranty.
4.17 Other Business of DMB. To the extent that DMB conducts any
business, makes any investments, or acquires any assets other than its
membership interest in Borrower pursuant to the Borrower Operating Agreement
(collectively, "Other DMB Activities"), DMB shall not conduct any such Other
DMB Activities in its own name or as direct activities of DMB. DMB shall
instead establish one or more subsidiaries or other entities (which need not
be wholly owned by DMB) ("Other DMB Entities"), in which the Other DMB
Activities shall be conducted, all upon such terms and conditions as DMB
shall see fit, provided such terms and conditions do not limit or impair
DMB's ability to perform its obligations under the Borrower Operating
Agreement and the Loan Documents. No Other DMB Entity shall have or perform
any obligations under the Subordinated Loan Documents or with respect to the
Approved Properties.
4.18 Administrative Expenses Budgets. All Administrative Expenses
Budgets shall include line items for contingencies and overruns in amounts
satisfactory to Subordinated Lender.
4.19 Documentation. Borrower and DMB shall, from time to time,
upon Subordinated Lender's reasonable request, provide Subordinated Lender
with copies of all material documentation and other material written
information related to the activities of Borrower as reasonably requested by
Subordinated Lender.
4.20 Disposition Agreements. All dispositions and refinancings of
Approved Properties shall be entered into at arm's length. Borrower shall
disclose to Subordinated Lender in writing any affiliation or relationship
between any DMB Party and any purchaser or lender with respect to any
Approved Property. The terms of disposition or refinancing shall include
the following unless Subordinated Lender agrees otherwise (including pursuant
to approval of a Loan Application): (a) disposition agreement shall be in
substantially the form of Exhibit "K" of the Senior Loan Agreement, or, at
Borrower's option, more favorable to the seller; (b) sale entirely for cash;
and (c) selling price to be no lower than the lowest selling price projected
in the Loan Application, provided that: (i) a sale at such price is
commercially reasonable under the circumstances; and (ii) Borrower has
provided Subordinated Lender with at least ten days prior notice of the
proposed selling price. If Borrower suffers a loss as a result of any
indemnification provided by Borrower under any disposition agreement, then
Subordinated Lender shall not be required to bear any portion of such loss,
except to the extent that such loss arises from Identified Environmental
Risks, and except to such extent in no event shall Subordinated Lender be
required to make any Subordinated Loan Advances whatsoever to cover any part
of such liability or loss. Regardless of whether Borrower assumes such
personal liability, in absolutely no event shall Subordinated Lender have
any such liability whatsoever. Nothing in the preceding restrictions shall
prevent Cleanup Contractor from providing any purchaser with such indemnities
and assurances as may have been provided for in the Loan Application or GMP
Agreement, provided that Borrower shall have no liability in connection
therewith.
4.21 Replacement of Cleanup Contractor or Good Faith Guarantor. If
any Cleanup Contractor or Good Faith Guarantor is the debtor in a Bankruptcy
Proceeding (whether voluntary or involuntary, and without regard to the
90-day period provided for in the definition of Bankruptcy Proceeding), then
within thirty days (forty-five days in the case of a Good Faith Guarantor)
after the initial commencement thereof Borrower shall replace such Cleanup
Contractor or Good Faith Guarantor with a Satisfactory Replacement Cleanup
Contractor or Satisfactory Replacement Good Faith Guarantor, as applicable.
4.22 DMB Affiliated Financing. Borrower shall promptly notify
Subordinated Lender of the amount and terms of any DMB Affiliated Financing
obtained by Borrower, and shall provide Subordinated Lender with copies of
all documentation related thereto. Borrower shall not enter into any DMB
Affiliated Financing unless the lender has entered into a subordination
agreement satisfactory to Subordinated Lender in Subordinated Lender's sole
and absolute discretion, and containing such terms and conditions as
Subordinated Lender shall require in its sole and absolute discretion. For
purposes of the Waterfall, the principal amount of DMB Affiliated Financing
shall be treated as Capital Contributions by DMB to Borrower with respect to
the affected Approved Property, and not as a loan.
4.23 Financial Statements. Borrower shall furnish to Lender:
4.23.1 Monthly Reports. Within 20 days after the end of each
month, a report of all Cash Flow, Net Proceeds from Sales or Refinancings
and deductions made in calculating the foregoing during such month.
4.23.2 Quarterly Financials. Within 45 days after the end of
each fiscal quarter of Borrower, including the fourth fiscal quarter of every
fiscal year, a copy of financial statements of Borrower, each Approved
Property and every Subsidiary, including balance sheets and profit and loss
statements, as of the end of each such quarter and for the corresponding
quarter of the preceding year and detailed statements of operations for the
year to date and for the corresponding period of the preceding year, all
certified by Borrower's chief financial officer.
4.23.3 Annual Financials. Within 120 days after the end of
each fiscal year of Borrower, a copy of the financial statements, consisting
of consolidated balance sheets, income statements and cash flow statements as
of the end of such fiscal year and consolidated statements of stockholders'
(or partners' or members') equity for such fiscal year for Borrower and each
Subsidiary, all in reasonable detail and prepared in accordance with
generally accepted accounting principles and audited by an independent
certified public accountant approved by Subordinated Lender, which approval
shall not be unreasonably withheld.
4.23.4 Accountants' Reports. Promptly upon receipt thereof
by Borrower, a copy of each report (including reports commenting on
Borrower's internal bookkeeping, accounting or financial procedures)
submitted to Borrower by the accountants that prepared, or the accountants
(if any) that audited, Borrower's financial statements.
4.23.5 Asset Markdowns. Notice of any "markdown" or
adjustment in book value or carrying value of any asset of Borrower or any
Subsidiary, promptly upon taking such markdown or adjustment.
4.23.6 Other Information. Promptly upon request, such other
information as Subordinated Lender may reasonably request with respect to the
business, affairs or condition (financial or otherwise) of Borrower or the
Subsidiaries.
4.24 Transfers of Interests in Borrower or any Subsidiary.
4.24.1 Prohibition. Except for the Subordinated Pledge
Agreement and as otherwise expressly permitted under this Agreement, without
the prior written consent of Subordinated Lender:
(i) neither Borrower nor any Subsidiary shall (ii)
directly or indirectly sell, transfer, convey, mortgage, pledge, or assign
any direct or indirect interest in any Property or any part thereof
(including any partnership, membership or any other ownership interest in
Borrower or any Subsidiary or any partner or member thereof);
(iii) no new general partner, member, or limited partner
having the ability to control the affairs of Borrower shall be admitted to or
created in Borrower or any Subsidiary (nor shall any existing general partner
or member or controlling limited partner withdraw from Borrower or such
Subsidiary, as applicable), and no change in Borrower's or any Subsidiary's
organizational documents relating to control over Borrower or such
Subsidiary, as applicable, and/or any Property shall be effected; and
(iv) no transfer shall be permitted of the beneficial
interest in Borrower, any of its constituent members, any Subsidiary or any
of the Properties (except as contemplated by the applicable Loan Application);
4.24.2 Definition: "Transfer." The term "transfer" shall
include the sale, transfer, conveyance, mortgage, pledge, or assignment of
the legal or beneficial ownership of (i) any Property, (ii) any partnership
interest in any member in Borrower that is a partnership, (iii) any voting
stock in any member of Borrower that is a corporation, and (iv) any
membership interest in any member of Borrower that is a limited liability
company; "transfer" shall not include the leasing of individual units within
any Property so long as Borrower complies with the provisions of the
Senior Loan Documents relating to such leasing activity or the transfers of
limited partner interests in Borrower so long as the requirements of this
Agreement are satisfied. Subordinated Lender shall endeavor to respond to
any written request for approval of a transfer within fifteen (15) days of
its receipt of notice of such proposed transfer together with all
documentation in connection therewith that Subordinated Lender may reasonably
request.
4.24.3 Certain Permitted Transfers. Notwithstanding anything
to the contrary contained in the foregoing, any holder of a direct or
indirect ownership interest in Borrower as of the date of this Agreement (an
"Interest Holder") shall have the right to transfer its ownership interest
without Subordinated Lender's prior consent, provided, that, (A) after taking
into account any prior transfers and the current transfer pursuant to this
paragraph, whether to the proposed transferee or otherwise, no such transfer
or series of transfers shall result in (I) the proposed transferee (together
with any other transferees pursuant to this paragraph) owning (directly or
indirectly, or beneficially) more than forty-nine percent (49%) of the direct
or indirect ownership interests in Borrower, or (II) a transfer of more than
forty-nine percent (49%) of the direct or indirect ownership interests in
Borrower; (B) no Event of Default has occurred and remains uncured; (C) no
change of control affecting Borrower shall occur as a result of such
transfer; (D) such transferee shall be a reputable entity or person of good
character, creditworthy and with sufficient financial net worth; (E) such
transferee and all transferees in the aggregate under this paragraph shall
have no voting rights and shall not possess the power to, directly or
indirectly, direct the management and policies of Borrower in any way,
whether through the ownership of voting securities, by contract or otherwise;
(F) any provisions in any of the organizational documents of either Borrower
or any Subsidiary that require the unanimous affirmative vote or consent of
all the holders of ownership interests in Borrower or any Subsidiary, as
applicable, or any other applicable voting threshold, shall not require or
include the vote or consent of such proposed transferee or transferees; and
(G) no transferee shall be an investment bank, securities firm, institutional
lender, or other significant competitor of Credit Suisse First Boston in any
substantial line of business of Credit Suisse First Boston, or an officer,
director, or employee of any of the foregoing.
4.25 Subordinated Pledge Agreement. Subject to the terms and
provisions of any applicable grace, notice and cure periods, Borrower shall
perform all of its obligations under the Subordinated Pledge Agreement.
5 GMP AGREEMENTS.
5.1 Cost Overruns. Notwithstanding anything to the contrary in
this Agreement, any cost overruns or obligations incurred by Cleanup
Contractor under any GMP Agreement shall be borne entirely by Cleanup
Contractor without contribution by Borrower, Subsidiary, or Subordinated
Lender.
5.2 On-Site Operations. Subordinated Lender shall have no right or
obligation to direct, manage, control, or participate in any Remediation. At
all times, Permitted Sponsor(s) shall constitute the Sponsor of, and shall
control, any and all Remediation, all in full compliance with all applicable
Law. Upon request, Borrower shall promptly cause a Permitted Sponsor to
confirm in writing to Subordinated Lender that such party is Sponsor as to
any Approved Property(ies) or Remediation designated by Subordinated Lender.
Subordinated Lender shall have neither the right nor the obligation to: (a)
take any action, make any decision or otherwise participate in management of
Borrower or any Subsidiary in any way if such action, decision or participation
would or could, in Subordinated Lender's judgment, cause Subordinated Lender
to be deemed a Sponsor of any Remediation; or (b) exercise decision making
control over any environmental compliance or hazardous substance handling or
disposal. Nothing in this paragraph shall limit any right or remedy of
Subordinated Lender upon the occurrence of an Event of Default.
6 OPERATING AGREEMENTS.
To protect Lender's interests as a creditor of Borrower and keep
Subordinated Lender fully informed of Borrower's and the Subsidiaries'
activities, Subordinated Lender shall have the following rights with respect
to the Operating Agreements, notwithstanding anything to the contrary in the
Operating Agreements.
6.1 Operating Agreements. DMB and the Members of DMB shall perform
their obligations under and comply with the Operating Agreements, including
their obligations to make Capital Contributions when and as required under
the Operating Agreements.
6.2 Approvals and Consents. To the extent that the Borrower
Operating Agreement provides that approval, consent or affirmative vote by
any Member(s) or eighty percent (80%) of Borrower's Board of Managers is
required as to any matter (the "Required Borrower Vote"), or that such matter
is required to be satisfactory to (or shall be agreed upon or established by)
the Required Borrower Vote, such matter shall also require express written
approval and agreement by Subordinated Lender in accordance with this
Agreement, subject however to the same limitations, conditions, restrictions
and qualifications (including any relating to, for example, "materiality")
that may apply to a Member's exercise of its rights under the Borrower
Operating Agreement (the "Operating Agreement Qualifications"). To the
extent that the Borrower Operating Agreement permits any Member or the Board
of Managers to require Borrower or any Member to take any action,
Subordinated Lender shall, subject to the Operating Agreement Qualifications,
also be entitled to require Borrower or any Member or the Board of Managers
of Borrower to take such action.
6.3 Delivery of Information. Subject to the Operating Agreement
Qualifications, Borrower shall provide Subordinated Lender with copies of all
Loan Applications, financial statements, reports, documents, and all written
communications and information of any kind provided to any Member pursuant to
the Borrower Operating Agreement, in each case at the same time and by the
same means provided to such Member pursuant to the Borrower Operating
Agreement. Borrower shall also provide Subordinated Lender with such further
written or oral information and documentation relating to the Borrower
Operating Agreement, Remediation, or any matter contemplated by the Borrower
Operating Agreement or this Agreement, as Subordinated Lender shall request
from time to time, subject to the Operating Agreement Qualifications.
6.4 Meetings. DMB shall notify Subordinated Lender of any meeting
of the Members or Board of Managers of Borrower to be held pursuant to the
Borrower Operating Agreement. Such notice shall be given to Subordinated
Lender at the same time, and by the same means, as it is given to the Members
and/or the Board of Managers. Subordinated Lender shall be entitled to
attend any meeting of the Members or the Board of Managers held pursuant to
the Borrower Operating Agreement.
6.5 Enforcement of Borrower Operating Agreement. Subordinated
Lender is an intended third-party beneficiary of the Borrower Operating
Agreement and shall have the right to enforce against each Member and the
Board of Managers all obligations of such Member and the Board of Managers
under the Borrower Operating Agreement. If a Liquidating Event occurs, then
Subordinated Lender shall have the right to require a liquidation of Borrower
in accordance with the terms of the Borrower Operating Agreement.
6.6 No Amendments. No Member or Board of Managers of Borrower
shall amend, modify, or waive any requirements of the Borrower Operating
Agreement without Subordinated Lender's consent. Any such amendment,
modification or waiver made without Subordinated Lender's consent shall be
void and of no force or effect. The DMB Operating Agreement shall
not be modified in any manner that would make any representation or warranty
in any Loan Document inaccurate. Modifications made by DMB or its members in
violation of the preceding sentence shall be deemed Borrower's breach of this
Agreement, as to which the Cure Period shall apply.
6.7 No Member Loans. No Member shall make loan(s) to Borrower
pursuant to Section 3.3.4 of the Borrower Operating Agreement or otherwise,
unless such loans are specifically permitted by this Agreement (such as DMB
Affiliated Financing made in compliance with this Agreement) or have been
approved by Subordinated Lender in writing.
6.8 DMB's Failure to Provide Funds. To the extent that DMB fails
to make a Capital Contribution under the Borrower Operating Agreement to pay
DMB's 5% share of any Cash Outlay (the "DMB Shortfall"), then (as to the
affected Approved Property, if the DMB Shortfall relates to a particular
Approved Property), Subordinated Lender may, at its option, but shall not
be obligated to, make an additional Subordinated Loan Advance to Borrower
(a "Shortfall Advance") to cover part or all of the DMB Shortfall, upon the
following terms (which shall apply separately as to the affected Approved
Property, if the DMB Shortfall relates only to a particular Approved Property):
6.8.1 Amount. The amount of the Shortfall Advance shall equal
all or any portion of the DMB Shortfall.
6.8.2 Subordinated Loan Amount. The outstanding balance of
the Subordinated Loan, and the Subordinated Loan Advances, shall be deemed to
have been increased by an amount equal to the sum of (a) the Shortfall
Advance plus (b) an amount (the "Shortfall Adjustment") equal to Twenty-Five
Percent (25%) (the "Shortfall Adjustment Percentage") of "a."
6.8.3 Capital Contributions. DMB's Capital Account within
Borrower (and Approved Investment as to the Approved Property, if applicable)
shall be deemed, but only for purposes of future Waterfall distributions (and
without thereby limiting or reducing DMB's obligation to make Capital
Contributions under the Borrower Operating Agreement) to have been reduced by
an amount equal to the Shortfall Adjustment.
6.8.4 Nonresidual Percentage Adjustment. For purposes of the
Waterfall only (but only as to the affected Approved Property, if the DMB
Shortfall relates to a particular Approved Property), wherever Subordinated
Lender would otherwise be entitled to receive only eighty percent (80%) of
any distribution, Subordinated Lender shall instead be entitled to receive
a percentage equal to 100 times (a) total Subordinated Loan Advances to date,
including the Shortfall Adjustment (allocable to the particular Approved
Property, if applicable) divided by (b) the sum of "a" plus DMB's Capital
Account in Borrower (and Approved Investment, if applicable) as to the
Approved Property. (The resulting increase in amounts disbursable to
Subordinated Lender, expressed as incremental percentage points to be
disbursed to Subordinated Lender, is referred to as the "Percentage
Adjustment.")
6.8.5 Residual Percentage Adjustment. Wherever Subordinated
Lender would otherwise be entitled to receive only Fifty Percent (50%) of a
particular distribution, Subordinated Lender shall instead be entitled to
receive a percentage equal to the sum of (a) Fifty Percent (50%) plus (b) 2.5
times the Percentage Adjustment. The remainder of such distribution shall be
payable to Borrower.
6.8.6 Subsequent Cash Outlays. If thereafter further Current
Cash Outlays arise, then the otherwise applicable provisions of the Borrower
Operating Agreement shall continue to apply without regard to any Percentage
Adjustment. For purposes of the Waterfall, however, but not for purposes of
future Capital Contributions or Subordinated Loan Advances, the Percentage
Adjustments shall be recalculated from time to time based on total funds
advanced from time to time by DMB and Subordinated Lender. Any Percentage
Adjustment shall not decrease the obligations of DMB or Borrower under this
Agreement, to the extent they exist under this Agreement, to make Capital
Contributions or increase the amount of any Subordinated Loan Advance.
6.8.7 Example. An example of the foregoing Percentage
Adjustment, and the effect thereof, is set forth on Exhibit "C."
6.8.8 Acknowledgment by Parties. Borrower and Subordinated
Lender acknowledge that although the Percentage Adjustment mechanism may
cause substantial changes in the distribution of Borrower Cash pursuant to
the Waterfall, such changes are reasonable, necessary and appropriate to
fully compensate Subordinated Lender for the incremental risk assumed by
Subordinated Lender as a result of making extra Subordinated Loan Advances to
cover any DMB Shortfall. The Percentage Adjustment mechanism was fully
negotiated between the parties and Borrower acknowledges that Subordinated
Lender would not have entered into this Agreement in the absence of such
Percentage Adjustment mechanism.
6.9 Subordinated Lender's Failure to Provide Funds. To the extent
that Subordinated Lender fails to make a Subordinated Loan Advance under this
Agreement, at a time when all conditions to the making of such Subordinated
Loan Advance have been satisfied, to pay Subordinated Lender's 80% share of
any Cash Outlay (the "Subordinated Lender Shortfall"), then (as to the
affected Approved Property, if the Subordinated Lender Shortfall relates to
a particular Approved Property), Borrower may, at its option, but shall not
be obligated to, make an additional Capital Contribution to Borrower (also, a
"Shortfall Advance") to cover part or all of the Subordinated Lender
Shortfall, upon the following terms (which shall apply separately as to
the affected Approved Property, if the Subordinated Lender Shortfall relates
only to a particular Approved Property):
6.9.1 Amount. The amount of Borrower's Shortfall Advance
shall equal all or any portion of the Subordinated Lender Shortfall.
6.9.2 Capital Account Adjustment. The outstanding balance of
DMB's Capital Contributions within Borrower shall be deemed to have been
increased by an amount equal to the sum of (a) the Shortfall Advance plus
(b) an amount (also, a "Shortfall Adjustment") equal to the Shortfall
Adjustment Percentage times "a."
6.9.3 Subordinated Loan Balance. The balance of the
Subordinated Loan Advances (and Approved Investment as to the Approved
Property, if applicable) shall be deemed, but only for purposes of future
Waterfall distributions (and without thereby limiting or reducing
Subordinated Lender's obligation to make future Subordinated Loan Advances
under this Agreement) to have been reduced by an amount equal to the
Shortfall Adjustment.
6.9.4 Nonresidual Percentage Adjustment. For purposes of the
Waterfall only (but only as to the affected Approved Property, if the
Subordinated Lender Shortfall relates to a particular Approved Property),
wherever DMB would otherwise be entitled to receive twenty percent (20%) of
any distribution, DMB shall instead be entitled to receive a percentage equal
to 100 times (a) total Capital Contributions by DMB to date, including the
Shortfall Adjustment (allocable to the particular Approved Property, if
applicable) divided by (b) the sum of "a" plus the Subordinated Loan
principal balance (and Approved Investment, if applicable) as to the Approved
Property. (The resulting increase in amounts disbursable to DMB, expressed as
incremental percentage points to be disbursed to DMB, is also referred to as
a "Percentage Adjustment.")
6.9.5 Residual Percentage Adjustment. Wherever DMB would
otherwise be entitled to receive Fifty Percent (50%) of a particular
distribution, DMB shall instead be entitled to receive a percentage equal to
the sum of (a) Fifty Percent (50%) plus (b) .625 times the Percentage
Adjustment. The remainder of such distribution shall be payable to
Subordinated Lender.
6.9.6 Subsequent Cash Outlays. If thereafter further Current
Cash Outlays arise, then the otherwise applicable provisions of this
Agreement shall continue to apply without regard to any Percentage
Adjustment. For purposes of the Waterfall, however, but not for purposes of
future Capital Contributions or Subordinated Loan Advances, the Percentage
Adjustments shall be recalculated from time to time based on total funds
advanced from time to time by DMB and Subordinated Lender. Any Percentage
Adjustment shall not decrease the obligations of Subordinated Lender under
this Agreement, to the extent they exist under this Agreement, to make
Subordinated Loan Advances or increase the amount of any Subordinated Loan
Advance.
6.9.7 Acknowledgment by Parties. Borrower and Subordinated
Lender acknowledge that although the Percentage Adjustment mechanism may
cause substantial changes in the distribution of Borrower Cash pursuant to
the Waterfall, such changes are reasonable, necessary and appropriate to
fully compensate DMB for the incremental risk assumed by DMB as a result of
making extra Capital Contributions to cover any Subordinated Lender
Shortfall. The Percentage Adjustment mechanism was fully negotiated between
the parties and Subordinated Lender acknowledges that Borrower would not have
entered into this Agreement in the absence of such Percentage Adjustment
mechanism.
6.10 Withdrawing Member. Notwithstanding anything to the contrary
in Section 6.10.3 of the Borrower Operating Agreement, any transfer of a
Withdrawing Member's Membership Interest to a third party shall require
Subordinated Lender's approval.
6.11 Copies of Notices. Any Member that sends a notice pursuant
to Section 10.3 of the Borrower Operating Agreement shall at the same time
and by the same means send a copy of such notice to Subordinated Lender.
6.12 Other DMB Entities. The Other DMB Entities shall be
adequately capitalized. DMB shall operate the Other DMB Entities as separate
entity(ies) and in compliance with the Subsidiary Structuring Covenants.
7 BORROWER'S SUBSIDIARIES.
7.1 Loan Obligations. Each Subsidiary shall:
7.1.1 Borrower's Loan Obligations. Perform and comply with
all obligations under this Agreement; and
7.1.2 Transfer Funds. By the close of the business day
following receipt, transfer to Borrower all Net Proceeds from Sales or
Refinancings. Each Subsidiary on the business day before every Payment Date
shall distribute to Borrower all other Borrower Cash held by such Subsidiary,
except the Subsidiary Cash Reserve.
7.2 Structuring. Each and every Subsidiary shall comply with the
following (the "Subsidiary Structuring Conditions"):
7.2.1 Structure. Each Subsidiary shall comply with the
definition of "Subsidiary" set forth in this Agreement;
7.2.2 Legally Separate. Remain a legally separate entity,
independent of Borrower. Without limiting the generality of the foregoing,
and, without limiting the foregoing, take such actions as shall be reasonably
required in order that:
(i) Shared Expenses. No Subsidiary shall incur any
material indirect or overhead expenses for items shared between such
Subsidiary and other Subsidiaries and/or Borrower, other than shared items of
expenses such as legal, auditing and other professional services, all of
which shall be allocated to the extent practical on the basis of actual use
or the value of services rendered, and otherwise on a basis reasonably
related to the actual use or the value of services rendered, it being
understood that Borrower shall pay all expenses owing by such Subsidiary or
Borrower relating to the preparation, negotiation, execution and delivery of
the Loan Documents (and any amendments, modifications or supplements
thereto), including, without limitation, legal, commitment, agency and other
fees.
(ii) Accounting and Management of Liabilities. Each
Subsidiary shall account for and manage its liabilities separately from
those of Borrower and every other Subsidiary, including payment of all
payroll and administrative expenses and taxes (other than taxes that are
determined or required to be determined on a consolidated or combined basis)
from its own assets.
(iii) Corporate Records. Each Subsidiary shall maintain
corporate records, books of account and stationery separate from those of
Borrower and every other Subsidiary.
(iv) Assets. Each Subsidiary's assets shall be
maintained in a manner that facilitates their identification and segregation
from those of Borrower or any other Subsidiary.
(v) Transaction Terms. Any transaction between a
Subsidiary and Borrower or any other Subsidiary shall be the type of
transaction that would be entered into by a prudent Person in the position of
such Subsidiary and shall be on terms that are at least as favorable as may
be obtained from a Person that is not Borrower or any other Subsidiary (it
being understood and agreed that the transactions contemplated in the Loan
Documents and approved by the Subordinated Lender meet the requirements of
this clause).
(vi) Debts. Except to the extent specified by the Loan
Documents and to the extent required by law, no Subsidiary shall be, nor
shall it hold itself out to be, responsible for the debts of Borrower or any
other Subsidiary.
(vii) Management. No Subsidiary shall participate in
remediation, disposition, or other activity related to the management of any
other entity;
(viii) Collateral. No Subsidiary shall provide any of
its assets as collateral for the benefit of any other Subsidiary or Borrower;
nor shall any Subsidiary allow any lien to be taken on any of its assets for
the benefit of any other Subsidiary or Borrower.
7.2.3 Independent Director. Have at least one independent
director, whose affirmative vote shall be required for the Subsidiary to
voluntarily commence any Bankruptcy Proceeding;
7.2.4 Use of Funds. Use its funds solely for its own
corporate purposes, and use only its own funds (including contributed capital
and loan proceeds) for such purposes, and maintain its own separate bank
accounts and employment relationships;
7.2.5 Dealings With Affiliates. Deal with Borrower, DMB and
Borrower's Affiliates solely on an arm's length basis, and provide services
to and obtain services from (and transact any other business with) any such
Affiliates based only on written agreements in its own name; and
7.2.6 Subsidiary Cash Reserve. Maintain a cash reserve equal
to the Subsidiary Cash Reserve.
7.3 Conduct of Business. Borrower shall not enter into contracts
relating to any Property(ies), or otherwise conduct business relating to any
Property(ies), in Borrower's name. Any such contracts shall be entered into,
and business shall be conducted, solely by the applicable Subsidiary, and
only in its own name.
8 REPRESENTATIONS AND WARRANTIES.
Borrower and DMB each represents and warrants as follows as of the
Closing Date and as of the date of each Subordinated Loan Advance:
8.1 Loan Applications. All Loan Applications reflect the best
information reasonably available to Borrower at the time of preparation of
such Loan Applications. To the best of Borrower's and DMB's knowledge, no
Loan Application omits any information necessary to make such Loan
Application, or any component thereof, not materially misleading. Except as
disclosed with particularity and specificity in a Loan Application, such Loan
Application complies with all the Loan Criteria.
8.2 Operating Agreements. The Operating Agreements are in full
force and effect and have not been amended, modified or waived. No Member is
in default under either Operating Agreement. No notice of any such default
has been given or received. All representations and warranties in Article 8
of the Borrower Operating Agreement are true and correct.
8.3 Subsidiaries. Each Subsidiary complies with the definition of
the term "Subsidiary."
8.4 Qualification, Etc. Borrower and/or Subsidiary as required:
(i) is authorized to do business in all jurisdictions in which qualification
is necessary, (ii) has all requisite power and authority to own its property
and conduct its business as conducted and as contemplated hereunder and to
enter into and perform its obligations under this Agreement and all other
documents and instruments contemplated hereby, and (iii) holds all material
licenses, certificates and permits from all governmental authorities
necessary for the conduct of business as contemplated hereby.
8.5 Authorization and Enforceability. The execution and delivery
of the Subordinated Loan Documents, and the performance of all obligations
hereunder and thereunder, and Borrower's making of any Approved Investments,
(i) have been duly authorized by all necessary action of Borrower and
Subsidiary as required, and (ii) do not and shall not require any consent or
approval of, notice to or any action by, any person or, if required, such
consents or approvals have been obtained in writing and delivered to
Subordinated Lender at closing. The Subordinated Loan Documents, when
executed and delivered, shall (and to the extent already executed and
delivered, do) constitute legal, valid and binding obligations of Borrower
and Subsidiary as required, enforceable against Borrower and Subsidiary as
required in accordance with their terms, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
8.6 No Material Litigation. No material litigation affecting
Borrower, DMB or any Subsidiary is pending, or to the knowledge of Borrower
or any Subsidiary presently threatened, at law or in equity, or before or by
any tribunal of any kind, including any federal, state, municipal or
other governmental department, commission, board, agency or instrumentality.
8.7 Compliance with Law. No DMB Party is in violation of or in
default under any applicable Law affecting any Approved Property, except to
the extent that a valid PPA (or conditional Clearance) has been obtained that
specifically allows such activity. To the best of the DMB Parties' knowledge
no DMB Party is in violation or default under any order, writ, injunction,
demand or decree of any court or any other Governmental Authority. No DMB
Party is in violation or default in any material respect under any indenture,
agreement or other instrument to which it is a party or by which its
properties are bound.
8.8 No Conflict. The DMB Parties' execution and delivery of the
Subordinated Loan Documents, and performance of their obligations thereunder:
(i) do not and shall not violate or result in a breach of, or constitute a
default under, or conflict with, or cause any acceleration of, any obligation
with respect to any provision or restriction of any indenture, deed of trust,
document, agreement or instrument to which any DMB Party is a party or by
which it or its property may be bound; (ii) do not and shall not violate (A)
the charter document or by-laws of any DMB Party or (B) any provision of
applicable law, regulation or order, including the provisions of any federal
or state tax or securities laws and any applicable rule, regulation, order,
writ, injunction or decree of any Governmental Authority; or (iii) result in
the creation or imposition of any lien or encumbrance of any nature
whatsoever upon any property or assets of Borrower or any Subsidiary.
8.9 Ownership. Each Subsidiary is the sole owner and holder of
its Approved Property, subject only to matters approved by Subordinated
Lender. There are no security interests, liens or other encumbrances
securing the payment of money affecting any Approved Property, other than
in favor of Senior Lender.
8.10 Place of Business. Borrower's principal place of business is
located at its address listed in the opening paragraph of this Agreement.
Borrower keeps its books and records at such address.
8.11 Financial Statements. All financial statements that any DMB
Party has submitted to Subordinated Lender or submits to Subordinated Lender
after the Closing Date were or shall be (as applicable) true and correct in
all material respects and as of the respective dates of such financial
statements, fairly present the respective financial conditions and results of
operations of the entities to which they, including notes thereto, relate, as
of the dates indicated and the results of operations and changes in financial
position, if any, for the periods therein specified, and are correct and
complete. All such financial statements were prepared in accordance with
proper accounting practices. Except as disclosed in writing to Subordinated
Lender, after the respective dates of such financial statements and
information, the applicable DMB Party has not incurred any material
liabilities or obligations, direct or contingent (including any DMB
Affiliated Financing), or entered into any material transactions not in the
ordinary course of business, nor has there occurred any event that would
have a Material Adverse Effect, or any development involving a prospective
event that would have a Material Adverse Effect, in the condition (financial
or otherwise), business prospects, net worth or results of operations of
such DMB Party. No DMB Party is the subject of any Bankruptcy Proceeding.
(The preceding sentence shall not be deemed to have been breached as to a
future Bankruptcy Proceeding affecting Cleanup Contractor or a Good Faith
Guarantor if the period permitted under this Agreement for replacement of
such Person has not expired.)
8.12 Accurate and Complete. This Agreement and all deliveries in
connection with or in furtherance of this Agreement and the Subordinated
Loan, to Borrower's and each Subsidiary's best knowledge, fully and fairly
state(d) the matters with which they purported to deal, and neither knowingly
misstated any material fact nor, separately or in the aggregate, omitted or
failed to state any material fact necessary to make the statements made
therein not misleading.
8.13 No Fraud. No fraud by any DMB Party or its Affiliate has
occurred in the negotiation of this Agreement or other documents related to
the consummation of the transactions contemplated by this Agreement.
8.14 ERISA. Borrower is not a party to (or subject to any claim or
lien by reason of) any employee benefit plan defined and regulated under the
Employee Retirement Income Security Act of 1974 and the regulations
promulgated thereunder.
8.15 No Contracts. Except as fully identified in the applicable
approved Loan Application, neither Borrower, nor any Subsidiary, owns or
holds, or is obligated under or a party to, any purchase option, right of
first refusal to purchase or any other contractual right to purchase,
acquire, sell, assign or dispose of any Approved Property or any portion
thereof, other than contracts approved by Subordinated Lender pursuant to
Loan Applications or otherwise.
8.16 GMP Agreements. Every GMP Agreement has been duly authorized
and executed by all parties thereto; is in full force and effect; and has not
been amended or waived. No party is in default under any such agreement.
8.17 Margin Regulations. Borrower does not own any "margin
security," as that term is defined in Regulations G and U of the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"), and
the proceeds of the Subordinated Loan shall be used only for the purposes
contemplated hereunder. The Subordinated Loan shall not be used, directly or
indirectly, for the purpose of purchasing or carrying any margin security,
for the purpose of reducing or retiring any indebtedness that was originally
incurred to purchase or carry any margin security or for any other purpose
that might cause any of the loans under this Agreement to be considered a
"purpose credit" within the meaning of Regulations G,T, U or X of the Federal
Reserve Board. Borrower and the Subsidiaries shall not take or permit any
agent acting on its behalf to take any action that might cause this Agreement
or any document or instrument delivered pursuant hereto to violate any
regulation of the Federal Reserve Board.
8.18 Taxes; Elections. All federal, state and local tax returns,
reports and statements required to be filed by Borrower and/or any Subsidiary
have been filed with the appropriate governmental agencies in all
jurisdictions in which such returns, reports and statements are required to
be filed, and all taxes and other impositions shown to be due and payable
have been timely paid prior to the date on which any fine, penalty, interest,
late charge or loss may be added thereto for non-payment thereof. No DMB
Party has granted or been requested to grant a waiver of any statute of
limitations relating to the payment of federal, state or local taxes.
8.19 Opinion(s) of Counsel. Borrower represents and warrants that
it has authorized and requested its counsel to prepare and deliver an opinion
letter(s) to Subordinated Lender, which Subordinated Lender is entitled to
rely on, with respect to the matters contemplated by this Agreement or as
otherwise addressed in any such opinion letter. Borrower acknowledges that (a)
the preparation of such an opinion constitutes, or might be construed to
constitute, representation of Subordinated Lender by Borrower's counsel and
that such representation is in conflict with such counsel's representation of
Borrower and that such representation might result in a loss of
confidentiality with respect to information and knowledge of or about
Borrower and (b) the consequences of any loss of confidentiality as a result
of the preparation and delivery of such an opinion have been fully disclosed
to it. Borrower hereby waives its attorney-client privilege with respect to
the limited matters set forth in such opinion letter.
8.20 No Default. Borrower is not in default under any Subordinated
Loan Document, nor has any event occurred that would, with the passage of
time or the giving of notice, constitute an Event of Default.
9 REMEDIES.
Upon the occurrence of any Event of Default, Subordinated Lender
shall have the following rights and remedies, all of which shall be
cumulative and may be exercised (and the exercise of which may be suspended
without prejudice) from time to time in Subordinated Lender's sole and
absolute discretion.
9.1 Termination of Advances. Subordinated Lender shall have no
further obligation to make any Subordinated Loan Advances.
9.2 Default Interest. To the extent that the amount thereof has
been determined, any Subordinated Loan Interest not paid when due and payable
under the Waterfall shall bear interest at the Default Rate.
9.3 Loan Termination Option.
9.3.1 Definitions. The following definitions shall apply:
(i) "Hypothetical Distribution" means the payment of the
entire Borrower Cash that would result from a hypothetical all-cash
liquidation of the Hypothetically Liquidated Assets, at the Hypothetical
Value, in accordance with the Waterfall.
(ii) "Hypothetical Liquidation Notice" means a written
notice from Subordinated Lender to Borrower pursuant to which Subordinated
Lender designates the Hypothetically Liquidated Assets and the Hypothetical
Value.
(iii) "Hypothetical Value" means the fair market value of
the Hypothetically Liquidated Assets as specified by Subordinated Lender in
its sole discretion.
(iv) "Hypothetically Liquidated Assets" means all of
Borrower's assets (including the proceeds of any sale or disposition of any
such assets between the Valuation Date and the closing) or such assets as may
be designated by Subordinated Lender in its sole discretion in the
Hypothetical Liquidation Notice.
(v) "Valuation Date" means the date that Subordinated
Lender transmits the Hypothetical Liquidation Notice.
9.3.2 Required Election. Subordinated Lender may deliver a
Hypothetical Liquidation Notice to Borrower. Within thirty (30) days after
Subordinated Lender's notice of the Hypothetical Liquidation Notice becomes
effective pursuant to this Agreement, Borrower shall elect by notice to
Subordinated Lender (the "Borrower's Buy/Sell Election") to either:
(i) Payment of Loan Option. Pay Subordinated Lender, in
full satisfaction of the Subordinated Loan, an amount equal to the
Hypothetical Distribution that Subordinated Lender would receive, pursuant to
the Waterfall, if the Hypothetically Liquidated Assets were liquidated at a
cash liquidation price equal to the Hypothetical Value, plus interest thereon
at the Interest Rate from the Valuation Date to the date of payment, and
simultaneously repay to Senior Lender the entire Senior Loan (the "Payment of
Loan Option"); or
(ii) Buyout of Borrower. Transfer, convey and assign to
Subordinated Lender all the Hypothetically Liquidated Assets, subject to the
Senior Loan Documents and all liens arising thereunder, in exchange for
payment by Subordinated Lender of an amount equal to the Hypothetical
Distribution that Borrower would receive if the Hypothetically Liquidated
Assets were liquidated at a cash liquidation price equal to the Hypothetical
Value and the proceeds distributed pursuant to the Waterfall (the "Borrower
Buyout Option").
9.3.3 Failure to Elect. If Borrower fails to timely deliver a
Borrower's Buy/Sell Election, then for a period of thirty days thereafter
Subordinated Lender shall have the right to elect, by notice to Borrower, to
withdraw the Hypothetical Liquidation Notice or to deem Borrower to have
elected, at Subordinated Lender's option, either the Payment of Loan Option or
the Borrower Buyout Option.
9.3.4 Timing.
(i) Payment of Loan Closing. If Borrower elects (or is
deemed to have elected) the Payment of Loan Option, then the closing of such
transaction (the "Payment of Loan Closing") shall occur within sixty (60)
days after the date Borrower gave Subordinated Lender the Borrower's Buy/Sell
Election. If Borrower's Event of Default based on which Subordinated
Lender delivered a Hypothetical Liquidation Notice was nonmonetary and arose
from acts or omissions of Borrower that did not involve fraud,
misappropriation or criminal acts, the foregoing sixty-day period shall be
extended: (a) by an additional sixty (60) days; and (b) by a further sixty
(60) days if, within 120 days after the date Borrower gave Subordinated Lender
the Borrower's Buy/Sell Election, Borrower shall have delivered to
Subordinated Lender written evidence, satisfactory to Subordinated Lender,
that Borrower has arranged: (a) noncontingent financing for at least 100% of
the total payments to be made by Borrower to any Lender at the Payment of
Loan Closing, which financing shall have been obtained from either or both
(i) an institutional lender (including a conduit lending program) or (ii) a
Person having a net worth of at least One Hundred Million Dollars
($100,000,000), provided that in either case in Subordinated Lender's
reasonable judgment such lender or other Person is credible, reputable, and
highly likely to perform its obligations; and/or (b) available cash equity
(as evidenced by a letter of credit and/or other similar assurances
satisfactory to Subordinated Lender in its reasonable judgment).
(ii) Borrower Buyout Closing. If Borrower elects (or is
deemed to have elected) the Buyout of Borrower Option, then the closing of
such transaction shall occur within ten (10) days after the date of such
election (the "Borrower Buyout Closing").
9.3.5 Remedies. If Borrower elects (or is deemed to have
elected) the Payment of Loan Option and fails to close when required, then:
(a) Borrower shall be automatically deemed to have elected the Borrower
Buyout Option, but any Hypothetical Distributions otherwise payable to
Borrower shall be reduced by ten percent (10%) to reasonably compensate
Subordinated Lender for the incremental delay, cost, and exposure to risk
resulting from Borrower's default (which ten percent (10%) reduction the
parties acknowledge constitutes a reasonable estimate of the damage to be
suffered by Subordinated Lender on account of such default, which damage the
parties acknowledge would otherwise be difficult or impossible to estimate);
or, at Subordinated Lender's option, (b) Subordinated Lender may withdraw the
Hypothetical Liquidation Notice and exercise any and all other rights and
remedies available to Subordinated Lender.
9.3.6 Effect. From and after the Payment of Loan Closing or
Borrower Buyout Closing, as applicable, the Subordinated Loan shall be deemed
to have been paid in full, and neither Borrower nor Subordinated Lender shall
have any further obligations under this Subordinated Loan Agreement, other
than as to any indemnities against claims made by third parties.
9.3.7 Other Distributions. A final distribution of Cash Flow,
in accordance with the Waterfall, shall be made immediately prior to the
Payment of Loan Closing or Borrower Buyout Closing, as applicable. To the
extent that after the Valuation Date Borrower disposes of any assets and
receives Net Proceeds from Sales or Refinancings, such proceeds shall be held
and not distributed by Borrower until after the Payment of Loan Closing or
Borrower Buyout Closing, as applicable.
9.4 Cure. Subordinated Lender may advance such sums as may be
appropriate in Subordinated Lender's judgment to cure the Event of Default.
All such advances shall be deemed Subordinated Loan Advances and shall be
repayable upon demand together with Default Interest, directly as a first-
priority application of Borrower Cash under the Borrower Operating Agreement
and the Waterfall.
9.5 Completion of Remediation. Subordinated Lender may engage
third-party environmental contractor(s) to complete any Remediation not
completed, and may complete any Development not completed. Remediation shall
be completed in substantially the manner contemplated by the applicable Loan
Application or in such other manner as such third-party environmental
contractor(s) shall recommend. Development shall be completed in such manner
as Subordinated Lender shall reasonably determine. Subordinated Lender may
pay, settle or compromise all existing bills and claims relating to any
Remediation or Development. Subordinated Lender's third-party environmental
contractor(s) may execute all applications and certificates in the name of
Borrower that may be required by Law with respect to any Remediation or
Development. Borrower hereby grants Subordinated Lender and its third-party
environmental contractor(s) a power of attorney for purposes of the
foregoing. This power of attorney shall be deemed to be a power coupled with
an interest, which cannot be revoked. All sums expended by Subordinated
Lender pursuant to this paragraph shall be deemed expenditures made to cure
Borrower's Event of Default.
9.6 Management. Subordinated Lender shall have the right, but not
the obligation, to require DMB to delegate any or all of its management
rights and responsibilities under the Borrower Operating Agreement to any
replacement manager designated and directed by Subordinated Lender.
9.7 Costs of Collection. Borrower shall reimburse all costs of
collection and enforcement incurred by Subordinated Lender, whether or not
suit is brought, including all courts costs and reasonable attorneys' fees.
10 EXCLUSIVITY.
10.1 Subordinated Lender's New Loan Opportunities. To the extent
that Subordinated Lender or the Principal Transactions Group of Credit Suisse
First Boston (the "Principal Transactions Group") becomes aware of any New
Loan Opportunity (but excluding (a) one-time or occasional opportunity(ies)
brought to either of them by third-party customer(s) or client(s) (but not
broker(s)) for the purpose of possibly investing in, or providing financing
for, such opportunity; and (b) an opportunity to invest in, or provide
financing for, any Environmentally Contaminated property that is part of a
pool of properties, which pool is not categorically identified as
environmentally distressed or having environmental issues), Subordinated Lender
shall exercise reasonable efforts to refer any such New Loan Opportunity to
Borrower, provided that none of the following conditions exists: (a) a New
Loan Termination; (b) an Event of Default; (c) any material Potential
Default; or (d) the occurrence of August 31, 1998. The making of a
loan secured by Environmentally Contaminated real property with a return that
does not depend on cash flow, appreciation, or profitability would not be
deemed a breach of the preceding sentence. If Borrower determines not to
pursue any such New Loan Opportunity referred by Subordinated Lender, then
Borrower shall not pursue such New Loan Opportunity and shall preserve the
confidentiality of such New Loan Opportunity, Borrower shall not disclose it
to third parties, and Subordinated Lender and the Principal Transactions
Group shall be free to pursue it with any other party(ies). Any New Loan
Opportunity referred to Borrower pursuant to this paragraph and pursued by
Borrower shall be subject to the same terms, conditions and procedures
set forth in this Agreement with respect to any Property.
10.2 Subordinated Lender Exclusivity. If at any time on or
before August 31, 1998, Andrew Stone ceases to be a senior officer of the
Principal Transactions Group, then Subordinated Lender shall promptly so
notify Borrower. In that case, unless a New Loan Termination has occurred,
Subordinated Lender shall either: (a) agree that from and after such
date Subordinated Lender shall not become involved (whether as an equity
investor or as a lender with a "participation" interest in net cash flow or
appreciation) in any new ventures (in which Subordinated Lender did not
previously participate) to invest in or remediate Environmentally
Contaminated real property (but the making of a secured loan with a return
that does not depend on cash flow, appreciation, or profitability would not
be deemed a breach of the foregoing restriction); or (b) offer Borrower a
one-time opportunity to implement a New Loan Termination. If Subordinated
Lender exercises option "b," then within fifteen (15) days after receipt of
Subordinated Lender's notice, Borrower shall have the right to elect to
implement a New Loan Termination. If Borrower so elects within such period,
then the parties shall take all actions reasonably necessary to implement a
New Loan Termination in accordance with this Agreement. If Borrower fails to
so elect, then Borrower's right to make such election shall expire, and
Subordinated Lender shall not be bound by the agreement described in the
preceding clause "a."
10.3 Other Environmentally Contaminated Real Property. So long as
no New Loan Termination has occurred, neither any DMB Party nor any Affiliate
of a DMB Party shall, at any time before September 1, 1998, participate in
any opportunity to invest as an equity owner in, or provide financing for,
any Property or Mortgage Acquisition that would otherwise constitute a
New Loan Opportunity (not including third-party Remediation work on a bona
fide fee-for-service basis) unless either (a) Subordinated Lender has
confirmed in writing that such Property or Mortgage Acquisition is not
appropriate for Borrower to pursue; or (b) Subordinated Lender has
disapproved, or been deemed to have disapproved, a Loan Application relating
to such Property or Mortgage Acquisition. If "a" or "b" has occurred as to a
New Loan Opportunity presented by Borrower, then Borrower shall be free to
pursue such New Loan Opportunity free of any claim by Subordinated Lender and
Subordinated Lender shall not pursue any such New Loan Opportunity referred
by Borrower and shall preserve the confidentiality of such New Loan
Opportunity, Subordinated Lender shall not disclose it to third parties, and
Borrower and DMB shall be free to pursue it with any other party(ies). Any
New Loan Opportunity referred to Subordinated Lender pursuant to this
paragraph and pursued by Borrower shall be subject to the same terms,
conditions and procedures set forth in this Agreement with respect to any
Property. Nothing in this paragraph shall restrict any party's activities
with respect to a Property as to which Subordinated Lender has rejected
(or deemed to have rejected) a Loan Application.
11 MISCELLANEOUS.
11.1 Subordinated Lender's Approval. Wherever this Agreement
refers to Subordinated Lender's approval or consent as to any matter, such
reference shall mean Subordinated Lender's prior written approval or consent
to such matter, which approval or consent Subordinated Lender may withhold
for any reason or no reason (and Subordinated Lender shall accordingly have no
obligation to be "reasonable"), except where expressly stated otherwise in
this Agreement. Without limiting the generality of the foregoing,
Subordinated Lender may disapprove any matter (other than any matter
consistent with an approved Loan Application) that would or could lead to
a Cash Outlay if Subordinated Lender has determined, in its sole and
unreviewable discretion, that Subordinated Lender no longer desires to make
Subordinated Loan Advances. Under no circumstances shall Subordinated Lender
be under any obligation to approve, or not to unreasonably disapprove, any
matter, except where expressly so provided in this Agreement. To the extent
that Subordinated Lender has the right under this Agreement to approve,
consent to, or withhold approval or consent to, any matter, which matter has
been approved or consented to by Senior Lender in writing, Subordinated
Lender shall be bound by Senior Lender's approval and may not disapprove such
matter for purposes of this Agreement.
11.2 Status of Subordinated Lender. Unless Subordinated Lender
elects otherwise, Subordinated Lender shall not exercise any of its rights
or remedies under this Agreement in any way that would or could cause
Subordinated Lender to be a Sponsor of any Remediation.
11.3 Affiliation with Senior Lender. Borrower acknowledges that
Subordinated Lender and Senior Lender are Affiliates. Notwithstanding such
affiliation, Subordinated Lender's rights, remedies and obligations under
this Agreement, and Subordinated Lender's exercise and performance thereof,
shall at all times be determined and interpreted as if no affiliation existed
between Subordinated Lender and Senior Lender. The preceding shall not be
deemed to impose any obligation on Subordinated Lender, or to limit or restrict
in any way Subordinated Lender's exercise of its rights and remedies under
the Subordinated Loan Documents. Subordinated Lender shall have no
obligation to require Senior Lender to act or not act in any particular
manner, and no liability, directly or indirectly, on account of any acts or
omissions of Senior Lender.
11.4 Borrower's Waiver of Claims. Borrower waives, releases, and
agrees not to sue upon, any claim against Subordinated Lender (whether
sounding in tort or otherwise), except a claim based upon breach of this
Agreement, gross negligence, willful misconduct, or knowing violations of
law. Whether or not such damages are related to a claim that is subject to
the waiver effected above, and whether or not such waiver is effective,
Subordinated Lender shall have no liability with respect to (and Borrower
waives, releases, and agrees not to sue upon any claim for) any special,
indirect, consequential, or punitive damages that Borrower suffers in
connection with, arising out of, or in any way related to, (a) the
transactions contemplated or the relationship established by this Agreement
or any of the other Subordinated Loan Documents, or (b) any act, omission, or
event occurring in connection with such transactions or relationship or
otherwise, unless a binding, final judgment of a court determines that such
damages resulted from breach of this Agreement, gross negligence, willful
misconduct or knowing violations of law.
11.5 Subordinated Lender's Waiver of Claims. Subordinated Lender
waives, releases, and agrees not to sue upon, any claim against Borrower, any
Subsidiary, or any of the Good Faith Guarantors (whether sounding in tort or
otherwise), except a claim based upon breach of any of the Subordinated Loan
Documents, gross negligence, willful misconduct, fraud, or knowing violations
of law. Whether or not such damages are related to a claim that is subject
to the waiver effected above, and whether or not such waiver is effective,
Borrower shall have no liability with respect to (and Subordinated Lender
waives, releases, and agrees not to sue upon any claim for) any special,
indirect, consequential, or punitive damages that Subordinated Lender suffers
in connection with, arising out of, or in any way related to, (a) the
transactions contemplated or the relationship established by this Agreement
or any of the other Subordinated Loan Documents, or (b) any act, omission, or
event occurring in connection with such transactions or relationship or
otherwise, unless a binding, final judgment of a court determines that such
damages resulted from breach of this Agreement, gross negligence, willful
misconduct, fraud or knowing violations of law.
11.6 Usury; Maximum Rate. Notwithstanding anything to the contrary
in any Subordinated Loan Document, Borrower and Subordinated Lender agree
that all agreements among them under any Subordinated Loan Documents are
limited expressly so that in no contingency or event whatsoever shall the
amount paid, or agreed to be paid, for the use, forbearance, or detention of
the money loaned to Borrower constituting the Subordinated Loan, or for the
performance or payment of any covenant or obligation contained in any of the
Subordinated Loan Documents, exceed the Highest Lawful Rate. If, due to any
circumstance whatsoever, fulfillment of any provision of any Subordinated
Loan Document (at the time performance of such provision is due) exceeds the
maximum amount of interest permitted by applicable law, then, automatically,
the obligation shall be modified or reduced so as to limit such interest to
the maximum amount permitted by applicable law. If at any time no Highest
Lawful Rate exists, then this paragraph shall be of no force or effect.
Borrower acknowledges that because the total anticipated amount of the
Subordinated Loan Advances would exceed $2,500,000, the Subordinated Loan is
not subject to any usury restrictions under New York law.
11.7 Relationship of Parties. The relationship between Borrower
and Subordinated Lender is that of borrower and lender only. Neither
Borrower nor Subordinated Lender is, nor shall either hold itself out to be,
the agent, employee, joint venturer, or partner of the other. Subordinated
Lender is not a partner, member, or agent of Borrower. Subordinated Lender
does not have, and shall not be deemed to have, any fiduciary relationship
with Borrower or fiduciary obligations to Borrower. Nothing in this
paragraph shall be deemed or construed to limit any of Borrower's obligations
to Subordinated Lender.
11.8 Further Assurances. Each party shall take such further
actions as shall be reasonably necessary from time to time to implement and
effectuate the intentions of the parties as expressed in this Agreement.
11.9 Separability. If all or any portion of any provision of this
Agreement is held to be invalid, illegal, or unenforceable in any respect,
then such invalidity, illegality, or unenforceability shall not affect any
other provision of this Agreement.
11.10 Notices. All notices or other communications required or
permitted under this Agreement shall be given by personal delivery or by
Federal Express or other nationally recognized overnight courier service.
Notices shall be effective when actually received or when delivery has been
unsuccessfully attempted twice as evidenced by a certificate by the third-party
delivery service. The parties' addresses are as set forth in the opening
paragraph of this Agreement. Each party may change its address to another
address within the United States by notice in accordance with this paragraph.
A copy of any notice shall be delivered at the same time, and by the same
means, to the recipient's attorneys, at the following addresses (or any
subsequent address designated by notice in accordance with this paragraph).
11.10.1 Borrower. Graham & James, 885 Third Avenue, 24th
Floor, New York, New York 10022-4802, Attention: Michael Zukerman, Esq. and
Koren Blair, Esq.
11.10.2 Subordinated Lender. Latham & Watkins, 885 Third
Avenue, Suite 1000, New York, New York 10022-4802, Attention: Geoff Hurley,
Esq., and Joshua Stein, Esq.
11.11 Authority of Attorneys. Any written notice, consent, waiver,
or extension of time given by an attorney actually representing a party to
this Agreement shall be effective as if given by such party.
11.12 Interpretation; Governing Law. The interpretation, validity
and enforcement of this Agreement shall be governed by and construed under
the laws of the State of New York notwithstanding the location of any
Approved Property. Terms such as "including," "include," and "such as,"
shall be interpreted in each case as if followed by the words "without
limitation" unless the context clearly requires otherwise. Words of
masculine, feminine, or neuter gender shall mean and include the correlative
words of the other genders. If a word is defined in the singular, the same
definition (modified to refer to the plural) shall be deemed to apply when such
word is used in the plural, and vice versa. All Exhibits and Schedules
attached to this Agreement are hereby incorporated by reference and made a
part of this Agreement as if set forth in full in the text of this Agreement.
Wherever any party's consent is not to be unreasonably withheld, such
consent shall not be unreasonably delayed or conditioned.
11.13 Amendments. This Agreement may be amended, discharged or
terminated only by a written instrument executed by Borrower and Subordinated
Lender.
11.14 Successors and Assigns. This Agreement shall bind and
benefit the parties and their successors, assigns, and legal representatives.
11.15 Assignment by Subordinated Lender. Subordinated Lender shall
be free at any time or from time to time to: (a) assign the Subordinated Loan
Documents to any Person wholly owned by Credit Suisse First Boston, whether
completely or only as they relate to any specific Approved Property(ies);
and/or (b) provided that Subordinated Lender continues to remain "lead"
lender, allow other Persons to participate in the Subordinated Loan as
participants. In addition, if Subordinated Lender obtains Borrower's
consent, which consent shall not be unreasonably withheld or delayed, then
Subordinated Lender may freely assign the Subordinated Loan Documents in
whole or in part to any Person. If Subordinated Lender from time to time
desires to make any assignment in compliance with this paragraph, complete or
partial, then Borrower shall provide such certificates, deliveries, and other
documents as Subordinated Lender shall reasonably require in connection
therewith, including amendments to the Subordinated Loan Documents to sever
the Subordinated Loan Documents as to particular Approved Property(ies)
or into two or more separate loans with multiple priorities, as requested by
Subordinated Lender, or as otherwise reasonably requested by Subordinated
Lender to facilitate any such transfer or assignment, provided that the
foregoing shall not increase Borrower's aggregate obligations. Borrower
shall have no obligation to reimburse any costs or expenses, including
attorneys' fees, incurred by Subordinated Lender as a result of the foregoing.
To the extent that any actual or potential assignee of the Loan or an
interest therein incurs any expenses (such as attorneys' and consultants'
fees, "due diligence" costs, and other transaction costs), which expenses
would not have been incurred but for such actual or potential assignment,
Borrower shall have no obligation to pay or contribute to such expenses.
11.16 Survival. All obligations, covenants, and indemnities made
by Borrower in this Agreement shall survive repayment of the Subordinated
Loan and all Subordinated Loan Interest.
11.17 Jury Trial Waiver. The parties waive jury trial in any
dispute related to arising from the Subordinated Loan Documents or the
Subordinated Loan, and in any action to enforce the Subordinated Loan
Documents or the Subordinated Loan.
11.18 Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which shall
constitute a single agreement.
11.19 Subordinated Lender Waivers. Subordinated Lender may at any
time and from time to time waive one or more of the conditions of this
Agreement but any such waiver shall be deemed to have been made pursuant to
and not in modification of this Agreement. Any such waiver in any one
instance or under any particular circumstance shall not be considered a waiver
of any such condition in any other instance or under any other circumstance.
<PAGE>
IN WITNESS WHEREOF, Borrower, Subordinated Lender, and DMB have
executed this Agreement as of the Closing Date.
SUBORDINATED LENDER BORROWER
GREENFIELDS FUNDING CORP. DMB/REMEDIATION LLC
By: Alan Baum By: Bruce S. Reshen
______________________ _____________________
Name: Alan Baum Name: Bruce S. Reshen
Title: President Title: President
DMB
DAMES & MOORE / BROOKHILL,
L.L.C.
By: DAMES & MOORE
VENTURES
By: Alan Krusi
________________________
Name: Alan Krusi
Title: President
By: BROOKHILL
HOLDINGS E-I, L.L.C.
By: Ronald B. Bruder
________________________
Name: Ronald B. Bruder
Title: President
<PAGE>
Subordinated Lender is an intended third-party beneficiary of Sections 6.1.2
and 6.1.3 of the DMB Operating Agreement, and entitled to enforce such
Sections directly against the undersigned.
DAMES & MOORE, INC. BROOKHILL CAPITAL RESOURCES
INC.
By: Mark A. Snell By: Ronald B. Bruder
_______________________ _________________________
Name: Mark A. Snell Name: Ronald B. Bruder
Title: Chief Financial Officer Title: President
<PAGE>
INDEX OF DEFINED TERMS
Administrative Expense Disbursements . . . . . . . . . . . . . . 2
Administrative Expenses. . . . . . . . . . . . . . . . . . . . . 2
Administrative Expenses Budget . . . . . . . . . . . . . . . . . 2
Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Approved Investment. . . . . . . . . . . . . . . . . . . . . . . 2
Approved Property. . . . . . . . . . . . . . . . . . . . . . . . 3
Bankruptcy Proceeding. . . . . . . . . . . . . . . . . . . . . . 3
Basic Return Disbursements . . . . . . . . . . . . . . . . . . . 3
Basic Subordinated Loan Interest . . . . . . . . . . . . . . . .21
Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Borrower Buyout Option . . . . . . . . . . . . . . . . . . . . .46
Borrower Cash. . . . . . . . . . . . . . . . . . . . . . . . . . 3
Borrower Operating Agreement . . . . . . . . . . . . . . . . . . 1
Borrower's Buy/Sell Election . . . . . . . . . . . . . . . . . .45
Buyout Closing . . . . . . . . . . . . . . . . . . . . . . . . .46
Cash Equivalent. . . . . . . . . . . . . . . . . . . . . . . . . 3
Cash Flow. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Cash Outlay. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Certificate of Approval. . . . . . . . . . . . . . . . . . . . . 9
Cleanup Contractor . . . . . . . . . . . . . . . . . . . . . . . 4
Clearance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Contingent Subordinated Loan Interest. . . . . . . . . . . . . .22
Cure Period. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Current Cash Outlay. . . . . . . . . . . . . . . . . . . . . . . 4
Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Default Interest . . . . . . . . . . . . . . . . . . . . . . . . 5
Develop. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Disbursement Request . . . . . . . . . . . . . . . . . . . . . . 5
DMB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
DMB Affiliated Financing . . . . . . . . . . . . . . . . . . . . 5
DMB Operating Agreement. . . . . . . . . . . . . . . . . . . . . 1
DMB Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
DMB Shortfall. . . . . . . . . . . . . . . . . . . . . . . . . .36
Environmental Claim. . . . . . . . . . . . . . . . . . . . . . . 6
Environmental Indemnitors. . . . . . . . . . . . . . . . . . . . 6
Environmental Insurance Policy . . . . . . . . . . . . . . . . . 6
Environmental Law. . . . . . . . . . . . . . . . . . . . . . . . 6
Environmental Risks. . . . . . . . . . . . . . . . . . . . . . . 7
Environmentally Contaminated . . . . . . . . . . . . . . . . . . 7
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . 7
Exit Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Federal Reserve Board. . . . . . . . . . . . . . . . . . . . . .44
Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . . . 9
Funding Conditions . . . . . . . . . . . . . . . . . . . . . . . 9
GMP Agreement. . . . . . . . . . . . . . . . . . . . . . . . . .10
Good Faith Guarantor(s). . . . . . . . . . . . . . . . . . . . .11
Good Faith Guaranty. . . . . . . . . . . . . . . . . . . . . . .11
Governmental Approval. . . . . . . . . . . . . . . . . . . . . .11
Governmental Authority . . . . . . . . . . . . . . . . . . . . .11
Hard Costs . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Hazardous Material . . . . . . . . . . . . . . . . . . . . . . .11
Hazardous Material Activity. . . . . . . . . . . . . . . . . . .11
Hazardous Material Release . . . . . . . . . . . . . . . . . . .11
Highest Lawful Rate. . . . . . . . . . . . . . . . . . . . . . .12
Identifiable Environmental Risks . . . . . . . . . . . . . . . .12
Identified Environmental Risks . . . . . . . . . . . . . . . . .12
Include. . . . . . . . . . . . . . . . . . . . . . . . . . .51, 52
Initial Property Funding . . . . . . . . . . . . . . . . . . . .12
Initial Property Funding Conditions. . . . . . . . . . . . . . .12
Interest Holder. . . . . . . . . . . . . . . . . . . . . . . . .33
Interest Rate. . . . . . . . . . . . . . . . . . . . . . . . . .14
Latent Environmental Risks . . . . . . . . . . . . . . . . . . .14
Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Leasing Guidelines . . . . . . . . . . . . . . . . . . . . . . .14
Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Liquidating Event. . . . . . . . . . . . . . . . . . . . . . . .14
Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Loan Agreements. . . . . . . . . . . . . . . . . . . . . . . . .14
Loan Application . . . . . . . . . . . . . . . . . . . . . . . .14
Loan Criteria. . . . . . . . . . . . . . . . . . . . . . . . . .24
Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . .14
Loan Recovery Shortfall. . . . . . . . . . . . . . . . . . . . .14
Local Counsel. . . . . . . . . . . . . . . . . . . . . . . . . .15
Material Adverse Effect. . . . . . . . . . . . . . . . . . . . .15
Maturity Date. . . . . . . . . . . . . . . . . . . . . . . . . .15
Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Mortgage Acquisition . . . . . . . . . . . . . . . . . . . . . .15
Net Proceeds from Sales or Refinancings. . . . . . . . . . . . .15
Net Property Profit. . . . . . . . . . . . . . . . . . . . . . .15
New Loan Opportunity . . . . . . . . . . . . . . . . . . . . . .16
New Loan Termination . . . . . . . . . . . . . . . . . . . . . .26
Operating Agreement Qualifications . . . . . . . . . . . . . . .35
Operating Agreements . . . . . . . . . . . . . . . . . . . . . .16
Other DMB Activities . . . . . . . . . . . . . . . . . . . . . .30
Other DMB Entities . . . . . . . . . . . . . . . . . . . . . . .31
Out of Balance . . . . . . . . . . . . . . . . . . . . . . . . .16
Outside Financing. . . . . . . . . . . . . . . . . . . . . . . .16
Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . .16
Payment of Loan Option . . . . . . . . . . . . . . . . . . . . .45
Percentage Adjustment. . . . . . . . . . . . . . . . . . . .37, 38
Permitted Sponsor. . . . . . . . . . . . . . . . . . . . . . . .16
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
PPA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Property Shortfall . . . . . . . . . . . . . . . . . . . . . . .22
Release Shortfall. . . . . . . . . . . . . . . . . . . . . . . .17
Release Shortfall Advance. . . . . . . . . . . . . . . . . . . .20
Remediation. . . . . . . . . . . . . . . . . . . . . . . . . . .17
Reminder Notice. . . . . . . . . . . . . . . . . . . . . . . . .25
Required Borrower Vote . . . . . . . . . . . . . . . . . . . . .35
Required Information . . . . . . . . . . . . . . . . . . . . . .23
Retained Earnings Reserve. . . . . . . . . . . . . . . . . . . .17
Satisfactory Replacement Cleanup
Contractor . . . . . . . . . . . . . . . . . . . . . . . .17
Senior Lender. . . . . . . . . . . . . . . . . . . . . . . . . . 1
Senior Loan Agreement. . . . . . . . . . . . . . . . . . . . . . 1
Senior Loan Documents. . . . . . . . . . . . . . . . . . . . . .17
Senior Loan Payments . . . . . . . . . . . . . . . . . . . . . .17
Shortfall Adjustment . . . . . . . . . . . . . . . . . . . .36, 38
Shortfall Adjustment Percentage. . . . . . . . . . . . . . . . .36
Shortfall Advance. . . . . . . . . . . . . . . . . . . . . .36, 37
Soft Costs . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Sponsor. . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Subordinated Lender. . . . . . . . . . . . . . . . . . . . . . . 1
Subordinated Lender Shortfall. . . . . . . . . . . . . . . . . .37
Subordinated Loan. . . . . . . . . . . . . . . . . . . . . . . . 1
Subordinated Loan Advance. . . . . . . . . . . . . . . . . .17, 18
Subordinated Loan Documents. . . . . . . . . . . . . . . . . . .18
Subordinated Loan Interest . . . . . . . . . . . . . . . . . . .21
Subordinated Note. . . . . . . . . . . . . . . . . . . . . . . .18
Subsequent Property Funding. . . . . . . . . . . . . . . . . . .18
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Subsidiary Cash Reserve. . . . . . . . . . . . . . . . . . . . .19
Subsidiary Structuring Covenants . . . . . . . . . . . . . . . .39
Such as. . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
Supplemental Return Disbursements. . . . . . . . . . . . . . . .19
Third Party Mortgage Proposal. . . . . . . . . . . . . . . . . .28
Waterfall. . . . . . . . . . . . . . . . . . . . . . . . . . . .19
_________________________
<PAGE>
EXHIBIT "A"
ADMINISTRATIVE EXPENSES BUDGET
Has Not Been Received
<PAGE>
EXHIBIT "B"
DESCRIPTION OF REMEDIATION PROFILES
TABLE 1
PROPERTY TARGETING CRITERIA
Category I - High Risk - Unsuitable
o Drinking water source impact likely or existing
o Pending/active litigation involving site contamination
o NPL/Superfund site
o Existing or likely health risk
o Radioactive waste
o Adjacent properties impacted
o Residential Neighborhood
o High Profile
Category II - Moderate Risk
o Acquisition price FMVd < $20M
o Remediation cost Less than 40% of FMVc
o Project term Less than 3 years
o Remedial plan approval process Normal
o Indemnifications Not likely
o Contamination Soil impact with water impact,
possible unknown or questionable
Geology, higher risk contaminants
o Existing use Non-productive
o Availability of data Some data but more required
o Title transfer Before remediation
Category III - Low Risk
o Acquisition price FMVd <$10M
o Remediation cost Less than 25% of FMV
o Project term Less than 24 months
o Remedial plan approval process Expedited
o Indemnifications Possible
o Contamination Soil impact only, favorable
geology, hydrocarbon, or other easily
treatable materials
o Existing use Productive
o Availability of Data Good
o Title transfer After remediation possible
- ---------------------------------------------------------------------------
FMVd - Fair Market Value of the property in a contaminated condition
FMVc - Fair Market Value of the property in a clean condition<PAGE>
EXHIBIT "C"
EXAMPLE OF PERCENTAGE ADJUSTMENT
Starting Point. As a starting point, assume Borrower has incurred to date
Cash Outlays in the amount of $1,000. Those were funded 75% ($750) with
Senior Loan Advances, and the balance 20% ($200) by Subordinated Loan
Advances and 5% ($50) by Capital Contributions made by DMB to Borrower.
The relative positions of Borrower and Subordinated Lender are as follows:
=========================================================================
Description Combined DMB's Capital Subordinated
Fundings by DMB Account within Loan
and Subordinated Borrower Advances
Lender
- -------------------------------------------------------------------------
Starting Point $250 $50 $200
=========================================================================
Additional Cash Outlay Required. After the foregoing, assume Borrower needs
to incur additional Cash Outlays in the amount of $500 (the "Second
Tranche"). To fund the Second Tranche, Senior Lender makes Senior Loan
Advances in the amount of $375, leaving $125 to be covered: (a) Borrower,
$25; and (b) Subordinated Lender, $100. Borrower fails to advance its $25;
Subordinated Lender fully funds its $100. The following calculations and
adjustments will be made:
=======================================================================
Initial Second Tranche $350 $0 $100
Subordinated Loan Advance
- -----------------------------------------------------------------------
Additional Subordinated Loan $375 $0 $25
Advance to Cover DMB Shortfall
- -----------------------------------------------------------------------
Shortfall Adjustment $375 ($6.25) $6.25
(25% x $25 Shortfall)
- -----------------------------------------------------------------------
New Balances $375 $43.75 $331.25
(Aggregate)
- -----------------------------------------------------------------------
New Percentage for Previously 43.75 / 375 331.25 / 375
"80%" Distributions = 11.66% 88.33%
- -----------------------------------------------------------------------
New Percentage for Previously 50% - (8.33% 50% + (8.33%
"50%" Distributions (Adjusted by x 2.5) = x 2.5) =
(8.33% x 2.5)) 50% - 20.82% 50% + 20.82%
= 28.18% = 70.82%
=======================================================================
Summary: As a result of the foregoing, DMB has contributed only 2/3 of
the Capital Contribution to Borrower it was required to contribute;
Subordinated Lender covered that DMB Shortfall; and DMB's participation in
"80%" distributions and "50%" distributions were both reduced to compensate
Subordinated Lender for the incremental risk assumed by Subordinated Lender
as a result of making Subordinated Loan Advances not originally contemplated.
<PAGE>
EXHIBIT "D"
WATERFALL
Notwithstanding anything to the contrary in the Borrower Operating
Agreement (including Sections 4.1, 4.2 and 4.3), all Borrower Cash shall
be allocated and applied as follows.
1 Applications of Property-Specific Borrower Cash.
To the extent attributable to or arising from specific Approved
Property(ies) (including the operations and dispositions thereof), Borrower
Cash for each calendar month of Borrower shall be applied and disbursed on
each Payment Date as follows (provided, however, that all sums otherwise
payable to DMB shall be subject to any provisions of the Senior Loan
Documents that require such sums to be applied or used instead in a
particular manner, such as on account of Release Shortfalls or to fund the
Retained Earnings Reserve):
1.1 First: to reimburse Subordinated Lender in full for any Subordinated
Loan Advances made by Subordinated Lender to cure any Event of Default by
Borrower;
1.2 Second, (a) eighty percent (80%) to Subordinated Lender on account
of Basic Subordinated Loan Interest attributable to Subordinated Loan
Advances relating to such Property and (b) twenty percent (20%) to DMB; but
only until such time as DMB has received (taking into account the current and
all prior Basic Return Disbursements and Supplemental Return Disbursements) a
cumulative annual return of ten percent (10%) per annum (calculated based on
actual days elapsed divided by 360) as to its Approved Investment in such
Approved Property(ies) (and Subordinated Lender has received Basic
Subordinated Loan Interest proportionate thereto) (the "Basic Return
Disbursements" payable to DMB);
1.3 Third, to pay Administrative Expenses and to repay any Capital
Contributions previously made by DMB to Borrower, or Subordinated Loan
Advances previously made by Subordinated Lender, to pay Administrative
Expenses, in proportion to such Capital Contributions and Subordinated Loan
Advances (the "Administrative Expense Disbursements");
1.4 Fourth, (a) eighty percent (80%) to Subordinated Lender on account
of Basic Subordinated Loan Interest and (b) twenty percent (20%) to DMB; but
only until all accrued Subordinated Loan Interest has been paid (and DMB has
received return on equity proportionate thereto) (the "Supplemental Return
Disbursements" payable to DMB);
1.5 Fifth, eighty percent (80%) to Subordinated Lender on account of
Subordinated Loan Advances attributable to such Approved Property and twenty
percent (20%) to DMB, to be applied against DMB's Capital Contributions on
account of Approved Investments with respect to such Approved Property, until
such time as the principal balance of the Subordinated Loan allocable to such
Approved Property, and DMB's Capital Contribution with respect to such
Approved Investments in such Approved Property, has each been reduced to
zero;
1.6 Sixth, Eighty percent (80%) to Subordinated Lender and twenty percent
(20%) to DMB, until the Loan Recovery Shortfall has been reduced to zero;
1.7 Seventh, the total remaining amount (the "Net Property Profit")
shall be paid fifty percent (50%) to DMB as additional return on its equity
investment in Borrower and fifty percent (50%) to Subordinated Lender as
Contingent Subordinated Loan Interest.
2 Disagreements Regarding Amount of Borrower Cash.
If at any time, pursuant to a good faith dispute, Borrower and
Subordinated Lender fail to agree as to the amount of Borrower Cash available
for distribution pursuant to the Waterfall, then pending resolution of such
disagreement, the Waterfall shall apply only as to the amount of Borrower
Cash that is not in dispute.
3 Other Cash.
To the extent that Borrower at any time holds any Borrower Cash, other
than Borrower Cash to be disbursed pursuant to "Applications of Property-
Specific Borrower Cash" above, such sums shall be disbursed and applied
pursuant to the following numbered paragraphs (above) in the following order:
1.3; 1.4; 1.6; and 1.7. Notwithstanding anything to the contrary in this
paragraph, any sums disbursable to DMB pursuant to this paragraph shall be
subject to the applicable restrictions and covenants set forth in the Senior
Loan Agreement, including requirements as to funding of the Retained Earnings
Reserve.
EXHIBIT "E"
ENVIRONMENTAL INSURANCE POLICY
Has Not Been Received
EXHIBIT "F"
SUBORDINATED PLEDGE AGREEMENT
Has Not Been included
DAMES & MOORE
EXHIBIT 21.1 LIST OF SUBSIDIARIES
The following is a list of subsidiaries of Dames & Moore, Inc., except as
indicated, each of the subsidiaries is wholly owned by the Company.
State or other jurisdiction
Name of incorporation or organization
Domestic Subsidiaries:
Aman Environmental Construction, Inc. California
Bovay Northwest, Inc. Washington
BRW Group, Inc. Delaware
Color Cave, Inc. California
DM Investors, Inc. Delaware
Dames & Moore America, L.P.* California
Dames & Moore Management Company California
Dames & Moore Servicing Company California
Dames & Moore Ventures California
Decision Quest Inc. California
DQ Squared, Inc. California
O'Brien-Kreitzberg Inc. California
Seismic Risk Insurance Services, Inc. California
Walk, Haydel & Associates, Inc. Louisiana
Foreign Subsidiaries:
AACM Central Europe Limited Hungary
Ashact, Dames & Moore Ltd. United Kingdom
Ashact Projects Ltd. United Kingdom
Bureau voor Milieumanagement BV The Netherlands
Dames & Moore Argentina S.A.** Argentina
Dames & Moore B.V. The Netherlands
Dames & Moore (BVI) Ltd British Virgin Islands
Dames & Moore, Canada Canada
Dames & Moore Chile Ltda. Chile
Dames & Moore GmbH & Co KG Germany
Dames and Moore Iberia SA Spain
Dames & Moore International SRL Italy
Dames & Moore International SRL Venezuela
Dames & Moore (Malaysia) Sdn Bhd Malaysia
Dames & Moore Pty. Ltd. Australia
Dames & Moore SRL France
Dames & Moore Singapore Singapore
Dames & Moore United Kingdom United Kingdom
Food & Agriculture International Ltd. United Kingdom
Forestry Technical Services PTY Limited Australia
HDML Pty Ltd. Australia
Hollingsworth Dames & Moore (PNG) Pty Ltd Papua New Guinea
International Agriculture Pty. LTD. Australia
Norecol, Dames & Moore, Inc. Canada
O'Brien Kreitzberg Ltd. United Kingdom
Professional Insurance Limited Bermuda
Saudi Arabian Dames & Moore Saudi Arabia
* Dames & Moore America: Dames & Moore Management Company 92% - General
partner and Professional Insurance Limited 8% - Limited partner.
** Dames & Moore, Inc. has a 70% interest in this Company.
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Dames & Moore, Inc.
We consent to Incorporation by reference in the Registration Statement No.
33-70758 on Form S-8 and Statement No. 33-47303 on Form S-8 of Dames &
Moore, Inc. of our report dated May 15, 1997, relating to the consolidated
statements of financial position of Dames & Moore, Inc. and subsidiaries as
of March 28, 1997 and March 29, 1996, and the related consolidated
statements of earnings, changes in shareholders' equity, and cash flows for
each of the years in the three-year period ended March 28, 1997, and the
related schedule, which report appears in the March 28, 1997 annual report
on Form 10-K of Dames & Moore, Inc. Our report refers to a change in
method of accounting for debt and equity securities.
KPMG Peat Marwick LLP
Los Angeles, California
June 18, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Consolidated Statement of Financial Position and the Consolidated
Statement of Earnings filed as part of the Form 10K and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-28-1997
<PERIOD-END> MAR-28-1997
<CASH> 12,726
<SECURITIES> 5,984
<RECEIVABLES> 178,713
<ALLOWANCES> (3,001)
<INVENTORY> 0
<CURRENT-ASSETS> 208,254
<PP&E> 19,594
<DEPRECIATION> 0
<TOTAL-ASSETS> 358,282
<CURRENT-LIABILITIES> 92,864
<BONDS> 0
0
0
<COMMON> 107,242
<OTHER-SE> 24,381
<TOTAL-LIABILITY-AND-EQUITY> 358,282
<SALES> 653,378
<TOTAL-REVENUES> 653,378
<CGS> 0
<TOTAL-COSTS> 198,120
<OTHER-EXPENSES> 418,397
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,386
<INCOME-PRETAX> 31,489
<INCOME-TAX> 12,949
<INCOME-CONTINUING> 18,540
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,540
<EPS-PRIMARY> .91
<EPS-DILUTED> .91
</TABLE>
