As filed with the Securities and Exchange Commission
on September 28, 1999.
----------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): August 31, 1999
CORRECTIONAL SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-23038 11-3182580
(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification No.)
1819 Main Street
Suite 1000
Sarasota, Florida 34326
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (941) 953-9199
Not Applicable
(Former name or former address, if changed since last report)
Exhibit Index on Page 5
<PAGE>
Item 5. Report of Other Events
On August 31, 1999, Correctional Services Corporation (the "Company")
entered into a Credit Agreement with Summit Bank, N.A., a New Jersey based
national bank. The Credit Agreement provides the Company with a $30,000,000
revolving line of credit to be used by the Company and its subsidiaries for
working capital and general corporate purposes and to finance the acquisition
of facilities, properties and other businesses. The Credit Agreement also
provides the Company with a delayed draw down credit facility which provides
the Company with up to $20,000,000 in additional financing to be used by the
Company to fund the redemption of the outstanding 7% Convertible Subordinated
Debentures Due February, 2006 that were issued by the Youth Services
International, Inc. ("YSI") subsidiary of the Company (the "Debentures"). As
described below, the Debenture holders have the right to require YSI to
redeem the Debentures prior to February 2006.
On the same date, the Company also entered into a Master Agreement
with Atlantic Financial Group, Ltd., Summit Bank, N.A. and SunTrust Bank,
Nashville, N.A. which provides the Company with access to an additional
$45,000,000 in financing which may be used by the Company to purchase land
and property and to finance the construction of new facilities through a
lease arrangement.
Simultaneously with the closing of the transactions contemplated by
the new Credit Agreement, the Company used approximately $13,080,000 of its
available credit under the revolving line of credit facility to discharge all
of its outstanding banking indebtedness to NationsBank, N.A., fees related to
the financing and repayment of other indebtedness. In addition, the Company
used approximately $14,750,000 of its available credit under the delayed draw
down facility to redeem Debentures having an original principal amount of
$16,280,000. As a result of these transactions, the Company has $16,920,000
available to it under its line of credit and $5,250,000 available to it for
delayed draw downs to redeem additional Debentures.
Further, in connection with the closing of the transactions
contemplated by the Credit Agreement and the Master Agreement, the Company
used approximately $18,984,000 of its available credit under the Master
Agreement to discharge its obligations to NationsBank under a similar
financing vehicle previously provided by NationsBank to the Company. As a
result, the Company currently has $26,016,000 available to it under its
property acquisition and construction financing facility.
As previously reported, the holders of the Debentures obtained the
right to require YSI to redeem the Debentures at 100% of the original
principal amount thereof, plus accrued but unpaid interest thereon, as a
result of the merger transaction consummated on March 31, 1999 in which CSC
acquired YSI. In November 1998, YSI obtained agreements from six holders of
Debentures, holding approximately $30.5 million of the outstanding principal
amount of the Debentures in the aggregate, under which the holders agreed to
postpone the redemption of their Debentures until March 31, 2000 (the first
anniversary of the closing date of the Merger).
On or about June 1, 1999, YSI redeemed approximately $1.7 million in
principal amount of Debentures for cash amount equal to 100% of the principal
2
<PAGE>
amount plus accrued interest as described above, from the Debenture holders
who elected not to enter into agreements with YSI to postpone the redemption
of their Debentures.
In anticipation of entering into its new credit facilities,
the Company agreed with certain holders of the Debentures (who had previously
agreed to postpone the redemption of their Debentures until March 31, 2000)
to redeem their Debentures upon the closing of the new credit facilities at a
redemption price equal to 90% of the original principal amount thereof, plus
accrued but unpaid interest. As noted above, the Company used approximately
$14,750,000 of its available credit under the Credit Agreement to fund these
redemptions.
As a result, approximately $14,220,000 in principal amount of the
Debentures remains outstanding. Unless the parties agree otherwise, the
Company will be required to redeem these remaining Debentures on March 31,
2000 at 100% of the original principal amount thereof, plus accrued but
unpaid interest.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
10.72 Credit Agreement, dated August 31, 1999, between
Correctional Services Corporation and Summit Bank, N.A.
10.73 Master Agreement, dated August 31, 1999, between
Correctional Services Corporation and Atlantic Financial Group, Ltd., Summit
Bank, N.A. and SunTrust Bank, Nashville, N.A.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this Current Report on Form 8-K to
be signed on its behalf by the undersigned hereunto duly authorized.
Date: September 28, 1999
CORRECTIONAL SERVICES CORPORATION
By: /s/ James F. Slattery
----------------------------------
James F. Slattery
Chairman of the Board, Chief
Executive Officer and President
4
<PAGE>
EXHIBIT INDEX
10.72 Credit Agreement, dated August 31, 1999, between Correctional
Services Corporation and Summit Bank, N.A.
10.73 Master Agreement, dated August 31, 1999, between Correctional
Services Corporation and Atlantic Financial Group, Ltd., Summit
Bank, N.A. and SunTrust Bank, Nashville, N.A.
5
<PAGE>
CREDIT AGREEMENT
by and among
CORRECTIONAL SERVICES CORPORATION
as Borrower,
CERTAIN OF ITS SUBSIDIARIES
as Guarantors,
THE LENDERS PARTY HERETO
as Lenders
and
SUMMIT BANK
as Syndication Agent
August 31, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
1. DEFINITIONS AND ACCOUNTING MATTERS 1
1.1 Certain Defined Terms 1
1.2 Accounting Terms and Determination 21
1.3 Classes and Types of Loans 22
1.4 Interpretation 22
2. COMMITMENTS, LOANS, NOTES AND PREPAYMENTS 23
2.1 Loans 23
2.1.1 Revolving Credit Loans Made to the Company 23
2.1.2 DD Loans Made to the Company 24
2.1.3 Limit on LIBOR Loans 24
2.2 Borrowings of Loans 24
2.3 Reduction of Commitments 24
2.3.1 Voluntary 24
2.3.2 Mandatory 25
2.4 Extension by Revolving Credit Lenders of the Expiration Date 25
2.5 Commitment Fees 25
2.6 Lending Offices 26
2.7 Several Obligations; Remedies Independent 26
2.8 Notes 26
2.9 Optional Prepayments and Conversions or Continuations of Loans 27
2.10 Mandatory Prepayments of DD Loans and Revolving Credit Loans 27
2.10.1 Capital Events 27
2.10.2 Excess Cash Flow 28
2.10.3 Borrowing Base Exceeded 28
2.11 Letters of Credit 28
2.11.1 General Provisions 28
2.11.2 Absolute Nature of Obligations 32
2.11.3 Uniform Customs and Practice 33
3. PAYMENTS OF PRINCIPAL AND INTEREST 33
3.1 Repayment of Principal of Loans 33
3.2 Interest
34
<PAGE>
4. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC. 35
4.1 Payments 35
4.2 Pro Rata Treatment 36
4.3 Computations 36
4.4 Minimum Amounts 36
4.5 Certain Notices 37
4.6 Non-Receipt of Funds by the Syndication Agent 37
4.7 Sharing of Payments, Etc. 38
5. YIELD PROTECTION, ETC. 39
5.1 Additional Costs 39
5.2 Limitation on Types of Loans 42
5.3 Illegality 42
5.4 Treatment of LIBOR Loans 42
5.5 Compensation 43
5.6 Substitution of Lenders 44
5.7 Additional Costs in Respect of Letters of Credit 44
6. GUARANTEE 45
6.1 The Guarantee 45
6.2 Obligations Unconditional 45
6.3 Reinstatement 46
6.4 Subrogation 46
6.5 Remedies 46
6.6 Instrument for the Payment of Money 47
6.7 Continuing Guarantee 47
6.8 Rights of Contribution 47
6.9 General Limitation on Guarantee Obligations 48
7. CONDITIONS PRECEDENT 48
7.1 Conditions Precedent to Initial Loans 48
7.1.1 Corporate Documents 48
7.1.2 Opinion of Counsel to the Obligors 49
7.1.3 Basic Documents 49
7.1.4 Master Agreement Conditions 49
7.1.5 Borrowing Base Certificate 49
7.1.6 Real Property Documents 49
7.1.7 Intercreditor Agreement 49
<PAGE>
7.1.8 Evidence of Insurance; No Liens 49
7.1.9 Perfection of Liens 49
7.1.10 Environmental Compliance 50
7.1.11 Indebtedness of Youth Services International
of Maryland, Inc. 50
7.1.12 Other Documents 50
7.2 DD Loans 50
7.3 Revolving Credit Loans 50
7.4 Initial and Subsequent Extensions of Credit 50
8. REPRESENTATIONS AND WARRANTIES 51
8.1 Representations and Warranties
51
8.1.1 Corporate Existence 51
8.1.2 Financial Condition 51
8.1.3 Litigation 52
8.1.4 No Breach 52
8.1.5 Action 52
8.1.6 Approvals 53
8.1.7 Use of Credit 53
8.1.8 ERISA 53
8.1.9 Taxes 53
8.1.10 Investment Company Act 53
8.1.11 Public Utility Holding Company Act 54
8.1.12 Material Agreements and Liens 54
8.1.13 Environmental Matters 54
8.1.14 Subsidiaries, Etc. 57
8.1.15 Title to Assets 57
8.1.16 True and Complete Disclosure 57
8.1.17 Real Property 58
8.1.18 Solvency 58
8.1.19 Acts of God 59
8.1.20 Labor Controversies; Union Contracts, Etc. 59
8.1.21 Intellectual Property 59
8.1.22 Business Relations 59
8.1.23 Year 2000 59
8.1.24 Subordinated Debt and Subordinated Debentures 60
8.1.25 Facility Contracts 60
8.1.26 Default of Indebtedness, Use Permits, Orders and
Other Agreements 60
8.1.27 Compliance with Laws 60
9. COVENANTS OF THE COMPANY 60
9.1 Affirmative and Negative Covenants 61
9.1.1 Financial Statements; Etc. 61
9.1.2 Litigation 65
<PAGE>
9.1.3 Existence, Etc. 65
9.1.4 Insurance 66
9.1.5 Prohibition of Fundamental Changes 67
9.1.6 Limitation on Liens 68
9.1.7 Indebtedness 70
9.1.8 Investments 70
9.1.9 Dividend Payments 71
9.1.10 Total Indebtedness to Adjusted EBITDA Ratio 71
9.1.11 Senior Debt to Adjusted EBITDA Ratio 72
9.1.12 Consolidated Net Worth 72
9.1.13 Consolidated Indebtedness to Net Worth Ratio 72
9.1.14 Minimum Fixed Charge Coverage Ratio 73
9.1.15 Sale Lease-back Transactions 73
9.1.16 Discount of Accounts 73
9.1.17 Lines of Business 73
9.1.18 Transactions with Affiliates 73
9.1.19 Use of Proceeds 74
9.1.20 Certain Obligations Respecting Subsidiaries 74
9.1.21 Modifications of Certain Documents 75
9.1.22 Qualifying Properties 75
9.1.23 Capital Expenditures 75
9.1.24 Dispositions of Assets or Subsidiaries 75
9.1.25 Posting-Closing Real Property 76
9.2 Regulations T, U and X 77
9.3 Further Assurances 77
10. EVENTS OF DEFAULT 77
10.1 Events of Default 77
11. THE SYNDICATION AGENT 81
11.1 Appointment, Powers and Immunities 81
11.2 Reliance by Syndication Agent 81
11.3 Defaults 82
11.4 Rights as a Lender 82
11.5 Indemnification 82
11.6 Non-Reliance on Syndication Agent and Other Lenders 83
11.7 Failure to Act 83
11.8 Resignation or Removal of Syndication Agent 83
12. MISCELLANEOUS 84
12.1 Waiver 84
<PAGE>
12.2 Notices 84
12.3 Expenses, Etc. 85
12.4 Amendments, Etc. 86
12.5 Successors and Assigns 86
12.6 Assignments and Participations 86
12.7 Survival 88
12.8 Captions 88
12.9 Counterparts 88
12.10 Governing Law; Submission to Jurisdiction 89
12.11 WAIVER OF JURY TRIAL 89
12.12 Confidentiality 89
<PAGE>
THIS CREDIT AGREEMENT dated as of August 31, 1999 (as further amended,
supplemented or modified from time to time, the "Agreement") is by and among
CORRECTIONAL SERVICES CORPORATION, a corporation duly organized and validly
existing under the laws of the State of Delaware (the "Company"); each of the
Subsidiaries of the Company identified under the caption "SUBSIDIARY
GUARANTORS" on the signature pages hereto or that, pursuant to Section
9.1.20(b), shall become a party hereto (individually, a "Subsidiary Guarantor"
and, collectively, the "Subsidiary Guarantors"; and the Subsidiary Guarantors
collectively with the Company, the "Obligors"); each of the lenders that is a
signatory hereto identified under the caption "LENDERS" on the signature pages
hereto or that, pursuant to Section 12.6(b) hereof, shall become a "Lender"
hereunder (individually, a "Lender" and, collectively, the "Lenders"); and
SUMMIT BANK, a New Jersey banking corporation, as syndication agent for the
Lenders (in such capacity, together with its successors in such capacity, the
"Syndication Agent").
In consideration of the mutual agreements contained in this Agreement
and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS AND ACCOUNTING MATTERS
1.1 Certain Defined Terms.
As used herein, the following terms shall have the following meanings
(all terms defined in this Section 1.1 or in other provisions of this
Agreement in the singular to have the same meanings when used in the plural
and vice versa):
"Account" shall mean any account, contract right, general intangible,
chattel paper, instrument or document representing any right to payment for
goods sold or services rendered, whether or not earned by performance and
whether or not evidenced by a contract, instrument or document, which is now
owned or hereafter acquired by the Company.
"Account Debtor" shall mean any Person who is or who may become
obligated to any Obligor, with respect to, or on account of, an Account.
"Adjusted EBITDA" , as measured at any time, shall mean the sum of the
following:
(i) For stabilized facilities (i.e., those open 12 months or
longer), (A) EBITDA attributable to those facilities for the trailing four
fiscal quarters; provided, however, if a stabilized facility undergoes an
expansion, the number of expansion beds will be treated as a newly developed
facility in accordance with clause (ii) below; plus (B) Synthetic Lease
Expense for the trailing four fiscal quarters plus (C) merger costs, net of
tax benefits, related to the merger of Youth Services International, Inc. with
and into the Company, all subject to the approval of the Syndication Agent
plus (D) charges incurred by the Obligors relating to the adoption of
SOP 98-5; plus
(ii) For newly developed facilities:
1
<PAGE>
(A) that are operational for at least three months, EBITDA
attributable to those facilities for each complete month since the
commencement of operations, annualized; or
(B) that are in the development stage (i.e., facilities
that have an awarded and signed Facility Contract but are not fully
operational) through the end of the third full month of operations, Pre-
Development Costs which have been incurred and expensed by the Obligors during
the development stage.
Notwithstanding the foregoing, (i) non-recurring charges and asset write-offs
incurred by Youth Services International, Inc. prior to its merger with and
into the Company shall be excluded from Adjusted EBITDA calculations and (ii)
subject to the approval of the Syndication Agent, (A) non-recurring charges
and asset write-offs incurred by the Company or its Subsidiaries in connection
with future acquisitions permitted hereunder may be excluded from Adjusted
EBITDA calculations and (B) non-recurring charges and asset write-offs
incurred by a Person acquired by the Company in accordance with the terms of
this Agreement, which charges and write-offs are (due to accounting or pooling
requirements) included in the consolidated financial statements of the
Company, may be excluded from Adjusted EBITDA calculations.
"Affiliate" shall mean any Person that directly or indirectly controls,
or is under common control with, or is controlled by, the Company and, if such
Person is an individual, any member of the immediate family (including
parents, spouse, children and siblings) of such individual and any trust whose
principal beneficiary is such individual shall be an Affiliate solely by
reason of his or her being a director, officer or employee of the Company or
any of its Subsidiaries. Neither the Syndication Agent nor any of the Lenders
shall be an Affiliate.
"Applicable Lending Office" shall mean, for each Lender and for each
Type of Loan, the "Lending Office" of such Lender (or of an affiliate of such
Lender) designated for such Type of Loan on the signature pages hereof or such
other office of such Lender (or of an affiliate of such Lender) as such Lender
may from time to time specify to the Syndication Agent and the Company as the
office at which its Loans of such Type are to be made and maintained.
"Applicable Commitment Fee Rate" shall mean:
(i) with reference to the Revolving Credit Commitments, a rate
per annum, determined from time to time in accordance with the table set forth
below. The Applicable Commitment Fee Rate shall be at "Level II" in the
following table for a period of six months following the Closing Date.
Thereafter, the Applicable Commitment Fee Rate shall change on the fifth
Business Day following receipt by the Syndication Agent of a Compliance
Certificate of the Company demonstrating that the ratio of the consolidated
Indebtedness of the Company and its Subsidiaries to Adjusted EBITDA as at the
last day of the immediately preceding fiscal quarter of the Company shall be
at a different level in the table below, whereupon the Applicable Commitment
Fee Rate shall be reduced or increased to the applicable percentage set forth
in such table. Notwithstanding the foregoing, the Applicable Commitment Fee
Rate shall not be reduced at any time during which an Event of Default shall
have occurred and be continuing
2
<PAGE>
Ratio of Applicable Commitment Fee
Indebtedness to Rate for Revolving Credit
Level Adjusted EBITDA Commitments
----- --------------- -----------
I > 3.75:1 .50%
-
II < 3.75:1 .375%
(ii) with reference to the DD Loan Commitments, 0.50% per annum.
"Applicable Margin" shall mean:
(i) with reference to Revolving Credit Loans that are Base Rate
Loans or LIBOR Loans, an amount in excess of the Base Rate or the LIBOR Rate,
as the case may be, determined from time to time in accordance with the table
set forth below. The Applicable Margin shall be at "Level III" in the
following table for a period of six months following the Closing Date.
Thereafter, the Applicable Margin shall change on the fifth Business Day
following receipt by the Syndication Agent of a Compliance Certificate of the
Company demonstrating that the ratio of the consolidated Indebtedness of the
Company and its Subsidiaries to Adjusted EBITDA as at the last day of the
immediately preceding fiscal quarter of the Company shall be at a different
level in the table below, whereupon the Applicable Margin shall be reduced or
increased to the applicable percentage set forth in such table.
Notwithstanding the foregoing, the Applicable Margin shall not be reduced at
any time during which an Event of Default shall have occurred and be
continuing:
Applicable Margin for Applicable Margin for
Ratio of Revolving Credit Revolving Credit Loans
Indebtedness to Loans that are that are
Level Adjusted EBITDA Base Rate Loans LIBOR Loans
----- --------------- --------------- -----------
I > 3.75:1 1.50% 3.00%
-
II < 3.75:1 and
> 3.25:1 1.25% 2.75%
-
III < 3.25:1 and
> 2.75:1 1.00% 2.50%
-
IV < 2.75:1 and
> 2.25:1 .75% 2.25%
-
V < 2.25:1 .50% 2.00%
3
<PAGE>
(ii) with reference to DD Loans that are Base Rate Loans,
an amount in excess of the Base Rate equal to the following amount during the
following periods:
Applicable Margin for DD
Loans that are
Period Base Rate Loans
------ ---------------
Closing Date to December 31, 2000 1.00%
January 1, 2001 to March 31, 2001 3.00%
April 1, 2001 and thereafter 4.00%
"Assignment and Assumption Agreement" shall have the meaning assigned to
such term in Section 12.6(b) hereof.
"Bankruptcy Code" shall mean the Federal Bankruptcy Code of 1978, as
amended from time to time.
"Base Rate" shall mean (with any change in the Base Rate to be effective
as of the date of change of either of the following rates) the higher of (i)
the rate which Syndication Agent publicly announces from time to time as its
prime lending rate, as in effect from time to time, and (ii) the Federal Funds
Rate, as in effect from time to time, plus one-half of one percent (0.50%) per
annum. The Syndication Agent's prime lending rate is a reference rate and
does not necessarily represent the lowest or best rate actually charged to
customers; the Syndication Agent may make commercial loans or other loans at
rates of interest at, above or below the Syndication Agent's prime lending
rate. The Base Rate is determined daily.
"Base Rate Loans" shall mean Loans that bear interest at rates based
upon the Base Rate.
"Base Term" shall have the meaning assigned to such term in the Lease.
"Basic Documents" shall mean, collectively, this Agreement, the Notes,
the Guaranty Agreement, the Security Documents, the Intercreditor Agreement
and the Letter of Credit Documents.
"Borrowing Base" shall mean at any time:
(i) 85% of the Qualified Accounts; minus
(ii) the aggregate outstanding amount of Pre-Development
Costs
Fundings.
"Borrowing Base Certificate" shall mean such form of borrowing base
certificate as the Syndication Agent shall provide for completion by the
Obligors in order to calculate the Borrowing Base.
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<PAGE>
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which banks are required or authorized to be closed for business in
Atlanta, Georgia, New York, New York or Princeton, New Jersey, and, if the
applicable Business Day relates to a LIBOR Advance, on which trading is not
carried on by and between banks in the London interbank market.
"Capital Event" shall mean (i) an Equity Issuance, (ii) a Disposition,
or (iii) an issuance by any Obligor of any Indebtedness described in clause
(a) or (b) of the definition "Indebtedness".
"Capital Expenditures" shall mean all payments, expenditures and
obligations incurred by a Person for the purchase, creation, improvement,
replacement, substitution, addition, renovation or lease of a fixed or capital
asset with a useful life of more than one year and which are required to be
classified or accounted for as a capital asset or capital lease on the balance
sheet or statement of cash flows of such Person, as determined in accordance
with GAAP, including equipment which is purchased simultaneously with the
trade-in of existing equipment owned by such Person to the extent of the gross
amount of the purchase price of such purchased equipment less the book value
of the equipment being traded in at such time, but excluding: (a) expenditures
made in connection with the replacement or restoration of assets, to the
extent such replacement or restoration is financed out of (i) insurance
proceeds paid on account of the loss of or damage to the assets so replaced or
restored or (ii) awards or compensation arising from the taking by
condemnation or eminent domain of the assets so replaced; (b) any portion of
capital lease obligations that is not required to be capitalized on such
Person's balance sheet; and (c) interest capitalized during construction.
"Capital Lease" shall mean, as of any date, any lease of property, real
or personal, which would be capitalized on a balance sheet of the lessee
prepared as of such date in accordance with GAAP, together with any other
lease by such lessee which is in substance a financing lease, including
without limitation, any lease under which (i) such lessee has or will have an
option to purchase the property subject thereto at a nominal amount or an
amount less than a reasonable estimate of the fair market value of such
property as of the date such lease is entered into, or (ii) the term of the
lease approximates or exceeds the expected useful life of the property leased
thereunder.
"Class" shall have the meaning assigned to such term in Section 1.3
hereof.
"Closing Date" shall mean the date hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral" shall mean the UCC Collateral and the Real Property
Collateral.
"Commitment" shall mean, collectively for each Lender, its Revolving
Credit Commitment and its DD Loan Commitment and "Commitments" shall mean
collectively the Revolving Credit Commitments and the DD Loan Commitments of
all of the Lenders.
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<PAGE>
"Compliance Certificate" shall mean a certificate executed and delivered
by a senior financial officer of the Company as of the preceding quarter and
for the preceding four quarterly results of operations in the form of Exhibit
B.
"Consolidated Debt Service" shall mean, for any period, for the Company
and its Subsidiaries (determined on a consolidated basis without duplication
in accordance with GAAP), the sum of (a) all payments of principal of
Indebtedness (including, without limitation, the principal component of any
payments under Capital Leases) scheduled to be made during such period plus
(b) all Consolidated Interest Expense for such period.
"Consolidated Interest Expense" shall mean, for any period, for the
Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), the sum or difference of (a) all
interest in respect of Indebtedness (including, without limitation, the
interest component of any payments under Capital Leases) accrued or
capitalized during such period (whether or not actually paid during such
period), plus (b) the net amount payable (or minus the net amount receivable)
under Interest Rate Protection Agreements during such period (whether or not
actually paid or received during such period), minus (c) direct reimbursements
received by an Obligor during such period by a party to a Facility Contract,
to the extent that such reimbursements relate to interest expense of the
Company or one of its Subsidiaries, plus (d) the interest component of any
payments in respect of any Synthetic Lease Financing accrued or capitalized
during such period (whether or not actually paid during such period).
"Consolidated Net Income" shall mean, for any period, the net income of
the Company and its Subsidiaries for such period, determined on a consolidated
basis without duplication in accordance with GAAP.
"Consolidated Net Worth" shall mean, as at any date, the total
stockholders equity for the Company and its Subsidiaries, determined on a
consolidated basis without duplication in accordance with GAAP.
"Continue", "Continuation" and "Continued" shall refer to the
continuation pursuant to Section 2.9 hereof of a LIBOR Loan from one Interest
Period to the next Interest Period.
"Convert", "Conversion" and "Converted" shall refer to a conversion
pursuant to Section 2.9 hereof of one Type of Loan into another Type of Loan,
which may be accompanied by the transfer by a Lender (at its sole discretion)
of a Loan from one Applicable Lending Office to another.
"DD Loan Commitment" shall mean, for each Lender, the obligation of such
Lender to make DD Loans in an aggregate principal amount at any one time
outstanding up to but not exceeding the amount set forth on Schedule I under
the caption "Amount of Commitment for DD Loans" (as the same may be reduced
from time to time pursuant to Section 2.3 hereof). The original aggregate
principal amount of the DD Loan Commitments is $20,000,000.
6
<PAGE>
"DD Loan Commitment Percentage" shall mean, with respect to any Lender,
the ratio of (a) the amount of the DD Loan Commitment of such Lender to
(b) the aggregate amount of the DD Loan Commitments of all of the Lenders.
"DD Loan Draw Expiration Date" shall mean the earlier of (i) the date
which is one year after the Closing Date or (ii) the date on which the amount
of DD Loans equals the DD Loan Commitment.
"DD Loan Lenders" shall mean (a) on the date hereof, Lenders having DD
Loan Commitments on the signature pages hereof, and (b) thereafter, Lenders
from time to time holding DD Loans and DD Loan Commitments after giving effect
to any assignments thereof permitted by Section 12.6(b) hereof.
"DD Loan Note" shall have the meaning assigned to such term in Section
2.8 hereof.
"DD Loans" shall mean the delayed draw loans provided for by
Section 2.1.2 hereof, which shall be Base Rate Loans.
"DD Loans Maturity Date" shall mean the date that is three years after
the DD Loan Draw Expiration Date.
"Default" shall mean an event that with notice or lapse of time or both
would become an Event of Default.
"Disposition" shall mean any sale, assignment, transfer or other
disposition of any assets of the Company or its Subsidiaries (whether now
owned or hereafter acquired), on which the Syndication Agent has a Lien for
the benefit of the Lenders, but excluding any sale, assignment, transfer or
other disposition of any assets sold or disposed of in the ordinary course of
business and on commercially reasonable terms.
"Dividend Payment" shall mean dividends (in cash, property or
obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any shares of any
class of stock of the Company or of any warrants, options or other rights to
acquire the same (or to make any payments to any Person, such as "phantom
stock" payments, where the amount thereof is calculated with reference to the
fair market or equity value of the Company or any of its Subsidiaries), but
excluding dividends payable solely in shares of common stock of the Company.
"Documentation Agent" shall have the meaning assigned to such term in
the Master Agreement.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"Dormant Subsidiaries" shall collectively mean Esmor, Inc., a Delaware
corporation; Esmor New Jersey, Inc., a New Jersey corporation; Youth Education
Services, Inc., a Maryland
7
<PAGE>
corporation; Youth Services International of Colorado, Inc., a Maryland
corporation; Youth Services International of Georgia, Inc., a Maryland
corporation; Youth Services International of Nevada, Inc., a Maryland
corporation; Youth Services International of Puerto Rico,
Inc., a Maryland corporation; Youth Services International Investments, LLC, a
Maryland limited liability company; Youth Services International Management,
LLC, a Maryland limited liability company; and CSC (UK) Limited, a corporation
formed under the laws of the United Kingdom.
"EBITDA" shall mean, for any period, for the Company and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), the sum of (a) Consolidated Net Income, plus (b)
depreciation and amortization expense deducted in the determination of such
Consolidated Net Income, plus (c) Consolidated Interest Expense deducted in
the determination of such Consolidated Net Income, plus (d) federal and state
income taxes as determined in accordance with GAAP and deducted in the
determination of such Consolidated Net Income, minus (e) any items of gain
which are extraordinary items as defined in GAAP to the extent reflected in
the determination of Consolidated Net Income, plus (f) extraordinary losses,
plus (g) non-cash compensation and accruals, plus (h) non-cash contributions
or accruals to or with respect to deferred profit sharing plans.
"Eligible Assignee" shall mean (i) a commercial bank organized under the
laws of the United States, or any state thereof, or any foreign bank that has
a branch or agency in the United States, having total assets in excess of
$1,000,000,000 or any commercial finance or asset based lending Affiliate of
any such commercial bank and (ii) any Lender or any Affiliate of any Lender.
"Environmental Claim" shall mean, with respect to any Person, any
written or oral notice, claim, demand or other communication (collectively, a
"Claim") by any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, governmental response costs, damages to
natural resources or other Property, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the presence, or Release into
the environment, of any Hazardous Material at any location, whether or not
owned by such Person, or (ii) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law. The term
"Environmental Claim" shall include, without limitation, any claim by any
governmental authority for enforcement, cleanup, removal, response, remedial
or other actions or damages pursuant to any applicable Environmental Law, and
any claim by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from the presence
of Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment.
"Environmental Laws" shall mean and include the Resource Conservation
and Recovery Act of 1976, (RCRA) 42 U.S.C. Sections 6901-6987, as amended by the
Hazardous and Solid Waste Amendments of 1984, the Comprehensive Environmental
Response, Compensation and Liability Act, as amended by the Superfund
Amendments and Reauthorization Act of 1986, 42 U.S.C. Sections 9601-9657,
(CERCLA), the Hazardous Materials Transportation Act of 1975, 49 U.S.C.
Sections 1801-1812, the Toxic Substances Control Act, 15 U.S.C.
Sections 2601-2671, the Clean Air Act, 42 U.S.C. Sections 7401 et seq.,
the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Sections 136
8
<PAGE>
et seq., and all similar federal, state and local environmental laws,
ordinances, rules, orders, statutes, decrees, judgments,
injunctions, codes and regulations, and any other federal, state or local
laws, ordinances, rules, codes and regulations, relating to the environment,
human health or natural resources or the regulation or control of or imposing
liability or standards of conduct concerning human health, the environment,
Hazardous Materials or the clean-up or other remediation of any Property, or
any part thereof, as any of the foregoing may have been from time to time
amended, supplemented or supplanted.
"Environmental Permits" shall mean all permits, licenses,
authorizations, certificates and approvals of foreign or domestic governmental
authorities required by Environmental Laws.
"Equity Issuance" shall mean (a) any issuance or sale by the Company or
any of its Subsidiaries after the Closing Date of (i) any capital stock,
(ii) any warrants or options exercisable in respect of capital stock (other
than any warrants or options issued to directors, officers or employees of the
Company or any of its Subsidiaries pursuant to an incentive compensation or
similar plan) and any capital stock of the Company issued upon the exercise of
such warrants or options or (iii) any other security or instrument
representing an equity interest (or the right to obtain any equity interest)
in the Company or any of its Subsidiaries or (b) the receipt by the Company or
any of its Subsidiaries after the Closing Date of any capital contribution
(whether or not evidenced by any equity security issued by the recipient of
such contribution); provided that Equity Issuance shall not include (A) any
such issuance or sale by any Subsidiary of the Company to the Company or any
Wholly Owned Subsidiary of the Company, or (B) any capital contribution by the
Company or any Wholly Owned Subsidiary of the Company to any Subsidiary of the
Company.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, or any successor federal statute.
"ERISA Affiliate" shall mean any corporation or trade or business that
is a member of any group of organizations (i) described in Section 414(b) or
(c) of the Code of which the Company is a member and (ii) solely for purposes
of potential liability under Section 302(c)(11) of ERISA and
Section 412(c)(11) of the Code and the lien created under Section 302(f) of
ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of
the Code of which the Company is a member.
"Eurocurrency Reserve Requirements" means for any day as applied to a
LIBOR Loan, the aggregate (without duplication) of the rates (expressed as a
decimal fraction) of reserve requirements in effect on such day (including,
without limitation, basic, supplemental, marginal and emergency reserves under
any regulations of the Board of Governors of the Federal Reserve System or
other Governmental Authority having jurisdiction with respect thereto) dealing
with reserve requirements prescribed for Eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of such Board)
maintained by a member bank of such System.
"Event of Default" shall have the meaning assigned to such term in
Section 10.1 hereof.
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<PAGE>
"Excess Cash Flow" shall mean:
(i) the sum of the following: (A) EBITDA plus (B) proceeds of
business interruption or similar insurance, plus (C) decreases in working
capital, plus (D) cash payments received as a result of tax refunds; minus
(ii) the sum of the following: (A) Consolidated Interest Expense
and scheduled payments of principal on term loans, plus (B) Capital
Expenditures that are not funded with debt or equity, plus (C) increases in
working capital plus (D) cash payments for taxes.
Notwithstanding the foregoing, in no event shall the proceeds of a Capital
Event be included in the calculation of Excess Cash Flow.
"Facility Contract" shall mean any contract between the Company or any
of its Subsidiaries and a Federal, state, local or foreign court or
government, or an agency, instrumentality or political subdivision thereof,
relating to the management by the Company or any Subsidiary of, or the
provisions by the Company or any such Subsidiary of other services to, a
correctional, rehabilitation, detention or like facility (whether for adults
or juveniles), as amended or modified from time to time.
"Federal Funds Rate" shall mean, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average
of the rates on overnight Federal funds transactions with member banks of the
Federal Reserve System arranged by Federal funds brokers, as set forth for
each day on the Page 4833 of the Telerate at 9:00 a.m. (New York, New York
time) or if such reporting service is unavailable, as published for such day
(or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such
day on such transactions received by the Syndication Agent from three Federal
funds brokers of recognized standing selected by the Syndication Agent.
"Fixed Charge Coverage Ratio" shall mean the ratio of (i) EBITDA plus
Synthetic Lease Expense plus rent expense of the Company and its Subsidiaries
minus taxes paid in cash by the Company and its Subsidiaries minus non-
recurring income of the Company and its Subsidiaries to (ii) Consolidated
Interest Expense plus Synthetic Lease Expense plus rent expense of the Company
and its Subsidiaries plus the amount of all scheduled payments of principal of
Indebtedness (but excluding therefrom the repayment of the Subordinated
Debentures with the proceeds of the DD Loans or the Company's 10% subordinated
notes with the proceeds of Revolving Credit Loans) plus maintenance Capital
Expenditures not funded from the proceeds of an Equity Issuance or the
issuance of Indebtedness described in clause (a) or (b) of the definition
"Indebtedness", all measured for the four fiscal quarters ending on the
date of calculation of such ratio.
"GAAP" shall mean generally accepted accounting principles, applied on
a basis consistent with prior periods; provided, however, that GAAP with
respect to any interim financial statements or reports shall be deemed subject
to year-end adjustments and footnotes made in accordance with GAAP.
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<PAGE>
"Hazardous Materials" shall mean any substance, waste or material which
is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous, including petroleum, crude oil
or any fraction thereof, petroleum derivatives, by products and other
hydrocarbons, or which is or becomes regulated under any Environmental Law by
any governmental authority, including any agency, department, commission,
board or instrumentality of the United States, any jurisdiction in which a
Property is located or any political subdivision thereof and also including,
without limitation, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls ("PCBs") and radon gas.
"Indebtedness" shall mean, for any Person at any date, without
duplication, (a) all indebtedness of such Person for borrowed money (whether
by loan or the issuance and sale of debt securities) or for the deferred
purchase price of property or services (other than current trade liabilities
incurred in the ordinary course of business and payable in accordance with
customary practices), (b) any other indebtedness of such Person which is
evidenced by a note, bond, debenture or similar instrument, (c) all
obligations of such Person under Capital Leases, (d) all obligations of such
Person in respect of letters of credit, acceptances or similar instruments
issued or created for the account of such Person, (e) all liabilities secured
by any Lien on any property owned by such Person even though such Person has
not assumed or otherwise become liable for the payment thereof, (f) all other
items which, in accordance with GAAP, would be included as liabilities on the
liability side of the balance sheet of such Person as of the date at which
Indebtedness is to be determined, (g) all guarantees of such Person in respect
of any of the foregoing and (h) the principal balance outstanding under any
synthetic lease, tax retention operating lease, off-balance sheet loan or
similar off-balance sheet financing product to which such Person is a party,
where such transaction is considered borrowed money indebtedness for tax
purposes but is classified as an operating lease in accordance with GAAP.
"Intercreditor Agreement" shall mean the Intercreditor Agreement, dated
as of the date hereof, among the Lessor, the Lenders, the Syndication Agent
and the lenders to the Lessor under the Loan Agreement, as the same may be
modified and in effect from time to time.
"Interest Period" shall mean, with respect to any LIBOR Loan, each
period commencing on the date such LIBOR Loan is made or Converted from a Base
Rate Loan or the last day of the immediately preceding Interest Period for
such Loan and ending on the numerically corresponding day in the first,
second, third or sixth month thereafter, as the Company may select as provided
in Section 4.5 hereof (or such longer period as may be requested by the
Company and agreed to by all of the Lenders), except that each Interest Period
that commences on the last Business Day of a calendar month (or on any day for
which there is no numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month. Notwithstanding the foregoing: (i) if any
Interest Period for any Revolving Credit Loan would otherwise end after the
Revolving Credit Commitment Termination Date, such Interest Period shall not
be available; (ii) each Interest Period that would otherwise end on a day
that is not a Business Day shall end on the next succeeding Business Day (or,
if such next succeeding Business Day falls in the next succeeding calendar
month, on the next preceding Business Day).
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<PAGE>
"Interest Rate Protection Agreement" shall mean any agreement
(including any master agreement and any agreement, whether or not in writing,
relating to any single transaction) that is an interest rate swap agreement,
basis swap, forward rate agreement, commodity swap, commodity option, equity
or equity index swap or option, bond option, interest rate option, forward
foreign exchange agreement, rate cap, collar or floor agreement, currency swap
agreement, cross-currency rate swap agreement, swaption, currency option or
any other similar agreement, including any option to enter into any of the
foregoing, or any combination of any of the foregoing, and other similar
agreements or arrangements designed to provide protection against fluctuations
in interest rates or currency exchange rates, pursuant to which any of the
Obligors has obligations to any Lender that may require payment in the future
by any such Obligors.
"Investment" shall mean any investment in any Person, whether by means
of purchase or acquisition of obligations or securities of such Person,
capital contribution to such Person, loan or advance to such Person, making of
a time deposit with such Person, guaranty or assumption of any obligation of
such Person or otherwise.
"Laws" shall mean all ordinances, statutes, rules, regulations, codes,
orders, injunctions, writs or decrees of any government, whether federal,
state, municipal or local, or any political subdivision or agency thereof, or
of any court, board (including, without limitation, the Financial Accounting
Standards Board) or similar entity established by any of the foregoing.
"Lease" shall mean the Master Lease Agreement, dated as of August 31,
1999, together with each Lease Supplement thereto, among the Lessees and the
Lessor.
"Leased Property" shall have the meaning assigned to such term in the
Master Lease.
"Lease Term" shall mean (a) the Base Term, as it may be renewed pursuant
to Section 14.9 of the Lease or (b) such shorter period as may result from
earlier termination of the Lease as provided therein.
"Lessor" shall have the meaning assigned to such term in the Master
Agreement.
"Letter of Credit" shall have the meaning assigned to such term in
Section 2.11.1 hereof.
"Letter of Credit Documents" shall collectively mean, with respect to
any Letter of Credit, any application therefor, any other agreements,
instruments, guarantees or other documents (whether general in application or
applicable only to such Letter of Credit) governing or providing for (a) the
rights and obligations of the parties concerned or at risk with respect to
such Letter of Credit or (b) any collateral security for any of such
obligations, each as the same may be modified and supplemented and in effect
from time to time.
"Letter of Credit Interest" shall mean, for each Revolving Credit
Lender, such Lender's participation interest (or, in the case of the Letter of
Credit Issuer, its retained interest) in the Letter of Credit Issuer's
liability under Letters of Credit and such Lender's rights and interests in
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<PAGE>
Reimbursement Obligations and fees, interest and other amounts payable in
connection with Letters of Credit and Reimbursement Obligations.
"Letter of Credit Issuer" shall mean Summit Bank as the issuer of
Letters of Credit under Section 2.11 hereof, together with its successors in
such capacity.
"Letter of Credit Liability" shall mean, without duplication, at any
time and in respect of any Letter of Credit, the sum of (a) the undrawn face
amount of such Letter of Credit, plus (b) the aggregate unpaid principal
amount of all Reimbursement Obligations of the Company at such time due and
payable in respect of all drawings made under such Letter of Credit. For
purposes of this Agreement, a Revolving Credit Lender (other than the Letter
of Credit Issuer) shall be deemed to hold a Letter of Credit Liability in an
amount equal to its participation interest in the related Letter of Credit
under Section 2.11 hereof, and the Letter of Credit Issuer shall be deemed to
hold a Letter of Credit Liability in an amount equal to its retained interest
in the related Letter of Credit after giving effect to the acquisition by the
Revolving Credit Lenders other than the Letter of Credit Issuer of their
participation interests under said Section 2.11.
"LIBOR" shall mean, for any Interest Period with respect to LIBOR Loans,
the offered rate for deposits in U.S. Dollars, for a period comparable to the
Interest Period and in an amount comparable to such Loans, appearing on the
Telerate Screen Page 3750 as of 11:00 A.M. (London, England time) on the day
that is two London Business Days prior to the first day of the Interest
Period. If two or more of such rates appear on the Telerate Screen Page 3750,
the rate for that Interest Period shall be the arithmetic mean of such rates.
If the foregoing rate is unavailable from the Telerate Screen for any reason,
then such rate shall be determined by the Syndication Agent from the Reuters
Screen LIBOR Page or, if such rate is also unavailable on such service, then on
any other interest rate reporting service of recognized standing designated in
writing by the Syndication Agent to the Company and the other Lenders; in any
such case rounded, if necessary, to the next higher 1/100 of 1.0%, if the rate
is not such a multiple.
"LIBOR Loans" shall mean LIBOR Loans that bear interest at rates based
on rates referred to in the definition of "LIBOR Rate" in this Section 1.1.
"LIBOR Rate" shall mean, with respect to each Interest Period for a
LIBOR Loan, the rate obtained by dividing (A) LIBOR for such Interest Period
by (B) a percentage equal to 1 minus the then stated maximum rate (stated as a
decimal) of all reserves requirements (including, without limitation, any
marginal, emergency, supplemental, special or other reserves) applicable to
any member bank of the Federal Reserve System in respect of Eurocurrency
liabilities as defined in Regulation D (or against any successor category of
liabilities as defined in Regulation D).
LIBOR
-----
1 - Eurocurrency Reserve Requirements
"Lien" shall mean, with respect to any asset, any mortgage, deed to
secure debt, deed of trust, lien, pledge, charge, security interest, security
title, preferential arrangement which has the practical effect of constituting
a security interest, encumbrance or servitude of any kind in respect of such
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<PAGE>
asset to secure or assure payment of an Indebtedness, whether by consensual
agreement or by operation of statute or other law, or by any agreement,
contingent or otherwise, to provide any of the foregoing. For purposes of the
Basic Documents and the Operative Documents, the Company or any Subsidiary
shall be deemed to own subject to a Lien any asset which it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, Capitalized Lease or other title retention agreement relating to
such asset.
"Loan Agreement" shall have the meaning assigned to such term in the
Master Agreement.
"Loans" shall collectively mean the Revolving Credit Loans and the DD
Loans.
"Margin Stock" shall mean "margin stock" as defined in Regulation T, U
or X.
"Master Agreement" shall mean the Master Agreement, dated as of the date
hereof, among the Company, the Subsidiary Guarantors, the Lessor, the
Syndication Agent, the Documentation Agent and certain lenders, as the same
shall be modified and supplemented and in effect from time to time.
"Material Adverse Effect" shall mean, relative to any occurrence, event,
condition or circumstance, or any change therein, of whatever nature
(including any adverse determination in any litigation, arbitration, or
governmental investigation or proceeding), a materially adverse effect on: (i)
the assets of or the business, revenues, financial condition, operations or
prospects of the Obligors taken as a whole; or (ii) the ability of the
Obligors, taken as a whole, to timely or fully perform any of the payment or
other material obligations involving any of their Indebtedness.
"Mortgage" shall mean, in connection with any fee or leasehold interest
in Property (except for the Leased Property) acquired by any Obligor, a
mortgage, deed of trust, leasehold mortgage or similar instrument executed by
such Obligor in favor of the Syndication Agent and the Lenders (or, if
applicable, in favor of a trustee, for the benefit of the Syndication Agent
and the Lenders), in each case in form and substance satisfactory to the
Lenders for whom such Mortgage is in favor and covering such interest in real
property, as said instrument shall be modified and supplemented and in effect
from time to time.
"Multiemployer Plan" means a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Notes" shall collectively mean the Revolving Credit Notes and the DD
Loan Notes and all promissory notes delivered in substitution or exchange
therefor, in each case as the same shall be modified and supplemented and in
effect from time to time.
"Operative Documents" shall have the meaning assigned to such term in
the Master Agreement.
"Overadvance" shall have the meaning assigned to such term in Section
2.10.3 hereof.
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"PBGC" shall mean the Pension Benefit Guaranty Corporation, and any
successor thereto.
"Permitted Extension Request Period" shall mean either of the following
periods (i) the period commencing on the date on which the Company delivers
its audited annual financial statements to the Lenders for its fiscal year
ending December 31, 2000 and ending 60 days after such date of delivery, or
(ii) the period commencing on the date on which the Company delivers its
audited annual financial statements to the Lenders for its fiscal year ending
December 31, 2001 and ending 60 days after such date of delivery.
"Permitted Investments" shall mean: (a) direct obligations of the
United States of America, or of any agency thereof, or obligations guaranteed
as to principal and interest by the United States of America, or of any agency
thereof, in either case maturing not more than 90 days from the date of
acquisition thereof; (b) certificates of deposit issued by any Lender or by
any bank or trust company organized under the laws of the United States of
America or any state thereof and having capital, surplus and undivided profits
of at least $500,000,000, maturing not more than 90 days from the date of
acquisition thereof; (c) commercial paper rated A-1 or better or P-1 by
Standard & Poor's Corporation or Moody's Investors Services, Inc.,
respectively, maturing not more than six months from the date of acquisition
thereof; (d) commercial paper of any Lender (or any Affiliate thereof located
in the United States of America) that is rated A-1 or better or P-1 by
Standard and Poor's Corporation or Moody's Investors Services, Inc.,
respectively, maturing not more than six months from the date of acquisition
thereof; (e) repurchase agreements entered into with any Lender or with any
bank or trust company satisfying the conditions of clause (b) hereof that are
secured by any obligation of the type described in clauses (a) through (d) of
this definition; and (f) money market funds acceptable to the Required
Lenders.
"Permitted Liens" shall have the meaning assigned to such term in
Section 9.1.6 hereof.
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).
"Plan" shall mean any "employee benefit plan" (as defined in Section
3(3) of ERISA), including, but not limited to, any defined benefit pension
plan, profit sharing plan, money purchase pension plan, savings or thrift
plan, stock bonus plan, employee stock ownership plan, Multiemployer Plan, or
any plan, fund, program, arrangement or practice providing for medical
(including post-retirement medical), hospitalization, accident, sickness,
disability, or life insurance benefits.
"Post-Default Rate" shall mean, in respect of any principal of any Loan,
any Reimbursement Obligation and any other amount outstanding under this
Agreement, any Note or any other Basic Document, a rate per annum equal to 2%
plus the Base Rate as in effect from time to time plus the Applicable Margin
for Base Rate Loans.
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<PAGE>
"Pre-Development Costs" shall mean costs incurred for any of the
following purposes in connection with a project or a property which the
Company intends to become a Qualifying Property: (i) one-time activities
associated with opening a new facility; (ii) the acquisition of raw land;
(iii) conducting business in a new territory; (iv) organizing a new entity;
(v) the commencement of some new operation and (vi) to the extent not included
in clauses (i) through (v) above, start-up and project development expenses,
including pre-opening, pre-operating, and pre-contract type costs. If and to
the extent a project or property, within nine months after the date of the
initial Pre-Development Costs Funding in connection therewith, becomes a
Qualifying Property, costs incurred for any of the purposes described in
clauses (i) through (vi) above shall no longer constitute Pre-Development
Costs.
"Pre-Development Costs Funding" shall mean Indebtedness incurred under
this Agreement to fund Pre-Development Costs. If and to the extent costs,
originally deemed Pre-Development Costs, are no longer so characterized as a
result of the project or property becoming a Qualifying Property, Indebtedness
incurred to fund such costs shall no longer be deemed Pre-Development Costs
Funding.
"Prior Security Interest" shall mean a valid and enforceable perfected
first-priority security interest under the Uniform Commercial Code in the UCC
Collateral.
"Property" shall mean each parcel of real property, together with the
improvements thereon, owned, leased or otherwise used or occupied by the
Company or any Subsidiary, wherever located.
"Qualified Account" shall mean an Account that meets all of the
following requirements on its date of invoice or other origination date and
continuing thereafter until collected:
(a) such Account represents a complete bona fide transaction
which requires no further act under any circumstances on the part of any
Obligor to make such Account payable by the Account Debtor;
(b) such Account shall not be unpaid more than 60 days beyond its
payment terms, not to exceed 90 days beyond the invoice date;
(c) the goods the sale of which gave rise to such Account were
shipped or delivered to the Account Debtor on an absolute sale basis and not on
a bill and hold sale basis, a consignment sale basis, a guaranteed sale basis,
a sale or return basis, or on the basis of any other similar understanding, and
no part of such goods has been returned or rejected;
(d) such Account is not evidenced by chattel paper, a note or an
instrument of any kind;
(e) the Account Debtor with respect to such Account is not
insolvent or the subject of any bankruptcy or insolvency proceedings of any
kind or of any other proceeding or action, which might have a materially
adverse effect on the business of such Account Debtor or is not, in the
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<PAGE>
reasonable discretion of the Syndication Agent based upon a change in
circumstances or objective facts, deemed ineligible for credit for any other
reason;
(f) if such Account arises from the performance of services, such
services have been fully rendered, and such Account does not represent a
progress billing;
(g) the Account Debtor with respect thereto is located within the
United States of America or Puerto Rico;
(h) such Account is a valid, legally enforceable obligation of
the Account Debtor with respect thereto and is not subject to any present or
contingent, and no facts exist which are the basis for any future, offset or
counterclaim or other defense on the part of such Account Debtor, including
without limitation, any account payable, rental or other amount owing by the
Obligor to such Account Debtor; provided, however, that any Account subject to
an offset, counterclaim or defense shall be deemed ineligible under this
subsection (h) only to the extent of such offset, counterclaim or defense;
(i) the Syndication Agent has a first position perfected
Lien
(for the benefit of the Lenders) in such Account, which is subject to no other
Lien;
(j) such Account is evidenced by an invoice or other
documentation in a form acceptable to the Syndication Agent;
(k) such Account does not arise out of any transaction with
a
Subsidiary or an Affiliate of the Obligors;
(l) such Account is not subject to any provision prohibiting
its
assignment or requiring notice of or consent to such assignment, other than the
type of notice required under subsection (o) below;
(m) if applicable, the goods giving rise to such Account
were
not, at the time of the sale thereof, subject to any Lien;
(n) such Account (or portion thereof) does not represent
amounts
owing as a late fee, interest or service charge;
(o) the Account Debtor with respect to such Account is not
the
United States government or any instrumentality or agency thereof or, if the
Account Debtor with respect to such Account is the United States government or
any instrumentality or agency thereof, such Account has, in the opinion of the
Syndication Agent or its counsel, been properly assigned to the Agent pursuant
to the Assignment of Claims Act of 1940, 31 U.S.C. 3727 and 41 U.S.C. 15; and
(p) at least 50% (in dollar amount) of all Accounts owing to
any
Obligor from such Account Debtor (including the Account in question) constitute
Qualified Accounts.
"Qualifying Property" shall mean a Property that is the subject of a
Facility Contract, where the Property or the Facility Contract, as applicable,
meet the following criteria: (a) the
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<PAGE>
Facility Contract has a term that is longer than or equal to the
Base Term, as the same may be renewed pursuant to Section 14.9 of the
Lease, and is otherwise acceptable to the Syndication
Agent; provided, however, in the event the governmental authority or other
party to the Facility Contract is prohibited by law from entering into a
Facility Contract with a term long enough to satisfy the provisions of this
clause (a), such requirement may, with the approval of the Required Lenders,
be waived or modified accordingly; (b) the Property is located in the United
States or Puerto Rico; and (c) the projected Fixed Charge Coverage Ratio
calculated for the Leased Property (and not on a consolidated basis for the
Company and its Subsidiaries) is not less than 1.50 to 1 over the term of such
Facility Contract based on 90% occupancy, all as set forth in a certificate of
a senior financial officer of the Company containing such detail and
computations as the Syndication Agent shall request.
"Quarterly Payment Date" shall mean the last Business Day of each March,
June, September, and December of each year, the first of which shall be the
first such day after the date of this Agreement.
"Real Property Collateral" shall mean the collateral under the
Mortgages.
"Regulations A, D, G, T, U and X" shall mean, respectively,
Regulations A, D, G, T, U and X of the Board of Governors of the Federal
Reserve System (or any successor), as the same may be modified and
supplemented and in effect from time to time.
"Regulatory Change" shall mean, with respect to any Lender, any change
after the date of this Agreement in Federal, state or foreign law or
regulations (including, without limitation, Regulation D) or the adoption or
making after the date of this Agreement of any interpretation, directive or
request applying to a class of banks including such Lender of or under any
Federal, state or foreign law or regulations (whether or not having the force
of law and whether or not failure to comply therewith would be unlawful) by
any court or governmental or monetary authority charged with the
interpretation or administration thereof.
"Reimbursement Obligations" shall mean, at any time, the obligations of
the Company then outstanding, or that may thereafter arise in respect of all
Letters of Credit then outstanding, to reimburse amounts paid by the Letter of
Credit Issuer in respect of any drawings under a Letter of Credit.
"Release" shall mean the release, deposit, disposal or leak of any
Hazardous Material into or upon or under any land or water or air, or
otherwise into the environment, including, without limitation, by means of
burial, disposal, discharge, emission, injection, spillage, leakage, seepage,
leaching, dumping, pumping, pouring, escaping, emptying, placement and the
like.
"Required Lenders" shall mean Lenders holding at least 66-2/3% of the
sum of the Commitments (or, if the Commitments shall have terminated or
expired, at least 66-2/3% of the aggregate unpaid principal amount of the
Loans).
"Revolving Credit Commitment" shall mean, for each Lender, the
obligation of such Lender to make Loans in an aggregate principal amount at
any one time outstanding up to but not
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exceeding the amount set forth opposite the name of such Lender on
Schedule 1 under the caption "Amount of Commitment for Revolving
Credit Loans " (as the same may be reduced from time to time
pursuant to Section 2.3 hereof). The original aggregate principal amount of
the Revolving Credit Commitments is $30,000,000.
"Revolving Credit Commitment Percentage" shall mean, with respect to any
Lender, the ratio of (a) the amount of the Revolving Credit Commitment of such
Lender to (b) the aggregate amount of the Revolving Credit Commitments of all
of the Lenders.
"Revolving Credit Commitment Termination Date" shall mean the Business
Day immediately preceding August 31, 2002.
"Revolving Credit Facility Usage" shall mean the sum of the Revolving
Credit Loans and the aggregate Letter of Credit Liability for all Letters of
Credit.
"Revolving Credit Lenders" shall mean (a) on the date hereof, Lenders
having Revolving Credit Commitments on the signature pages hereof, and
(b) thereafter, Lenders from time to time holding Revolving Credit Loans and
Revolving Credit Commitments after giving effect to any assignments thereof.
"Revolving Credit Loans" shall mean the revolving credit loans provided
for by Section 2.1.1 hereof, which may be Base Rate Loans and/or LIBOR Loans.
"Revolving Credit Note" shall have the meaning assigned to such term in
Section 2.8 hereof.
"Security Agreement" shall mean the Security Agreement dated as of the
date hereof, as amended, among the Obligors and the Syndication Agent, and as
the same shall be further modified and supplemented and in effect from time to
time.
"Security Documents" shall mean, collectively, the Security Agreement,
any Mortgage and all Uniform Commercial Code financing statements required by
this Agreement, the Security Agreement or any Mortgage to be filed with
respect to any Collateral.
"Senior Debt" shall mean all Indebtedness, including, without
limitation, the Loans, Letter of Credit Liability and Indebtedness under
synthetic leases minus Subordinated Debt.
"Special Purpose Subsidiary" shall mean a Subsidiary of the Company (i)
formed or acquired for the purpose of consummating, and which consummates, an
acquisition of Property of a nature described in Section 9.1.6(h) hereof and
(ii) whose Indebtedness shall be the sole responsibility of such entity and
for which neither the Company nor any of its other Subsidiaries shall have any
responsibility by contract, operation of law or otherwise.
"Subordinated Debentures" shall mean the 7% Convertible Subordinated
Debentures issued by Youth Services International, Inc., due 2006, in the
aggregate principal amount of $30,470,000.
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"Subordinated Debt" shall mean any unsecured Indebtedness of the Company
(a) no part of the principal of which is stated to be payable or is required
to be paid (whether by way of mandatory sinking fund, mandatory redemption,
mandatory prepayment or otherwise) prior to the Revolving Credit Commitment
Termination Date, and the payment of the principal of and interest on which
and other obligations of the Company in respect thereof are subordinated to
the prior payment in full of the principal of and interest (including post-
petition interest) on the Notes and all other obligations and liabilities of
the Company to the Lenders hereunder on terms and conditions first approved in
writing by the Required Lenders and (b) otherwise containing terms, covenants
and conditions satisfactory in form and substance to the Required Lenders, as
evidenced by their prior written approval thereof.
"Summit Bank" shall mean Summit Bank, a New Jersey banking corporation.
"Subsidiary" shall mean, with respect to any Person, any corporation or
other business entity of which more than fifty percent (50%) of the
outstanding common stock or other ownership interests is owned, directly or
indirectly, by such Person.
"Syndication Agent" shall mean Summit Bank, its successors and assigns.
"Synthetic Lease Closing Date" shall mean a "Closing Date" as defined in
the Master Agreement.
"Synthetic Lease Expense" shall mean the interest and unused facility
fees components of the required payments by the Company and its Subsidiaries
under the Synthetic Leases to which any of them is a party.
"Synthetic Lease Financing" shall mean one or more transactions
consisting of the following (provided that any such transaction need not
include the matters described in clause (e) below):
(a) the Company or one of its Subsidiaries enters into a lease,
as lessee, of a Property (to be used for a correctional, rehabilitation,
detention or like facility) with another Person (the "Lessor");
(b) pursuant to a loan agreement (the "Loan Agreement"), the
Lessor borrows money from one or more lenders denominated "A Lenders" (the "A
Lenders") and one or more lenders denominated "B Lenders" (the "B Lenders");
(c) the Lessor (or another Person, which may be an Affiliate of
the Lessor) makes an investment (the "C Investment") to pay a portion of the
cost of such real Property and improvements;
(d) the Company and its Subsidiaries enter into a guarantee of
the Lessor's obligations to the A Lenders under the Loan Agreement (the "A
Guarantee"); and
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(i) the A Guarantee is secured by Liens on substantially
all of the collateral for the Loans and the Reimbursement Obligations; and
(ii) the Loans, the Reimbursement Obligations and the other
obligations of the Company under this Agreement and under the other Basic
Documents are secured by Liens, on a pari passu basis, on any collateral
securing the Lessor's obligations to the A Lenders under the Loan Agreement
(the "A Collateral Contribution"); and
(e) the Company and its Subsidiaries enter into a guarantee of
the Lessor's obligations to the B Lenders under the Loan Agreement (the "B
Guarantee"); and
(i) the B Guarantee and the C Investment are secured by
Liens on substantially all of the collateral for the Loans; and
(ii) the Loans, the Reimbursement Obligations and the other
obligations of the Company under this Agreement and under the other Basic
Documents are secured by Liens on any collateral securing the Lessor's
obligations to the B Lenders under the Loan Agreement or securing the C
Investment (the "B and C Collateral Contribution").
"Type" shall have the meaning assigned to such term in Section 1.3
hereof.
"UCC" shall mean the Uniform Commercial Code as in effect in any
applicable jurisdiction.
"UCC Collateral" shall mean the property of the Obligors in which
security interests are to be granted under the Security Agreement.
"Use Permit" shall mean any permit issued by a Federal, state, local or
foreign court or government, or an agency, instrumentality or subdivision
thereof, that is required for the operation by the Company or its Subsidiaries
of any correctional, rehabilitation or detention facility, facility for
troubled juvenile offenders or similar facilities managed or operated by the
Company or its Subsidiaries.
"Wholly Owned Subsidiary" means any Subsidiary all of the shares of
capital stock or other ownership interests of which (except directors'
qualifying shares) are at the time directly or indirectly owned by the
Company.
1.2 Accounting Terms and Determinations.
(a) Any accounting terms used but not otherwise defined herein
shall have their customary meanings as defined in, pursuant to, or in
accordance with GAAP. All other terms used by not otherwise defined herein
shall have the meanings provided by the UCC to the extent said terms are used
or defined therein.
(b) The Company shall deliver to the Lenders at the same time as
the delivery of any annual or quarterly financial statement under Section 9.1
hereof (i) a description in reasonable detail of any material variation
between the application of accounting principles
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employed in the preparation of such statement and the application of
accounting principles employed in the preparation of the next preceding
annual or quarterly financial statements as to which no objection has
been made in accordance with the last sentence of subsection
(a) above and (ii) reasonable estimates of the difference between
such statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of
compliance with the covenants set forth in Section 9 hereof, the Company will
not change the last day of its fiscal year from December 31 of each year, or
the last days of the first three fiscal quarters in each of its fiscal years
from March 31, June 30, September 30 and December 31 of each year,
respectively.
(d) If, after the date of this Agreement, there shall occur any
change in GAAP and such change shall result in a change in the method of
calculation of any financial covenant, standard or term found in this
Agreement, either the Company or the Required Lenders may by notice to the
other Lenders and the Company, respectively, require that the Lenders and the
Borrower negotiate in good faith to amend such covenant, standard or term so
as equitably to reflect such change in GAAP, with the desired result being
that the criteria for evaluating the financial condition of the Obligors shall
be the same as if such change had not been made.
1.3 Classes and Types of Loans.
Loans hereunder are distinguished by "Type." The "Type" of a Loan
refers to whether such Loan is a Base Rate Loan or a LIBOR Loan, each of which
constitutes a Type. Loans and Commitments may also be distinguished by
"Class." The "Class" of a Loan or Commitment refers to whether such Loan is a
Revolving Credit Loan or a DD Loan, each of which constitutes a Class. Loans
may be identified by both Type and Class.
1.4 Interpretation.
(a) In this Agreement and each other Basic Document, unless a
clear contrary intention appears: (i) the singular number includes the plural
number, and vice versa; (ii) reference to any Person includes such Person's
successors and assigns but, if applicable, only if such successors and assigns
are permitted by this Agreement, and reference to a Person in a particular
capacity excludes such Person in any other capacity or individually; (iii)
reference to any gender includes each other gender; (iv) references to any
agreement (including this Agreement and the Schedules and Exhibits hereto),
document or instrument means such agreement, document or instrument as amended
or modified and in effect from time to time in accordance with the terms
thereof and, if applicable, the terms hereof and reference to any promissory
note includes any promissory note which is an extension or renewal thereof or
a substitute or replacement therefor; (v) unless the context indicates
otherwise, reference to any Article, Section, Schedule or Exhibit means such
Article or Section hereof or Schedule or Exhibit hereto; (vi) "hereunder,"
"hereof," "hereto" and words of similar import shall be deemed references to
this Agreement as a whole and not to any particular Article, Section or other
provision hereof, (vii) "including" (and with correlative meaning "include")
means including without limiting the generality of any description preceding
such term; and (viii) relative to the
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determination of any period of time, "from" means "from and including"
and "to" and "through" means "to but excluding."
(b) Wherever pursuant to this Agreement (i) the Syndication
Agent
or the Lenders exercise any right given to it or them to approve or disapprove,
(ii) any arrangement or term is to be satisfactory to the Syndication Agent or
the Lenders, or (iii) any other decision or determination is to be made by the
Syndication Agent or the Lenders, the decision of the Lenders to approve or
disapprove, all decisions that arrangements or terms are satisfactory or not
satisfactory and all other decisions and determinations made by the Syndication
Agent or the Lenders, shall be in the sole but reasonable discretion of the
Syndication Agent or the Lenders, except as may be otherwise expressly provided
herein.
(c) Wherever pursuant to this Agreement it is provided
that the
Company or the Obligors pay any costs and expenses, such costs and expenses
shall include, but not be limited to, reasonable legal fees and out-of-pocket
disbursements of the Syndication Agent, whether with respect to retained firms,
the reimbursement for the out-of-pocket expenses of in-house staff (but not in-
house staff time), or otherwise.
2. COMMITMENTS, LOANS, NOTES AND PREPAYMENTS
2.1 Loans.
2.1.1 Revolving Credit Loans Made to the Company.
Each Revolving Credit Lender severally agrees, on the terms
and conditions of this Agreement, to make loans to the Company in Dollars
during the period from and including the Closing Date to but not including the
Revolving Credit Commitment Termination Date in an aggregate principal amount
at any one time outstanding up to but not exceeding the amount of the
Revolving Credit Commitment of such Lender as in effect from time to time.
Subject to the terms and conditions of this Agreement, during such period the
Company may borrow, repay and reborrow the amount of the Revolving Credit
Commitments by means of Base Rate Loans and LIBOR Loans and may Convert
Revolving Credit Loans of one Type into Revolving Credit Loans of the other
Type (as provided in Section 2.9 hereof) or Continue Revolving Credit LIBOR
Loans from one Interest Period to the next Interest Period (as provided in
Section 2.9 hereof), provided that in no event shall the aggregate principal
amount of all Revolving Credit Loans, together with the aggregate amount of
all Letter of Credit Liabilities, exceed the lesser of (i) aggregate amount of
the Revolving Credit Commitments, or (ii) the Borrowing Base as in effect from
time to time. In addition to the foregoing, in no event shall the aggregate
amount of Pre-Development Costs Fundings made hereunder exceed $10,000,000,
except that the Company may re-borrow (x) Pre-Development Costs Fundings that
have been repaid with the proceeds of an Equity Issuance or the sale of the
Leased Property (to a Person other than an Obligor or its Affiliate) for which
such Pre-Development Costs Fundings were incurred and (y) Pre-Development
Costs Fundings incurred in connection with a property or project that becomes
a Qualifying Property.
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2.1.2 DD Loans Made to the Company.
Each Lender severally agrees, on the terms and conditions of
this Agreement, to make loans to the Company in Dollars during the period from
and including the Closing Date to but not including the DD Loan Draw Expiration
Date in an aggregate principal amount at any one time outstanding up to but
not exceeding the amount of the DD Loan Commitment of such Lender as in effect
from time to time. Subject to the terms and conditions of this Agreement,
during such period the Company may make up to three requests for DD Loans.
All DD Loans shall be Base Rate Loans. In no event shall the aggregate
principal amount of all DD Loans exceed the aggregate amount of the DD Loan
Commitments as in effect from time to time.
2.1.3 Limit on LIBOR Loans.
No more than six separate Interest Periods in respect of
LIBOR Loans may be outstanding at any one time.
2.2 Borrowings of Loans.
The Company shall give the Syndication Agent notice of each
borrowing hereunder as provided in Section 4.5 hereof. Not later than 1:00 p.m.
New York time on the date specified for each borrowing of Loans hereunder, each
Lender shall make available the amount of the Loan or Loans to be made by it
on such date to the Syndication Agent, at account number 35008-02 (ABA No. 021
202 162) maintained by the Syndication Agent with Summit Bank, in immediately
available funds, for the account of the Company . The amount so received by
the Syndication Agent in respect of Revolving Credit Loans or DD Loans shall,
subject to the terms and conditions of this Agreement, be made available to
the Company by depositing the same, in immediately available funds, in an
account of the Company maintained with a bank in the United States, designated
by the Company.
2.3 Reduction of Commitments.
2.3.1 Voluntary.
The Company shall have the right at any time and from time to time
upon five Business Days' prior written notice to the Syndication Agent to
permanently reduce, in whole multiples of $1,000,000 of principal, or
terminate, the Revolving Credit Commitments or the DD Loan Commitments, in
each instance without penalty or premium, except as hereinafter set forth,
provided that any such reduction or termination shall be accompanied by
prepayment of the applicable Loans, and, in the case of a prepayment of LIBOR
Loans, the full amount of interest accrued on the principal sum to be prepaid
(and all amounts referred to in Section 5.5 hereof), to the extent that the
aggregate amount thereof then outstanding exceeds the applicable Commitments
as so reduced or terminated. From the effective date of any such reduction or
termination the obligations of the Company to pay the applicable commitment
fee shall correspondingly be reduced or cease.
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2.3.2 Mandatory.
(a) The aggregate amount of the Revolving Credit
Commitments shall automatically be reduced (i) in accordance with the
provisions of Section 2.10.1 hereof, upon the occurrence of a Capital Event
and (ii) to zero on the Revolving Credit Commitment Termination Date.
(b) The aggregate amount of the DD Loan Commitments
shall
automatically be reduced by each of the following payments, but only if and to
the extent such payment is made subsequent to March 31, 2000: (i) the amount
of each voluntary payment of the DD Loans on the date on which the Company
makes such payment; (ii) on the date of each mandatory payment of the DD Loans
if such payment is timely; and (iii) by the amount of each required payment on
the due date of such required payment if the Company is late in making a
mandatory or scheduled payment of such Loans.
(c) The Commitments of any Class once terminated or
reduced may not be reinstated.
2.4 Extension by Revolving Credit Lenders of the Expiration Date.
During each Permitted Extension Request Period, the Company may request
a one-year extension of the Revolving Credit Commitment Termination Date by
written notice to the Lenders holding Revolving Credit Commitments, and such
Lenders agree to respond to the Company's request for an extension within 45
days following receipt of the request; provided, however, that the failure of
any Lender to respond within such time period shall not in any manner
constitute an agreement by such Lender to extend the Revolving Credit
Commitment Termination Date. If all Lenders holding Revolving Credit
Commitments elect to extend, the Revolving Credit Commitment Termination Date
shall be extended for a period of one year. The Revolving Credit Commitment
Termination Date may be extended two times (for a total extension of two
years) pursuant to this Section; provided, however, the second extension may
be requested by the Company only if the initial extension was requested by the
Company and granted by the Lenders.
2.5 Commitment Fees.
(a) The Company shall pay to the Syndication Agent, for the
account of each Revolving Credit Lender, a commitment fee on the daily average
unused amount of such Lender's Revolving Credit Commitment (for which purpose
the aggregate amount of any Letter of Credit Liabilities shall be deemed to be
a pro rata (based on the Revolving Credit Commitments) use of each Lender's
Revolving Credit Commitment), for the period from and including the Closing
Date to (but not including) the earlier of the date such Commitment is reduced
to zero and the Revolving Credit Commitment Termination Date, at a rate per
annum equal to the Applicable Commitment Fee Rate. Accrued commitment fees
shall be payable on (i) each Quarterly Payment Date and (ii) the date the
Revolving Credit Commitments are reduced to zero or the Revolving Credit
Commitment Termination Date.
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(b) The Company shall pay to the Syndication Agent, for the
account of each Lender, a commitment fee on the daily average unused amount of
such Lender's DD Loan Commitment, for the period from and including the
Closing Date to (but not including) the date such Commitment is reduced to
zero, at a rate per annum equal to the Applicable Commitment Fee Rate.
Accrued commitment fees shall be payable on (i) each Quarterly Payment Date
and (ii) the date the DD Loan Commitments are reduced to zero or the DD Loan
Draw Expiration Date.
2.6 Lending Offices.
The Loans of each Type made by each Lender shall be made and
maintained at such Lender's Applicable Lending Office for Loans of such Type.
2.7 Several Obligations; Remedies Independent.
The failure of any Lender to make any Loan to be made by it on the
date specified therefor shall not relieve any other Lender of its obligation to
make its Loan on such date, but neither any Lender nor the Syndication Agent
shall be responsible for the failure of any other Lender to make a Loan to be
made by such other Lender, and no Lender shall have any obligation to the
Syndication Agent or any other Lender for the failure by such Lender to make
any Loan required to be made by such Lender. The amounts payable by the
Company at any time hereunder and under the Notes to each Lender shall be a
separate and independent debt and each Lender shall be entitled to protect and
enforce its rights arising out of this Agreement and the Notes, and it shall
not be necessary for any other Lender or the Syndication Agent to consent to,
or be joined as an additional party in, any proceedings for such purposes.
2.8 Notes.
(a) The Revolving Credit Loans made by each Lender shall be
evidenced by a single promissory note of the Company substantially in the form
of Exhibit A-1 hereto (each a "Revolving Credit Note"), dated the date hereof,
payable to such Lender in a principal amount equal to the amount of its
Revolving Credit Commitment as originally in effect and otherwise duly
completed.
(b) The DD Loans made by each Lender shall be evidenced by a
single promissory note of the Company substantially in the form of Exhibit A-2
hereto (each a "DD Loan Note"), dated the date hereof, payable to such Lender
in a principal amount equal to the amount of its DD Loan Commitment as
originally in effect and otherwise duly completed.
(c) The date, amount, Type, interest rate and duration of
Interest Period (if applicable) of each Loan made by each Lender to the
Company, and each payment made on account of the principal thereof, shall be
recorded by such Lender on its books and, prior to any transfer of the Note
evidencing the Loans held by it, endorsed by such Lender on the schedule
attached to such Note or any continuation thereof; provided that the failure
of such Lender to make any such recordation or endorsement shall not affect
the obligations of the Company
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to make a payment when due of any amount owing hereunder or under such
Note in respect of the Loans to be evidenced by such Note.
(d) No Lender shall be entitled to have its Notes subdivided, by
exchange for promissory notes of lesser denominations or otherwise, except in
connection with a permitted assignment of all or any portion of such Lender's
relevant Commitment, Loans and Notes pursuant to Section 12.6(b) hereof.
2.9 Optional Prepayments and Conversions or Continuations of Loans.
(a) Subject to Section 4.4 hereof, the Company shall have the
right to prepay Revolving Credit Loans, or (subject to Section 2.1.3 hereof)
to Convert Loans of one Type into Loans of another Type or to Continue LIBOR
Loans, at any time or from time to time, provided that the Company shall give
the Syndication Agent notice of each such prepayment, Conversion or
Continuation as provided in Section 4.5 hereof and, upon the date specified in
any such notice of prepayment, the amount to be prepaid shall become due and
payable hereunder. Notwithstanding the foregoing, and without limiting the
rights and remedies of the Lenders under Section 10 hereof, in the event that
any Event of Default shall have occurred and be continuing, the right of the
Company to Convert any Base Rate Loan into a LIBOR Loan, or to Continue any
Loan as a LIBOR Loan shall be suspended, in which event all Loans shall be
Converted (on the last day(s) of the respective Interest Periods therefor) or
Continued, as the case may be, as Base Rate Loans.
(b) Subject to Sections 2.3, 3.1, 4.4, and 5.5 hereof, the
Company shall have the right to prepay DD Loans, at any time or from time to
time, provided that the Company shall give the Syndication Agent notice of
each such prepayment, as provided in Section 4.5 hereof and, upon the date
specified in any such notice of prepayment, the amount to be prepaid shall
become due and payable hereunder.
2.10 Mandatory Prepayments of DD Loans and Revolving Credit Loans.
2.10.1 Capital Events.
No later than five Business Days prior to the occurrence of
each Capital Event, the Company will deliver to the Syndication Agent and the
Lenders a statement, certified by a senior financial officer of the Company,
in form and detail reasonably satisfactory to the Syndication Agent, of the
amount of the anticipated net proceeds from such Capital Event. Within five
Business Days after the receipt of proceeds from such Capital Event, the
Company shall make a mandatory prepayment of the DD Loans in the amount of the
net proceeds resulting therefrom. If the net proceeds (i) exceed the amounts
outstanding under the DD Loans by less than $10,000,000 or resulted from an
Equity Issuance, the Syndication Agent shall determine the percentages, if
any, of such excess to be applied to reduce the Revolving Credit Commitments
and/or repay the Revolving Credit Loans or (ii) exceed the amounts outstanding
under the DD Loans by $10,000,000 or more and did not result from an Equity
Issuance, the Required Lenders shall determine the percentages, if any, of
such excess to be applied to reduce the Revolving Credit Commitments and/or
repay the Revolving Credit Loans. Such payments in reduction of
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the Revolving Credit Loans shall be made within five Business Days of the date
on which the Syndication Agent notifies the Company of the amount of the
required payments.
2.10.2 Excess Cash Flow.
Not later than 90 days after the end of each fiscal year,
commencing with the fiscal year ending December 31, 2000, the Company shall
prepay the DD Loans in an aggregate amount equal to 50% of the Excess Cash
Flow for such fiscal year (computed on the basis of the financial statements
provided to the Syndication Agent pursuant to Section 9.1.1(c) hereof);
provided, however, such prepayment shall only be required if the ratio of
Senior Debt to EBITDA as at the end of such fiscal year equals or exceeds 2.0
to 1.0. The Company shall demonstrate its computation of Excess Cash Flow and
its prepayment of the DD Loans in its annual Compliance Certificate for such
year.
2.10.3 Borrowing Base Exceeded.
Whenever the outstanding principal balance of Revolving Credit
Loans by the Lenders plus the Letter of Credit Liabilities exceed the lesser
of (i) the Borrowing Base or (ii) the Revolving Credit Commitments (such
excess being hereinafter referred to as the "Over-advance"), the Company shall
make, within one Business Day following demand by the Syndication Agent, a
mandatory prepayment of principal in the amount of the Overadvance, together
with accrued interest on such principal amount.
2.11 Letters of Credit.
2.11.1 General Provisions.
Subject to the terms and conditions of this Agreement, and subject
to the prior consent of the Letter of Credit Issuer, Revolving Credit
Commitments may be utilized, upon the request of the Company, in addition to
the Revolving Credit Loans provided for by Section 2.1.1 hereof, for the
issuance by the Letter of Credit Issuer of letters of credit (collectively,
"Letters of Credit") for the account of the Company or any of its Subsidiaries
(as specified by the Company), provided that in no event shall (i) the
aggregate amount of all Letter of Credit Liabilities exceed $3,000,000,
(ii) the aggregate amount of all Letter of Credit Liabilities plus the
aggregate principal amount of the Revolving Credit Loans exceed the aggregate
amount of the Revolving Credit Commitments as in effect from time to time.
The following additional provisions shall apply to Letters of Credit:
(a) The Company shall give the Syndication Agent at least
three Business Days' irrevocable prior notice (effective upon receipt)
specifying the Business Day (which shall be no later than 30 days preceding
the Revolving Credit Commitment Termination Date) each Letter of Credit is to
be issued and the account party or parties therefor and describing in
reasonable detail the proposed terms of such Letter of Credit (including the
beneficiary thereof) and the nature of the transactions or obligations
proposed to be supported thereby (including whether such Letter of Credit is
to be a commercial letter of credit or a standby letter
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of credit). Upon receipt of any such notice, the Syndication Agent shall
advise the Letter of Credit Issuer of the contents thereof.
(b) On each day during the period commencing with the
issuance by the Letter of Credit Issuer of any Letter of Credit and until such
Letter of Credit shall have expired or been terminated, the Revolving Credit
Commitment of each Lender shall be deemed to be utilized for all purposes of
this Agreement in an amount equal to such Lender's Revolving Credit Commitment
Percentage of the then undrawn face amount of such Letter of Credit. Each
Revolving Credit Lender (other than the Letter of Credit Issuer) agrees that,
upon the issuance of any Letter of Credit hereunder, it shall automatically
acquire a participation in the Letter of Credit Issuer's liability under such
Letter of Credit in an amount equal to such Lender's Revolving Credit
Commitment Percentage of such liability, and each Revolving Credit Lender
(other than the Letter of Credit Issuer) thereby shall absolutely,
unconditionally and irrevocably assume, as primary obligor and not as surety,
and shall be unconditionally obligated to the Letter of Credit Issuer to pay
and discharge when due, its Revolving Credit Commitment Percentage of the
Letter of Credit Issuer's liability under such Letter of Credit.
(c) Upon receipt from the beneficiary of any Letter of
Credit of any demand for payment under such Letter of Credit, the Letter of
Credit Issuer shall promptly notify the Company (through the Syndication
Agent) of the amount to be paid by the Letter of Credit Issuer as a result of
such demand and the date on which payment is to be made by the Letter of
Credit Issuer to such beneficiary in respect of such demand. Notwithstanding
the identity of the account party of any Letter of Credit, the Company hereby
unconditionally agrees to pay and reimburse the Syndication Agent for the
account of the Letter of Credit Issuer for the amount of each demand for
payment under such Letter of Credit at or prior to the date on which payment
is to be made by the Letter of Credit Issuer to the beneficiary thereunder,
without presentment, demand, protest or other formalities of any kind.
(d) Forthwith upon its receipt of a notice referred to in
subsection (c) of this Section 2.11.1, the Company shall advise the
Syndication Agent whether or not the Company intends to borrow hereunder to
finance its obligation to reimburse the Letter of Credit Issuer for the amount
of the related demand for payment and, if it does, submit a notice of such
borrowing as provided in Section 4.5 hereof. In the event that the Company
fails to so advise the Syndication Agent, or if the Company fails to reimburse
the Letter of Credit Issuer for a payment under a Letter of Credit by the date
of such payment, the Syndication Agent shall give each Revolving Credit Lender
prompt notice of the amount of the demand for payment, specifying such
Lender's Revolving Credit Commitment Percentage of the amount of the related
demand for payment.
(e) Each Revolving Credit Lender (other than the Letter of
Credit Issuer) shall pay to the Syndication Agent for the account of the
Letter of Credit Issuer at the principal office in Dollars and in immediately
available funds, the amount of such Lender's Revolving Credit Commitment
Percentage of any payment under a Letter of Credit upon notice by the Letter
of Credit Issuer (through the Syndication Agent) to such Lender requesting
such payment and specifying such amount. Each such Revolving Credit Lender's
obligation to make
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such payment to the Syndication Agent for the account of the Letter of
Credit Issuer under this subsection (e), and the Letter of
Credit Issuer's right to receive the same, shall be absolute and unconditional
and shall not be affected by any circumstance whatsoever, including, without
limitation, the failure of any other Lender to make its payment under this
subsection (e), the financial condition of the Company (or any other account
party), the existence of any Event of Default or the termination of the
Revolving Credit Commitments. Each such payment to the Letter of Credit
Issuer shall be made without any offset, abatement, withholding or reduction
whatsoever. If any Lender shall default in its obligation to make any such
payment to the Syndication Agent for the account of the Letter of Credit
Issuer, for so long as such default shall continue the Syndication Agent may
at the request of the Letter of Credit Issuer withhold from any payments
received by the Syndication Agent under this Agreement or any Note for the
account of such Lender the amount so in default and, to the extent so
withheld, pay the same to the Letter of Credit Issuer in satisfaction of such
defaulted obligation.
(f) Upon the making of each payment by a Revolving Credit
Lender to the Letter of Credit Issuer pursuant to subsection (e) above in
respect of any Letter of Credit, such Lender shall, automatically and without
any further action on the part of the Syndication Agent, the Letter of Credit
Issuer or such Lender, acquire (i) a participation in an amount equal to such
payment in the Reimbursement Obligation owing to the Letter of Credit Issuer
by the Company hereunder and under the Letter of Credit Documents relating to
such Letter of Credit and (ii) a participation in a percentage equal to such
Lender's Revolving Credit Commitment Percentage in any interest or other
amounts payable by the Company hereunder and under such Letter of Credit
Documents in respect of such Reimbursement Obligation (other than the
commissions, charges, costs and expenses payable to the Letter of Credit
Issuer pursuant to subsection (g) of this Section 2.11.1). Upon receipt by
the Letter of Credit Issuer from or for the account of the Company of any
payment in respect of any Reimbursement Obligation or any such interest or
other amount (including by way of setoff or application of proceeds of any
collateral security), the Letter of Credit Issuer shall promptly pay to the
Syndication Agent for the account of each Lender entitled thereto, such
Lender's Revolving Credit Commitment Percentage of such payment, each such
payment by the Letter of Credit Issuer to be made in the same money and funds
in which received by the Letter of Credit Issuer. In the event any payment
received by the Letter of Credit Issuer and so paid to the Revolving Credit
Lenders hereunder is rescinded or must otherwise be returned by the Letter of
Credit Issuer, each Revolving Credit Lender shall, upon the request of the
Letter of Credit Issuer (through the Syndication Agent), repay to the Letter
of Credit Issuer (through the Syndication Agent) the amount of such payment
paid to such Lender, with interest at the rate specified in subsection (j) of
this Section 2.11.1.
(g) The Company shall pay to the Syndication Agent for the
account of each Revolving Credit Lender (ratably in accordance with their
respective Revolving Credit Commitment Percentages) a letter of credit fee in
respect of each Letter of Credit at a rate per annum equal to the Applicable
Margin for Revolving Credit Loans that are LIBOR Loans (computed on the basis
of a 360-day year and the actual number of days elapsed) on the daily average
undrawn face amount of such Letter of Credit for the period from and including
the date of issuance of such Letter of Credit (i) in the case of a Letter of
Credit that expires in accordance
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with its terms, to and including such expiration date and (ii) in the case
of a Letter of Credit that is drawn in full or is otherwise terminated other
than on the stated expiration date of such Letter of Credit, to but
excluding the date such Letter of Credit is drawn in full or is terminated
(such fee to be non-refundable, to be paid in arrears on each Quarterly
Payment Date and on the Revolving Credit Commitment
Termination Date and to be calculated for each day after giving effect to any
payments made under such Letter of Credit on such day). In addition, the
Company shall pay to the Syndication Agent for the account of the Letter of
Credit Issuer a fronting fee in respect of each Letter of Credit in an amount
equal to 1/4 of 1% per annum of the daily average undrawn face amount of such
Letter of Credit for the period from and including the date of issuance of
such Letter of Credit (i) in the case of a Letter of Credit that expires in
accordance with its terms, to and including such expiration date and (ii) in
the case of a Letter of Credit that is drawn in full or is otherwise
terminated other than on the stated expiration date of such Letter of Credit,
to but excluding the date such Letter of Credit is drawn in full or is
terminated (such fee to be non-refundable, to be paid in arrears on each
Quarterly Payment Date and on the Revolving Credit Commitment Termination Date
and to be calculated for any day after giving effect to any payments made
under such Letter of Credit on such day) plus all commissions, charges, costs
and expenses in the amounts customarily charged by the Letter of Credit Issuer
from time to time in like circumstances with respect to the issuance of each
Letter of Credit and drawings and other transactions relating thereto.
(h) Promptly following the end of each calendar month, the
Letter of Credit Issuer shall deliver (through the Syndication Agent) to each
Revolving Credit Lender and the Company a notice describing the aggregate
amount of all Letters of Credit outstanding at the end of such month. Upon
the request of any Lender from time to time, the Letter of Credit Issuer shall
deliver any other information reasonably requested by such Lender with respect
to each Letter of Credit then outstanding.
(i) The issuance by the Letter of Credit Issuer of each
Letter of Credit shall, in addition to the conditions precedent set forth in
Section 7 hereof, be subject to the conditions precedent that (i) such Letter
of Credit shall be in such form, contain such terms and support such
transactions as shall be satisfactory to the Letter of Credit Issuer
consistent with its then current practices and procedures with respect to
letters of credit of the same type, (ii) such Letter of Credit shall have an
expiration date no later than the earlier of (A) one year from its date of
issuance or (B) the Revolving Credit Commitment Termination Date, and
(iii) the Company shall have executed and delivered such applications,
agreements and other instruments relating to such Letter of Credit as the
Letter of Credit Issuer shall have reasonably requested consistent with its
then current practices and procedures with respect to letters of credit of the
same type, provided that in the event of any conflict between any such
application, agreement or other instrument and the provisions of this
Agreement or any Security Document, the provisions of this Agreement and the
Security Documents shall control.
(j) To the extent that any Revolving Credit Lender shall
fail to pay any amount required to be paid pursuant to subsection (e) or (f)
of this Section 2.11.1 on the due date therefor, such Lender shall pay
interest to the Letter of Credit Issuer (through the Syndication Agent) on
such amount at the Federal Funds Rate from and including such due date
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to but excluding the date such payment is made, provided that if such Lender
shall fail to make such payment to the Letter of Credit Issuer within three
Business Days of such due date, then, retroactively to the due date, such Lender
shall be obligated to pay interest on such amount at the Post-Default Rate.
(k) The issuance by the Letter of Credit Issuer of any
modification or supplement to any Letter of Credit hereunder shall be subject
to the same conditions applicable under this Section 2.11.1 to the issuance of
new Letters of Credit, and no such modification or supplement shall be issued
hereunder unless either (i) the respective Letter of Credit affected thereby
would have complied with such conditions had it originally been issued
hereunder in such modified or supplemented form or (ii) each Revolving Credit
Lender shall have consented thereto.
2.11.2 Absolute Nature of Obligations.
The Company agrees to indemnify and save harmless the Syndication
Agent, the Revolving Credit Lenders and the Letter of Credit Issuer from and
against any and all claims, demands, liabilities, damages, losses, costs,
charges and out-of-pocket expenses (including reasonable attorneys' fees)
which the Agent may incur or be subject to as a consequence, direct or
indirect, of the issuance of any Letter of Credit or any action or proceeding
relating to a court order, injunction, or other process or decree restraining
or seeking to restrain the Letter of Credit Issuer from paying any amount
under the Letter of Credit. The obligation of the Company to reimburse the
Letter of Credit Issuer, and of the Lenders to make payments to the Letter of
Credit Issuer, with respect to Letters of Credit shall be irrevocable and
shall not be subject to any qualification or exception whatsoever and shall be
made in accordance with the terms and conditions of this Agreement under all
circumstances, including, without limitation, any of the following
circumstances:
(a) Any lack of validity or enforceability of this
Agreement, any Letter of Credit or any of the other Basic Documents;
(b) The existence of any claim, setoff, defense or other
right which the Company or any of its Subsidiaries may have at any time
against a beneficiary named in a Letter of Credit or any transferee of any
Letter of Credit (or any Person for whom any such transferee may be acting),
the Syndication Agent, the Letter of Credit Issuer, any Lender or any other
Person, whether in connection with this Agreement, any Letter of Credit, the
transactions contemplated herein or any unrelated transactions (including any
underlying transactions between the Company or any of its Subsidiaries and
the beneficiary named in any Letter of Credit);
(c) Any draft, certificate or any other document presented
under a Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(d) The surrender or impairment of any security for the
performance or observance of any of the terms of any of the Basic Documents;
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(e) Payment by the Letter of Credit Issuer under any
Letter of Credit against presentation of a demand, draft or certificate or
other document which does not comply with the terms of such Letter of Credit;
provided, that such payment does not constitute gross negligence or willful
misconduct of the Letter of Credit Issuer;
(f) Any lack of validity, effectiveness, or sufficiency of
any instrument transferring or assigning or purporting to transfer or assign
any Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part;
(g) Any loss or delay in the transmission or otherwise of
any document required in order to make a drawing under any Letter of Credit or
of the proceeds thereof;
(h) Any failure of the beneficiary of a Letter of Credit to
strictly comply with the conditions required in order to draw upon any Letter
of Credit;
(i) Any misapplication by the beneficiary of any Letter of
Credit or the proceeds of any drawing under such Letter of Credit; or
(j) Any other circumstance or happening whatsoever which
would give rise to a defense against payment or is similar to any of the
foregoing.
2.11.3 Uniform Customs and Practice.
The Uniform Customs and Practice for Documentary Credits as most
recently published by the International Chamber of Commerce shall in all
respects be deemed a part of this Agreement as if set forth at length herein
and shall apply to the Letters of Credit.
3. PAYMENTS OF PRINCIPAL AND INTEREST
3.1 Repayment of Principal of Loans.
(a) The Company hereby promises to pay to the Syndication Agent
for the account of each Revolving Credit Lender the entire outstanding
principal of such Lender's Revolving Credit Loans outstanding, and each
Revolving Credit Loan shall mature, on the Revolving Credit Commitment
Termination Date. In addition, each Revolving Credit Loan used by the Company
to fund Pre-Development Costs shall be repaid on or before the date which is
nine months after the date on which such Loan was made to the Company.
(b) The Company hereby promises to pay to the Syndication Agent
for the account of each DD Lender the outstanding principal of such Lender's
DD Loans as follows:
(i) The Company shall pay the outstanding principal
balance of the DD Loans in 12 equal quarterly installments payable on each
three-month anniversary date of the DD Loan Draw Expiration Date (or, if a
month in which payment is due has no numerically corresponding date to the DD
Loan Draw Expiration Date, the final day of such month),
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beginning on the three-month anniversary immediately following the DD Loan
Draw Expiration Date;
(ii) If the Company shall prepay any DD Loans, whether such
payment is a mandatory prepayment based on Excess Cash Flow, a Capital Event
or otherwise or is a voluntary prepayment, such prepayment shall be applied to
the quarterly installments referred to in clause (i) above in the inverse
order of their scheduled maturities; and
(iii) If not sooner paid, the entire principal balance of
all DD Loans shall be due and payable on the DD Loans Maturity Date.
3.2 Interest.
(a) The Company hereby promises to pay to the Syndication Agent
for account of each Lender interest on the unpaid principal amount of each
Revolving Credit Loan made by such Lender for the period from and including
the date of such Revolving Credit Loan to but excluding the date such
Revolving Credit Loan shall be paid in full, at the following rates per annum:
(i) during such periods as such Loan is a Base Rate Loan,
the Base Rate (as in effect from time to time) plus the Applicable Margin; and
(ii) during such periods as such Loan is a LIBOR Loan, for
each Interest Period relating thereto, the LIBOR Rate for such Loan for such
Interest Period plus the Applicable Margin.
Notwithstanding the foregoing, from and after the occurrence and during the
continuance of an Event of Default, the Company hereby promises to pay to the
Syndication Agent for the account of each Revolving Credit Lender interest at
the applicable Post-Default Rate on any principal of any Revolving Credit Loan
made by such Lender, on any Reimbursement Obligation held by such Lender, and
on any other amount payable by the Company hereunder or under the Notes held
by such Lender to or for account of such Lender. Accrued interest on each
Loan shall be payable (i) in the case of a Base Rate Loan, monthly on the last
Business Day of each month, (ii) in the case of a LIBOR Loan, on the last day
of each Interest Period therefor and, if such Interest Period is longer than
three months, at three-month intervals following the first day of such
Interest Period, and (iii) in the case of any Revolving Credit Loan that is a
LIBOR Loan, upon the payment or prepayment thereof or the Conversion of such
Loan to a Loan of another Type (but only on the principal amount so paid,
prepaid or Converted), except that interest payable at the Post-Default Rate
shall be payable from time to time on demand. Promptly after the
determination of any interest rate provided for herein or any change therein,
the Syndication Agent shall give notice thereof to the Lenders to which such
interest is payable and to the Company.
(b) The Company hereby promises to pay to the Syndication Agent
for the account of each Lender interest on the unpaid principal amount of each
DD Loan made by such Lender for the period from and including the date of such
DD Loan to but excluding the date
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such DD Loan shall be paid in full at the Base Rate (as in effect from time
to time) plus the Applicable Margin. Notwithstanding the foregoing, from
and after the occurrence and during the continuance of an Event of Default,
the Company hereby promises to pay to the Syndication Agent for the account
of each Lender interest at the applicable Post-Default Rate on any principal
of any DD Loan made by such Lender and on any other amount payable by the
Company hereunder or under the Note evidencing such DD Loan held by
such Lender to or for the account of such Lender. Accrued interest on
each DD Loan shall be payable monthly on the last day of
each month, except that interest payable at the Post-Default Rate shall be
payable from time to time on demand. Promptly after the determination of any
interest rate provided for herein or any change therein, the Syndication Agent
shall give notice thereof to the Lenders to which such interest is payable and
to the Company.
4. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
4.1 Payments.
(a) Except to the extent otherwise provided herein, all payments
of principal, interest, Reimbursement Obligations and other amounts to be made
by the Company under this Agreement and the Notes, and, except to the extent
otherwise provided therein, all payments to be made by the Obligors under any
other Basic Document, shall be made in Dollars, in immediately available
funds, without deduction, set-off or counterclaim, to the Syndication Agent at
account number 3500802 (ABA No. 021 202 162) maintained by the Syndication
Agent with Summit Bank, not later than 2:00 p.m. New York time on the date on
which such payment shall become due (each such payment made after such time on
such due date to be deemed to have been made on the next succeeding Business
Day).
(b) Any Lender for whose account any such payment is to be made
may (but shall not be obligated to) debit the amount of any such payment that
is not made by such time to any ordinary deposit account of the Company or its
Subsidiaries with such Lender (with notice to the Company and the Syndication
Agent).
(c) The Company shall, at the time of making each payment under
this Agreement or any Note for the account of any Lender, specify to the
Syndication Agent (which shall so notify the intended recipient(s) thereof)
the Loans, Reimbursement Obligations or other amounts payable by the Company
hereunder to which such payment is to be applied (and in the event that the
Company fails to so specify, or if an Event of Default has occurred and is
continuing, the Syndication Agent may distribute such payment to the Lenders
for application in such manner as it or the Required Lenders, subject to
Section 4.2 hereof, may determine to be appropriate).
(d) Each payment received by the Syndication Agent under this
Agreement or any Note for the account of any Lender shall be paid by the
Syndication Agent promptly to such Lender, in immediately available funds, at
such Lender's Applicable Lending Office for the Loan or other obligation in
respect of which such payment is made.
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(e) If the due date of any payment under this Agreement or any
Note would otherwise fall on a day that is not a Business Day, such date shall
(except as otherwise provided in the definition "Interest Period") be extended
to the next succeeding Business Day, and interest shall be payable for any
principal so extended for the period of such extension.
4.2 Pro Rata Treatment.
Except to the extent otherwise provided herein: (a) each borrowing
of Loans of any Class from the Lenders under Section 2.1 hereof shall be made
from the Lenders holding Commitments of such Class, and each termination or
reduction of the amount of the Commitments shall be applied to the respective
Commitments of such Class of the Lenders ratably in accordance with the
amounts of their respective Commitments of such Class, (b) each payment of a
commitment fee under Section 2.4 hereof in respect of Commitments of any Class
shall be made for the account of the Lenders pro rata according to the amounts
of their respective Commitments of such Class; (c) the making, Conversion and
Continuation of Revolving Credit Loans (other than Conversions provided for by
Section 5.4 hereof) shall be made pro rata among the Lenders according to the
amounts of their respective Commitments for such Loans (in the case of making
of such Loans) or their respective outstanding amounts of such Loans (in the
case of Conversions and Continuations of Loans) and the then current Interest
Period for each Loan of the same Class and Type shall be coterminous; (d) each
payment or prepayment of principal of Loans of any Class shall be made for the
account of the Lenders pro rata in accordance with the respective unpaid
principal amounts of the Loans of such Class held by them; and (e) each
payment of interest on Loans of any Class shall be made for the account of the
Lenders pro rata in accordance with the amounts of interest on Loans of such
Class then due and payable to the Lenders.
4.3 Computations.
Except as otherwise provided herein, interest on Loans, other
than Base Rate Loans, and Reimbursement Obligations and commitment fees shall
be computed on the basis of a year of 360 days and the actual days elapsed
(including the first day but excluding the last day) occurring in the period
for which payable, and interest on Base Rate Loans shall be computed on the
basis of a year of 365 or 366 days as the case may be and the actual days
elapsed (including the first day but excluding the last day) occurring in the
period for which payable.
4.4 Minimum Amounts.
Except for mandatory prepayments made pursuant to Section 2.10
hereof and Conversions or prepayments made pursuant to Section 5.4 hereof, each
borrowing, Conversion and partial prepayment of principal of Loans shall be in
an aggregate amount at least equal to $500,000 (or $1,000,000 in the case of
LIBOR Loans), and in integral multiples of $500,000 in excess thereof. For
purposes of this Section, borrowings, Conversions or prepayments of or into
Loans of different Types or, in the case of LIBOR Loans, having different
Interest Periods at the same time hereunder shall be deemed separate
borrowings, Conversions and prepayments, one for each Type or Interest Period.
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4.5 Certain Notices.
Notices by the Company to the Syndication Agent of terminations or
reductions of the Commitments, of borrowings, Conversions, Continuations and
optional prepayments of Loans, of Types of Loans and of the duration of
Interest Periods shall be irrevocable and shall be effective only if received
by the Syndication Agent not later than 11:00 a.m. New York time on the number
of Business Days prior to the date of the relevant termination, reduction,
borrowing, Conversion, Continuation or prepayment or the first day of such
Interest Period specified below:
Number of Business
Notice Days' Prior Notice
------ ------------------
Termination or reduction of
Commitments Three
Borrowing or prepayment of, or
Conversions into, Base Rate Loans Same day
Borrowing or prepayment of, Conversions
into, Continuations as, or duration of
Interest Period for, LIBOR Loans Three
Each such notice of termination or reduction shall specify the amount of the
Commitments to be terminated or reduced. Each such notice of borrowing,
Conversion, Continuation or optional prepayment shall specify the amount
(subject to Sections 4.4 and 5.5 hereof), Type and Class of each Loan to be
borrowed, Converted, Continued or prepaid (and, in the case of a Conversion,
the Type of Loan to result from such Conversion) and the date of borrowing,
Conversion, Continuation or optional prepayment (which shall be a Business
Day). Each such notice of the duration of an Interest Period shall specify
the Loans to which such Interest Period is to relate. The Syndication Agent
shall promptly notify the Lenders of the contents of each such notice. In the
event that the Company fails to select the Type of Loan, or the duration of
any Interest Period for any LIBOR Loan, within the time period and otherwise
as provided in this Section 4.5, such Loan (if outstanding as a LIBOR Loan)
will be automatically Converted into a Base Rate Loan on the last day of the
then current Interest Period for such Loan or (if outstanding as a Base Rate
Loan) will remain as, or (if not then outstanding) will be made as, a Base
Rate Loan.
4.6 Non-Receipt of Funds by the Syndication Agent.
Unless the Syndication Agent shall have been notified by a Lender
or the Company (the "Payor") prior to the date on which the Payor is to make
payment to the Syndication Agent of (in the case of a Lender) the proceeds of
a Loan to be made by such Lender hereunder or (in the case of the Company)
a payment to the Syndication Agent for the account of one or more of the Lenders
hereunder (such payment being herein called the "Required Payment"), which
notice shall be effective upon receipt, that the Payor does not intend to make
the Required Payment to the Syndication Agent, the Syndication Agent may
assume that the Required Payment has been
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made and may, in reliance upon such assumption (but shall not be required to),
make the amount thereof available to the intended recipient(s) on such date.
If the Payor has not in fact made the Required Payment to the Syndication
Agent, the recipient(s) of such payment shall, on demand, repay to the
Syndication Agent the amount so made available, together with interest
thereon in respect of each day during the period commencing on the date
(the "Advance Date") such amount was so made available by the Syndication
Agent until the date the Syndication Agent recovers such amount at a rate
per annum equal to the Federal Funds Rate for such day and, if such
recipient(s) shall fail promptly to make such payment, the Syndication
Agent shall be entitled to recover such amount, on demand, from the Payor,
together with interest as aforesaid, provided that if neither
the recipient(s) nor the Payor shall return the Required Payment to the
Syndication Agent within three Business Days of the Advance Date, then,
retroactively to the Advance Date, the Payor and the recipient(s) shall each
be obligated to pay interest on the Required Payment as follows:
(a) if the Required Payment shall represent a payment to be made
by the Company to the Lenders, the Company and the recipient(s) shall each be
obligated retroactively to the Advance Date to pay interest in respect of the
Required Payment at the Post-Default Rate (and, in case the recipient(s) shall
return the Required Payment to the Syndication Agent, without limiting the
obligation of the Company under Section 3.2 hereof to pay interest to such
recipient(s) at the Post-Default Rate in respect of the Required Payment);
provided, however, that the Company's payment, and a Lender's acceptance, of
interest at the Post-Default Rate shall not constitute an election of remedies
or otherwise limit the rights and remedies of the Syndication Agent and the
Lenders resulting from the Company's failure to make payment as aforesaid; and
(b) if the Required Payment shall represent proceeds of a Loan
to be made by the Lenders to the Company, the Payor and the Company shall each
be obligated retroactively to the Advance Date to pay interest in respect of
the Required Payment at the rate of interest provided for such Required
Payment pursuant to Section 3.2 hereof (and, in case the Company shall return
the Required Payment to the Syndication Agent, without limiting any claim the
Company may have against the Payor in respect of the Required Payment).
4.7 Sharing of Payments, Etc.
(a) The Company agrees that, in addition to (and without
limitation of) any right of set-off, banker's lien or counterclaim a Lender
may otherwise have, each Lender shall be entitled, at its option, to offset
balances held by it for the account of the Company at any of its offices, in
Dollars or in any other currency, against any principal of or interest on any
of such Lender's Loans, Reimbursement Obligations or any other amount payable
to such Lender hereunder, that is not paid when due (regardless of whether
such balances are then due to the Company), in which case it shall promptly
notify the Company and the Syndication Agent thereof, provided that such
Lender's failure to give such notice shall not affect the validity thereof.
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(b) If any Lender shall obtain from any Obligor or the Lessor
payment of any principal of or interest on any Loan of either Class or Letter
of Credit Liability owing to it or payment of any other amount under this
Agreement or any other Basic Document through the exercise of any right of
set-off, banker's lien or counterclaim or similar right or otherwise (other
than from the Syndication Agent as provided herein), and, as a result of such
payment, such Lender shall have received a greater percentage of the principal
of or interest on the Loans of such Class, Letter of Credit Liabilities or
such other amounts then due hereunder or thereunder by such Obligor or the
Lessor to such Lender than the percentage received by any other Lender, it
shall promptly purchase from such other Lenders participations in (or, if and
to the extent specified by such Lender, direct interests in) the Loans of such
Class, Letter of Credit Liabilities or such other amounts, respectively, owing
to such other Lenders (or in interest due thereon, as the case may be) in such
amounts, and make such other adjustments from time to time as shall be
equitable, to the end that all the Lenders shall share the benefit of such
excess payment (net of any expenses that may be incurred by such Lender in
obtaining or preserving such excess payment) pro rata in accordance with the
unpaid principal of and/or interest on the Loans of such Class, Letter of
Credit Liabilities or such other amounts, respectively, owing to each of the
Lenders. To such end, all the Lenders shall make appropriate adjustments
among themselves (by the resale of participations sold or otherwise) if such
payment is rescinded or must otherwise be restored.
(c) The Company agrees that any Lender so purchasing such a
participation (or direct interest) may exercise all rights of set-off,
banker's lien, counterclaim or similar rights with respect to such
participation as fully as if such Lender were a direct holder of Loans or
other amounts (as the case may be) owing to such Lender in the amount of such
participation.
(d) Nothing contained herein shall require any Lender to
exercise any such right or shall affect the right of any Lender to exercise,
and retain the benefits of exercising, any such right with respect to any
other indebtedness or obligation of any Obligor. If, under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured
claim in lieu of a set-off to which this Section 4.7 applies, such Lender
shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders entitled
under this Section 4.7 to share in the benefits of any recovery on such
secured claim.
5. YIELD PROTECTION, ETC.
5.1 Additional Costs.
(a) The Company shall pay directly to each Lender from time
to time such amounts as such Lender may determine to be necessary to compensate
such Lender for any costs actually incurred by such Lender that such Lender
determines are attributable to its making or maintaining of any LIBOR Loans or
its obligation to make any LIBOR Loans hereunder, or any reduction in any
amount receivable by such Lender hereunder in respect of any of such Loans or
such obligation (such increases in costs and reductions in amounts receivable
being herein called "Additional Costs"), resulting from any Regulatory Change
that:
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(i) shall subject any Lender (or its Applicable
Lending
Office for any of such Loans) to any tax, duty or other charge in respect of
such Loans or its Notes or changes the basis of taxation of any amounts
payable to such Lender under this Agreement or its Notes in respect of any of
such Loans (excluding (A) franchise taxes imposed on it or (B) changes in the
rate of tax on the overall net income of such Lender or of such Applicable
Lending Office, in each case, by the jurisdiction in which such Lender has its
principal office or such Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit
or
similar requirements (other than, in the case of any Lender for any period as
to which the Company is required to pay any amount under subsection below, the
reserves and "Eurocurrency liabilities" under Regulation D referred to
therein) relating to any extensions of credit or other assets of, or any
deposits with or other liabilities of, such Lender (including, without
limitation, any of such Loans or any deposits referred to in the definition of
"LIBOR Rate" in Section 1.1 hereof), or any commitment of such Lender
(including, without limitation, the Commitments of such Lender hereunder); or
(iii) imposes any other condition affecting this
Agreement
or its Notes (or any of such extensions of credit or liabilities) or its
Commitments.
If any Lender requests compensation from the Company under this
Section 5.1(a), the Company may, by notice to such Lender (with a copy to the
Syndication Agent), suspend the obligation of such Lender thereafter to make
or Continue LIBOR Loans, or to Convert Base Rate Loans into LIBOR Loans, until
the Regulatory Change giving rise to such request ceases to be in effect (in
which case the provisions of Section 5.4 hereof shall be applicable), provided
that such suspension shall not affect the right of such Lender to receive the
compensation so requested.
(b) Without limiting the effect of the provisions of
subsection (a) of this Section 5.1, in the event that, by reason of any
Regulatory Change, any Lender either (i) incurs Additional Costs based on or
measured by the excess above a specified level of the amount of a category of
deposits or other liabilities of such Lender that includes deposits by
reference to which the interest rate on LIBOR Loans is determined as provided
in this Agreement or a category of extensions of credit or other assets of
such Lender that includes LIBOR Loans or (ii) becomes subject to restrictions
on the amount of such a category of liabilities or assets that it may hold,
then, if such Lender so elects by notice to the Company (with a copy to the
Syndication Agent), the obligation of such Lender to make or Continue, or to
Convert Base Rate Loans into, LIBOR Loans hereunder shall be suspended until
such Regulatory Change ceases to be in effect (in which case the provisions of
Section 5.4 hereof shall be applicable).
(c) Without limiting the effect of the foregoing provisions
of
this Section 5.1 (but without duplication), the Company shall pay directly to
each Lender from time to time on request such amounts as such Lender may
determine to be necessary to compensate such Lender (or, without duplication,
the bank holding company of which such Lender is a subsidiary) for any costs
actually incurred by such Lender that it determines are attributable to the
maintenance by such Lender (or any Applicable Lending Office or such bank
holding company), pursuant to any
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law or regulation or any interpretation, directive or request (whether
or not having the force of law and whether or not failure to comply
therewith would be unlawful) of any court or governmental or
monetary authority (i) following any Regulatory Change or
(ii) implementing any risk-based capital guideline or other requirement
(whether or not having the force of law and whether or not the failure to
comply therewith would be unlawful) heretofore or hereafter issued by any
government or governmental or supervisory authority implementing at the
national level the Basle Accord (including, without limitation, the Final
Risk-Based Capital Guidelines of the Board of Governors of the Federal Reserve
System (12 C.F.R. Part 208, Appendix A; 12 C.F.R. Part 225, Appendix A) and
the Final Risk-Based Capital Guidelines of the Office of the Comptroller of
the Currency (12 C.F.R. Part 3, Appendix A)), of capital in respect of its
Commitments or Loans (such compensation to include, without limitation, an
amount equal to any reduction of the rate of return on assets or equity of
such Lender (or any Applicable Lending Office or such bank holding company) to
a level below that which such Lender (or any Applicable Lending Office or such
bank holding company) could have achieved but for such law, regulation,
interpretation, directive or request). For purposes of this Section 5.1(c)
and Section 5.6 hereof, "Basle Accord" shall mean the proposals for risk-based
capital framework described by the Basle Committee on Banking Regulations and
Supervisory Practices in its paper entitled "International Convergence of
Capital Measurement and Capital Standards" dated July 1988, as amended,
modified and supplemented and in effect from time to time or any replacement
thereof.
(d) Each Lender shall notify the Company of any event occurring
after the date of this Agreement entitling such Lender to compensation under
subsection (a) or (c) of this Section 5.1 as promptly as practicable, but in
any event within 45 days after such Lender obtains actual knowledge thereof;
provided that (i) if any Lender fails to give such notice within 45 days after
it obtains actual knowledge of such an event, such Lender shall, with respect
to compensation payable pursuant to this Section 5.1 in respect of any costs
resulting from such event, only be entitled to payment under this Section 5.1
for costs incurred from and after the date 45 days prior to the date that such
Lender does give such notice and (ii) each Lender will designate a different
Applicable Lending Office for the Loans of such Lender affected by such event
if such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender, except that such Lender shall have no
obligation to designate an Applicable Lending Office that is not located in
the United States of America. Each Lender will furnish to the Company a
certificate setting forth the basis and amount of each request by such Lender
for compensation under subsection (a) or (c) of this Section 5.1.
Determinations and allocations by any Lender for purposes of this Section 5.1
of the effect of any Regulatory Change pursuant to subsection (a) or (b) of
this Section 5.1, or of the effect of capital maintained pursuant to
subsection (c) of this Section 5.1, on its costs or rate of return of
maintaining Loans or its obligation to make Loans, or on amounts receivable by
it in respect of Loans, and of the amounts required to compensate such Lender
under this Section 5.1, shall be conclusive, absent demonstrable error.
(e) Notwithstanding anything in this Section 5.1 to the
contrary, to the extent that any Lender does not charge all of its customers
who are similarly situated to the Company in respect of any Additional Costs
or other cost or compensation referred to this Section 5.1, such Lender shall
not charge the Company for such Additional Cost or other cost or compensation.
5.2 Limitation on Types of Loans.
Anything herein to the contrary notwithstanding, if, on or prior
to the determination of any LIBOR Rate for any Interest Period:
(a) the Syndication Agent determines, which determination shall
be conclusive, that quotations of interest rates for the relevant deposits
referred to in the definition of "LIBOR Rate" in Section 1.1 hereof are not
being provided in the relevant amounts or for the relevant maturities for
purposes of determining rates of interest for LIBOR Loans as provided herein;
or
(b) if the Required Lenders determine, which determination shall
be conclusive, and notify the Syndication Agent that the relevant rates of
interest referred to in the definition of "LIBOR Rate" in Section 1.1 hereof
upon the basis of which the rate of interest for LIBOR Loans for such Interest
Period is to be determined do not adequately cover the cost to such Lenders of
making or maintaining LIBOR Loans for such Interest Period; then the
Syndication Agent shall give the Company and each Lender prompt notice thereof
and, so long as such condition remains in effect, the Lenders shall be under
no obligation to make additional LIBOR Loans, to Continue LIBOR Loans or to
Convert Base Rate Loans into LIBOR Loans, and the Company shall, on the last
day(s) of the then current Interest Period(s) for the outstanding LIBOR Loans,
either prepay such Loans or Convert such Loans into Base Rate Loans in
accordance with Section 2.9 hereof.
5.3 Illegality.
Notwithstanding any other provision of this Agreement, in the event
that it becomes unlawful for any Lender or its Applicable Lending Office to
honor its obligation to make or maintain LIBOR Loans hereunder, then such Lender
shall promptly notify the Company thereof (with a copy to the Syndication
Agent) and such Lender's obligation to make or Continue, or to Convert Base
Rate Loans into, LIBOR Loans shall be suspended until such time as such Lender
may again make and maintain LIBOR Loans (in which case the provisions of
Section 5.4 hereof shall be applicable).
5.4 Treatment of LIBOR Loans.
If the obligation of any Lender to make LIBOR Loans or to Continue,
or to Convert Base Rate Loans into, LIBOR Loans shall be suspended pursuant to
Section 5.1 or 5.3 hereof, such Lender's LIBOR Loans shall be automatically
Converted into Base Rate Loans on the last day(s) of the then current Interest
Period(s) for LIBOR Loans (or, in the case of a Conversion required by
Section 5.1(b) or 5.3 hereof, on such earlier date as such Lender may specify
to the Company with a copy to the Syndication Agent) and, unless and until
such Lender gives notice as provided below that the circumstances specified in
Section 5.1 or 5.3 hereof that gave rise to such Conversion no longer exist:
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(a) to the extent that such Lender's LIBOR Loans have been so
Converted, all payments and prepayments of principal that would otherwise be
applied to such Lender's LIBOR Loans shall be applied instead to its Base Rate
Loans; and
(b) all Loans that would otherwise be made or Continued by such
Lender as LIBOR Loans shall be made or Continued instead as Base Rate Loans,
and all Loans of such Lender that would otherwise be Converted into LIBOR
Loans shall be Converted instead into (or shall remain as) Base Rate Loans.
If such Lender gives notice to the Company with a copy to the
Syndication Agent that the circumstances specified in Section 5.1 or 5.3
hereof that gave rise to the Conversion of such Lender's LIBOR Loans pursuant
to this Section 5.4 no longer exist (which such Lender agrees to do promptly
upon such circumstances ceasing to exist) at a time when LIBOR Loans made by
other Lenders are outstanding, such Lender's Base Rate Loans shall be
automatically Converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding LIBOR Loans, to the extent necessary so that,
after giving effect thereto, all Loans held by the Lenders holding LIBOR Loans
and by such Lender are held pro rata (as to principal amounts, Types and
Interest Periods) in accordance with their respective Commitments.
5.5 Compensation.
The Company shall pay to the Syndication Agent for the account of
each Lender, upon the request of such Lender through the Syndication Agent, such
amount or amounts as shall be sufficient (in the reasonable opinion of such
Lender) to compensate it for any loss or out-of-pocket expense actually
incurred that such Lender determines is attributable to:
(a) any payment, mandatory or optional prepayment or Conversion
of a LIBOR Loan made by such Lender for any reason (including, without
limitation, the acceleration of the Loans pursuant to Section 10 hereof) on a
date other than the last day of the Interest Period for such Loan; or
(b) any failure by the Company for any reason (including,
without limitation, the failure of any of the conditions precedent specified
in Section 7 hereof to be satisfied) to borrow a LIBOR Loan from such Lender
on the date for such borrowing specified in the relevant notice of borrowing
given pursuant to Section 2.2 hereof.
Without limiting the effect of the preceding sentence, such compensation
shall include an amount equal to the excess, if any, of (i) the amount of
interest that otherwise would have accrued on the principal amount so paid,
prepaid, Converted or not borrowed (other than the portion thereof consisting
of the Applicable Margin) for the period from the date of such payment,
prepayment, Conversion or failure to borrow to the last day of the then
current Interest Period for such Loan (or, in the case of a failure to borrow,
the Interest Period for such Loan that would have commenced on the date
specified for such borrowing) at the applicable rate of interest for such Loan
provided for herein over (ii) the amount of interest that otherwise would have
accrued on such principal amount at a rate per annum equal to the interest
component of the amount such Lender would have bid in the London interbank
market for Dollar deposits of
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leading banks in amounts comparable to such principal amount and with
maturities comparable to such period (as reasonably determined by such Lender).
5.6 Substitution of Lenders.
In the event that the Company becomes obligated to pay additional
amounts to any Lender pursuant to Section 5.1 hereof, then (unless such Lender
has theretofore taken steps to remove or cure, and has removed or cured, the
conditions creating the cause for such obligation to pay such additional
amounts), then the Company may, so long as no Event of Default shall be
continuing, within 60 days after the demand by such Lender for such additional
amounts, designate another bank which is reasonably acceptable to the
Syndication Agent and the Required Lenders (exclusive of the Commitment of the
Lender seeking additional compensation under Section 5.1 hereof) (such other
bank being herein called a "Replacement Lender") to purchase all of the Loans
of such Lender and all of such Lender's rights and obligations hereunder
(without recourse to or warranty by, or expense to, such Lender) for a
purchase price equal to the outstanding principal amount of such Lender's
Loans plus any accrued but unpaid interest thereon and any accrued but unpaid
fees in respect of such Lender's Commitments and any other amounts then
payable to such Lender hereunder, and to assume all of the obligations of such
Lender hereunder (except for such rights as survive the repayment of the
Loans) and, upon such purchase such Lender shall no longer be a party hereto
or have any rights hereunder (except for those that survive repayment of the
Loans) and shall be released from all of its obligations hereunder, and the
Replacement Lender shall succeed to the rights and obligations of such Lender
hereunder.
5.7 Additional Costs in Respect of Letters of Credit.
Without limiting the obligations of the Company under Section 5.1
hereof (but without duplication), if as a result of any Regulatory Change or any
risk-based capital guideline or other requirement heretofore or hereafter
issued by any government or governmental or supervisory authority implementing
at the national level the Basle Accord there shall be imposed, modified or
deemed applicable any tax, reserve, special deposit, capital adequacy or
similar requirement against or with respect to or measured by reference to
Letters of Credit issued or to be issued hereunder and the result shall be to
increase the cost to any Lender or Lenders of issuing (or purchasing
participations in) or maintaining its obligation hereunder to issue (or
purchase participations in) any Letter of Credit hereunder or reduce any
amount receivable by any Lender hereunder in respect of any Letter of Credit
(which increases in cost, or reductions in amount receivable, shall be the
result of such Lender's or Lenders' reasonable allocation of the aggregate of
such increases or reductions resulting from such event), then, upon demand by
such Lender or Lenders (through the Syndication Agent), the Company shall pay
immediately to the Syndication Agent for account of such Lender or Lenders,
from time to time as specified by such Lender or Lenders (through the
Syndication Agent), such additional amounts as shall be sufficient to
compensate such Lender or Lender (through the Syndication Agent) for such
increased costs or reductions in amount. A statement as to such increased
costs or reductions in amount incurred by any such Lender or Lender, submitted
by such Lender or Lenders to the Company shall be conclusive in the absence of
manifest error as to the amount thereof.
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6. GUARANTEE
6.1 The Guarantee.
The Subsidiary Guarantors hereby jointly and severally guarantee to
each Lender and the Syndication Agent and their respective successors and
assigns the prompt payment in full when due (whether at stated maturity, by
acceleration or otherwise) of (i) the principal of and interest on the Loans
made by the Lenders hereunder and under the Notes and all other amounts from
time to time owing to the Lenders or the Syndication Agent by the Company
under this Agreement, the Notes, the Letter of Credit Documents or the
Security Documents, and (ii) all amounts owing by the Company under the Lease
or the Guaranty Agreement, in each case strictly in accordance with the terms
thereof (such obligations being herein collectively called the "Guaranteed
Obligations"). The Subsidiary Guarantors hereby further jointly and severally
agree that if the Company shall fail to pay in full when due (whether at
stated maturity, by acceleration or otherwise) any of the Guaranteed
Obligations, the Subsidiary Guarantors will promptly pay the same, without any
demand or notice whatsoever, and that in the case of any extension of time of
payment or renewal of any of the Guaranteed Obligations, the same will be
promptly paid in full when due (whether at extended maturity, by acceleration
or otherwise) in accordance with the terms of such extension or renewal.
6.2 Obligations Unconditional.
The obligations of the Subsidiary Guarantors under Section 6.1
hereof are absolute and unconditional, joint and several, irrespective of the
value, genuineness, validity, regularity or enforceability of the obligations
of the Company under this Agreement, the Notes, the Guaranty Agreement or any
other agreement or instrument referred to herein or therein, or any
substitution, release or exchange of any other guarantee of or security for
any of the Guaranteed Obligations and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a surety
or guarantor, it being the intent of this Section 6.2 that the obligations
of the Subsidiary Guarantors hereunder shall be absolute and unconditional,
joint and several, under any and all circumstances. Without limiting the
generality of the foregoing, it is agreed that the occurrence of any one or
more of the following shall not alter or impair the liability of the Subsidiary
Guarantors hereunder which shall remain absolute and unconditional as described
above:
(a) at any time or from time to time, without notice to the
Subsidiary Guarantors, the time for any performance of or compliance with any
of the Guaranteed Obligations may be extended, or such performance or
compliance may be waived;
(b) any of the acts mentioned in any of the provisions of this
Agreement or the Notes or any other agreement or instrument referred to herein
or therein may be done or omitted;
(c) the maturity of any of the Guaranteed Obligations may be
accelerated, or any of the Guaranteed Obligations may be modified,
supplemented or amended in any respect, or any right under this Agreement, the
Notes or the Guaranty Agreement or any other agreement or instrument referred
to herein or therein may be waived or any other guarantee of any of the
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Guaranteed Obligations or any security therefor may be released or exchanged
in whole or in part or otherwise dealt with; or
(d) any lien or security interest granted to, or in favor of,
the Syndication Agent or any Lender or Lenders as security for any of the
Guaranteed Obligations may fail to be perfected.
The Subsidiary Guarantors hereby expressly waive diligence, presentment,
demand of payment, protest and all notices whatsoever, and any requirement
that the Syndication Agent or any Lender exhaust any right, power or remedy
or proceed against the Company under this Agreement, the Notes or the Guaranty
Agreement or any other agreement or instrument referred to herein or therein,
or against any other Person under any other guarantee of, or security for, any
of the Guaranteed Obligations.
6.3 Reinstatement.
The obligations of the Subsidiary Guarantors under this Section 6
shall be automatically reinstated if and to the extent that for any reason any
payment by or on behalf of the Company in respect of the Guaranteed
Obligations is rescinded or must be otherwise restored by any holder of any of
the Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise and the Subsidiary Guarantors
jointly and severally agree that they will indemnify the Syndication Agent and
each Lender on demand for all reasonable costs and expenses (including,
without limitation, fees of counsel) incurred by the Syndication Agent or such
Lender in connection with such rescission or restoration, including any such
costs and expenses incurred in defending against any claim alleging that such
payment constituted a preference, fraudulent transfer or similar payment under
any bankruptcy, insolvency or similar law.
6.4 Subrogation.
The Subsidiary Guarantors hereby jointly and severally agree that, until
the payment and satisfaction in full of all Guaranteed Obligations and the
expiration and termination of the Commitments of the Lenders under this
Agreement, they shall not exercise any right or remedy arising by reason of
any performance by them of their guarantee in Section 6.1 hereof, whether by
subrogation or otherwise, against the Company or any other guarantor of any of
the Guaranteed Obligations or any security for any of the Guaranteed
Obligations.
6.5 Remedies.
The Subsidiary Guarantors jointly and severally agree that, as between
the Subsidiary Guarantors and the Lenders, the obligations of the Company
under this Agreement and the Notes may be declared to be forthwith due and
payable as provided in Section 10 hereof (and shall be deemed to have become
automatically due and payable in the circumstances provided in said
Section 10) for purposes of Section 6.1 hereof, notwithstanding any stay,
injunction or other prohibition preventing such declaration (or such
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obligations from becoming automatically due and payable) as against the
Company and that, in the event of such declaration (or such obligations being
deemed to have become automatically due and payable), such obligations
(whether or not due and payable by the Company) shall forthwith become due and
payable by the Subsidiary Guarantors for purposes of said Section 6.1.
6.6 Instrument for the Payment of Money.
Each Subsidiary Guarantor hereby acknowledges that the guarantee in
this Section 6 constitutes an instrument for the payment of money, and consents
and agrees that any Lender or the Syndication Agent, at its sole option, in the
event of a dispute by such Subsidiary Guarantor in the payment of any moneys
due hereunder, shall have the right to bring motion-action under New York CPLR
Section 3213.
6.7 Continuing Guarantee.
The guarantee in this Section 6 is a continuing guarantee, and shall
apply to all Guaranteed Obligations whenever arising.
6.8 Rights of Contribution.
The Subsidiary Guarantors hereby agree, as between themselves, that
if any Subsidiary Guarantor shall become an Excess Funding Guarantor (as defined
below) by reason of the payment by such Subsidiary Guarantor of any Guaranteed
Obligations, each other Subsidiary Guarantor shall, on demand of such Excess
Funding Guarantor (but subject to the next sentence), pay to such Excess
Funding Guarantor an amount equal to such Subsidiary Guarantor's Pro Rata
Share (as defined below and determined, for this purpose, without reference to
the Properties, debts and liabilities of such Excess Funding Guarantor) of the
Excess Payment (as defined below) in respect of such Guaranteed Obligations.
The payment obligation of a Subsidiary Guarantor to any Excess Funding
Guarantor under this Section 6.8 shall be subordinate and subject in right of
payment to the prior payment in full of the obligations of such Subsidiary
Guarantor under the other provisions of this Section 6 and such Excess Funding
Guarantor shall not exercise any right or remedy with respect to such excess
until payment and satisfaction in full of all of such obligations.
For purposes of this Section 6.8, (i) "Excess Funding Guarantor" shall
mean, in respect of any Guaranteed Obligations, a Subsidiary Guarantor that
has paid an amount in excess of its Pro Rata Share of such Guaranteed
Obligations, (ii) "Excess Payment" shall mean, in respect of any Guaranteed
Obligations, the amount paid by an Excess Funding Guarantor in excess of its
Pro Rata Share of such Guaranteed Obligations and (iii) "Pro Rata Share" shall
mean, for any Subsidiary Guarantor, the ratio (expressed as a percentage) of
(x) the amount by which the aggregate present fair saleable value of all
Properties of such Subsidiary Guarantor (excluding any shares of stock of any
other Subsidiary Guarantor) exceeds the amount of all the debts and
liabilities of such Subsidiary Guarantor (including contingent, subordinated,
unmatured and unliquidated liabilities, but excluding the obligations of such
Subsidiary Guarantor hereunder and any obligations of any other Subsidiary
Guarantor that have been Guaranteed by such Subsidiary Guarantor) to (y) the
amount by which the aggregate fair saleable value of all Properties of the
Company and all of the Subsidiary Guarantors exceeds the amount of all the
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debts and liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities, but excluding the obligations of the Company and the
Subsidiary Guarantors hereunder) of the Company and all of the Subsidiary
Guarantors, all as of the Closing Date. If any Subsidiary becomes a
Subsidiary Guarantor hereunder subsequent to the Closing Date, then for
purposes of this Section 6.8 such subsequent Subsidiary Guarantor shall be
deemed to have been a Subsidiary Guarantor as of the Closing Date and the
aggregate present fair saleable value of the Properties, and the amount of the
debts and liabilities, of such Subsidiary Guarantor as of the Closing Date
shall be deemed to be equal to such value and amount on the date such
Subsidiary Guarantor becomes a Subsidiary Guarantor hereunder.
6.9 General Limitation on Guarantee Obligations.
In any action or proceeding involving any state corporate law,
or any state or Federal bankruptcy, insolvency, fraudulent conveyance,
reorganization or other law affecting the rights of creditors generally,
if the obligations of any Subsidiary Guarantor under Section 6.1 hereof
would otherwise, taking into account the provisions of Section 6.8 hereof,
be held or determined to be void, invalid or unenforceable, or subordinated
to the claims of any other creditors, on account of the amount of its
liability under said Section 6.1, then, notwithstanding any other provision
hereof to the contrary, the amount of such liability shall, without any further
action by such Subsidiary Guarantor, any Lender, the Syndication Agent or
any other Person, be automatically limited and reduced to the highest amount
that is valid and enforceable and not subordinated to the claims of other
creditors as determined in such action or proceeding.
7. CONDITIONS PRECEDENT
7.1 Conditions Precedent to Initial Loans.
No Lender shall have any obligation to make a Loan hereunder until
the Syndication Agent shall have received the following, each of which shall be
satisfactory to the Syndication Agent in form and substance:
7.1.1 Corporate Documents.
Certified copies of (i) the charter and by-laws of each Obligor,
(ii) all corporate authority for each Obligor (including, without limitation,
board of director resolutions and evidence of the incumbency of officers) with
respect to the execution, delivery and performance of such of the Basic
Documents and the Operative Documents to which such Obligor is intended to be
a party and each other document to be delivered by such Obligor from time to
time in connection herewith and the extensions of credit hereunder (and the
Syndication Agent and each Lender may conclusively rely on such certificate
until it receives notice in writing from such Obligor to the contrary) and
(iii) good standing certificates for each Obligor in its jurisdiction of
formation and in each other jurisdiction in which it is qualified to transact
business.
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7.1.2 Opinions of Counsel to the Obligors.
An opinion, dated the Closing Date, of Foley & Lardner counsel to
the Obligors, and an opinion of local counsel to the Obligors in such
jurisdictions as the Syndication Agent may require, in each case in form and
substance satisfactory to the Syndication Agent.
7.1.3 Basic Documents.
The Basic Documents, including, without limitation, this
Agreement, the Notes, the Guaranty Agreement and the Security Documents, duly
executed and delivered by each Obligor that is a party thereto.
7.1.4 Master Agreement Conditions.
Evidence that each of the conditions precedent set forth in
Article III of the Master Agreement shall have been duly satisfied.
7.1.5 Borrowing Base Certificate.
A Borrowing Base Certificate prepared as of the Closing Date
showing a Borrowing Base not less than the total amount of Loans requested by
the Company on the Closing Date.
7.1.6 Real Property Documents.
Surveys, title commitments (with premiums paid and containing only
those exceptions reasonably acceptable to the Syndication Agent), affidavits
of title and such other documents as the Syndication Agent or the title
companies may request in connection with the Mortgages being granted by the
Obligors pursuant to this Agreement.
7.1.7 Intercreditor Agreement.
The Lenders hereunder, the Lessor, the lenders to the Lessor under
the Loan Agreement and the Syndication Agent shall have entered into the
Intercreditor Agreement.
7.1.8 Evidence of Insurance; No Liens.
Evidence reasonably satisfactory to the Syndication Agent that
the
tangible Collateral is properly insured in accordance with the provisions of
this Agreement and that the Collateral is not subject to any Lien other than
Permitted Liens.
7.1.9 Perfection of Liens.
Evidence reasonably satisfactory to the Syndication Agent that
all
filings, recordings and other actions that are necessary or desirable in order
to establish and perfect the Syndication Agent's security interest in the
Collateral as a valid perfected first priority security interest for the
benefit of the Lenders shall have been or shall be duly effected, including,
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without limitation, (i) the filing of financing statements, (ii) the
recordation of the Mortgages, (iii) the filing of UCC statements, (iv) the
preparation and filing of assignments and notices pursuant to the Assignment of
Claims Act of 1940, (v) the recording of negative pledges against Property not
encumbered by the Mortgages, and (vi) the filing or recordation of such other
documents as the Syndication Agent shall deem necessary or desirable, all in
form and substance satisfactory to the Syndication Agent, and all fees, taxes
and other charges relating to such filings and recordings shall have been paid
by the Company.
7.1.10 Environmental Compliance.
Evidence reasonably satisfactory to the Syndication Agent that the
Obligors have complied with all Environmental Laws applicable to them.
7.1.11 Indebtedness of Youth Services International of
Maryland, Inc.
All Indebtedness of Youth Services International of Maryland,
Inc. to Summit Bank shall have been, or concurrently herewith shall be,
paid in full.
7.1.12 Other Documents.
Such other documents, instruments, certificates and opinions as
the Syndication Agent or its counsel may reasonably request.
7.2 DD Loans.
The obligation of any Lender to make any DD Loans is subject to the
further condition precedent that the Company shall specify in its request for
such Loans the amount of Subordinated Debentures that the Company will repay
using the proceeds of such DD Loans, the date of such repayment (which shall
be the date of the borrowing therefor) and the amount of such Subordinated
Debentures which shall be outstanding after giving effect to such payment.
7.3 Revolving Credit Loans.
Each Loan Request for Revolving Credit Loans shall state whether the
proceeds thereof shall be used to fund (i) any Pre-Development Costs and, if
so, the aggregate amount of Pre-Development Costs Fundings outstanding
hereunder and under all Synthetic Lease Financings, or (ii) the acquisition or
construction of any facility and the amounts and nature thereof, all to the
satisfaction of the Syndication Agent.
7.4 Initial and Subsequent Extensions of Credit.
The obligation of any Lender to make any Loan or otherwise extend credit
to the Company upon the occasion of each borrowing or other extension of
credit hereunder is subject to the further conditions precedent that, both
immediately prior to the making of such Loan or other extension of credit and
also after giving effect thereto and to the intended use thereof: (a) no
Default or Event of Default shall have occurred and be continuing; (b) the
representations and warranties made by each Obligor in Section 8 hereof and in
each of the other Basic Documents
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to which it is a party, shall be true and complete on and as of the
date of the making of such Loan or other extension of credit with the
same force and effect as if made on and as of such date
(or, if any such representation or warranty is expressly stated to have been
made as of a specific date, as of such specific date), and (c) there shall
have been no Material Adverse Effect and the Company shall certify to such
effect.
8. REPRESENTATIONS AND WARRANTIES
8.1. Representations and Warranties.
Each Obligor, as to itself, represents and warrants to the
Syndication Agent and the Lenders that:
8.1.1 Corporate Existence.
Each Obligor: (i) is a corporation or other entity duly
organized, validly existing and (except as otherwise proved in the legal
opinion of Foley & Lardner of even date herewith) in good standing under the
laws of the jurisdiction of its organization, as set forth on the signature
pages to this Agreement; (ii) has all requisite corporate or other power, and
has all material governmental licenses, authorizations, consents and approvals
necessary to own its assets and carry on its business as now being or as
proposed to be conducted; and (iii) is qualified to do business and is in good
standing in all jurisdictions in which the nature of the business conducted by
it makes such qualification necessary and where failure so to qualify could
reasonably be expected to (either individually or in the aggregate) have a
Material Adverse Effect.
8.1.2 Financial Condition.
The Company has heretofore furnished to each of the Lenders and
the Syndication Agent the consolidated and consolidating balance sheets of the
Company and its Subsidiaries as at December 31, 1998 and the related
consolidated and consolidating statements of income, retained earnings and
cash flow of the Company and its Subsidiaries for the fiscal year ended on
said date, with the opinion thereon (in the case of said consolidated balance
sheet and statements) of Grant Thorton LLP or other independent certified
public accountants of nationally recognized standing reasonably acceptable to
the Lenders and the Syndication Agent, and the unaudited consolidated and
consolidating balance sheets of the Company and its Subsidiaries as at March
31, 1999 and June 30, 1999 and the related consolidated and consolidating
statements of income and retained earnings of the Company and its Subsidiaries
for the three-month and six month, respectively, period ended on such dates.
All such financial statements fairly present the consolidated financial
condition of the Company and its Subsidiaries, and (in the case of said
consolidating financial statements) the respective unconsolidated financial
condition of the Company and its Subsidiaries, as at said dates and the
consolidated and unconsolidated results of their operations for the fiscal
year and three-month period ended on said dates (subject, in the case of such
financial statements as at March 31, 1999 and June 30, 1999, to normal year-
end audit adjustments), all in accordance with generally accepted accounting
principles and practices applied on a consistent basis, except as otherwise
indicated in the notes thereto. None of the
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Obligors has on the date hereof any material contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments,
in each case, of a type required to be reflected in a balance
sheet prepared in accordance with GAAP, except as referred to or reflected or
provided for in said balance sheets as at said dates. Since December 31,
1998, there has been no material adverse change in the consolidated financial
condition, operations, business or prospects taken as a whole of the Obligors
from that set forth in said financial statements as at said date.
8.1.3 Litigation.
Except as disclosed in Schedule 8.1.3 hereto, (i) there are no
legal or arbitral proceedings, or any proceedings by or before any
governmental or regulatory authority or agency, now pending or (to the
knowledge of the Obligors) threatened against any Obligor that, if adversely
determined, could be reasonably expected to (either individually or in the
aggregate) have a Material Adverse Effect and (ii) there are no outstanding
judgments, rulings, orders, awards or decrees rendered by any court, arbitral,
administrative, governmental or quasi-judicial body binding upon any Obligor.
8.1.4 No Breach.
None of the execution and delivery of this Agreement or the other
Basic Documents, the consummation of the transactions herein and therein
contemplated or compliance with the terms and provisions hereof and thereof
will conflict with or result in a breach of, or require any consent under, the
charter or by-laws of any Obligor, or any applicable law or regulation, or any
order, writ, injunction or decree of any court or governmental authority or
agency, or any agreement or instrument to which any Obligor is a party or by
which any of them or any of their Property is bound or to which any of them is
subject (other than such consents as have been obtained and are in full force
and effect), or constitute a default under any such agreement or instrument,
or (except for the Liens created pursuant to the Basic Documents) result in
the creation or imposition of any Lien upon any Property of the Obligors
pursuant to the terms of any such agreement or instrument.
8.1.5 Action.
Each Obligor has all necessary power, authority and legal right to
execute, deliver and perform its obligations under this Agreement and each of
the other Basic Documents to which it is a party; the execution, delivery and
performance by each Obligor of each of the Basic Documents to which it is a
party have been duly authorized by all necessary corporate action on its part
(including, without limitation, any required shareholder approvals); and this
Agreement has been duly and validly executed and delivered by each Obligor and
constitutes, and each of the other Basic Documents to which it is a party when
executed and delivered by such Obligor will constitute, its legal, valid and
binding obligation, enforceable against each Obligor in accordance with its
terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or similar laws of general
applicability affecting the enforcement of creditors' rights and (b) the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
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8.1.6 Approvals.
No authorizations, approvals or consents of, and no filings or
registrations with, any governmental or regulatory authority or agency, or any
securities exchange, are necessary for the execution, delivery or performance
by any Obligor of the Basic Documents to which it is a party or for the
legality, validity or enforceability hereof or thereof, except for filings and
recordings in respect of the Liens created pursuant to the Basic Documents.
8.1.7 Use of Credit.
None of the Obligors is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose,
whether immediate, incidental or ultimate, of buying or carrying Margin Stock,
and no part of the proceeds of any extension of credit hereunder will be used
to buy or carry any Margin Stock.
8.1.8 ERISA.
Each Plan and, to the knowledge of each Obligor, each
Multiemployer Plan, is in compliance in all material respects with, and has
been administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law, and no event
or condition has occurred and is continuing as to which any Obligor would be
under an obligation to furnish a report to the Lenders and the Syndication
Agent under Section 9.1.1(g) hereof.
8.1.9 Taxes.
The Obligors are members of an affiliated group of corporations
filing consolidated returns for Federal income tax purposes, of which the
Company is the "common parent" (within the meaning of Section 1504 of the
Code) of such group. Each Obligor has filed (either directly, or indirectly
through the Company) all Federal income tax returns and all other material tax
returns that are required to be filed by them and have paid (either directly,
or indirectly through the Company) all taxes due pursuant to such returns or
pursuant to any assessment received by any Obligor, except for any taxes being
contested by an Obligor in good faith by proper proceedings as to which no
Liens have been created on any property of any Obligor. The charges, accruals
and reserves on the books of the Obligors in respect of taxes and other
governmental charges are, in the opinion of the Obligors, adequate. The
Company has not given or been requested to give a waiver of the statute of
limitations relating to the payment of Federal, state, local and foreign taxes
or other impositions.
8.1.10 Investment Company Act.
None of the Obligors is an "investment company", or a company
"controlled" by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended.
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8.1.11 Public Utility Holding Company Act.
None of the Obligors is a "holding company", or an "affiliate" of
a "holding company" or a "subsidiary company" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
8.1.12 Material Agreements and Liens.
(a) Part A of Schedule 8.1.12 hereto is a complete and
correct list, as of the date of this Agreement, of each credit agreement, loan
agreement, indenture, material purchase agreement, guarantee, letter of credit
or other material arrangement providing for or otherwise relating to any
Indebtedness or any extension of credit (or commitment for any extension of
credit) to, or guarantee by, any Obligor, and the aggregate principal or face
amount outstanding or that may become outstanding under each such arrangement
is correctly described in Part A of said Schedule 8.1.12.
(b) Part B of Schedule 8.1.12 hereto is a complete and
correct list, as of the date of this Agreement, of each Lien securing
Indebtedness of any Person and covering any Obligor, and the aggregate
Indebtedness secured (or that may be secured) by each such Lien and the
property covered by each such Lien is correctly described in Part B of said
Schedule 8.1.12.
8.1.13 Environmental Matters.
Each Obligor has obtained all Environmental Permits required under
all applicable Environmental Laws to carry on its business as now being or as
currently proposed to be conducted, except to the extent the failure to have
any such Environmental Permit would not (either individually or in the
aggregate) have a Material Adverse Effect. Each of such Environmental Permits
is in full force and effect and each of the Obligors is in substantial
compliance with the terms and conditions thereof, and is also in substantial
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any applicable Environmental Law, except to the extent failure to comply
therewith would not (either individually or in the aggregate) have a Material
Adverse Effect.
In addition, except as set forth in Schedule 8.1.13 hereto:
(a) No notice, notification, demand, request for
information, citation, summons or order has been issued to any Obligor or
about which any Obligor has otherwise become aware, no complaint has been
filed against any Obligor or about which any Obligor has otherwise become
aware, no penalty has been assessed against any Obligor or about which any
Obligor has otherwise become aware and no investigation or review is pending
or, to the knowledge of any Obligor, threatened by any governmental authority
or other entity with respect to (i) any alleged failure by any Obligor to have
any Environmental Permit required under any Environmental Law in connection
with the conduct of the business of any Obligor, (ii) any actual or alleged
violation by any Obligor or any Property of any applicable Environmental Law
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or (iii) with respect to any generation, treatment, storage, recycling,
transportation, discharge or disposal, or any Release of any Hazardous
Materials generated by any Obligor, which has either not been resolved to the
satisfaction of the governmental authority or which would not individually or
in the aggregate have a Material Adverse Effect.
(b) None of the Obligors owns, operates or leases a
treatment, storage or disposal facility requiring a permit under the Resource
Conservation and Recovery Act of 1976, as amended, or under any comparable
state or local statute; and
(i) to the knowledge of the Obligors, no
polychlorinated biphenyls (PCBs) are or have been present at any site or
facility now owned, operated or leased by any Obligor, nor, to the knowledge
of any Obligor, were any PCBs present at any site or facility previously
owned, operated or leased by any Obligor, during such period of ownership,
operation or lease;
(ii) to the knowledge of the Obligors, no asbestos or
asbestos-containing materials that are friable or bear a reasonable chance of
becoming friable are present at any site or facility now owned, operated or
leased by any Obligor, nor, to the knowledge of any Obligor, were any such
asbestos or asbestos-containing materials present at any site or facility
previously owned, operated or leased by any Obligor, during such period of
ownership, operation or lease;
(iii) (A) to the knowledge of the Obligors, there are
no underground storage tanks for Hazardous Materials, active or abandoned, at
any site or facility now owned, operated or leased by any Obligor that are not
in material compliance with all applicable Environmental Laws, and there are
no surface impoundments for Hazardous Materials, active or abandoned, at any
site or facility now owned, operated or leased by any Obligor and (B) to the
knowledge of any Obligor, there were no underground storage tanks for
Hazardous Materials, active or abandoned, at any site or facility previously
owned, operated or leased by any Obligor that were not, during such period of
ownership, operation or lease, in material compliance with all applicable
Environmental Laws, and to the knowledge of any Obligor, there were no surface
impoundments for Hazardous Materials, active or abandoned, at any site or
facility previously owned, operated or leased by any Obligor, during such
period of ownership, operation or lease;
(iv) no Hazardous Materials have been Released at, on
or under any site or facility now owned, operated or leased by any Obligor in
a reportable quantity established by any applicable Environmental Law, nor, to
the knowledge of any Obligor, did such a Release occur at any site or facility
previously owned, operated or leased by any Obligor, during such period of
ownership, operation or lease; and
(v) no Hazardous Materials have been otherwise
Released at, on or under any site or facility now owned, operated or leased by
any Obligor that would (either individually or in the aggregate) have a
Material Adverse Effect, nor, to the knowledge of any Obligor, did such a
Release occur at any site or facility previously owned, operated or leased by
any Obligor, during such period of ownership, operation or lease.
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(c) To the knowledge of the Obligors, none of them has
transported or arranged for the transportation of any Hazardous Material to
any location that is listed on the National Priorities List ("NPL") under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended ("CERCLA"), listed for possible inclusion on the NPL by the
Environmental Protection Agency in the Comprehensive Environmental Response
and Liability Information System, as provided for by 40 C.F.R. 300.5
("CERCLIS"), or on any similar state or local list or that is the subject of
Federal, state or local enforcement actions or other investigations that may
lead to Environmental Claims against the Company or any of its Subsidiaries,
which individually or in the aggregate would have a Material Adverse Effect.
(d) No Hazardous Material generated by any Obligor has
been recycled, treated, stored, disposed of or Released by any Obligor at any
facility which is subject to an Environmental Claim which would reasonably be
expected individually or in the aggregate to have a Material Adverse Effect.
(e) No written or, to the knowledge of any Obligor, oral
notification of a Release of a Hazardous Material has been filed by or on
behalf of any Obligor, and no site or facility now or previously owned,
operated or leased by any Obligor is listed or was listed during such period
of ownership, operation or lease or, to the knowledge of any Obligor, proposed
for listing on the NPL, CERCLIS or any similar state list of sites requiring
investigation or clean-up, in each case, which has either not been resolved to
the satisfaction of the issuing authority or which would not individually or
in the aggregate have a Material Adverse Effect.
(f) No Liens have arisen under or pursuant to any
Environmental Laws on any site or facility owned, operated or leased by any
Obligor, and no government action has been taken or, to the knowledge of any
Obligor, is in process that could subject any such site or facility to such
Liens, and none of the Obligors would be required to place any notice or
restriction relating to the presence of Hazardous Materials at any site or
facility owned by it in any deed to the real property on which such site or
facility is located.
(g) All investigations, studies, audits, tests, reviews or
other analyses conducted by or on behalf of, or that are in the possession of,
any Obligor relating to environmental matters at or affecting any site or
facility now or previously owned, operated or leased by any Obligor and that
reveal facts, circumstances or conditions that could reasonably be expected to
result in a Material Adverse Effect have been made available to the Funding
Parties.
(h) Each Property is in compliance in all material
respects with all Environmental Laws and, to the knowledge of the related
Obligor, there are no present or past facts, circumstances, activities,
events, conditions or occurrences regarding such Property (including, without
limitation, the release or presence of Hazardous Materials) that could
reasonably be anticipated to (i) form the basis of a material claim against
such Property, any Lender or such Obligor, (ii) cause such Property to be
subject to any material restrictions on ownership, occupancy, use or
transferability under any Environmental Law, (iii) require the filing or
recording of any notice or restriction relating to the presence of Hazardous
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Materials in the real estate records in the county or other appropriate
municipality in which such Property is located, or (D) prevent or materially
interfere with the continued operation and maintenance of such Property as
contemplated by the Obligors.
8.1.14 Subsidiaries, Etc.
(a) Set forth in Part A of Schedule 8.1.14 hereto is a
complete and correct list, as of the date hereof, of all of the Subsidiaries
of the Company, together with, for each such Subsidiary, (i) the jurisdictions
in which such Subsidiary was organized and is qualified to transact business,
(ii) each Person holding ownership interests in such Subsidiary and (iii) the
nature of the ownership interests held by each such Person and the percentage
of ownership of such Subsidiary represented by such ownership interests.
(b) Set forth in Part B of Schedule 8.1.14 hereto is a
complete and correct list, as of the date of this Agreement, of all
Investments (other than Investments disclosed in Part A of said
Schedule 8.1.14 hereto) held by the Company or any of its Subsidiaries in any
Person (other than Investments which are Permitted Investments or deposits
maintained with banks in the ordinary course of business) and, for each such
Investment, (i) the identity of the Person or Persons holding such Investment
and (ii) the nature of such Investment. None of the Dormant Subsidiaries (x)
owns assets having a fair market value in excess of $25,000 (other than the
account receivable from Corrections Corporation of America to the Company) or
(y) actively conducts business.
8.1.15 Title to Assets.
Each Obligor owns and has on the date hereof, good and marketable
title or valid and subsisting leaseholds (subject only to Liens permitted by
Section 9.1.6 hereof) to the assets, including the Properties, shown to be
owned in the most recent financial statements referred to in Section 8.1.2
hereof (other than assets disposed of in the ordinary course of business).
Each Obligor (a) owns and has on the date hereof good and marketable title to,
or has on the date hereof a valid and subsisting leasehold estate in, and
(b) enjoys on the date hereof peaceful and undisturbed possession of, all
assets, including the Properties (subject only to Liens permitted by
Section 9.1.6 hereof), that are necessary for the operation and conduct of its
businesses.
8.1.16 True and Complete Disclosure.
The information (other than projections), reports, financial
statements, exhibits and schedules furnished in writing by or on behalf of the
Obligors to the Syndication Agent or any Lender in connection with the
negotiation, preparation or delivery of this Agreement and the other Basic
Documents or included herein or therein or delivered pursuant hereto or
thereto, when taken as a whole, do not contain any untrue statement of
material fact or omit to state any material fact necessary to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading. All projections furnished by or on behalf of the
Obligors in writing to the Syndication Agent or any Lender for purposes of
this Agreement or in connection with this Agreement or the transactions
contemplated hereby were prepared by the Company in good faith based on
assumptions determined to be reasonable by the Company
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under the then existing facts and circumstances. All written information
furnished after the date hereof by any Obligor to the Syndication Agent
or the Lenders in connection with this Agreement and the other
Basic Documents and the transactions contemplated hereby and thereby
will be true, complete and accurate in every material respect, or
(in the case of projections) based on reasonable assumptions, on the
date, and under the facts and circumstances, as of which
such information is stated or certified. There is no fact actually known to
any Obligor that could have a Material Adverse Effect that has not been
disclosed herein, in the other Basic Documents or in a report, financial
statement, exhibit, schedule, disclosure letter or other writing furnished to
the Lenders for use in connection with the transactions contemplated hereby or
thereby.
8.1.17 Real Property.
Set forth on Schedule 8.1.17 hereto is a list, as of the date
hereof, of all of the real property interests held by the Company and its
Subsidiaries, indicating in each case whether the respective Property is owned
or leased, the identity of the owner or lessor and the location of the
respective Property. Except as set forth in Schedule 8.1.17, the present
condition of each Property conforms in all material respects with all
conditions or requirements of all existing material permits and approvals
issued with respect to such Property, and the related Obligor's future
intended use of such Property does not, in any material respect, violate any
applicable Law. To the knowledge of the related Obligor, no material notices,
complaints or orders of violation or non-compliance have been issued or
threatened or are contemplated by any governmental authority with respect to
any Property or any present or intended future use thereof. All material
agreements, easements and other rights, public or private, which are necessary
to permit the lawful use and operation of each Property as the related Obligor
intends to use such Property and which are necessary to permit the lawful
intended use and operation of all presently intended utilities, driveways,
roads and other means of egress and ingress to and from the same have been, or
to such Obligor's knowledge will be, obtained and are or will be in full force
and effect, and the Obligor has no knowledge of any pending material
modification or cancellation of any of the same.
8.1.18 Solvency.
Subject to Sections 6.7 and 6.8 hereof, each Obligor (i) is
solvent and will not be rendered insolvent by the incurrence of the
obligations under, or by the execution and delivery of this Agreement, the
Notes, and any other Basic Documents to which it is a party or signatory, or
by any transactions contemplated hereunder or thereunder, (ii) is able to pay
its debts as they come due and does not intend to incur, or believe that it
will incur, debts beyond its ability to pay such debts as they mature or come
due, (iii) has capital sufficient to carry on its business and any business in
which it intends or is about to engage, and (iv) owns property and assets
having a value in excess of its liabilities and debts.
8.1.19 Acts of God.
Neither the business nor properties of any Obligor are presently
affected by any fire, explosion, accident, drought, storm, hail, earthquake,
embargo, act of God or of the public
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enemy or of political unrest, or potential expropriation, or other
casualty (whether or not covered by insurance) which could have
a Material Adverse Effect.
8.1.20 Labor Controversies; Union Contracts, Etc.
There are no labor controversies pending or, to the knowledge of
any Obligor, threatened against any Obligor, which if adversely determined
could have a Material Adverse Effect. There are no pending or, to any
Obligor's knowledge, threatened or anticipated (i) employment discrimination
charges or complaints against or involving any Obligor before any governmental
Person, (ii) unfair labor practice charges or complaints, disputes or
grievances or arbitration proceedings or controversies affecting any Obligor,
(iii) union representation petitions respecting the employees of any Obligor,
or (v) strikes, slowdowns, work stoppages, or lockouts or threats thereof
affecting any Obligor. Schedule 8.1.20 sets forth a list of all collective
bargaining agreements covering any of the employees of any Obligor, together
with the expiration date of each such agreement. True and complete copies of
each such agreements have been delivered to the Syndication Agent. No Obligor
has breached or otherwise failed to comply with any provision of any
collective bargaining agreement or other labor union contract applicable to
any of its employees.
8.1.21 Intellectual Property.
Each Obligor has the legal right to all intellectual property that
is necessary for the conduct of its business. With respect to all such
intellectual property: (i) one or more of the Obligors is the sole and
exclusive owner of the entire and unencumbered right, title and interest in
and to thereof; (ii) the Obligors have no knowledge of the existence of any
intellectual property rights held by any other Person that would preclude any
Obligor from using its intellectual property rights in the conduct of its
business; (iii) no claim has been made, and the Obligors have no knowledge of
any claim that is likely to be made, that the use by any Obligor of any of its
intellectual property violates the rights of any third party.
8.1.22 Business Relations.
There exists no actual or threatened termination, cancellation, or
adverse limitation of, or any adverse modification or change in, the
contractual and/or business relationship between any Obligor and any
governmental agency, bureau or instrumentality, and there exists no present
condition or state of facts or circumstances in such relations, which in
either case could have a Material Adverse Effect.
8.1.23 Year 2000.
The Obligors have developed and are actively executing a plan and
implementation strategy that adequately addresses the calendar year 2000 so
that no Obligor will experience invalid or incorrect results or abnormal
software or hardware operation related to calendar year 2000. Such plan
includes the creation of software systems which include calendar year 2000
date conversion and compatibility capabilities, including, but not limited to,
date data century recognition, same century and multiple century formula and
date value calculations,
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and user interface data values that reflect the appropriate year. The
Obligors are proceeding in accordance with the implementation schedule under
such plan.
8.1.24 Subordinated Debt and Subordinated Debentures.
There is no event of default or event which, with the giving of
notice or passage of time or both, would constitute an event of default under
the documents evidencing or securing the Subordinated Debt or the Subordinated
Debentures.
8.1.25 Facility Contracts.
Schedule 8.1.25 is a correct and complete list of all material
Facility Contracts. The Obligors have furnished the Syndication Agent with
true, correct and complete copies of the Facility Contracts requested by the
Syndication Agent, and all Facility Contracts are in full force and effect.
The Obligors have received no notice of default under any of the Facility
Contracts and have performed in all material respects all of the terms,
covenants, conditions or warranties to be performed and observed by the
Obligors thereunder.
8.1.26 Default of Indebtedness, Use Permits, Orders and
Other Agreements.
No Obligor is in breach or default of, and no event of default or
event, which with the passage of time or giving of notice or both, would
constitute, mature into or become a default or event of default, has occurred
and is continuing with respect to (i) any Indebtedness of any kind or nature,
(ii) any Use Permit, (iii) any judgment, order, award or decree issued by any
court or governmental or administrative agency, or (iv) any agreement to which
it is a party, which breach or default might have a Material Adverse Effect.
8.1.27 Compliance with Laws.
(a) Each Obligor has complied in all material respects
with all Laws applicable to it or to the conduct of its business,
noncompliance with which could have a Material Adverse Effect.
(b) To the best of the Obligors' knowledge, no Federal,
state, local or foreign authorities have proposed any limitations in any
ordinance, regulation, plan or contract with any Obligor with respect to such
Obligor's business as it is presently being conducted, which limitation, if
enacted, might have a Material Adverse Effect.
9. COVENANTS OF THE COMPANY
The Company covenants and agrees with the Lenders and the Syndication
Agent that, so long as any Commitment, Loan or Letter of Credit Liability is
outstanding and until payment in full of all amounts payable by the Company
hereunder:
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9.1 Affirmative and Negative Covenants.
The Company covenants and agrees that:
9.1.1 Financial Statements; Etc.
The Company shall deliver to each of the Syndication Agent and the
Lenders (in such form as shall be satisfactory to the Syndication Agent):
(a) as soon as available and in any event within 20 days
after the end of each calendar month, consolidated statements of income and
retained earnings of the Company and its Subsidiaries for such month and for
the period from the beginning of the respective fiscal year to the end of such
month, and the related consolidated balance sheets of the Company and its
Subsidiaries as at the end of such month, accompanied by a certificate of a
senior financial officer of the Company, which certificate shall state that
said consolidated financial statements fairly present the consolidated
financial condition and results of operations of the Company and its
Subsidiaries, and said consolidating financial statements fairly present the
respective individual unconsolidated financial condition and results of
operations of the Company and of each of its Subsidiaries, in each case in
accordance with generally accepted accounting principles, consistently
applied, as at the end of, and for, such month (subject to normal year-end
audit adjustments with the absence of footnotes);
(b) as soon as available and in any event within 45 days
after the end of each quarterly fiscal period of each fiscal year of the
Company, (i) a statement of occupancy rates at each of the facilities owned or
maintained by the Company and its Subsidiaries as at the end of such period,
for each Facility Contract for such period and for the period from the
beginning of the respective fiscal year to the end of such fiscal quarter and
(ii) an analysis of the chief financial officer of the financial condition of
the Company and its Subsidiaries, on a consolidated and consolidating basis,
as of the end of such period;
(c) as soon as available and in any event within 90 days
after the end of each fiscal year of the Company, (i) consolidated and
consolidating statements of income and retained earnings, and a consolidated
statement of cash flows, of the Company and its Subsidiaries for such fiscal
year and the related consolidated and consolidating balance sheets of the
Company and its Subsidiaries as at the end of such fiscal year, setting forth
in each case in comparative form the corresponding consolidated and
consolidating figures for the preceding fiscal year, and accompanied (A) in
the case of said consolidated statements and balance sheet of the Company, by
an opinion thereon of independent certified public accountants of recognized
national standing (which opinion shall not contain any impermissible
qualification), which opinion shall state that said consolidated financial
statements fairly present the consolidated financial condition and results of
operations of the Company and its Subsidiaries as at the end of, and for, such
fiscal year in accordance with generally accepted accounting principles, and
by a management letter or similar letter submitted to the Company by such
accountants and (B) in the case of said consolidating statements and balance
sheet, by a certificate of a senior financial officer of the Company, which
certificate shall state that said consolidating financial statements fairly
present the respective individual unconsolidated financial condition and
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results of operations of the Company and of each of its Subsidiaries, in each
case in accordance with generally accepted accounting principles, consistently
applied, as at the end of, and for, such fiscal year and (ii) within 60 days
after the end of each fiscal year of the Company, annual projections for the
Company and its Subsidiaries (A) for such year (including the year in which
the Loans become due), and promptly after any material revision to such
projections, such projections as so revised and (B) as the Syndication Agent
may otherwise reasonably request;
(d) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, that the Company
shall have filed with the Securities and Exchange Commission (or any
governmental agency substituted therefor) or any national securities exchange;
(e) to the extent not previously furnished to the
Syndication Agent and the Lenders, promptly upon the mailing thereof to the
shareholders of the Company generally, copies of all financial statements,
reports and proxy statements so mailed;
(f) without duplication of any provision of subsection (c)
above, promptly after the receipt by the Company thereof, copies of each
report submitted to any Obligor by independent accountants in connection with
any annual, interim or special audit of the books of any Obligor made by such
accountants, or any management letters or similar documents submitted to any
Obligor by such accountants;
(g) as soon as possible, and in any event within ten days
after the Company knows or has reason to believe that any of the events or
conditions specified below with respect to any Plan or Multiemployer Plan has
occurred or exists, a statement signed by a senior financial officer of the
Company setting forth details respecting such event or condition and the
action, if any, that the Company or its ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required to be filed with
or given to PBGC by the Company or an ERISA Affiliate with respect to such
event or condition):
(i) any reportable event, as defined in
Section 4043(b) of ERISA and the regulations issued thereunder, with respect
to a Plan, as to which PBGC has not by regulation waived the requirement of
Section 4043(a) of ERISA that it be notified within 30 days of the occurrence
of such event (provided that a failure to meet the minimum funding standard of
Section 412 of the Code or Section 302 of ERISA, including, without
limitation, the failure to make on or before its due date a required
installment under Section 412(m) of the Code or Section 302(e) of ERISA, shall
be a reportable event regardless of the issuance of any waivers in accordance
with Section 412(d) of the Code); and any request for a waiver under
Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of
a notice of intent to terminate any Plan or any action taken by the Company or
an ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under
Section 4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any Plan, or the
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receipt by the Company or any ERISA Affiliate of a notice from a
Multiemployer Plan that such action has been taken by PBGC
with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a
Multiemployer Plan by the Company or any ERISA Affiliate that results in
liability under Section 4201 or 4204 of ERISA (including the obligation to
satisfy secondary liability as a result of a purchaser default) or the receipt
by the Company or any ERISA Affiliate of notice from a Multiemployer Plan that
it is in reorganization or insolvency pursuant to Section 4241 or 4245 of
ERISA or that it intends to terminate or has terminated under Section 4041A of
ERISA;
(v) the institution of a proceeding by a fiduciary
of any Multiemployer Plan against the Company or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed within 30
days; and
(vi) the adoption of an amendment to any Plan that,
pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA, would
result in the loss of tax-exempt status of the trust of which such Plan is a
part if the Company or an ERISA Affiliate fails to timely provide security to
the Plan in accordance with the provisions of said Sections;
(h) without prejudice as to whether a Default or an Event
of Default has occurred, promptly after the Company knows or has reason to
believe that any Default or an Event of Default has occurred, a notice of such
Default or Event of Default describing the same in reasonable detail and,
together with such notice or as soon thereafter as possible, a description of
the action that the Company has taken or proposes to take with respect
thereto;
(i) within 20 days after the end of each calendar month, a
Borrowing Base Certificate as of the end of the immediately preceding month;
(j) within 20 days after the end of each calendar month,
an accounts receivable aging schedule for the Company and its Subsidiaries on
a consolidated basis;
(k) from time to time such other information regarding the
financial condition, operations, business or prospects of the Company or any
of its Subsidiaries (including, without limitation, any Plan or Multiemployer
Plan and any reports or other information required to be filed under ERISA)
available to the Company, as the Syndication Agent or any Lender may
reasonably request;
(l) at the time it furnishes each set of financial
statements pursuant to subsection (b) or (c) above, a Compliance Certificate
of a senior financial officer of the Company to the effect that no Event of
Default has occurred and is continuing (or, if any Event of Default has
occurred and is continuing, describing the same in reasonable detail and
describing the action that the Company has taken or proposes to take with
respect thereto). In addition, at the time the Company furnishes to the
Syndication Agent and each Lender, the financial statements required pursuant
to subsection (b) above, the Company shall furnish to the Syndication Agent
and each Lender, a certificate of a senior financial officer setting forth in
reasonable detail the computations necessary to determine whether the Company
is in compliance with Sections
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9.1.10 through and including 9.1.14 hereof as of the date as of which
such financial statements have been provided. Further, upon the
request of the Syndication Agent from and after the
occurrence of an Event of Default, at the time the Company furnishes the
financial statements required pursuant to subsection (a) above, the Company
shall furnish to the Syndication Agent each Lender, a certificate of a senior
financial officer setting forth in reasonable detail the computations
necessary to determine whether the Company is in compliance with Sections
9.1.10 through and including 9.1.14 hereof as of date as of which such
financial statements have been provided;
(m) as soon as practicable and, in any event, at least
five Business Days prior to the consummation thereof, notice of a Capital
Event, together with the information required under Section 2.10.1 hereof;
(n) prompt notice of the occurrence of any event or
condition, or the obtaining of any knowledge by the Obligors which, if the
same had occurred or been obtained as of the Closing Date, would result in any
representation or warranty herein being false or misleading in any material
respect;
(o) promptly upon any Obligor's becoming aware thereof,
notice of any proposed Laws, or amendments thereto, which would restrict or
prohibit any Obligor from operating its business in substantially the same
manner in which it is presently conducted;
(p) promptly upon discovery thereof, notice of any
development, event or condition, financial or otherwise, which might have a
Material Adverse Effect;
(q) prompt notice of the entry by any Obligor, as lessor,
into a lease with a third party (that is not an Affiliate of such Obligor), as
lessee, for any material portion of any Property owned by such Obligor and,
promptly upon the request of the Syndication Agent, the Obligor shall execute
and deliver in recordable form, and pay all recording fees in connection with,
an assignment of leases and rents to be recorded against the Property in
question;
(r) prompt notice of the assertion of any Environmental
Claim by any Person against, or with respect to the activities of, any Obligor
and notice of any alleged violation of or non-compliance with any
Environmental Permit, which, if adversely determined, could reasonably be
expected to have a Material Adverse Effect;
(s) promptly upon any Obligor's becoming aware thereof,
notice of any violation or breach by any Obligor of the terms of, or any
revocation or suspension or threatened revocation or suspension of, any Use
Permit or other permit of an Obligor, if the same could reasonably be expected
to have a Material Adverse Effect;
(t) prompt notice of the termination or non-renewal of any
of the Facility Contracts which, individually or in the aggregate with all
other Facility Contracts terminated or not renewed during the prior six-month
period, provided for annual payments to the Obligors of not less than
$10,000,000; and
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(u) prompt notice of the entry by the Obligors into new
Facility Contracts (i) which, individually or in the aggregate with all other
Facility Contracts entered into during the prior six-month period, provide for
annual payments to the Obligors of not less than $10,000,000 and (ii) under
which the other party is the United States government or any bureau, agency or
instrumentality thereof. Promptly upon the request of the Syndication Agent
or any Lender, the Company or the Obligor that is a party to each such
Facility Contract shall (A) provide a copy of the same to the requesting party
and (B) in the case of a Facility Contract described in clause (ii) above,
execute and deliver such notices and assignments as may be required to comply
with the Assignment of Claims Act of 1940.
9.1.2 Litigation.
The Company will promptly give to the Syndication Agent and each
Lender, notice of all legal or arbitral proceedings, and of all proceedings by
or before any governmental or regulatory authority or agency, and any material
development in respect of such legal or other proceedings, affecting the
Company or any of its Subsidiaries, except proceedings that, if adversely
determined, would not (either individually or in the aggregate) have a
Material Adverse Effect.
9.1.3 Existence, Etc.
The Company will, and will cause each of its Subsidiaries to:
(a) preserve and maintain its legal existence and all of
its material rights, privileges, licenses and franchises; provided, however,
upon at least 30 days' prior written notice to the Syndication Agent and the
Lenders and so long as the Company has taken such actions and executed and
delivered such documents (including, without limitation, such modifications of
the Basic Documents as may be necessary to make Youth Services International,
Inc. a co-borrower hereunder and UCC statements) as the Syndication Agent may
reasonably request or may deem necessary or desirable to perfect or continue
the perfection of any Liens granted by the Company or its Subsidiaries to or
for the benefit of the Syndication Agent and the Lenders, some or all of its
Subsidiaries may be merged with and into Youth Services International, Inc.;
(b) comply with the requirements of all applicable Laws,
if failure to comply there could be reasonably expected (either individually
or in the aggregate) to have a Material Adverse Effect;
(c) pay and discharge all taxes, assessments and
governmental charges or levies imposed on it or on its income or profits or on
any of its Property prior to the date on which penalties attach thereto,
except for any such tax, assessment, charge or levy the payment of which is
being contested in good faith and by proper proceedings and against which
adequate reserves are being maintained;
(d) maintain all of its properties necessary to the
conduct of its business in good working order and condition, ordinary wear and
tear excepted;
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(e) keep adequate records and books of account, in which
complete entries will be made in accordance with generally accepted accounting
principles consistently applied; and
(f) upon notice to the Company, permit representatives of
the Syndication Agent or any Lender during normal business hours, to examine,
copy and make extracts from its books and records, to inspect any of its
Properties, and to discuss its business and affairs with its officers, all to
the extent reasonably requested by the Syndication Agent or any Lender.
9.1.4 Insurance.
(a) The Company will, and will cause each of its
Subsidiaries to, maintain insurance with financially sound and reputable
insurance companies in such amounts and covering such casualties and risks as
are customary in accordance with prudent business practice in the case of
companies engaged in the same or a similar business and similarly situated,
which insurance may provide for reasonable deductibility from coverage
thereof. The Company will, upon requests, furnish to the Syndication Agent
from time to time a certificate from an executive office of the Company
setting forth the nature and extent of all insurance maintained by the Company
and its Subsidiaries.
(b) Such insurance shall name the Syndication Agent as
loss payee (to the extent covering risk of loss or damage to tangible
property) and as an additional named insured as its interests may appear (to
the extent covering any other risk). Each policy referred to in this
Section 9.1.4 shall provide that it will not be canceled or reduced, or
allowed to lapse without renewal, except after not less than 30 days' notice
to the Syndication Agent and shall also provide that the interests of the
Syndication Agent and the Lenders shall not be invalidated by any act or
negligence of the Obligors or any Person having an interest in any Property
covered by a mortgage nor by occupancy or use of any such Property for
purposes more hazardous than permitted by such policy nor by any foreclosure
or other proceedings relating to such Property. The Company will advise the
Syndication Agent promptly of any significant policy cancellation (other than
any such cancellation in connection with the replacement thereof), reduction
or amendment.
(c) On or before the Closing Date, and periodically
thereafter at least 30 days prior to the applicable policy expiration dates,
the Company will deliver to the Syndication Agent certificates of insurance
satisfactory to the Syndication Agent evidencing the existence of all
insurance required to be maintained by the Company hereunder setting forth the
respective coverages, limits of liability, carrier, policy number and period
of coverage. The Company will not obtain or carry separate insurance
concurrent in form or contributing in the event of loss with that required by
this Section 9.1.4 unless the Syndication Agent is the named insured
thereunder, with loss payable as provided herein. The Company will
immediately notify the Syndication Agent whenever any such separate insurance
is obtained and shall deliver to the Syndication Agent certificates evidencing
the same.
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(d) Without limiting the obligations of the Company under
the foregoing provisions of this Section 9.1.4, in the event the Company shall
fail to maintain in full force and effect insurance as required by the
foregoing provisions of this Section 9.1.4, then the Syndication Agent may
(upon notice to the Company), but shall have no obligation so to do, procure
insurance covering the interests of the Syndicated Agent and the Lenders in
such amounts and against such risks as the Syndication Agent (or the Required
Lenders) shall deem appropriate, and the Company shall reimburse the
Syndication Agent in respect of any premiums paid by the Syndication Agent in
respect thereof.
9.1.5 Prohibition of Fundamental Changes.
(a) Except as otherwise permitted under Sections 9.1.3(a)
and 9.1.5(b) hereof, the Company will not, nor will it permit any of its
Subsidiaries to, enter into any transaction of merger or consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution). The Company will not, nor will it permit any of
its Subsidiaries to, acquire any business or property from, or capital stock
of, or be a party to any acquisition of, any Person except for (w) purchases
of inventory and other property to be sold or used in the ordinary course of
business, (x) Investments permitted under Section 9.1.8 hereof, (y) Capital
Expenditures permitted under Section 9.1.23 hereof and (z) acquisitions
permitted under Section 9.1.5(b) below.
(b)(i) An Obligor may merge with any Person other than
another Obligor, so long as the Obligor is the surviving corporation in any
such merger and no Default or Event of Default would result therefrom
immediately after giving effect thereto; and (ii) any Obligor may acquire
stock in a new Subsidiary, or acquire all or substantially all of the assets
or properties of, any Person or any division or operations of any Person, or
create a new Subsidiary, provided that no Default or Event of Default would
result therefrom immediately after giving effect thereto and that the
provisions of Section 9.1.20, if applicable, are complied with; provided,
however, that (A) any individual transaction described in clause (i) or (ii)
above that involves total consideration (as defined below) to be paid by the
Obligors in excess of twenty-five (25%) percent of the Consolidated Net Worth
of the Obligors as at the date of the most recent quarterly financial
statements delivered to the Syndication Agent and the Lenders pursuant to
Section 9.1.1(b) hereof or (B) if within any 12-month period the aggregate
amount of consideration paid by the Obligors for all transactions of a nature
described in clause (i) or (ii) above exceeds $30,000,000, the transaction
whose consideration when aggregated with the transactions over the previous 12
months exceeds $30,000,000 and each transaction thereafter during such period,
must also be approved in advance in writing by the Syndication Agent and:
(A) The Company must deliver to the Syndication Agent, no
less than 15 Business Days prior to the consummation of such transaction, a
certificate executed by the senior financial officer of the Company certifying
to the Syndication Agent that no Default or Event of Default will result from
such transaction after giving effect thereto, and also certifying and
demonstrating to the reasonable satisfaction of the Syndication Agent that the
Obligors are in compliance with each of the financial covenants set forth in
Sections 9.1.10 through and including 9.1.14 hereof calculated on a Historical
Pro Forma Basis (as defined below);
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(B) The transaction shall be subject to the Company's
standard due diligence review, which due diligence materials shall be
delivered to the Syndication Agent at least 15 Business Days prior to the
consummation of such transaction. The results of such due diligence shall be
acceptable to the Syndication Agent in its sole discretion, and shall include,
without limitation, environmental and accounting due diligence, including
disclosure of contingent liabilities, documentation of reserves for
remediation, clean-up, closure and/or monitoring, as necessary or applicable;
(C) The Company will supply the Syndication Agent at least
15 Business Days prior to the consummation of such transaction with detailed
information on the target company, including but not limited to, three years
of historical financial statements, together with updated consolidating
projections through the DD Loan Maturity Date;
(D) The Company will supply the Syndication Agent at least
15 Business Days prior to the consummation of such transaction with (i)
evidence satisfactory to the Syndication Agent that the target company is Year
2000 compliant or ready, or (ii) an action plan to cure any deficiencies,
which shall be acceptable to the Syndication Agent in its sole discretion;
(E) The target company must have EBITDA of at least $1 for
its four fiscal quarters immediately preceding the proposed closing date for
such transaction; and
(F) The Company will supply the Syndication Agent with
such additional information and reports as the Syndication Agent may request.
For purposes of this Section: "consideration" means the total purchase price
(including cash expended, stock or other non-cash consideration paid, Debt
incurred, and liabilities incurred or assumed) paid or to be paid; and
"Historical Pro Forma Basis" means, for any period ending as at the end of the
month preceding the month in which Obligors propose to make any such
acquisition permitted hereunder, the relevant financial terms (i.e., those
included in calculating the financial covenants set forth in Sections 9.1.10
through and including 9.1.14 hereof) as calculated and determined for the
Obligors including any Subsidiaries acquired during the measurement period and
to be acquired and with respect to which the calculation of the various
financial covenants on a Historical Pro Forma Basis is being made, all
determined in accordance with GAAP and calculated as if all such acquired and
to be acquired Subsidiaries had been owned by the Obligors through the
measurement period involved, with any adjustments to historical financial
statements to be approved by the Syndication Agent.
9.1.6 Limitation on Liens.
The Company will not, nor will it permit any of its Subsidiaries
to, create, incur, assume or suffer to exist any Lien upon any of its
property, whether now owned or hereafter acquired, except (without
duplication) the following (the "Permitted Liens"):
(a) Liens created pursuant to the Security Documents, the
Basic Documents or the Operative Documents;
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(b) Liens in existence on the date hereof and listed in
Part B of Schedule 8.1.12 hereto;
(c) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or that are being contested in good faith
and by appropriate proceedings if adequate reserves with respect thereto are
maintained on the books of the Company or the affected Subsidiaries, as the
case may be, in accordance with GAAP;
(d) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
that are not overdue for a period of more than 30 days or that are being
contested in good faith and by appropriate proceedings and Liens securing
judgments but only to the extent for an amount and for a period not resulting
in an Event of Default under Article XII(j) of the Lease;
(e) pledges or deposits under worker's compensation,
unemployment insurance and other social security legislation;
(f) deposits to secure the performance of bids, trade
contracts (other than for Indebtedness), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of business and
encumbrances consisting of zoning restrictions, easements, licenses,
restrictions on the use of Property or minor imperfections in title thereto
that, in the aggregate, are not material in amount, and that do not in any
case materially detract from the value of the Property subject thereto or
interfere with the ordinary conduct of the business of the Company or any of
its Subsidiaries;
(h) Liens upon Property acquired after the date hereof (by
purchase, construction or otherwise) by a Special Purpose Subsidiary, each of
which Liens either (A) existed on such Property before the time of its
acquisition and was not created in anticipation thereof or (B) were created
solely for the purpose of securing Indebtedness representing, or incurred to
finance, refinance or refund, the cost (including the cost of construction) of
such Property; provided that (i) no such Lien shall extend to or cover any
Property of the Company or its Subsidiaries (other than such Special Purpose
Subsidiary) and (ii) the principal amount of Indebtedness secured by any such
Lien shall at no time exceed 80% of the fair market value (as determined in
good faith by a senior financial officer of the Company) of such Property at
the time it was acquired (by purchase, construction or otherwise); and
(i) Liens securing any future Synthetic Lease Financing
that are pari passu with the Liens under the Security Documents.
9.1.7 Indebtedness.
The Company will not, nor will it permit any of its Subsidiaries
to, create, incur or suffer to exist any Indebtedness except (without
duplication):
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(a) Indebtedness arising pursuant to the Basic Documents
or the Operative Documents;
(b) Indebtedness outstanding on the date hereof and listed
in Part A of Schedule 8.1.12 hereto;
(c) Indebtedness of Subsidiaries of the Company to the
Company or to other Subsidiaries of the Company;
(d) Indebtedness of the Company and its Subsidiaries
secured by Liens permitted under Section 9.1.6 (other than Section 9.1.6(h))
hereof up to but not exceeding $500,000 at any one time outstanding;
(e) Indebtedness of one or more Special Purpose
Subsidiaries in an aggregate amount not exceeding $20,000,000 at any one time
outstanding;
(f) Indebtedness consisting of any future Synthetic Lease
Financing;
(g) additional Indebtedness of the Company and its
Subsidiaries (including, without limitation, Capital Lease obligations) up to
but not exceeding $500,000 at any one time outstanding; and
(h) Subordinated Debt of the Company.
9.1.8 Investments.
The Company will not, nor will it permit any of its Subsidiaries
to, make or permit to remain outstanding any Investments except:
(a) operating and payroll deposit accounts with banks;
(b) Investments outstanding on the date hereof and
disclosed in Schedule 8.1.14;
(c) Permitted Investments;
(d) Investments by the Company and its Subsidiaries in
capital stock of Subsidiaries of the Company to the extent outstanding on the
date of the financial statements of the Company and its Subsidiaries referred
to in Section 8.1.2 hereof and advances by the Company and its Subsidiaries to
Subsidiaries of the Company in the ordinary course of business;
(e) Interest Rate Protection Agreements, if any, required
to be maintained under this Agreement;
(f) additional Investments (i) up to but not exceeding
$5,000,000 in the aggregate, so long as the Syndication Agent, in its sole and
absolute discretion, has consented
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thereto or (ii) exceeding $5,000,000 in the aggregate, so long as the
Required Lenders, in their sole and absolute discretion, have consented thereto;
(g) existing and future Investments comprised of stocks,
bonds and notes of existing or former account debtors of the Obligors if such
Investment was received pursuant to the consummation of a bankruptcy plan of
reorganization or similar proceedings of such account debtor; and
(h) loans or advances by the Company or any of its
Subsidiaries to employees in the ordinary course of business in an aggregate
amount at anyone time outstanding not to exceed $250,000.
9.1.9 Dividend Payments.
The Company will not, nor will it permit any of its Subsidiaries
to, declare or make any Dividend Payment at any time, except a Dividend
Payment from a Subsidiary to the Company in order to fund the mandatory
prepayment required under Section 2.1.10 hereof upon the occurrence of a
Capital Event involving such Subsidiary.
9.1.10 Total Indebtedness to Adjusted EBITDA Ratio.
The Company will not permit the ratio of (i) the consolidated
Indebtedness of the Company and its Subsidiaries as of the last day of any
fiscal quarter of the Company ending during any test period set forth in the
table below, to (ii) Adjusted EBITDA for the period of four consecutive fiscal
quarters ending on the same day, to be greater than the ratio set forth
opposite such test period below:
Four Fiscal
Quarters Ending Ratio
--------------- -----
Closing Date 4.25:1
September 30, 1999 4.25:1
December 31, 1999 4.00:1
March 31, 2000 4.00:1
June 30, 2000 4.00:1
September 30, 2000 4.00:1
December 31, 2000
and thereafter 3.50:1
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9.1.11 Senior Debt to Adjusted EBITDA Ratio.
The Company will not permit the ratio of (i) the Senior Debt of
the Company and its Subsidiaries as of the last day of any fiscal quarter of
the Company ending during any test period set forth in the table below, to
(ii) Adjusted EBITDA for the period of four consecutive fiscal quarters ending
on the same day, to be greater than the ratio set forth opposite such test
period below:
Four Fiscal
Quarters Ending Ratio
--------------- -----
Closing Date 3.75:1
September 30, 1999 3.75:1
December 31, 1999 3.25:1
March 31, 2000 3.25:1
June 30, 2000 3.25:1
September 30, 2000 3.25:1
December 31, 2000
and thereafter 2.50:1
9.1.12 Consolidated Net Worth.
The Company will not permit its Consolidated Net Worth to be less
than $41,733,000 plus the sum of the following through the date of determination
(i) 90% of cumulative, positive (any loss shall be treated as zero)
Consolidated Net Income earned in each fiscal year on and after the end of the
most recent fiscal quarter prior to the Closing Date through such date of
determination and (ii) 100% of the net proceeds of Equity Issuances from the
Closing Date through such date of determination.
9.1.13 Consolidated Indebtedness to Net Worth Ratio.
The Company will not permit the ratio of (i) the consolidated
Indebtedness of the Company and its Subsidiaries to (ii) the sum of the
consolidated Indebtedness of the Company and its Subsidiaries plus
Consolidated Net Worth to exceed 70% at any time prior to December 31, 2001 or
65% from and after such date.
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9.1.14 Minimum Fixed Charge Coverage Ratio.
The Company will not permit the Fixed Charge Coverage Ratio to be
less than 1.50 to 1.0 as of the date hereof and thereafter; provided, however,
for purposes of calculating the Fixed Charge Coverage Ratio at each fiscal
quarter end through and including December 31, 1999, (i) the results of
operations of Youth Services International, Inc. and its Subsidiaries and the
effects of SOP 98-5 for 1998 shall be excluded from EBITDA and (ii) non-cash
merger charges plus legal fees incurred in 1999 by the Obligors in connection
with the merger with Youth Services International, Inc. and its Subsidiaries
shall be added to EBITDA.
9.1.15 Sale Lease-back Transactions.
The Company will not, and will not permit any of its Subsidiaries
to, enter into any arrangement with any Person whereby the Company or such
Subsidiary shall sell or otherwise transfer any of its property, whether now
owned or hereafter acquired, and thereafter rent or lease such property or
similar property for substantially the same use or uses as the property sold
or transferred unless both of the following conditions are satisfied: (a) the
consideration received by the Company or such Subsidiary in connection with
such transfer is at least equal to the fair market value of the property so
transferred (as reasonably determined by the board of directors of the
Company), and (b) all of the net proceeds received by the Company or any of
its Subsidiaries in connection with any such transaction are used by the
Company, within 12 months of the receipt thereof, to either (i) acquire other
Property in compliance with the term of the Master Agreement and/or (ii) repay
or prepay Indebtedness of the Company in accordance with Section 2.10.1
hereof.
9.1.16 Discount of Accounts.
The Company will not, and will not permit any of its Subsidiaries
to, sell (with or without recourse) or discount any of their Accounts.
9.1.17 Lines of Business.
Neither the Company nor any of its Subsidiaries will engage to any
substantial extent in any line or lines of business activity other than the
business of operating or providing services to correctional and/or detention
facilities, substance abuse rehabilitation facilities, facilities for at-risk
or troubled juveniles, and related lines of business.
9.1.18 Transactions with Affiliates.
Except as expressly permitted by this Agreement, the Company will
not, nor will it permit any of its Subsidiaries to, directly or indirectly:
(a) make any Investment in an Affiliate; (b) transfer, sell, lease, assign or
otherwise dispose of any Property to an Affiliate; (c) merge into or
consolidate with or purchase or acquire Property from an Affiliate; or
(d) enter into any other transaction directly or indirectly with or for the
benefit of an Affiliate (including, without limitation, guarantees and
assumptions of obligations of an Affiliate); provided that (x) any Affiliate
who is an individual may serve as a director, officer or employee of the
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Company or any of its Subsidiaries and receive reasonable compensation for his
or her services in such capacity and (y) the Company and its Subsidiaries may
enter into transactions (other than extensions of credit by the Company or any
of its Subsidiaries to an Affiliate or the payment of management or similar
fees by the Company or a Subsidiary to an Affiliate) providing for the leasing
of property, the rendering or receipt of services or the purchase or sale of
inventory and other property in the ordinary course of business if the
monetary or business consideration arising therefrom would be substantially as
advantageous to the Company and its Subsidiaries as the monetary or business
consideration that would obtain in a comparable transaction with a Person not
an Affiliate.
9.1.19 Use of Proceeds.
The Company will use the proceeds of (a) the Revolving Credit
Loans solely to refinance existing Indebtedness of the Company and Youth
Services International of Maryland, Inc. (provided, however, if and to the
extent there is availability under the DD Loan Commitment, proceeds of the
Revolving Credit Loan may not be used to repay the Subordinated Debentures of
the Obligors), for general corporate and working capital purposes and for
acquisitions permitted hereunder, and to make loans to the Subsidiary
Guarantors for any of the foregoing purposes; provided, however, in no event
shall the aggregate amount of Pre-Development Cost Fundings outstanding at any
one time hereunder exceed $10,000,000 and (b) the DD Loans solely for purposes
of repaying a portion of the Subordinated Debentures.
9.1.20 Certain Obligations Respecting Subsidiaries.
(a) The Company will, and will cause each of its
Subsidiaries to, take such action from time to time as shall be necessary to
ensure that each of its Subsidiaries is a Wholly Owned Subsidiary.
(b) The Company will take such action, and will cause each
of its Subsidiaries (other than the Dormant Subsidiaries and any Special
Purpose Subsidiaries) to take such action, from time to time as shall be
necessary to ensure that all Subsidiaries of the Company are Subsidiary
Guarantors and, thereby, "Obligors" hereunder. Without limiting the
generality of the foregoing, in the event that the Company or any of its
Subsidiaries shall form or acquire any new Subsidiary, the Company or the
respective Subsidiary will cause such new Subsidiary to become a "Subsidiary
Guarantor" (and, thereby, an "Obligor") hereunder and a party to the Security
Agreement and other applicable Security Documents pursuant to written
instruments in form and substance satisfactory to the Syndication Agent, and
to deliver such proof of corporate action, incumbency of officers, opinions of
counsel, judgment and lien searches, and other documents as the Syndication
Agent shall have requested.
(c) Neither the Company nor any of the other Obligors
shall suffer, cause or permit any of the Dormant Subsidiaries to start
conducting business or acquire assets having a fair market in excess of
$25,000, unless prior to doing so, the Company and each such entity shall have
complied with the provisions of Section 9.1.20(b) hereof that would otherwise
be applicable, had such entity not been a Dormant Subsidiary.
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9.1.21 Modifications of Certain Documents.
No Obligor will consent to any modification, supplement or waiver
of (i) any of the provisions of any Facility Contract which, individually or
in the aggregate with all other such modifications, supplements or waivers,
would have or be likely to have a Material Adverse Effect or (ii) any of the
subordination provisions governing the Subordinated Debentures or any other
Subordinated Debt.
9.1.22 Qualifying Properties.
The Company will cause, in the manner hereinafter set forth, each
Leased Property to become a Qualifying Property, except for the Leased
Properties located in Mangonia Park, Florida, Eagle Lake, Texas, and Eloy,
Arizona. If the Company has received Pre-Development Costs Fundings with
respect to a Leased Property while it was in the pre-development phase (and
before it was a Leased Property), the Leased Property must become a Qualifying
Property on or before the date that is nine months after the date of the
initial Pre-Development Costs Funding with respect thereto. If the Company
has not received Pre-Development Costs Fundings with respect to a Leased
Property, the Leased Property must become a Qualifying Property on or before
the date that is nine months after the date of the initial funding (excluding
any funding to acquire raw land) under a Synthetic Lease Financing.
9.1.23 Capital Expenditures.
The Company will not, and will not permit any of its Subsidiaries
to, make any Capital Expenditures at any time, except for the following:
(a) Capital Expenditures in an aggregate amount not to
exceed $50,000,000 per year; and
(b) Capital Expenditures made in connection with
acquisitions permitted under Section 9 hereof.
9.1.24 Dispositions of Assets or Subsidiaries.
Each of the Obligors shall not, and shall not permit any of its
Subsidiaries to, sell, convey, assign, lease, abandon or otherwise transfer or
dispose of, voluntarily or involuntarily, any of its properties or assets,
tangible or intangible (including sale, assignment, discount or other
disposition of accounts, contract rights, chattel paper, equipment or general
intangibles with or without recourse or of capital stock, shares of beneficial
interest, partnership interests or limited liability company interests of a
Subsidiary of such Obligor), except:
(a) any sale, transfer or lease of assets (i) by any
Wholly Owned Subsidiary of such Obligor to another Obligor, (ii) in the
ordinary course of business and on commercially reasonable terms, (iii)
consisting of obsolete or worn-out property, tools or equipment no longer used
or useful in its business, (iv) permitted under Section 9.1.15 hereof; or (v)
constituting the Obligor's Tampa Bay Academy;
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(b) any sale of a Leased Property subject to the
requirements for such a sale in the Master Agreement and the other Operative
Documents; or
(c) any sale, transfer or lease of assets, other than
those specifically excepted pursuant to clauses (a) and (b) above, so long as
(i) the net proceeds therefrom are applied in accordance with the provisions
of Section 2.10.1. of this Agreement and (ii) (A) the Syndication Agent, in
its sole and absolute discretion, has consented to such disposition, in the
event the aggregate fair market value of all property so disposed of does not
exceed $6,000,000 or (B) the Required Lenders, in their sole and absolute
discretion, have consented to such disposition, in the event the aggregate
fair market value of all property so disposed of exceeds $6,000,000.
9.1.25 Post-Closing Real Property.
If any Obligor acquires any interest in Property (whether in fee
or a leasehold estate, but excluding any Leased Properties and any Property
described in Section 9.1.6(h) hereof) after the Closing Date, such Obligor
shall so notify the Syndication Agent and shall also:
(a) furnish to the Syndication Agent one or more Mortgages
for the benefit of the Lenders covering such interest in real property and, if
such property is a leasehold estate, appropriate estoppel certificates from
the respective landlords thereof; and
(b) furnish to the Syndication Agent evidence to the
satisfaction of the Syndication Agent that the such real property is not
subject to any Lien (other than Liens permitted under the Basic Documents);
and
(c) upon the request of the Syndication Agent, do each of
the following:
(i) obtain one or more mortgagee policies of title
insurance on forms of and issued by one or more title companies satisfactory
to such Syndication Agent (the "Title Companies"), insuring the validity and
priority of the Liens created under such Mortgage(s) for and in amounts
satisfactory to the Syndication Agent, subject only to such exceptions as are
satisfactory to the Syndication Agent;
(ii) furnish to the Syndication Agent as-built
surveys of recent date of the Property, showing such matters as may be
required by such Syndication Agent, which surveys shall be in form and content
acceptable to the Syndication Agent, and certified to the Syndication Agent
and the Title Companies, and shall have been prepared by a registered surveyor
acceptable to the Syndication Agent; and
(iii) furnish to the Syndication Agent certified
copies of unconditional certificates of occupancy (or, if it is not the
practice to issue certificates of occupancy in the jurisdiction in which the
facilities to be covered by such Mortgage(s) are located, then such other
evidence reasonably satisfactory to the Syndication Agent) permitting the
fully functioning operation and occupancy of each such facility and of such
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other permits necessary for the use and operation of each such facility issued
by the respective governmental authorities having jurisdiction over each such
facility. In addition, the Company shall have paid to the Title Companies all
expenses and premiums of the Title Companies in connection with the issuance
of such policies and in addition shall have paid to the Title Companies an
amount equal to the recording and stamp taxes payable in connection with
recording such Mortgage in the appropriate county land office(s).
9.2 Regulations T, U and X.
The Company will not nor will it permit any Subsidiary to take any
action that would result in any non-compliance of the Fundings made hereunder
with Regulations T, U and X of the Board of Governors of the Federal Reserve
System.
9.3 Further Assurances.
Upon the written request of the Syndication Agent or any Lender, each
Obligor, at its own cost and expense, will promptly take such actions and
execute and deliver such documents including, without limitation, executing
and delivering all financing statements (including precautionary financing
statements), fixture filings and other similar documents and causing the same
to be recorded or filed in the appropriate public offices, as may be necessary
or reasonably desirable to preserve, protect and perfect the Lien of the
Syndication Agent or the Lenders on the Collateral and the rights and remedies
of the Syndication Agent and the Lenders under this Agreement.
10. EVENTS OF DEFAULT
10.1 Events of Default.
If one or more of the following events (herein called "Events of
Default") shall occur and be continuing:
(a) The Company shall: (i) default in the payment of any
principal of any Loan or any Reimbursement Obligation when due (whether at
stated maturity or at mandatory or optional prepayment); or (ii) default in
the payment of any interest on any Loan, any fee, compensation, cost or any
other amount payable by it hereunder, under any other Basic Document or under
any fee letter when due and such default shall have continued unremedied for
five Business Days; or
(b) The Company or any of its Subsidiaries shall default in the
payment when due of any principal of or interest on any of its other
Indebtedness aggregating $250,000 or more, or in the payment when due of any
amount under any Interest Rate Protection Agreement, or any event specified in
any note, agreement, indenture or other document evidencing or relating to any
such Indebtedness or any event specified in any Interest Rate Protection
Agreement shall occur if the effect of such event is to cause, or (with the
giving of any notice or the lapse of time or both) to permit the holder or
holders of such Indebtedness (or a trustee or agent on behalf of such holder
or holders) to cause, such Indebtedness to become due, or to be prepaid in
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full (whether by redemption, purchase, offer to purchase or otherwise), prior
to its stated maturity; or in the case of any Interest Rate Protection
Agreement, to permit the payments owing under such Interest Rate Protection
Agreement to be liquidated or the Company shall be in default in or obligated
to pay any "Recourse Deficiency Amount" (as that term is defined in the Master
Agreement) in respect of the 1999 Synthetic Lease Financing; or
(c) If any representation or warranty by the Company or any
Obligor in this Agreement, in any other Basic Document or in any certificate
or document delivered to the Syndication Agent or any Lender pursuant hereto
or thereto shall have been incorrect in any material respect when made; or
(d) If an Event of Default (as defined therein) shall have
occurred under any other Basic Document; or
(e) The Company or any of its Subsidiaries shall commence any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (B) seeking appointment of a receiver, trustee, custodian or
other similar official for it or for all or any substantial part of its
assets, or the Lessee or any of its Subsidiaries shall make a general
assignment for the benefit of its creditors; or (ii) there shall be commenced
against the Company or any of its Subsidiaries any case, proceeding or other
action of a nature referred to in clause (i) above which (A) results in the
entry of an order for relief or any such adjudication or appointment or
(B) remains undismissed, undercharged or unbonded for a period of 90 days; or
(iii) there shall be commenced against the Company or any of its Subsidiaries
any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order for any
such relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within 90 days from the entry thereof; or (iv) the Company or
any of its Subsidiaries shall take any action in furtherance of, or indicating
its consent to, approval of, or acquiescence in, any of the acts set forth in
clause (i), (ii), or (iii) above; or (v) the Company or any of its
Subsidiaries shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due;
(f) The Company or any other Obligor shall default in the
performance of any of its obligations under any of Section 9 hereof; or any
Obligor shall default in the performance of any of its other obligations in
this Agreement (excluding those obligations expressly covered by another
provision of this Section 10) and such default shall continue unremedied for a
period of 30 or more days; or
(g) A final judgment or judgments for the payment of money in an
amount in excess of $250,000 shall be rendered by one or more courts,
administrative tribunals or other bodies having jurisdiction against the
Company or any of its Subsidiaries and the same shall not be discharged (or
provision shall not be made for such discharge), or a stay of execution
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thereof shall not be procured, within 60 days from the date of entry thereof
and the Company or such Subsidiary (as the case may be) shall not, within said
period of 30 days, or such longer period during which execution of the same
shall have been stayed, appeal therefrom and cause the execution thereof to be
stayed during such appeal;
(h) An event or condition specified in Section 9.1.1(g) hereof
shall occur or exist with respect to any Plan or Multiemployer Plan and, as a
result of such event or condition, together with all other such events or
conditions, the Company or any ERISA Affiliate shall incur or in the opinion
of the Required Lenders shall be reasonably likely to incur a liability to a
Plan, a Multiemployer Plan or Pension Benefit Guaranty Corporation (or any
combination of the foregoing) that, in the determination of the Required
Lenders, would (either individually or in the aggregate) have a Material
Adverse Effect; or
(i) Ten days after the date on which the Company or any of its
Subsidiaries first learn (whether by notice from the Syndication Agent or
otherwise) that an Environmental Claim has been asserted against the Company
or any of its Subsidiaries, or any predecessor in interest of the Company or
any of its Subsidiaries or Affiliates, that, in the judgment of the Required
Lenders, is reasonably likely to be determined adversely to the Company or any
of its Subsidiaries, and the amount thereof (either individually or in the
aggregate) is reasonably likely to have a Material Adverse Effect (insofar as
such amount is payable by the Company or any of its Subsidiaries but after
deducting any portion thereof that is reasonably expected to be paid by other
creditworthy Persons jointly and severally liable therefor); or
(j) The Liens created by the Security Documents shall at any
time not constitute a valid and perfected Lien on the collateral stated to be
covered thereby (to the extent perfection by filing, registration, recordation
or possession is required herein or therein) in favor of the Syndication
Agent, free and clear of all other Liens (other than Liens permitted under
Section 9.1.6 hereof or under the respective Security Documents), or, except
for expiration in accordance with its terms, any of the Security Documents,
the Guaranty Agreement or the obligations of the Subsidiary Guarantors
hereunder shall for whatever reason be terminated or cease to be in full force
and effect, or the enforceability thereof shall be contested by any Obligor;
or
(k) Fifteen Business Days shall have elapsed after any material
Facility Contract shall have been terminated and shall not have been renewed
on substantially the same terms or terms more favorable to the Obligors
(unless during such 15 Business Day period the Company shall have demonstrated
to the satisfaction of the Syndication Agent and each Lender that such
termination will not have a Material Adverse Effect); or
(l) Any Use Permit relating to a material Facility Contract
shall be revoked, withdrawn or otherwise terminated; or any Use Permit
relating to a material Facility Contract shall be modified, amended or
supplemented in a way which the Required Lenders reasonably determine could
have a Material Adverse Effect; provided, however, neither of the foregoing
shall constitute an Event of Default if, within 30 days after the date on
which the Company or any of its Subsidiaries first learn of such event
(whether by notice from the Syndication Agent or otherwise), such event is
cured; or
(m) Any person or group of persons (within the meaning of
Sections 13(d) or 14(a) of the Securities Exchange Act of 1934, as amended),
other than Gilder Gagnon Howe & Co., LLC, shall have acquired beneficial
ownership of (within the meaning of Rule 13d-3 promulgated by the Securities
and Exchange Commission under said Act) thirty-five percent (35%) or more of
the voting capital stock of the Company; or (ii) within a period of twelve
(12) consecutive calendar months, individuals who were directors of the
Company on the first day of such period shall cease to constitute a majority
of the board of directors of the Company; or
(n) An Event of Default (as defined in the Lease) shall exist
and be continuing (whether or not the Lease has terminated or expired), or any
Event of Default (as defined therein) shall have occurred under any other
Operative Documents;
(o) Ten days after notice from the Syndication Agent of the
occurrence of any other event which, in the reasonable judgment of the
Required Lenders, is likely to have a Material Adverse Effect.
thereupon: (1) in the case of an Event of Default other than one referred to
in subsection (e) or of this Section with respect to any Obligor, (A) the
Syndication Agent may and, upon request of the Required Lenders shall, by
notice to the Company, terminate the Commitments and they shall thereupon
terminate, and (B) the Syndication Agent may and, upon request of the Required
Lenders shall, by notice to the Company, declare the principal amount then
outstanding of, and the accrued interest on, the Loans, the Reimbursement
Obligations and all other amounts payable by the Obligors hereunder and under
the Notes to be forthwith due and payable, whereupon such amounts shall be
immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by each
Obligor; and (2) in the case of the occurrence of an Event of Default
referred to in subsection (e) of this Section with respect to any Obligor, the
Commitments shall automatically be terminated and the principal amount then
outstanding of, and the accrued interest on, the Loans, the Reimbursement
Obligations and all other amounts payable by the Obligors hereunder and under
the Notes shall automatically become immediately due and payable without
presentment, demand, protest or other formalities of any kind, all of which
are hereby expressly waived by each Obligor.
In addition, upon the occurrence and during the continuance of any Event
of Default (if the Syndication Agent has declared the principal amount then
outstanding of, and accrued interest on, the Loans and all other amounts
payable by the Company hereunder and under the Notes to be due and payable),
the Company agrees that it shall, if requested by the Syndication Agent or the
Required Lenders through the Syndication Agent (and, in the case of any Event
of Default referred to in subsection (e) of this Section with respect to any
Obligor, forthwith, without any demand or the taking off any other action by
the Syndication Agent or the Lenders) provide cover for the Letter of Credit
Liabilities by paying to the Syndication Agent immediately available funds in
an amount equal to the then aggregate undrawn face amount of all Letters of
Credit, which funds shall be held by the Syndication Agent in the Collateral
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Account as collateral security in the first instance for the Letter of Credit
Liabilities and be subject to withdrawal only as therein provided.
11. THE SYNDICATION AGENT
11.1 Appointment, Powers and Immunities.
Each Lender hereby irrevocably appoints and authorizes the Syndication
Agent to act as its agent hereunder and under the other Basic Documents with
such powers as are specifically delegated to the Syndication Agent by the
terms of this Agreement and of the other Basic Documents, together with such
other powers as are reasonably incidental thereto. The Syndication Agent
(which term as used in this sentence and in Section 12.5 and the first
sentence of Section 12.6 hereof shall include reference to its Affiliates and
its own and its Affiliates' officers, directors, employees and agents): (a)
shall have no duties or responsibilities except those expressly set forth in
this Agreement and in the other Basic Documents, and shall not by reason of
this Agreement or any other Basic Document be a trustee for any Lender; (b)
shall not be responsible to the Lenders for any recitals, statements,
representations or warranties contained in this Agreement or in any other
Basic Document, or in any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement or any other
Basic Document, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, any Note or any other Basic
Document or any other document referred to or provided for herein or therein
or for any failure by the Company or any other Person to perform any of its
obligations hereunder or thereunder; (c) shall not be required to initiate or
conduct any litigation or collection proceedings hereunder or under any other
Basic Document; and (d) shall not be responsible for any action taken or
omitted to be taken by it hereunder or under any other Basic Document or under
any other document or instrument referred to or provided for herein or therein
or in connection herewith or therewith, except for its own gross negligence or
willful misconduct. The Syndication Agent may employ agents and attorneys-in-
fact and shall not be responsible for the negligence or misconduct of any such
agents or attorneys-in-fact selected by it in good faith. The Syndication
Agent may deem and treat the payee of any Note as the holder thereof for all
purposes hereof unless and until a notice of the assignment or transfer
thereof shall have been filed with, and approved by, the Syndication Agent in
accordance with the provisions of Section 12.6(b) hereof.
11.2 Reliance by Syndication Agent.
The Syndication Agent shall be entitled to rely upon any certification,
notice or other communication (including, without limitation, any thereof by
telephone, telecopy, telex, telegram or cable) believed by it to be genuine
and correct and to have been signed or sent by or on behalf of the proper
Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by the Syndication Agent.
As to any matters not expressly provided for by this Agreement or any other
Basic Document, the Syndication Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder or thereunder in accordance
with instructions given by the Required Lenders or, if provided herein, in
accordance with the instructions given all of the Lenders, and such
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instructions of such Lenders and any action taken or failure to act pursuant
thereto shall be binding on all of the Lenders.
11.3 Defaults.
The Syndication Agent shall not be deemed to have knowledge or notice of
the occurrence of an Event of Default unless the Syndication Agent has
received notice from a Lender or the Company specifying such Event of Default
and stating that such notice is a "Notice of Default." In the event that the
Syndication Agent receives such a notice of the occurrence of a Default, the
Syndication Agent shall give prompt notice thereof to the Lenders. The
Syndication Agent shall (subject to Section 12.7 hereof) take such action with
respect to such Event of Default as shall be directed by the Required Lenders,
provided that, unless and until the Syndication Agent shall have received such
directions, the Syndication Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Event of
Default as it shall deem advisable in the best interest of the Lenders except
to the extent that this Agreement expressly requires that such action be
taken, or not be taken, only with the consent or upon the authorization of the
Required Lenders or all of the Lenders.
11.4 Rights as a Lender.
With respect to its Commitments and the Loans made by it, Summit Bank
(and any successor acting as Syndication Agent) in its capacity as a Lender
hereunder shall have the same rights and powers hereunder as any other Lender
and may exercise the same as though it were not acting as the Syndication
Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise
indicates, include the Syndication Agent in its individual capacity. Summit
Bank (and any successor acting as Syndication Agent) and its Affiliates may
(without having to account therefor to any Lender) accept deposits from, lend
money to, make investments in and generally engage in any kind of banking,
trust or other business with the Obligors (and any of their Subsidiaries or
Affiliates) as if it were not acting as the Syndication Agent, and Summit Bank
and its Affiliates may accept fees and other consideration from the Obligors
for services in connection with this Agreement or otherwise without having to
account for the same to the Lenders.
11.5 Indemnification.
The Lenders agree to indemnify the Syndication Agent (to the extent not
reimbursed under Section 12.3 hereof, but without limiting the obligations of
the Company under said Section 12.3), ratably in accordance with their
respective Commitments, for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever that may be imposed on,
incurred by or asserted against the Syndication Agent (including by any
Lender) arising out of or by reason of any investigation in or in any way
relating to or arising out of this Agreement or any other Basic Document or
any other documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby (including, without limitation,
the costs and expenses that the Company is obligated to pay under Section 12.3
hereof, but excluding, unless an Event of Default has occurred and is
continuing, normal administrative costs and expenses incident to the
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performance of its agency duties hereunder) or the enforcement of any of the
terms hereof or thereof or of any such other documents, provided that no
Lender shall be liable for any of the foregoing to the extent they arise from
the gross negligence or willful misconduct of the party to be indemnified.
11.6 Non-Reliance on Syndication Agent and Other Lenders.
Each Lender agrees that it has, independently and without reliance on
the Syndication Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Company and its Subsidiaries and decision to enter into this Agreement and
that it will, independently and without reliance upon the Syndication Agent or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or under any other Basic
Document. The Syndication Agent shall not be required to keep itself informed
as to the performance or observance by any Obligor of this Agreement or any of
the other Basic Documents or any other document referred to or provided for
herein or therein or to inspect the Properties or books of the Company or any
of its Subsidiaries. Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by the
Syndication Agent hereunder or under the Security Documents, the Syndication
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the affairs, financial condition or
business of the Company or any of its Subsidiaries (or any of their
Affiliates) that may come into the possession of the Syndication Agent or any
of its affiliates.
11.7 Failure to Act.
Except for action expressly required of the Syndication Agent hereunder
and under the other Basic Documents, the Syndication Agent shall in all cases
be fully justified in failing or refusing to act hereunder and thereunder
unless it shall receive further assurances to its satisfaction from the
Lenders of their indemnification obligations under Section 11.5 hereof against
any and all liability and expense that may be incurred by it by reason of
taking or continuing to take any such action.
11.8 Resignation or Removal of Syndication Agent.
Subject to the appointment and acceptance of a successor Syndication
Agent as provided below, the Syndication Agent may resign at any time by
giving notice thereof to the Lenders and the Company, and the Syndication
Agent may be removed at any time with or without cause by the Required
Lenders. Upon any such resignation or removal, the Required Lenders shall
have the right to appoint a successor Syndication Agent, subject to the
approval of the Company which approval shall not be unreasonably withheld or
delayed. If no successor Syndication Agent shall have been so appointed by
the Required Lenders (and approved by the Company) and shall have accepted
such appointment within 30 days after the retiring Syndication Agent's giving
of notice of resignation or the Required Lenders' removal of the retiring
Syndication Agent, then the retiring Syndication Agent may, on behalf of the
Lenders, appoint a successor Syndication Agent, subject to the approval of the
Company which approval shall not be unreasonably withheld or delayed. Upon
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the acceptance of any appointment as Syndication Agent hereunder by a
successor Syndication Agent, such successor Syndication Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Syndication Agent, and the retiring Syndication Agent
shall be discharged from its duties and obligations hereunder. After any
retiring Syndication Agent's resignation or removal hereunder as Syndication
Agent, the provisions of Section 11 of this Agreement shall continue in effect
for its benefit in respect of any actions taken or omitted to be taken by it
while it was acting as the Syndication Agent. The Syndication Agent may at
any time assign all of its rights and obligations hereunder to any affiliate
of the Syndication Agent by notice to the Company and each Lender.
12. MISCELLANEOUS
12.1 Waiver.
No failure on the part of the Syndication Agent or any Lender to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege under this Agreement or any Note shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege under this Agreement or any Note preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. The remedies provided herein are cumulative and not exclusive of
any remedies provided by law. Each Obligor irrevocably waives, to the fullest
extent permitted by applicable law, any claim that any action or proceeding
commenced by the Syndication Agent or any Lender relating in any way to this
Agreement should be dismissed or stayed by reason, or pending the resolution,
of any action or proceeding commenced by any Obligor relating in any way to
this Agreement whether or not commenced earlier. To the fullest extent
permitted by applicable law, the Obligors shall take all measures necessary
for any such action or proceeding commenced by the Syndication Agent or any
Lender to proceed to judgment prior to the entry of judgment in any such
action or proceeding commenced by any Obligor.
12.2 Notices.
All notices, requests and other communications provided for herein and
under the Security Documents (including, without limitation, any modifications
of, or waivers, requests or consents under, this Agreement) shall be given or
made in writing (including, without limitation, by telex or telecopy),
delivered to the intended recipient at the "Address for Notices" specified in
on Schedule I; or, as to any party, at such other address as shall be
designated by such party in a notice to each other party. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have
been duly given when transmitted by telex or telecopier or personally
delivered or, in the case of a mailed notice, upon receipt, in each case given
or addressed as aforesaid.
12.3 Expenses, Etc.
The Company agrees to pay or reimburse each of the Lenders and the
Syndication Agent for: (a) all reasonable out-of-pocket costs and expenses of
the Syndication Agent (including, without limitation, the reasonable fees and
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expenses of counsel to the Syndication Agent) in connection with (i) the
negotiation, preparation, execution and delivery of this Agreement and the
other Basic Documents and the extension of credit hereunder and (ii) the
negotiation or preparation of any modification, supplement or waiver of any of
the terms of this Agreement or any of the other Basic Documents (whether or
not consummated); (b) all reasonable out-of-pocket costs and expenses of the
Lenders and the Syndication Agent (including, without limitation, the
reasonable fees and expenses of legal counsel) in connection with (i) any
Event of Default and any enforcement or collection proceedings resulting
therefrom, including, without limitation, all manner of participation in or
other involvement with (x) bankruptcy, insolvency, receivership, foreclosure,
winding up or liquidation proceedings, (y) judicial or regulatory proceedings
and (z) workout, restructuring or other negotiations or proceedings (whether
or not the workout, restructuring or transaction contemplated thereby is
consummated) and (ii) the enforcement of this Section 12.3; and (c) all
transfer, stamp, documentary or other similar taxes, assessments or charges
levied by any governmental or revenue authority in respect of this Agreement
or any of the other Basic Documents or any other document referred to herein
or therein and all costs, expenses, taxes, assessments and other charges
incurred in connection with any filing, registration, recording or perfection
of any security interest contemplated by any Basic Document or any other
document referred to therein. The Company hereby agrees to indemnify the
Syndication Agent and each Lender and their respective directors, officers,
employees, attorneys and agents from, and hold each of them harmless against,
any and all losses, liabilities, claims, damages or expenses incurred by any
of them (including, without limitation, any and all losses, liabilities,
claims, damages or expenses incurred by the Syndication Agent to any Lender,
whether or not the Syndication Agent or any Lender is a party thereto) arising
out of or by reason of any investigation or litigation or other proceedings
(including any threatened investigation or litigation or other proceedings)
relating to the repurchase transaction and the transactions contemplated
thereby, the extensions of credit hereunder or any actual or proposed use by
the Company or any of its Subsidiaries of the proceeds of any of the
extensions of credit hereunder, including, without limitation, the reasonable
fees and disbursements of counsel incurred in connection with any such
investigation or litigation or other proceedings (but excluding any such
losses, liabilities, claims, damages or expenses incurred by reason of the
gross negligence or willful misconduct of the Person to be indemnified).
Without limiting the generality of the foregoing, the Company will (x)
indemnify the Syndication Agent for any payments that the Syndication Agent is
required to make under any indemnity issued to any bank referred to in
Section 4.2 of the Security Agreement to which remittances in respect to
Accounts, as defined therein, are to be made and (y) indemnify the Syndication
Agent and each Lender from, and hold the Syndication Agent and each Lender
harmless against, any losses, liabilities, claims, damages or expenses
described in the preceding sentence arising under any Environmental Law as a
result of (i) the past, present or future operations of the Company or any of
its Subsidiaries (or any predecessor in interest to the Company or any of its
Subsidiaries), or (ii) the past, present or future condition of any site or
facility owned, operated or leased at any time by the Company or any of its
Subsidiaries (or any such predecessor in interest), or (iii) any Release or
threatened Release of any Hazardous Materials at or from any such site or
facility, including any such Release or threatened Release that shall occur
during any period when the Syndication Agent or any Lender shall be in
possession of any such site or facility following the exercise by the
Syndication Agent or any Lender of any of its rights and remedies hereunder or
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under any of the Security Documents, provided that the Company shall not be
liable under this subclause (y) for any of the foregoing to the extent they
arise solely from the gross negligence or willful misconduct of the party to
be indemnified (or such party's employees or agents).
12.4 Amendments, Etc.
Except as otherwise expressly provided in this Agreement, any provision
of this Agreement or the other Basic Documents may be modified or supplemented
only by an instrument in writing signed by the Company, the Syndication Agent
and the Required Lenders, or by the Company and the Syndication Agent acting
with the consent of the Required Lenders, and any provision of this Agreement
or the other Basic Documents may be waived by the Required Lenders or by the
Syndication Agent acting with the consent of the Required Lenders; provided
that: (a) no modification, supplement or waiver shall, unless by an instrument
signed by all of the Lenders or by the Syndication Agent acting with the
consent of all of the Lenders: (i) increase, or extend the term of any of the
Commitments, or extend the time or waive any requirement for the reduction or
termination of any of the Commitments, (ii) extend the date fixed for the
payment of principal of or interest on any Loan, the Reimbursement Obligations
or any fee hereunder, (iii) reduce the amount of any such payment of
principal, (iv) reduce the rate at which interest is payable thereon or any
fee is payable hereunder, (v) alter the rights or obligations of the Company
to prepay Loans, (vi) alter the terms of this Section 12.4, or (vii) modify
the definition of the term "Required Lenders," or modify in any other manner
the number or percentage of the Lenders required to make any determinations or
waive any rights hereunder or to modify any provision hereof; (b) any
modification or supplement of Section 11 hereof shall require the consent of
the Syndication Agent; and (c) any modification or supplement of Section 6
hereof shall require the consent of each Subsidiary Guarantor.
12.5 Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
12.6 Assignments and Participations.
(a) No Obligor may assign any of its rights or obligations
hereunder or under the Notes without the prior consent of all of the Lenders
and the Syndication Agent.
(b) Each Lender may, with the consent of the Syndication Agent
and (in the case of a Revolving Credit Lender) the Letter of Credit Issuer,
assign any of its Loans, its Notes, its Letter of Credit Liabilities and its
Commitments to an Eligible Assignee provided that (i) no such consent by the
Syndication Agent shall be required in the case of any assignment to another
Lender or an Affiliate of an assigning Lender; (ii) any such partial
assignment shall be in an amount at least equal to $5,000,000 and, after
giving effect thereto, the Commitment of both the assignor and the assignee is
at least $1,000,000, unless the assignee is an Affiliate of an assigning
Lender; and (iii) each such assignment by a Lender of its Loans, Letter of
Credit Liabilities or Commitment shall be made in such manner so that the same
portion of its Loans, Letter of Credit Liabilities and Commitment is assigned
to the respective assignee. Upon execution and delivery by the assignor and
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the assignee to the Syndication Agent of an Assignment and Assumption
Agreement substantially in the form of Exhibit C hereto (the "Assignment and
Assumption Agreement") pursuant to which such assignee agrees to become a
"Lender" hereunder (if not already a Lender) having the Commitment(s), Letter
of Credit Liabilities and Loans specified in such Assignment and Assumption
Agreement, and upon the consent thereto by the Syndication Agent, to the
extent required above, the assignee shall have, to the extent of such
assignment (unless otherwise provided in such assignment with the consent of
the Syndication Agent), the obligations, rights and benefits of a Lender
hereunder holding the Commitment(s), Letter of Credit Liabilities and Loans
(or portion thereof) assigned to it (in addition to the Commitment(s), Letter
of Credit Liabilities and Loans, if any, theretofore held by such assignee)
and the assigning Lender shall, to the extent of such assignment, be released
from the Commitment(s) (or portion(s) thereof) so assigned. Upon each such
assignment, (x) the assigning Lender shall pay the Syndication Agent an
assignment fee of $3,500, and (y) the assignee, as a condition precedent
thereto, shall execute and deliver a joinder agreement pursuant to which it
becomes a party to the Intercreditor Agreement. Within five Business Days
after receipt by the Company of (i) notice from the Syndication Agent of any
assignment made pursuant to this Section 12.6(b) and (ii) Substitute Notes
reflecting the Commitments and Loans assigned hereunder, the Company shall
execute and deliver such Notes to the Syndication Agent for distribution to
the appropriate parties.
(c) A Lender may sell or agree to sell to one or more other
Persons a participation in a portion of any Loans or Letter of Credit Interest
held by it, or in its Commitments, in which event each purchaser of a
participation (a "Participant") shall, except as otherwise provided in
Section 4.7(c) hereof, not have any other rights or benefits under this
Agreement or any Note or any other Basic Document (the Participant's rights
against such Lender in respect of such participation to be those set forth in
the agreements executed by such Lender in favor of the Participant);
provided, however, that the aggregate participations in its Commitment (after
giving effect to any permitted assignment hereunder) sold by a Lender
hereunder shall not exceed fifty percent (50%) of such Commitment (provided
further that (A) sales of participations to an Affiliate of the Lender shall
not be included in such calculation and (B) no such maximum amount shall be
applicable to any participation sold at any time there exists an Event of
Default). All amounts payable by the Company to any Lender under Section 5
hereof in respect of Loans and Letter of Credit Interest held by it, and its
Commitments, shall be determined as if such Lender had not sold or agreed to
sell any participations in such Loans, Letter of Credit Interest and
Commitments, and as if such Lender were funding each of such Loan, Letter of
Credit Interest and Commitments in the same way that it is funding the portion
of such Loan and Commitments in which no participations have been sold. In no
event shall a Lender that sells a participation agree with the Participant to
take or refrain from taking any action hereunder or under any other Basic
Document except that such Lender may agree with the Participant that it will
not, without the consent of the Participant, agree to (i) increase or extend
the term, or extend the time or waive any requirement for the reduction or
termination, of such Lender's related Commitment, (ii) extend the date fixed
for the payment of principal of or interest on the related Loan or Loans,
Reimbursement Obligations or any portion of any fee hereunder payable to the
Participant, (iii) reduce the amount of any such payment of principal, (iv)
reduce the rate at which interest is payable thereon, or any fee hereunder
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payable to the Participant, to a level below the rate at which the Participant
is entitled to receive such interest or fee, (v) alter the rights or
obligations of the Company to prepay the related Loans or (vi) consent to any
modification, supplement or waiver hereof or of any of the other Basic
Documents to the extent that the same, under Section 11.10 or 12.4 hereof,
requires the consent of each Lender. Any Lender selling a participation
hereunder shall provide prompt written notice to the Syndication Agent of the
name of such participant.
(d) In addition to the assignments and participations permitted
under the foregoing provisions of this Section 12.6, any Lender may (without
notice to the Company, the Syndication Agent or any other Lender and without
payment of any fee) (i) assign and pledge all or any portion of its Loans and
its Notes to any Federal Reserve Bank as collateral security pursuant to
Regulation A and any Operating Circular issued by such Federal Reserve Bank
and (ii) assign all or any portion of its rights under this Agreement and its
Loans and its Notes to an Affiliate. No such assignment shall release the
assigning Lender from its obligations hereunder.
(e) A Lender may furnish any information concerning the Company
or any of its Subsidiaries in the possession of such Lender from time to time
to assignees and participants (including prospective assignees and
participants), subject, however, to the provisions of Section 12.12 hereof.
(f) Anything in this Section 12.6 to the contrary
notwithstanding, no Lender may assign or participate any interest in any Loan
or Reimbursement Obligation held by it hereunder to the Company or any of its
Affiliates or Subsidiaries without the prior consent of each Lender.
12.7 Survival.
The obligations of the Company under Sections 5.1, 5.5, 5.7 and 12.3
hereof, the obligations of each Subsidiary Guarantor under Section 6.3 hereof,
and the obligations of the Lenders under Section 11.5 hereof, shall survive
the repayment of the Loans and the Reimbursement Obligations and the
termination of the Commitments.
12.8 Captions.
The table of contents and captions and Section headings appearing herein
are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
12.9 Counterparts.
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument and any of
the parties hereto may execute this Agreement by signing any such counterpart.
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12.10 Governing Law; Submission to Jurisdiction.
This Agreement and the Notes shall be governed by, and construed in
accordance with, the law of the State of New York. Each Obligor hereby
submits to the nonexclusive jurisdiction of the United States District Court
for the District of New Jersey and of the Superior Court of the State of New
Jersey for the purposes of all legal proceedings arising out of or relating to
this Agreement or the transactions contemplated hereby. Each Obligor
irrevocably waives, to the fullest extent permitted by applicable law, any
objection that it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
12.11 WAIVER OF JURY TRIAL.
EACH OF THE OBLIGORS, THE SYNDICATION AGENT AND THE LENDERS HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
12.12 Confidentiality.
Each Lender and the Syndication Agent agrees (on behalf of itself and
each of its affiliates, directors, officers, employees and representatives) to
use reasonable precautions to keep confidential, in accordance with their
customary procedures for handling confidential information of the same nature
and in accordance with safe and sound banking practices, any non-public
information supplied to it by the Company pursuant to this Agreement, provided
that nothing herein shall limit the disclosure of any such information (i) to
the extent required by statute, rule, regulation or judicial process, (ii) to
counsel for any of the Lenders or the Syndication Agent, (iii) to bank
examiners, auditors or accountants, (iv) to the Syndication Agent or any other
Lender, (v) in connection with any litigation to which any one or more of the
Lenders or the Syndication Agent is a party relating to any of the Obligors
or the transactions contemplated hereby, (vi) to a subsidiary or affiliate of
such Lender or (vii) to any assignee or participant (or prospective assignee
or participant) so long as such assignee or participant (or prospective
assignee or participant) first executes and delivers to the respective Lender
a Confidentiality Agreement substantially in the form of Exhibit D hereto;
provided, further, that
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in no event shall any Lender or the Syndication Agent be obligated or required
to return any materials furnished by the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered as of the day and year first above written.
CORRECTIONAL SERVICES CORPORATION,
a Delaware corporation
By: /s/ Ira M. Cotler
----------------------------------
Ira M. Cotler
Executive Vice President
YOUTH SERVICES INTERNATIONAL, INC.,
a Maryland corporation
By: /s/ Ira M. Cotler
---------------------------------
Ira M. Cotler
Executive Vice President
FF&E, INC.,
a New Jersey corporation
By: /s/ Ira M. Cotler
--------------------------------
Ira M. Cotler
Executive Vice President
COMMUNITY CORRECTIONS, INC.,
a Texas corporation
By: /s/ Ira M. Cotler
--------------------------------
Ira M. Cotler
Executive Vice President
(Signatures continued on next page)
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YOUTH SERVICES INTERNATIONAL
OF NORTHERN IOWA, INC.,
an Iowa corporation
By: /s/ Ira M. Cotler
--------------------------------
Ira M. Cotler
Executive Vice President
YOUTH SERVICES INTERNATIONAL
OF BALTIMORE, INC.,
a Maryland corporation
By: /s/ Ira M. Cotler
-------------------------------
Ira M. Cotler
Executive Vice President
YOUTH SERVICES INTERNATIONAL
OF VIRGINIA, INC.,
a Virginia corporation
By: /s/ Ira M. Cotler
--------------------------------
Ira M. Cotler
Executive Vice President
YOUTH SERVICES INTERNATIONAL
HOLDINGS, INC.,
a Delaware corporation
By: /s/ Ira M. Cotler
--------------------------------
Ira M. Cotler
Executive Vice President
(Signatures continued on next page)
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YOUTH SERVICES INTERNATIONAL
REAL PROPERTY PARTNERSHIP, LLP,
a Maryland limited liability partnership
By: /s/ Ira M. Cotler
---------------------------------
Ira M. Cotler
Executive Vice President of Both
Partners
YOUTH SERVICES INTERNATIONAL
OF DELAWARE, INC.,
a Delaware corporation
By: /s/ Ira M. Cotler
-------------------------------
Ira M. Cotler
Executive Vice President
YOUTH SERVICES INTERNATIONAL
OF ILLINOIS, INC.,
a Maryland corporation
By: /s/ Ira M. Cotler
-------------------------------
Ira M. Cotler
Executive Vice President
YOUTH SERVICES INTERNATIONAL
OF MARYLAND, INC.,
a Maryland corporation
By: /s/ Ira M. Cotler
-------------------------------
Ira M. Cotler
Executive Vice President
(Signatures continued on next page)
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YOUTH SERVICES INTERNATIONAL
OF MINNESOTA, INC.,
a Maryland corporation
By: /s/ Ira M. Cotler
--------------------------------------
Ira M. Cotler
Executive Vice President
YOUTH SERVICES INTERNATIONAL
OF SOUTH DAKOTA, INC.,
a South Dakota corporation
By: /s/ Ira M. Cotler
--------------------------------------
Ira M. Cotler
Executive Vice President
YOUTH SERVICES INTERNATIONAL
OF TEXAS, INC.,
a Texas corporation
By: /s/ Ira M. Cotler
--------------------------------------
Ira M. Cotler
Executive Vice President
YSI OF CENTRAL IOWA, INC.,
an Iowa corporation
By: /s/ Ira M. Cotler
-------------------------------------
Ira M. Cotler
Executive Vice President
(Signatures continued on next page)
93
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YOUTH SERVICES INTERNATIONAL
OF IOWA, INC.,
a Maryland corporation
By: /s/ Ira M. Cotler
------------------------------------=
Ira M. Cotler
Executive Vice President
YOUTH SERVICES INTERNATIONAL
OF MICHIGAN, INC.,
a Michigan corporation
By: /s/ Ira M. Cotler
-----------------------------------
Ira M. Cotler
Executive Vice President
YOUTH SERVICES INTERNATIONAL
OF MISSOURI, INC.,
a Missouri corporation
By: /s/ Ira M. Cotler
-----------------------------------
Ira M. Cotler
Executive Vice President
YOUTH SERVICES INTERNATIONAL
OF TENNESSEE, INC.,
a Maryland corporation
By: /s/ Ira M. Cotler
-----------------------------------
Ira M. Cotler
Executive Vice President
(Signatures continued on next page)
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YOUTH SERVICES INTERNATIONAL
SOUTHEASTERN PROGRAMS, INC.,
a Maryland corporation
By: /s/ Ira M. Cotler
-----------------------------------
Ira M. Cotler
Executive Vice President
CSC MANAGEMENT DE PUERTO RICO, INC.,
a Puerto Rico corporation
By: /s/ Ira M. Cotler
-----------------------------------
Ira M. Cotler
Executive Vice President
SUMMIT BANK,
as the Syndication Agent and a Lender
By: /s/ Lisa Cohen
----------------------------------
Lisa Cohen
Vice President
MASTER AGREEMENT
Dated as of August 31, 1999
among
CORRECTIONAL SERVICES CORPORATION,
as a Lessee and as Guarantor,
CERTAIN SUBSIDIARIES OF CORRECTIONAL SERVICES CORPORATION
THAT ARE OR MAY HEREAFTER BECOME PARTY HERETO,
as Lessees
CERTAIN SUBSIDIARIES OF CORRECTIONAL SERVICES CORPORATION,
as Subsidiary Guarantors
ATLANTIC FINANCIAL GROUP, LTD., as Lessor
CERTAIN FINANCIAL INSTITUTIONS PARTIES HERETO,
as Lenders
SUMMIT BANK, as Syndication Agent
and
SUNTRUST BANK, NASHVILLE, N.A., as Documentation Agent
<PAGE>
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS; INTERPRETATION 1
ARTICLE II. ACQUISITIONS; CONSTRUCTION AND LEASE;
FUNDINGS; NATURE OF TRANSACTION 2
SECTION 2.1 Agreement to Acquire,Construct, Fund
and Lease 2
SECTION 2.2 Fundings of Purchase Price,
Development Costs and Construction Costs 2
SECTION 2.3 Funded Amounts and Interest and Yield
Thereon 6
SECTION 2.4 Lessee Owner for Tax Purposes 7
SECTION 2.5 Amounts Due Under Lease 7
ARTICLE III. CONDITIONS PRECEDENT; DOCUMENTS 8
SECTION 3.1 Conditions to the Obligations of the
Funding Parties on each Closing Date 8
SECTION 3.2 Additional Conditions for the Initial
Closing Date 13
SECTION 3.3 Conditions to the Obligations of Lessee 15
SECTION 3.4 Conditions to the Obligations of the
Funding Parties on each Funding Date 16
SECTION 3.5 Completion Date Conditions 18
SECTION 3.6 Addition of Lessees 20
SECTION 3.7 Certain Post Closing Matters 21
ARTICLE IV. REPRESENTATIONS 21
SECTION 4.1 Representations of Obligors 21
SECTION 4.2 Survival of Representations and
Effect of Fundings 34
SECTION 4.3 Representations of the Lessor 34
SECTION 4.4 Representations of each Lender 37
ARTICLE V. COVENANTS OF COMPANY AND THE LESSOR 38
SECTION 5.1 Affirmative Covenants 38
SECTION 5.2 Regulations T, U and X 56
SECTION 5.3 Further Assurances 56
SECTION 5.4 Additional Required Appraisals 56
SECTION 5.5 Lessor's Covenants 57
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ARTICLE VI. TRANSFERS BY LESSOR AND LENDERS 59
SECTION 6.1 Lessor Transfers and Replacement 59
SECTION 6.2 Lender Transfers 59
ARTICLE VII. INDEMNIFICATION
61
SECTION 7.1 General Indemnification 61
SECTION 7.2 Environmental Indemnity 63
SECTION 7.3 Proceedings in Respect of Claims 64
SECTION 7.4 General Tax Indemnity 66
SECTION 7.5 Increased Costs, etc. 72
SECTION 7.6 End of Term Indemnity
80
SECTION 7.7 Guarantee
81
ARTICLE VIII. MISCELLANEOUS
85
SECTION 8.1 Survival of Agreements 85
SECTION 8.2 Notices 85
SECTION 8.3 Counterparts 85
SECTION 8.4 Amendments 85
SECTION 8.5 Headings, etc. 87
SECTION 8.6 Parties in Interest 87
SECTION 8.7 GOVERNING LAW 87
SECTION 8.8 Expenses 87
SECTION 8.9 Severability 88
SECTION 8.10 Liabilities of the Funding Parties
88
SECTION 8.11 Submission to Jurisdiction; Waivers 88
SECTION 8.12 Liabilities of the Syndication Agent 89
SECTION 8.13 Intercreditor Agreement 89
ii
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MASTER AGREEMENT
THIS MASTER AGREEMENT, dated as of August 31, 1999 (as it may be amended
or modified from time to time in accordance with the provisions hereof, this
"Master Agreement"), is among CORRECTIONAL SERVICES CORPORATION, a Delaware
corporation (the "Company"), certain Subsidiaries of the Company that are or
may hereafter become parties hereto as lessees pursuant to Section 3.6
(individually, together with the Company in its capacity as a lessee, a
"Lessee" and collectively the "Lessees"), as Lessees, each of the Subsidiaries
of the Company identified under the caption "SUBSIDIARY GUARANTORS" on the
signature pages hereto (individually, a "Subsidiary Guarantor" and
collectively, the "Subsidiary Guarantors"), ATLANTIC FINANCIAL GROUP, LTD., a
Texas limited partnership (the "Lessor"), certain financial institutions
parties hereto as lenders (together with any other financial institution that
becomes a party hereto as a lender, collectively referred to as "Lenders" and
individually as a "Lender"), SUMMIT BANK, a New Jersey banking corporation, as
syndication agent for the Lenders (in such capacity, the "Syndication Agent")
and SUNTRUST BANK, NASHVILLE, N.A., a national banking association, as
documentation agent (in such capacity, the "Documentation Agent").
PRELIMINARY STATEMENT
In accordance with the terms and provisions of this Master Agreement,
the Lease, the Loan Agreement and the other Operative Documents, (i) the
Lessor contemplates acquiring Land and, in certain cases, the Buildings
thereon identified by the Company from time to time, and leasing such Land and
Buildings thereon to a Lessee, (ii) the Company, as Construction Agent for the
Lessor, wishes, in certain instances, to construct Buildings on Land for the
Lessor and, when completed, the related Lessee wishes to lease such Buildings
from the Lessor as part of the Leased Properties under the Lease, (iii) the
Company, as agent, wishes to obtain, and the Lessor is willing to provide,
funding for the acquisition of the Land and Buildings, or, in certain
instances, the construction of Buildings, and (iv) the Lessor wishes to
obtain, and Lenders are willing to provide, from time to time, financing of a
portion of the funding of the acquisition of the Land and Buildings and, if
applicable, the construction of the Buildings.
In consideration of the mutual agreements contained in this Master
Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I.
DEFINITIONS; INTERPRETATION
Unless the context shall otherwise require, capitalized terms used and
not defined herein shall have the meanings assigned thereto in Appendix A
hereto for all purposes hereof; and the rules of interpretation set forth in
Appendix A hereto shall apply to this Master Agreement.
<PAGE>
ARTICLE II.
ACQUISITIONS; CONSTRUCTION AND LEASE; FUNDINGS; NATURE OF TRANSACTION
SECTION 2.1 Agreement to Acquire, Construct, Fund and Lease.
(a) Land.
Subject to the terms and conditions of this Master Agreement, with
respect to each parcel of Land identified by the Company, on the related
Closing Date (i) the Lessor agrees to acquire such interest in the related
Land, and any Building thereon, from the applicable Seller as is transferred,
sold, assigned and conveyed to the Lessor pursuant to the applicable Purchase
Agreement or to lease such interest in the related Land, and any Building
thereon, from the applicable Ground Lessor as is leased to the Lessor pursuant
to the applicable Ground Lease, (ii) the Lessor hereby agrees to lease, or
sublease, as the case may be, such Land and any Building thereon to the
related Lessee pursuant to the Lease, and (iii) the related Lessee hereby
agrees to lease, or sublease, as the case may be, such Land, and any Building
thereon, from the Lessor pursuant to the Lease.
(b) Building.
With respect to each parcel of Land on which a Building is to be
constructed, subject to the terms and conditions of this Master Agreement,
from and after the Closing Date relating to such Land (i) the Construction
Agent agrees, pursuant to the terms of the Construction Agency Agreement, to
construct and install the Building on such Land for the Lessor prior to the
Scheduled Construction Termination Date, (ii) the Lenders and the Lessor agree
to fund the costs of such construction and installation (and interest and
yield thereon), (iii) the Lessor shall lease, or sublease, as the case may be,
such Building as part of such Leased Property to the related Lessee pursuant
to the Lease, and (iv) the related Lessee shall lease, or sublease, as the
case may be, such Building from the Lessor pursuant to the Lease.
SECTION 2.2 Fundings of Purchase Price, Development Costs and
Construction Costs.
(a) Initial Funding and Payment of Purchase Price for Land and
Development Costs on Closing Date.
Subject to the terms and conditions of this Master Agreement, on
the Closing Date for any Land, and any Building thereon, each Lender shall
make available to the Lessor its initial Loan with respect to such Land, and
any Building thereon, in an amount equal to the product of such Lender's
Commitment Percentage times the purchase price for the Land, and any Building
thereon, and the development, transaction and closing costs incurred by the
Construction Agent, as agent, through such Closing Date (the "Acquisition
Costs" for such Land and Building, if any), which funds the Lessor shall use,
together with the Lessor's own funds in an amount equal to the product of the
Lessor's Commitment Percentage times the Acquisition
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Costs for the related Land and any Building thereon, to purchase the Land,
and any Building thereon, from the applicable Seller pursuant to the appli-
cable Purchase Agreement orlease the Land and any Building thereon, from the
applicable Ground Lessor pursuant to the applicable Ground Lease, as the case
may be, and to pay to the Construction Agent the amount of such development,
transaction and closing costs, and the Lessor shall lease, or sublease, as the
case may be, such Land to the related Lessee pursuant to the Lease.
(b) Subsequent Fundings and Payments of Construction Costs
during Construction Term.
Subject to the terms and conditions of this Master Agreement, if a
Building is to be constructed on Land, on each Funding Date following the
Closing Date for each such parcel of Land until the related Construction Term
Expiration Date, (i) each Lender shall make available to the Lessor a Loan in
an amount equal to the product of such Lender's Commitment Percentage times
the amount of Funding requested by the Construction Agent for such Funding
Date, which funds the Lessor hereby directs each Lender to pay over to the
Construction Agent as set forth in paragraph (d), and (ii) the Lessor shall
pay over to the Construction Agent its own funds (which shall constitute a
part of, and an increase in, the Lessor's Invested Amount with respect to such
Leased Property) in an amount equal to the product of the Lessor's Commitment
Percentage times the amount of Funding requested by the Construction Agent for
such Funding Date.
(c) Aggregate Limits on Funded Amounts.
The aggregate amount that the Funding Parties shall be committed
to provide as Funded Amounts under this Master Agreement and the Loan
Agreement shall not exceed (x) with respect to each Leased Property, the costs
of purchase and construction of such Leased Property and the related
development, transaction, closing and financing costs, or (y) $45,000,000 in
the aggregate for all Leased Properties. The aggregate amount that any
Funding Party shall be committed to fund under this Master Agreement and the
Loan Agreement shall not exceed the lesser of (i) such Funding Party's
Commitment and (ii) such Funding Party's Commitment Percentage of the
aggregate Fundings requested under this Master Agreement. The aggregate
amount that the Funding Parties shall be committed to provide as Funded
Amounts under this Master Agreement and the Loan Agreement for Land on which
no Construction has commenced is $7,500,000. The Funding Parties shall have
no obligation to make a Funding for Pre-Development Costs (other than for the
acquisition of vacant Land to the extent set forth in the foregoing sentence)
with respect to any Leased Property until such time as Construction has
commenced with respect to such Leased Property.
(d) Notice, Time and Place of Fundings.
With respect to each Funding, a Lessee or the Construction Agent,
as the case may be, shall give the Lessor and the Syndication Agent an
irrevocable prior telephone (followed within one Business Day with written) or
written notice not later than 11:00 a.m., New York, New York time, at least
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<PAGE>
three Business Days prior to the proposed Closing Date or other Funding Date,
as the case may be, pursuant, in each case, to a Funding Request in the form
of Exhibit A (a "Funding Request"), specifying the Closing Date or subsequent
Funding Date, as the case may be, the amount of Funding requested, whether
such Funding shall be a LIBOR Advance or a Base Rate Advance or a combination
thereof and the Rent Period(s) therefor. All documents and instruments
required to be delivered on such Closing Date pursuant to this Master
Agreement shall be delivered at the offices of Wolff & Samson, P.A., 5 Becker
Farm Road, Roseland, New Jersey 07068, or at such other location as may be
determined by the Lessor, the Construction Agent and the Syndication Agent.
Each Funding shall occur on a Business Day and shall be in an amount equal to
$250,000 or an integral multiple of $100,000 in excess thereof, with a maximum
of eight Fundings per month. All remittances made by any Lender and the
Lessor for any Funding shall be made in immediately available funds by wire
transfer to or, as is directed by, the Construction Agent, with receipt by the
Construction Agent not later than 12:00 noon, New York, New York time, on the
applicable Funding Date, upon satisfaction or waiver of the conditions
precedent to such Funding set forth in Section 3; such funds shall (1) in the
case of the initial Funding on a Closing Date, be used to pay the purchase
price to the applicable Seller for the related Land and pay development,
transaction and closing costs related to such Land, and (2) in the case of
each subsequent Funding be paid to the Construction Agent, for the payment or
reimbursement of Construction costs or Pre-Development Costs related to a
Leased Property for which Construction has commenced incurred through such
Funding Date and not previously paid or reimbursed.
(e) Lessee's Deemed Representation for Each Funding.
Each Funding Request by a Lessee or the Construction Agent shall
be deemed a reaffirmation of each Lessee's indemnity obligations in favor of
the Indemnitees under the Operative Documents and a representation and
warranty by such Lessee or the Construction Agent, as the case may be, to the
Lessor, the Syndication Agent and the Lenders that on the proposed Closing
Date or Funding Date, as the case may be, (i) the amount of Funding requested
represents amounts owing in respect of the purchase price of the related Land,
and any Building thereon, and development, transaction and closing costs in
respect of the Leased Property (in the case of the initial Funding on a
Closing Date) or amounts that are then due to third parties in respect of the
Construction or Pre-Development Costs related to a Leased Property for which
Construction has commenced, or amounts paid by the Construction Agent to third
parties in respect of the Construction or Pre-Development Costs related to a
Leased Property for which Construction has commenced for which the
Construction Agent has not previously been reimbursed by a Funding (in the
case of any Funding), (ii) no Event of Default or Potential Event of Default
exists, (iii) the representations and warranties of the Company and each
Lessee set forth in Section 4.1 are true and correct in all material respects
as though made on and as of such Funding Date, except to the extent such
representations or warranties relate solely to an earlier date, in which case
such representations and warranties shall have been true and correct in all
material respects on and as of such earlier date and (iv) the amount of such
Funding, plus the outstanding Funded Amounts related to the related Leased
Property does not exceed the Construction Budget for such Leased Property.
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(f) Not Joint Obligations.
Notwithstanding anything to the contrary set forth herein or in
the other Operative Documents, each Lender's and the Lessor's commitments
shall be several, and not joint. In no event shall any Funding Party be
obligated to fund an amount in excess of such Funding Party's Commitment
Percentage of any Funding, or to fund amounts in the aggregate in excess of
such Funding Party's Commitment.
(g) Non-Pro Rata Fundings.
Notwithstanding anything to the contrary set forth in this Master
Agreement, at the Syndication Agent's option, Fundings may be made by drawing
on the Lessor's Commitment until such Commitment is fully funded before
drawing on the Lenders' Commitments. In such event, when the Lessor's
Commitment is fully funded, the Lenders will fund, on a pro rata basis as
among themselves, 100% of the amount of the Fundings thereafter, provided
that, in no event will the Lessor's Invested Amount be less than 3% of the
aggregate Funded Amounts. In no event shall any Funding Party have any
obligation to fund any amount hereunder in excess of the amount of such
Funding Party's Commitment.
(h) Facility Fee.
Company shall pay to the Syndication Agent, for the ratable
benefit of each Funding Party based upon its unfunded portion of the aggregate
Commitments, a facility fee (the "Facility Fee") for the period commencing on
the date hereof to and including the Lease Termination Date payable quarterly
in arrears on each Quarterly Payment Date, and on the Lease Termination Date
in an amount equal to (i) the Facility Fee Percentage, times (ii) the
aggregate of the Commitments less the Funded Amounts outstanding, times (iii)
1/360 times (iv) the number of days from and including the date hereof (in the
case of the first Quarterly Payment Date) or the immediately preceding
Quarterly Payment Date (in the case of each other Quarterly Payment Date) to,
but excluding, such Quarterly Payment Date. The Facility Fee Percentage shall
be at "Level II" in the following table for a period of six months following
the Initial Closing Date. Thereafter, the Facility Fee Percentage shall
change on the fifth Business Day following receipt by the Syndication Agent of
a Compliance Certificate of the Company demonstrating that the ratio of the
consolidated Indebtedness of the Company and its Subsidiaries to Adjusted
EBITDA as at the last day of the immediately preceding fiscal quarter of the
Company shall be at a different level in the table below, whereupon the
Facility Fee Percentage shall be reduced or increased to the applicable
percentage set forth in such table. Notwithstanding the foregoing, the
Facility Fee Percentage shall not be reduced at any time during which an Event
of Default shall have occurred and be continuing):
Level I Ratio of Indebtedness to Adjusted EBITDA Facility Fee Percentage
>3.75:1 .500%
-
5
<PAGE>
Level II >3.75:1 .375%
SECTION 2.3 Funded Amounts and Interest and Yield Thereon.
(a) The Lessor's Invested Amount for any Leased Property
outstanding from time to time shall accrue yield ("Yield") at the Lessor Rate,
computed using the actual number of days elapsed and a 360 day year. If all
or a portion of the principal amount of or yield on the Lessor's Invested
Amounts shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue amount shall, without limiting the
rights of the Lessor under the Lease, to the maximum extent permitted by law,
accrue yield at the Overdue Rate, from the date of nonpayment until paid in
full (both before and after judgment).
(b) Each Lender's Funded Amount for any Leased Property
outstanding from time to time shall accrue interest as provided in the Loan
Agreement.
(c) During the Construction Term with respect to any Leased
Property, in lieu of the payment of accrued interest, on each Payment Date,
each Lender's Funded Amount in respect of a Construction Land Interest shall
automatically be increased by the amount of interest accrued and unpaid on the
related Loans pursuant to the Loan Agreement during the Rent Period ending
immediately prior to such Payment Date (except to the extent that at any time
such increase would cause such Lender's Funded Amount to exceed such Lender's
Commitment, in which event the related Lessee shall pay such excess amount to
such Lender in immediately available funds on such Payment Date). Similarly,
in lieu of the payment of accrued Yield, on each Payment Date, the Lessor's
Invested Amount in respect of a Construction Land Interest shall automatically
be increased by the amount of Yield accrued on the Lessor's Invested Amount in
respect of such Leased Property during the Rent Period ending immediately
prior to such Payment Date (except to the extent that at any time such
increase would cause the Lessor's Invested Amount to exceed the Lessor's
Commitment, in which event the related Lessee shall pay such excess amount to
the Lessor in immediately available funds on such Payment Date). Such
increases in Funded Amounts shall occur without any disbursement of funds by
the Funding Parties.
(d) Three Business Days prior to the last day of each Rent
Period, the Company shall deliver (which delivery may be by facsimile) to the
Lessor and the Syndication Agent a notice substantially in the form of Exhibit
I (each, a "Payment Date Notice"), appropriately completed, specifying the
allocation of the Funded Amounts related to such Rent Period to LIBOR Advances
and Base Rate Advances and the Rent Periods therefor, provided that no such
allocation to LIBOR Advances shall be in an amount less than $1,000,000 and
provided, further, that any LIBOR Advance made in respect of a Construction
Land Interest shall have a Rent Period of one month. Each such Payment Date
Notice shall be irrevocable. If no such notice is given, the Funded Amounts
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shall be allocated to a LIBOR Advance with a Rent Period of three (3) months.
SECTION 2.4 Lessee Owner for Tax Purposes.
With respect to each Leased Property, it is the intent of the Lessees
and the Funding Parties that for federal, state and local tax and commercial
law purposes the Lease shall be treated as the repayment and security
provisions of a loan by the Lessor to the Lessees, and that the related Lessee
shall be treated as the legal and beneficial owner entitled to any and all
benefits of ownership of such Leased Property and all payments of Basic Rent
during the Lease Term shall be treated as payments of interest and principal.
Each Lessee and each Funding Party agree to file tax returns consistent with
such intent. Nevertheless, each Lessee and the Guarantor acknowledges and
agrees that no Funding Party or any other Person has made any representations
or warranties concerning the tax, financial, accounting or legal
characteristics or treatment of the Operative Documents and that each Lessee
and the Guarantor has obtained and relied solely upon the advice of its own
tax, accounting and legal advisors concerning the Operative Documents and the
accounting, tax, financial and legal consequences of the transactions
contemplated therein.
SECTION 2.5 Amounts Due Under Lease.
With respect to each Leased Property, anything else herein or elsewhere
to the contrary notwithstanding, it is the intention of the Lessees and the
Funding Parties that: (i) subject to clauses (ii) and (iii) below, the amount
and timing of Basic Rent due and payable from time to time from the related
Lessee under the Lease shall be equal to the aggregate payments due and
payable with respect to interest on the Loans in respect of such Leased
Property and Yield on the Lessor's Invested Amounts in respect of such Leased
Property on each Payment Date; (ii) if the related Lessee elects the Purchase
Option with respect to a Leased Property or becomes obligated to purchase such
Leased Property under the Lease, the Funded Amounts in respect of such Leased
Property, all interest and Yield thereon and all other obligations of the
related Lessee owing to the Funding Parties in respect of such Leased Property
shall be paid in full by Lessee, (iii) if the Lessees properly elect the
Remarketing Option, the Lessees will only be required to pay the Recourse
Deficiency Amount and the other amounts required to be paid pursuant to
Section 14.6 of the Lease, which amounts shall be used to pay the principal of
the A Loans, and the Lessees shall only be required to pay to the Lenders the
principal amount of the B Loans and to the Lessor the Lessor's Invested
Amounts, to the extent of the proceeds of the sale of the Leased Properties in
accordance with Section 14.6 of the Lease; and (iv) upon an Event of Default
resulting in an acceleration of the Lessees' obligation to purchase the Leased
Properties under the Lease, the amounts then due and payable by the Lessees
under the Lease shall include all amounts necessary to pay in full the Loans,
and accrued interest thereon, the Lessor's Invested Amounts and accrued Yield
thereon and all other obligations of the Lessees owing to the Funding Parties
pursuant to the Operative Documents.
7
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ARTICLE III.
CONDITIONS PRECEDENT; DOCUMENTS
SECTION 3.1 Conditions to the Obligations of the Funding Parties on
each Closing Date.
The obligations of the Lessor and each Lender to carry out their
respective obligations under Section 2 of this Master Agreement to be
performed on the Closing Date with respect to any Leased Property shall be
subject to the fulfillment to the satisfaction of, or waiver by, each such
party hereto (acting directly or through its counsel) on or prior to such
Closing Date of the following conditions precedent, provided that the
obligations of any Funding Party shall not be subject to any conditions
contained in this Section 3.1 which are required to be performed by such
Funding Party:
(a) Documents.
The following documents shall have been executed and delivered by
the respective parties thereto:
(i) Deed and Purchase Agreement.
The related original Deed duly executed by the applicable Seller
and in recordable form, and, except with respect to the Leased Properties
being acquired on the Initial Closing Date, copies of the related Purchase
Agreement, assigned to the Lessor, shall each have been delivered to the
Syndication Agent by the Company, with copies thereof to each other Funding
Party or the related Ground Lease assigned to the Lessor shall have been
delivered to the Syndication Agent, with copies thereof to each other Funding
Party, as applicable (it being understood, that each Purchase Agreement and
each Ground Lease shall be reasonably satisfactory in form and substance to
the Lessor and the Syndication Agent).
(ii) Lease Supplement; Supplement to Construction Agency
Agreement.
The original of the related Lease Supplement, duly executed by the
related Lessee and the Lessor and in recordable form, shall have been
delivered to the Syndication Agent by such Lessee. If applicable, on or prior
to the Closing Date of each parcel of Land, the original of the related
Supplement to Construction Agency Agreement, duly executed by the Construction
Agent and the Lessor, shall have been delivered to the Syndication Agent by
the Construction Agent.
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(iii) Mortgage or Deed of Trust and Assignment of Lease
and Rents.
Counterparts of the Mortgage or Deed of Trust, as the case may be,
(substantially in the form of Exhibit D-1 or D-2, as the case may be, attached
hereto), duly executed by the Lessor and in recordable form, shall have been
delivered to the Syndication Agent (which Mortgage or Deed of Trust, as the
case may be, shall, subject to Section 3.7, secure the aggregate Commitments,
unless such mortgage is subject to a tax based on the amount of indebtedness
secured thereby, in which case the amount secured will be limited to debt in
an amount equal to 125% of the projected cost of acquisition and construction
of such Leased Property); and the Assignment of Lease and Rents (substantially
in the form of Exhibit B attached hereto) in recordable form, duly executed by
the Lessor, shall have been delivered to the Syndication Agent by the Lessor.
(iv) Security Agreement and Assignment.
If Buildings are to be constructed on the Land, counterparts of
the Security Agreement and Assignment (substantially in the form of Exhibit C
attached hereto), duly executed by the Construction Agent, with an
acknowledgment and consent thereto satisfactory to the Lessor and the
Syndication Agent duly executed by the related General Contractor and the
related Architect, as applicable, and complete copies of the related
Construction Contract and the related Architect's Agreement certified by the
Construction Agent, shall have been delivered to the Lessor and the
Syndication Agent (it being understood and agreed that if no related
Construction Contract or Architect's Agreement exists on such Closing Date,
such delivery shall not be a condition precedent to the Funding on such
Closing Date, and in lieu thereof the Construction Agent shall deliver
complete copies of such Security Agreement and Assignment and consents
concurrently with the Construction Agent's entering into such contracts).
(v) Survey.
The related Lessee shall have delivered, or shall have caused to
be delivered, to the Lessor and the Syndication Agent, at such Lessee's
expense, an accurate survey certified to the Lessor and the Syndication Agent
in a form reasonably satisfactory to the Lessor and the Syndication Agent and
showing no state of facts unsatisfactory to the Lessor or the Syndication
Agent and prepared within ninety (90) days of such Closing Date (or such other
time period agreed to by the Lessor and the Syndication Agent) by a Person
reasonably satisfactory to the Lessor and the Syndication Agent. Such survey
shall (1) be acceptable to the Title Insurance Company for the purpose of
providing extended coverage to the Lessor and a lender's comprehensive
endorsement to the Syndication Agent, (2) show no encroachments on such Land
by structures owned by others, and no encroachments from any part of such
Leased Property onto any land owned by others, and (3) disclose no state of
facts reasonably objectionable to the Lessor, the Syndication Agent or the
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Title Insurance Company, and be reasonably acceptable to each such Person.
(vi) Title and Title Insurance.
On such Closing Date, the Lessor shall receive from a title
insurance company acceptable to the Lessor and the Syndication Agent an ALTA
Owner's Policy of Title Insurance issued by such title insurance company and
the Syndication Agent shall receive from such title insurance company an ALTA
Mortgagee's Policy of Title Insurance issued by such title insurance company,
in each case, in the amount of the projected cost of acquisition and
construction of such Leased Property, reasonably acceptable in form and
substance to the Lessor (in the case of the ALTA Owner's Policy of Title
Insurance) and the Syndication Agent, respectively (collectively, the "Title
Policy"). Notwithstanding the foregoing, in the case of Land on which
Construction is not expected to commence until three or more months after the
acquisition of such Land, the amount of the Title Policy shall be equal to the
Acquisition Costs for such Land; prior to the commencement of Construction on
any such Land, the Construction Agent shall deliver a bring down and amendment
to such Title Policy increasing the amount thereof to the sum of the
Acquisition Costs and the projected cost of construction of such Leased
Property. The Title Policy shall be dated as of such Closing Date, and, to
the extent permitted under Applicable Law, shall include such affirmative
endorsements as the Lessor or the Syndication Agent shall reasonably request.
(vii) Appraisal.
Each Funding Party shall have received a report of the Appraiser
(an "Appraisal"), paid for by the Company or the related Lessee, which shall
meet the requirements of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, shall be reasonably satisfactory to such Funding
Party and shall state in a manner reasonably satisfactory to such Funding
Party the lower of either the cost basis or the "going concern" basis of such
Land and existing Buildings or any Building to be constructed thereon. Such
Appraisal must show that the lower of either the cost basis or the "going
concern" basis of such Leased Property (if a Building is to be constructed on
the Land, determined as if the Building had already been completed in
accordance with the related Plans and Specifications and by excluding from
such value the amount of assessments on such Leased Property) is at least 100%
of the total cost of such Leased Property, including the trade fixtures,
equipment and personal property utilized in connection with the Leased
Property and to be funded by the Funding Parties. In the case of Land without
any Building thereon or any Plans and Specifications for a Building on the
related Closing Date, an Appraisal meeting the foregoing requirements need not
be delivered on or prior to the Closing Date but shall be delivered on or
before the 45th day following the development of Plans and Specifications for
a Building thereon; if the cost basis and "going concern" basis shown in the
Appraisal so obtained by the Funding Parties fails to meet the requirement of
the preceding sentence, such failure shall constitute an Event of Default.
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(viii) Environmental Audit and related Reliance Letter.
The Lessor and the Syndication Agent shall have received an
Environmental Audit for such Leased Property, which shall be conducted in
accordance with ASTM standards and shall not include a recommendation for
further investigation and is otherwise satisfactory to the Lessor and the
Syndication Agent; and the firm that prepared the Environmental Audit for such
Leased Property shall have delivered to the Lessor and the Syndication Agent a
letter stating that the Lessor, the Syndication Agent and the Lenders may rely
upon such firm's Environmental Audit of such Land, it being understood that
the Lessor's and the Syndication Agent's acceptance of any such Environmental
Audit shall not release or impair any Lessee's obligations under the Operative
Documents with respect to any environmental liabilities relating to such
Leased Property.
(ix) Evidence of Insurance.
The Lessor and the Syndication Agent shall have received from the
related Lessee certificates of insurance evidencing compliance with the
provisions of Article VIII of the Lease (including the naming of the Lessor,
the Syndication Agent and the Lenders as additional insured or loss payee with
respect to such insurance, as their interests may appear), in form and
substance reasonably satisfactory to the Lessor and the Syndication Agent.
(x) UCC Financing Statement; Recording Fees; Transfer
Taxes.
The Syndication Agent shall have received (i) UCC-1 and, if
required by applicable law, UCC-2 financing statements, duly executed by the
Lessor and the related Lessee, to be filed with the Secretary of State of the
applicable State (or other appropriate filing office) and the county where the
related Land is located, respectively, and such other Uniform Commercial Code
financing statements as the Syndication Agent deems necessary or desirable in
order to perfect its interests and (ii) the payment of all recording and
filing fees and taxes with respect to any recordings or filings made of the
related Deed, the Lease, the related Lease Supplement, the related Mortgage
and the related Assignment of Lease and Rents.
(xi) Opinions.
An opinion of local counsel for the related Lessee qualified in
the jurisdiction in which such Leased Property is located, substantially in
the form set forth in Exhibit G-2 attached hereto, and containing such other
matters as the Lessor or the Syndication Agent shall reasonably request, shall
have been delivered and addressed to each of the Lessor, the Syndication Agent
and the Lenders. To the extent reasonably requested by the Syndication Agent,
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opinions supplemental to those delivered under Section 3.2(vi) and reasonably
satisfactory to the Syndication Agent shall have been delivered and addressed
to each of the Lessor, the Syndication Agent and the Lenders.
(xii) Officer's Certificate.
The Syndication Agent shall have received an Officer's Certificate
of the Lessor stating that, to the best of such officer's knowledge, (A) each
and every representation and warranty of the Lessor contained in the Operative
Documents is true and correct in all material respects on and as of such
Closing Date as though made on and as of such Closing Date, except to the
extent such representations or warranties relate solely to an earlier date, in
which case such representations and warranties shall have been true and
correct in all material respects on and as of such earlier date; (B) no Event
of Default or Potential Event of Default has occurred and is continuing;
(C) each Operative Document to which the Lessor is a party is in full force
and effect with respect to it; and (D) no event that would reasonably be
expected to have a Material Adverse Effect has occurred since the date of the
most recent financial statements of the Lessor delivered or required to be
delivered to the Syndication Agent.
(xiii) Good Standing Certificates.
The Syndication Agent shall have received good standing
certificates for the Lessor and the related Lessee from the appropriate
offices of the state where the related Land is located.
(b) Litigation.
No action or proceeding shall have been instituted or, to the
knowledge of any Funding Party, threatened nor shall any governmental action,
suit, proceeding or investigation be instituted or threatened before any
Governmental Authority, nor shall any order, judgment or decree have been
issued or proposed to be issued by any Governmental Authority, to set aside,
restrain, enjoin or prevent the performance of this Master Agreement or any
transaction contemplated hereby or by any other Operative Document or which
could reasonably be expected to result in a Material Adverse Effect.
(c) Legality.
In the opinion of such Funding Party or its counsel, the
transactions contemplated by the Operative Documents shall not violate any
Applicable Law, and no change shall have occurred or been proposed in
Applicable Law that would make it illegal for such Funding Party to
participate in any of the transactions contemplated by the Operative
Documents.
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(d) No Events.
(i) No Event of Default, Potential Event of Default, Event of Loss
or Event of Taking relating to such Leased Property shall have occurred and be
continuing, (ii) no action shall be pending or threatened by a Governmental
Authority to initiate a Condemnation or an Event of Taking, and (iii) there
shall not have occurred any event that would reasonably be expected to have a
Material Adverse Effect since December 31, 1998.
(e) Representations.
Each representation and warranty of the parties hereto or to any
other Operative Document contained herein or in any other Operative Document
shall be true and correct in all material respects as though made on and as of
such Closing Date, except to the extent such representations or warranties
relate solely to an earlier date, in which case such representations and
warranties shall have been true and correct in all material respects on and as
of such earlier date.
(f) Cutoff Date.
No Closing Date shall occur after the Funding Termination Date.
(g) Transaction Expenses.
The related Lessee shall have paid, or made arrangements to pay,
the transaction costs then accrued and invoiced which the Lessees have agreed
to pay pursuant to Section 8.8.
(h) Syndication Agent's Approval.
The Syndication Agent shall have approved each Leased Property,
any such approval not to be unreasonably withheld.
SECTION 3.2 Additional Conditions for the Initial Closing Date.
The obligations of the Lessor and each Lender to carry out their
respective obligations under Section 2 of this Master Agreement to be
performed on the Initial Closing Date shall be subject to the satisfaction of,
or waiver by, each such party hereto (acting directly or through its counsel)
on or prior to the Initial Closing Date of the following conditions precedent
in addition to those set forth in Section 3.1, provided that the obligations
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of any Funding Party shall not be subject to any conditions contained in this
Section 3.2 which are required to be performed by such Funding Party:
(i) Loan Agreement; Guaranty Agreement.
Counterparts of the Loan Agreement, duly executed by the Lessor,
the Agent and each Lender shall have been delivered to each of the Lessor and
the Syndication Agent. An A Note and a B Note, duly executed by the Lessor,
shall have been delivered to the Syndication Agent. The Guaranty Agreement,
duly executed by the Company, shall have been delivered to the Syndication
Agent. The Assignment of Purchase Option, duly executed by the Company and
the Lessor, shall have been delivered to the Syndication Agent.
(ii) Master Agreement.
Counterparts of this Master Agreement, duly executed by the
parties hereto, shall have been delivered to each of the parties hereto.
(iii) Construction Agency Agreement.
Counterparts of the Construction Agency Agreement, duly executed
by the parties thereto shall have been delivered to each of the parties
hereto.
(iv) Lease.
Counterparts of the Lease, duly executed by the Lessees party to
this Master Agreement on the Initial Closing Date and the Lessor, shall have
been delivered to each Funding Party and the original, chattel paper copy of
the Lease shall have been delivered to the Syndication Agent.
(v) Lessee's Resolutions and Incumbency Certificate,
etc.
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Each of the Syndication Agent and the Lessor shall have received
(x) a certificate of the Secretary or an Assistant Secretary of each Obligor
party hereto on the Initial Closing Date, attaching and certifying as to
(i) the Board of Directors' (or appropriate committee's) resolution duly
authorizing the execution, delivery and performance by it of each Operative
Document to which it is or will be a party, (ii) the incumbency and signatures
of persons authorized to execute and deliver such documents on its behalf,
(iii) its articles or certificate of incorporation, certified as of a recent
date by the Secretary of State of the state of its incorporation and (iv) its
by-laws, and (y) good standing certificates for each Obligor party hereto on
the Initial Closing Date from the appropriate offices of the States of such
Obligor's incorporation and principal place of business.
(vi) Opinions of Counsel.
The opinions of Foley & Lardner, dated the Initial Closing Date,
substantially in the form set forth in Exhibit G-1 attached hereto, and
containing such other matters as the parties to whom it is addressed shall
reasonably request, shall have been delivered and addressed to each of the
Lessor, the Syndication Agent and the Lenders. The opinion of Brown
McCarroll & Oaks Hartline, LLP, dated the Initial Closing Date, substantially
in the form set forth in Exhibit G-3 attached hereto, and containing such
other matters as the parties to whom it is addressed shall reasonably request,
shall have been delivered to each of the Syndication Agent, the Lenders and
the Company.
(vii) Good Standing Certificate.
The Syndication Agent and the Company shall have received a good
standing certificate for the Lessor from the appropriate office of the State
of Texas.
(viii) Lessor's Consents and Incumbency Certificate, etc.
The Syndication Agent and the Company shall have received (A) a
certificate of the Secretary or an Assistant Secretary of the General Partner
of the Lessor attaching and certifying as to (i) the consents of the partners
of the Lessor duly authorizing the execution, delivery and performance by it
of each Operative Document to which it is or will be a party, (ii) the
incumbency and signatures of persons authorized to execute and deliver such
documents on its behalf, and (iii) the Partnership Agreement and (B) a
certificate of limited partnership from the Secretary of State of Texas.
SECTION 3.3 Conditions to the Obligations of Lessee.
The obligations of any Lessee to lease a Leased Property from the Lessor
are subject to the fulfillment on the related Closing Date to the satisfaction
of, or waiver by, such Lessee, of the following conditions precedent:
(a) General Conditions.
The conditions set forth in Sections 3.1 and 3.2 that require
fulfillment by the Lessor or the Lenders shall have been satisfied, including
the delivery of good standing certificates by the Lessor pursuant to Sections
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3.1(a)(xiii) and 3.2(vii) and the delivery of an opinion of counsel for the
Lessor pursuant to Section 3.2(vi) and the execution and delivery of the
Operative Documents to be executed by the Lessor or the Lenders in connection
with such Leased Property.
(b) Legality.
In the opinion of such Lessee or its counsel, the transactions
contemplated by the Operative Documents shall not violate any Applicable Law,
and no change shall have occurred or been proposed in Applicable Law that
would make it illegal for such Lessee to participate in any of the
transactions contemplated by the Operative Documents.
(c) Purchase Agreement; Ground Lease.
The Purchase Agreement and, if applicable, the Ground Lease and
all documents to be delivered under the Purchase Agreement or Ground Lease,
including title insurance, survey and environmental audit, shall be reasonably
satisfactory to such Lessee.
SECTION 3.4 Conditions to the Obligations of the Funding Parties on
each Funding Date.
The obligations of the Lessor and each Lender to carry out their
respective obligations under Section 2 of this Master Agreement to be
performed on each Funding Date shall be subject to the fulfillment to the
satisfaction of, or waiver by, each such party hereto (acting directly or
through their respective counsel) on or prior to each such Funding Date of the
following conditions precedent, provided that the obligations of any Funding
Party shall not be subject to any conditions contained in this Section 3.4
which are required to be performed by such Funding Party:
(a) Funding Request.
The Lessor and the Syndication Agent shall have received from the
Construction Agent or a Lessee the Funding Request therefor pursuant to
Section 2.2(d).
(b) Condition Fulfilled.
As of such Funding Date, the condition set forth in Section
3.1(d)(i) shall have been satisfied.
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(c) Representations.
As of such Funding Date, both before and after giving effect to
the Funding requested by the Construction Agent or a Lessee on such date, the
representations and warranties that the Construction Agent or such Lessee is
deemed to make pursuant to Section 2.2(e) shall be true and correct in all
material respects on and as of such Funding Date as though made on and as of
such Funding Date, except to the extent such representations or warranties
relate solely to an earlier date, in which case such representations and
warranties shall have been true and correct in all material respects on and as
of such earlier date.
(d) No Bonded Stop Notice or Filed Mechanics Lien.
As of such Funding Date, and as to any Funded Amount requested for
any Leased Property on such Funding Date, (i) none of the Lessor, the
Syndication Agent or any Lender has received (with respect to such Leased
Property) a bonded notice to withhold Loan funds that has not been discharged
by the related Lessee or the Construction Agent, and (ii) no mechanic's liens
or materialman's liens have been filed against such Leased Property that have
not been discharged by the related Lessee, bonded over in a manner reasonably
satisfactory to the Syndication Agent or insured over by the Title Insurance
Company.
(e) Lease Supplement.
If the Funding relates to a Building that will be leased under a
Lease Supplement separate from the Lease Supplement for the related Land, the
original of such separate Lease Supplement, duly executed by the related
Lessee and the Lessor and in recordable form, shall have been delivered to the
Syndication Agent.
(f) Funding Termination Date.
The Funding Termination Date shall not have occurred.
(g) Additional Requirements for Fundings to Finance
Construction.
As of such Funding Date, and as to any Funded Amount requested for
any Leased Property on such Funding Date the Syndication Agent shall have
received the following: (i) a copy of each Construction Contract, Architect's
Agreement and similar agreement and all amendments to each with respect to
such Leased Property; (ii) a project budget for the construction of the Leased
Property certified by a senior financial officer of Construction Agent
outlining amounts spent to date, current funding requirements and the balance
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of the budget available for completion; (iii) copies of all change orders for
the construction on such Leased Property; (iv) copies of all requests for
payment together with supporting documentation submitted by the architect or
general contractor; (v) a down-date endorsement to the title policy for such
Leased Property dated the date of the requested advance; (vi) a statement by a
senior financial officer for the Construction Agent reconciling the budget
previously delivered with the construction expenses to the date of the
requested Advance; (vii) lien waivers from the General Contractor and the
subcontractors that previous invoices have been paid and the only outstanding
amount is the current request; and (viii) such other supporting information as
the Syndication Agent may reasonably request from time to time.
SECTION 3.5 Completion Date Conditions.
The occurrence of the Completion Date with respect to any Leased
Property shall be subject to the fulfillment to the satisfaction of, or waiver
by, each party hereto (acting directly or through its counsel) of the
following conditions precedent:
(a) Title Policy Endorsements; Architect's Certificate.
The Construction Agent shall have furnished to each Funding Party
(1) the following endorsements to the related Title Policy (each of which
shall be subject to no exceptions other than those reasonably acceptable to
the Syndication Agent): a date-down endorsement (redating and confirming the
coverage provided under the Title Policy and each endorsement thereto) and a
"Form 9" endorsement (if available in the applicable jurisdiction), in each
case, effective as of a date not earlier than the date of completion of the
Construction, and (2) a certificate of the Architect dated at or about the
Completion Date, in form and substance reasonably satisfactory to the
Syndication Agent, the Lessor and the Lenders, and stating that (i) the
related Building has been completed substantially in accordance with the Plans
and Specifications therefor, and such Leased Property is ready for occupancy,
(ii) such Plans and Specifications comply in all material respects with all
Applicable Laws in effect at such time, and (iii) to the best of the
Architect's knowledge, such Leased Property, as so completed, complies in all
material respects with all Applicable Laws in effect at such time. The
Construction Agent shall also deliver to the Syndication Agent true and
complete copies of: (A) an "as built" or "record" set of the Plans and
Specifications, (B) a plat of survey of such Leased Property "as built" to a
standard reasonably acceptable to the Syndication Agent showing all easements,
paving, driveways, fences and exterior improvements, and (C) copies of a
certificate or certificates of occupancy for such Leased Property or other
legally equivalent permission to occupy such Leased Property.
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(b) Construction Completion.
Any related Construction shall have been completed substantially
in accordance with the related Plans and Specifications, the related Deed and
all Applicable Laws, and such Leased Property shall be ready for occupancy and
operation. All fixtures, equipment and other property contemplated under the
Plans and Specifications to be incorporated into or installed in such Leased
Property shall have been substantially incorporated or installed, free and
clear of all Liens except for Permitted Liens.
(c) Construction Agent Certification.
The Construction Agent shall have furnished the Lessor, the
Syndication Agent and each Lender with a certification of the Construction
Agent (substantially in the form of Exhibit H) that:
(i) all amounts owing to third parties for the related
Construction have been paid in full (other than contingent
obligations for which the Construction Agent has made adequate
reserves), and no litigation or proceedings are pending, or to the
best of the Construction Agent's knowledge, are threatened,
against such Leased Property or the Construction Agent or the
related Lessee which could reasonably be expected to have a
Material Adverse Effect;
(ii) all material consents, licenses and permits and
other governmental authorizations or approvals required for such
Construction and operation of such Leased Property have been
obtained and are in full force and effect;
(iii) such Leased Property has available all services of
public facilities and other utilities necessary for use and
operation of such Leased Property for its intended purposes
including, without limitation, adequate water, gas and electrical
supply, storm and sanitary sewerage facilities, telephone, other
required public utilities and means of access between the related
Building and public highways for pedestrians and motor vehicles;
(iv) all material agreements, easements and other rights,
public or private, which are necessary to permit the lawful use
and operation of such Leased Property as the related Lessee
intends to use such Leased Property under the Lease and which are
necessary to permit the lawful intended use and operation of all
then intended utilities, driveways, roads and other means of
egress and ingress to and from the same have been obtained and are
in full force and effect and neither the Construction Agent nor
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the related Lessee has any knowledge of any pending modification
or cancellation of any of the same; and the use of such Leased
Property does not depend on any variance, special exception or
other municipal approval, permit or consent that has not been
obtained and is in full force and effect for its continuing legal
use;
(v) all of the requirements and conditions set forth in
Section 3.5(b) hereof have been completed and fulfilled with
respect to such Leased Property and the related Construction; and
(vi) such Leased Property is in compliance in all
material respects with all applicable zoning laws and regulations.
SECTION 3.6 Addition of Lessees.
After the date hereof, additional Subsidiaries of the Company may become
Lessees hereunder and under the other Operative Documents upon satisfaction of
the following conditions precedent:
(a) such Subsidiary and the Guarantor shall have executed and
delivered to the Syndication Agent and the Lessor a Joinder Agreement,
substantially in the form of Exhibit E;
(b) such Subsidiary shall have delivered to each of the
Syndication Agent and the Lessor (x) a certificate of the Secretary or an
Assistant Secretary of such Subsidiary, attaching and certifying as to (i) the
Board of Directors' resolution duly authorizing the execution, delivery and
performance by it of each Operative Document to which it is or will be a
party, (ii) the incumbency and signatures of persons authorized to execute and
deliver such documents on its behalf, (iii) its certificate of incorporation,
certified as of a recent date by the Secretary of State of its incorporation
and (iv) its by-laws, and (y) good standing certificates from the appropriate
offices of the States of such Subsidiary's incorporation and principal place
of business;
(c) such Subsidiary shall have delivered opinions of Foley &
Lardner, addressed to each of the Lessor, the Syndication Agent and the
Lenders, substantially in the form set forth in Exhibit G-1, with respect to
such Subsidiary; and
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(d) the Syndication Agent, the Lessor and the Lenders shall
have received such other documents, certificates and information as any of
them shall have reasonably requested.
SECTION 3.7 Certain Post Closing Matters. As of the Initial Closing
Date, the Mortgage on the Leased Property located in Florida shall only secure
an amount equal to $800,000; prior to the commencement of construction on such
Leased Property, the Company shall cause the amount secured by such Mortgage
and the related title insurance to be increased to 125% of the projected cost
of acquisition and construction of such Leased Property. As of the Initial
Closing Date, the Mortgage on the Leased Property located in Puerto Rico shall
only secure an amount equal to $11,135,000; within 30 days of the Initial
Closing Date, the Company shall cause the amount secured by such Mortgage and
the related title insurance to be increased to $11,800,000.
ARTICLE IV.
REPRESENTATIONS
SECTION 4.1 Representations of Obligors.
Effective as of the date of execution hereof, as of each Closing Date
and as of each Funding Date, each Obligor, as to itself, represents and
warrants to each of the other parties hereto as follows:
(a) Corporate Existence.
Each Obligor: (i) is a corporation, partnership or other entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, as set forth on the signature pages to this
Master Agreement; (ii) has all requisite corporate or other power, and has all
material governmental licenses, authorizations, consents and approvals
necessary to own its assets and carry on its business as now being or as
proposed to be conducted; and (iii) is qualified to do business and is in good
standing in all jurisdictions in which the nature of the business conducted by
it makes such qualification necessary and where failure so to qualify could
reasonably be expected to (either individually or in the aggregate) have a
Material Adverse Effect.
(b) Financial Condition.
The Company has heretofore furnished to each of the Funding
Parties the consolidated and consolidating balance sheets of the Company and
its Subsidiaries as at December 31, 1998 and the related consolidated and
consolidating statements of income, retained earnings and cash flow of the
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Company and its Subsidiaries for the fiscal year ended on said date, with the
opinion thereon (in the case of said consolidated balance sheet and
statements) of Grant Thorton LLP or other independent certified public
accountants of nationally recognized standing reasonably acceptable to the
Funding Parties, and the unaudited consolidated and consolidating balance
sheets of the Company and its Subsidiaries as at March 31, 1999 and June 30,
1999 and the related consolidated and consolidating statements of income and
retained earnings of the Company and its Subsidiaries for the three-month and
six-month, respectively, period ended on such dates. All such financial
statements fairly present the consolidated financial condition of the Company
and its Subsidiaries, and (in the case of said consolidating financial
statements) the respective unconsolidated financial condition of the Company
and its Subsidiaries, as at said dates and the consolidated and unconsolidated
results of their operations for the fiscal year and three-month period ended
on said dates (subject, in the case of such financial statements as at March
31 and June 30, 1999, to normal year-end audit adjustments), all in accordance
with GAAP and practices applied on a consistent basis, except as otherwise
indicated in the notes thereto. None of the Obligors has on the date hereof
any material contingent liabilities, liabilities for taxes, unusual forward or
long-term commitments or unrealized or anticipated losses from any unfavorable
commitments, in each case, of a type required to be reflected in a balance
sheet prepared in accordance with GAAP, except as referred to or reflected or
provided for in said balance sheets as at said dates. Since December 31,
1998, there has been no material adverse change in the consolidated financial
condition, operations, business or prospects taken as a whole of the Obligors
from that set forth in said financial statements as at said date.
(c) Litigation.
Except as disclosed in Schedule 4.1(c) hereto, (i) there are no
legal or arbitral proceedings, or any proceedings by or before any
governmental or regulatory authority or agency, now pending or (to the
knowledge of the Obligors) threatened against any Obligor that, if adversely
determined could be reasonably expected to (either individually or in the
aggregate) have a Material Adverse Effect and (ii) there are no outstanding
judgments, rulings, orders, awards or decrees rendered by any court, arbitral,
administrative, governmental or quasi-judicial body binding upon any Obligor.
(d) No Breach.
None of the execution and delivery of this Master Agreement and
the other Operative Documents, the consummation of the transactions herein and
therein contemplated or compliance with the terms and provisions hereof and
thereof will conflict with or result in a breach of, or require any consent
under, the charter or by-laws of any Obligor, or any applicable law or
regulation, or any order, writ, injunction or decree of any court or
governmental authority or agency, or any agreement or instrument to which any
Obligor is a party or by which any of them or any of their Property is bound
or to which any of them is subject (other than such consents as have been
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obtained and are in full force and effect), or constitute a default under any
such agreement or instrument, or (except for the Liens created pursuant to the
Operative Documents) result in the creation or imposition of any Lien upon any
Property of the Obligors pursuant to the terms of any such agreement or
instrument.
(e) Action.
Each Obligor has all necessary power, authority and legal right to
execute, deliver and perform its obligations under each of the Operative
Documents to which it is a party; the execution, delivery and performance by
each Obligor of each of the Operative Documents to which it is a party have
been duly authorized by all necessary corporate action on its part (including,
without limitation, any required shareholder approvals); and this Master
Agreement has been duly and validly executed and delivered by each Obligor and
constitutes, and each of the other Operative Documents to which it is a party
when executed and delivered by such Obligor will constitute, its legal, valid
and binding obligation, enforceable against each Obligor in accordance with
its terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or similar laws of general
applicability affecting the enforcement of creditors' rights and (b) the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(f) Approvals.
No authorizations, approvals or consents of, and no filings or
registrations with, any governmental or regulatory authority or agency, or any
securities exchange, are necessary for the execution, delivery or performance
by any Obligor of the Operative Documents to which it is a party or for the
legality, validity or enforceability hereof or thereof, except for filings and
recordings in respect of the Liens created pursuant to the Operative
Documents.
(g) Use of Credit.
None of the Obligors is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose,
whether immediate, incidental or ultimate, of buying or carrying Margin Stock,
and no part of the proceeds of any extension of credit hereunder will be used
to buy or carry any Margin Stock.
(h) ERISA.
Each Plan, and, to the knowledge of each Obligor, each
Multiemployer Plan, is in compliance in all material respects with, and has
been administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law, and no event
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or condition has occurred and is continuing as to which any Obligor would be
under an obligation to furnish a report to the Funding Parties under
Section 5.1(a)(viii) hereof.
(i) Taxes.
The Obligors are members of an affiliated group of corporations
filing consolidated returns for Federal income tax purposes, of which the
Company is the "common parent" (within the meaning of Section 1504 of the
Code) of such group. Each Obligor has filed (either directly, or indirectly
through the Company) all Federal income tax returns and all other material tax
returns that are required to be filed by them and have paid (either directly,
or indirectly through the Company) all taxes due pursuant to such returns or
pursuant to any assessment received by any Obligor, except for any taxes being
contested by an Obligor in good faith by proper proceedings as to which no
Liens have been created on any Property of any Obligor. The charges, accruals
and reserves on the books of the Obligors in respect of taxes and other
governmental charges are, in the opinion of the Obligors, adequate. The
Company has not given or been requested to give a waiver of the statute of
limitations relating to the payment of Federal, state, local and foreign taxes
or other impositions.
(j) Investment Company Act.
None of the Obligors is an "investment company", or a company
"controlled" by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended.
(k) Public Utility Holding Company Act.
None of the Obligors is a "holding company", or an "affiliate" of
a "holding company" or a "subsidiary company" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
(l) Material Agreements and Liens.
(i) Part A of Schedule 4.1(l) hereto is a complete and
correct list, as of the date of this Master Agreement, of each credit
agreement, loan agreement, indenture, material purchase agreement,
guarantee, letter of credit or other material arrangement providing for
or otherwise relating to any Indebtedness or any extension of credit (or
commitment for any extension of credit) to, or guarantee by, any
Obligor, and the aggregate principal or face amount outstanding or that
may become outstanding under each such arrangement is correctly
described in Part A of said Schedule 4.1(l).
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(ii) Part B of Schedule 4.1(l) hereto is a complete and
correct list, as of the date of this Master Agreement, of each Lien
securing Indebtedness of any Person and covering any Obligor, and the
aggregate Indebtedness secured (or that may be secured) by each such
Lien and the Property covered by each such Lien is correctly described
in Part B of said Schedule 4.1(l).
(m) Environmental Matters.
Each Obligor has obtained all Environmental Permits, required
under all applicable Environmental Laws to carry on its business as now being
or as currently proposed to be conducted, except to the extent failure to have
any such Environmental Permit, would not (either individually or in the
aggregate) have a Material Adverse Effect. Each of such Environmental
Permits, is in full force and effect and each of the Obligors is in compliance
with the terms and conditions thereof, and is also in compliance with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any
applicable Environmental Law, except to the extent failure to comply therewith
would not (either individually or in the aggregate) have a Material Adverse
Effect.
In addition, except as set forth in Schedule 4.1(m) hereto:
(i) No notice, notification, demand, request for
information, citation, summons or order has been issued to any Obligor
or about which any Obligor has otherwise become aware, no complaint has
been filed against any Obligor or about which any Obligor has otherwise
become aware, no penalty has been assessed against any Obligor or about
which any Obligor has otherwise become aware and no investigation or
review is pending or, to the knowledge of any Obligor, threatened by any
governmental authority or other entity with respect to (i) any alleged
failure by any Obligor to have any Environmental Permit required under
any Environmental Law in connection with the conduct of the business of
any Obligor, (ii) any actual or alleged violation by any Obligor or any
Property of any applicable Environmental Law or (iii) with respect to
any generation, treatment, storage, recycling, transportation, discharge
or disposal or Release of any Hazardous Materials generated by any
Obligor, which has either not been resolved to the satisfaction of the
issuing authority or which would not individually or in the aggregate
have a Material Adverse Effect.
(ii) None of the Obligors owns, operates or leases a
treatment, storage or disposal facility requiring a permit under the
Resource Conservation and Recovery Act of 1976, as amended, or under any
comparable state or local statute; and
(1) to the knowledge of the Obligors, no
polychlorinated biphenyls (PCBs) are or have been present at any
site or facility now owned, operated or leased by any Obligor,
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nor, to the knowledge of any Obligor, were any PCBs present at any
site or facility previously owned, operated or leased by any
Obligor during such period of ownership, operation or lease;
(2) to the knowledge of the Obligors, no asbestos or
asbestos-containing materials that are friable or bear a
reasonable chance of becoming friable are present at any site or
facility now owned, operated or leased by any Obligor, nor, to the
knowledge of any Obligor, were any such asbestos or asbestos-
containing materials present at any site or facility previously
owned, operated or leased by any Obligor, during such period of
ownership, operation of lease;
(3) (A) to the knowledge of the Obligors, there are
no underground storage tanks for Hazardous Materials, active or
abandoned, at any site or facility now owned, operated or leased
by any Obligor that are not in material compliance with all
applicable Environmental Laws, and there are no surface
impoundments for Hazardous Materials, active or abandoned at any
site or facility now or previously owned, operated or leased by
any Obligor and (B) to the knowledge of any Obligor, there were no
underground storage tanks for Hazardous Materials, active or
abandoned, at any site or facility previously owned, operated or
leased by any Obligor that were not, during such period of
ownership, operation or lease, in material compliance with all
applicable Environmental Laws, and to the knowledge of any
Obligor, there were no surface impoundments for Hazardous
Materials, active or abandoned, at any site or facility previously
owned, operated or leased by any Obligor, during such period of
ownership, operation or lease;
(4) no Hazardous Materials have been Released at, on
or under any site or facility now owned, operated or leased by any
Obligor in a reportable quantity established by any applicable
Environmental Law, nor, to the knowledge of any Obligor, did such
a Release occur at any site or facility previously owned, operated
or leased by any Obligor during such period of ownership,
operation or lease; and
(5) no Hazardous Materials have been otherwise
Released at, on or under any site or facility now owned, operated
or leased by any Obligor that would (either individually or in the
aggregate) have a Material Adverse Effect, nor, to the knowledge
of any Obligor, did such a such Release occur at any site or
facility previously owned, operated or leased by any Obligor,
during such period of ownership, operation or lease.
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(iii) To the knowledge of the Obligors, none of them has
transported or arranged for the transportation of any Hazardous Material
to any location that is listed on the National Priorities List ("NPL")
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), listed for possible
inclusion on the NPL by the Environmental Protection Agency in the
Comprehensive Environmental Response and Liability Information System,
as provided for by 40 C.F.R. SEC. 300.5 ("CERCLIS"), or on any similar
state or local list or that is the subject of Federal, state or local
enforcement actions or other investigations that may lead to
Environmental Claims against the Company or any of its Subsidiaries,
which individually or in the aggregate would have a Material Adverse
Effect.
(iv) No Hazardous Material generated by the Company or
any of its Subsidiaries has been recycled, treated, stored, disposed of
or Released by any Obligor at any facility which is subject to an
Environmental Claim which would reasonably be expected individually or
in the aggregate to have a Material Adverse Effect.
(v) No written or, to the knowledge of any Obligor, oral
notification of a Release of a Hazardous Material has been filed by or
on behalf of any Obligor and no site or facility now or previously
owned, operated or leased by any Obligor is listed or was listed during
such period of ownership, operation or lease or, to the knowledge of any
Obligor, proposed for listing on the NPL, CERCLIS or any similar state
list of sites requiring investigation or clean-up, in each case, which
has either not been resolved to the satisfaction of the issuing
authority or which would not individually or in the aggregate have a
Material Adverse Effect.
(vi) No Liens have arisen under or pursuant to any
Environmental Laws on any site or facility owned, operated or leased by
any Obligor, and no government action has been taken or, to the
knowledge of any Obligor, is in process that could subject any such site
or facility to such Liens, and none of the Obligors would be required to
place any notice or restriction relating to the presence of Hazardous
Materials at any site or facility owned by it in any deed to the real
property on which such site or facility is located.
(vii) All investigations, studies, audits, tests, reviews
or other analyses conducted by or on behalf of, or that are in the
possession of, any Obligor relating to environmental matters at or
affecting any site or facility now or previously owned, operated or
leased by any Obligor and that reveal facts, circumstances or conditions
that could reasonably be expected to result in a Material Adverse Effect
have been made available to the Funding Parties.
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(viii) Each Property is in compliance in all material
respects with all Environmental Laws and, to the knowledge of the
related Obligor, there are no present or past facts, circumstances,
activities, events, conditions or occurrences regarding such Property
(including, without limitation, the release or presence of Hazardous
Materials) that could reasonably be anticipated to (i) form the basis of
a material claim against such Property, any Funding Party or such
Obligor, (ii) cause such Property to be subject to any material
restrictions on ownership, occupancy, use or transferability under any
Environmental Law, (iii) require the filing or recording of any notice
or restriction relating to the presence of Hazardous Materials in the
real estate records in the county or other appropriate municipality in
which such Property is located, or (D) prevent or materially interfere
with the continued operation and maintenance of such Property as
contemplated by the Obligors.
(n) Subsidiaries, Etc.
(i) Set forth in Part A of Schedule 4.1(n) hereto is a
complete and correct list, as of the date of this Master Agreement, of
all of the Subsidiaries of the Company, together with, for each such
Subsidiary, (A) the jurisdiction of organization of such Subsidiary,
(B) each Person holding ownership interests in such Subsidiary and
(C) the nature of the ownership interests held by each such Person and
the percentage of ownership of such Subsidiary represented by such
ownership interests.
(ii) Set forth in Part B of Schedule 4.1(n) hereto is a
complete and correct list, as of the date of this Master Agreement, of
all Investments (other than Investments disclosed in Part A of said
Schedule 4.1(n) hereto) held by the Company or any of its Subsidiaries
in any Person (other than Investments which are Permitted Investments or
deposits maintained with banks in the ordinary course of business) and,
for each such Investment, (x) the identity of the Person or Persons
holding such Investment and (y) the nature of such Investment. None of
the Dormant Subsidiaries (x) owns assets having a fair market value in
excess of $25,000 (other than the account receivable from Corrections
Corporation of America to the Company) or (y) actively conducts
business.
(o) Title to Assets.
Each Obligor owns and has on the date hereof, good and marketable
title or valid and subsisting leaseholds (subject only to Liens permitted by
Section 5.1(f) hereof) to the assets, including the Properties shown to be
owned in the most recent financial statements referred to in Section 4.1(b)
hereof (other than assets disposed of in the ordinary course of business).
Each Obligor (a) owns and has on the date hereof, good and marketable title
to, or has on the date hereof a valid and subsisting leasehold estate in, and
(b) enjoys on the date hereof, peaceful and undisturbed possession of, all
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assets, including the Properties (subject only to Liens permitted by
Section 5.1(f) hereof) that are necessary for the operation and conduct of its
businesses.
(p) True and Complete Disclosure.
The information (other than projections), reports, financial
statements, exhibits and schedules furnished in writing by or on behalf of the
Obligors to the Syndication Agent or any Funding Party in connection with the
negotiation, preparation or delivery of this Master Agreement and the other
Operative Documents or included herein or therein or delivered pursuant hereto
or thereto, when taken as a whole do not contain any untrue statement of
material fact or omit to state any material fact necessary to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading. All projections furnished by or on behalf of the
Obligors in writing to the Syndication Agent or any Funding Party for purposes
of this Master Agreement or in connection with this Agreement or the
transactions contemplated hereby were prepared by the Company in good faith
based on assumptions determined to be reasonable by the Company under the then
existing facts and circumstances. All written information furnished after the
date hereof by any Obligor to the Syndication Agent and the Operative Parties
in connection with this Master Agreement and the other Operative Documents and
the transactions contemplated hereby and thereby will be true, complete and
accurate in every material respect, or (in the case of projections) based on
reasonable assumptions, on the date, and under the facts and circumstances, as
of which such information is stated or certified. There is no fact actually
known to any Obligor that could have a Material Adverse Effect that has not
been disclosed herein, in the other Operative Documents or in a report,
financial statement, exhibit, schedule, disclosure letter or other writing
furnished to the Funding Parties for use in connection with the transactions
contemplated hereby or thereby.
(q) Real Property.
Set forth on Schedule 4.1(q) hereto is a list, as of the date
hereof, of all of the real property interests held by the Company and its
Subsidiaries, indicating in each case whether the respective Property is owned
or leased, the identity of the owner or lessor and the location of the
respective Property. Except as set forth in Schedule 4.1(q), the present
condition of each Property (including each Lease Property) conforms in all
material respects with all conditions or requirements of all existing material
permits and approvals issued with respect to such Property, and the related
Obligor's future intended use of such Property does not, in any material
respect, violate any applicable Law. To the knowledge of the related Obligor,
no material notices, complaints or orders of violation or non-compliance have
been issued or threatened or are contemplated by any governmental authority
with respect to any Property (including each Lease Property) or any present or
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intended future use thereof. All material agreements, easements and other
rights, public or private, which are necessary to permit the lawful use and
operation of each Property (including each Lease Property) as the related
Obligor intends to use such Property and which are necessary to permit the
lawful intended use and operation of all presently intended utilities,
driveways, roads and other means of egress and ingress to and from the same
have been, or to such Obligor's knowledge will be, obtained and are or will be
in full force and effect, and such Obligor has no knowledge of any pending
material modification or cancellation of any of the same.
(r) Hazardous Materials - Leased Properties.
(i) To the best knowledge of the related Lessee, on the
Closing Date for each Leased Property, there are no Hazardous Materials
present at, upon, under or within such Leased Property or released or
transported to or from such Leased Property (except in compliance in all
material respects with all Applicable Law).
(ii) On the related Closing Date, no Governmental Actions
have been taken or, to the best knowledge of the related Lessee, are in
process or have been threatened, which could reasonably be expected to
subject such Leased Property, any Lender or the Lessor to any Claims or
Liens with respect to such Leased Property under any Environmental Law
which would have a Material Adverse Effect, or would have a material
adverse effect on the Lessor or any Lender.
(iii) The related Lessee has, or will obtain on or before
the date required by Applicable Law, all Environmental Permits necessary
to operate each Leased Property in accordance with Environmental Laws
and is complying with and has at all times complied with all such
Environmental Permits, except to the extent the failure to obtain such
Environmental Permits or to so comply would not have a Material Adverse
Effect.
(iv) Except as set forth in the related Environmental
Audit or in any notice subsequently furnished by the related Lessee to
the Syndication Agent and approved by the Syndication Agent in writing
prior to the respective times that the representations and warranties
contained herein are made or deemed made hereunder, no notice,
notification, demand, request for information, citations, summons,
complaint or order has been issued or filed to or with respect to such
Lessee, no penalty has been assessed on such Lessee and no investigation
or review is pending or, to its best knowledge, threatened by any
Governmental Authority or other Person in each case relating to any
Leased Property with respect to any alleged material violation or
liability of such Lessee under any Environmental Law. To the best
knowledge of such Lessee, no material notice, notification, demand,
request for information, citations, summons, complaint or order has been
issued or filed to or with respect to any other Person, no material
penalty has been assessed on any other Person and no investigation or
review is pending or threatened by any Governmental Authority or other
Person relating to any Leased Property with respect to any alleged
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material violation or liability under any Environmental Law by any other
Person.
(v) Each Leased Property and each portion thereof are
presently in compliance in all material respects with all Environmental
Laws, and, to the best knowledge of the related Lessee, there are no
present or past facts, circumstances, activities, events, conditions or
occurrences regarding such Leased Property (including without limitation
the release or presence of Hazardous Materials) that could reasonably be
anticipated to (A) form the basis of a material Claim against such
Leased Property, any Funding Party or such Lessee, (B) cause such Leased
Property to be subject to any material restrictions on ownership,
occupancy, use or transferability under any Environmental Law,
(C) require the filing or recording of any notice or restriction
relating to the presence of Hazardous Materials in the real estate
records in the county or other appropriate municipality in which such
Leased Property is located, or (D) prevent or materially interfere with
the continued operation and maintenance of such Leased Property as
contemplated by the Operative Documents.
(s) Solvency.
Subject to Section 7.7(g) and (h), each Obligor (i) is solvent and
will not be rendered insolvent by the incurrence of the obligations under, or
by the execution and delivery of this Master Agreement or any other Operative
Documents to which it is a party or signatory, or by any transactions
contemplated hereunder or thereunder, (ii) is able to pay its debts as they
come due and does not intend to incur, or believe that it will incur, debts
beyond its ability to pay such debts as they mature or come due, (iii) has
capital sufficient to carry on its business and any business in which it
intends or is about to engage, and (iv) owns property and assets having a
value in excess of its liabilities and debts.
(t) Act of God.
Neither the business nor properties of any Obligor are presently
affected by any fire, explosion, accident, drought, storm, hail, earthquake,
embargo, act of God or of the public enemy or of political unrest, or
potential expropriation, or other casualty (whether or not covered by
insurance) which could have a Material Adverse Effect.
(u) Labor Controversies; Union Contracts, Etc.
There are no labor controversies pending or, to the knowledge of
any Obligor, threatened against any Obligor, which if adversely determined
could have a Material Adverse Effect. There are no pending or, to any
Obligor's knowledge, threatened or anticipated (i) employment discrimination
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charges or complaints against or involving any Obligor before any governmental
Person, (ii) unfair labor practice charges or complaints, disputes or
grievances or arbitration proceedings or controversies affecting any Obligor,
(iii) union representation petitions respecting the employees of any Obligor,
or (v) strikes, slowdowns, work stoppages, or lockouts or threats thereof
affecting any Obligor. Schedule 4.1(u) sets forth a list of all collective
bargaining agreements covering any of the employees of any Obligor, together
with the expiration date of each such agreement. True and complete copies of
each such agreements have been delivered to the Syndication Agent. No Obligor
has breached or otherwise failed to comply with any provision of any
collective bargaining agreement or other labor union contract applicable to
any of its employees.
(v) Intellectual Property.
Each Obligor has the legal right to all intellectual property that
is necessary for the conduct of its business. With respect to all such
intellectual property: (i) one or more of the Obligors is the sole and
exclusive owner of the entire and unencumbered right, title and interest in
and to thereof; (ii) the Obligors have no knowledge of the existence of any
intellectual property rights held by any other Person that would preclude any
Obligor from using its intellectual property rights in the conduct of its
business; and (iii) no claim has been made, and the Obligors have no knowledge
of any claim that is likely to be made, that the use by any Obligor of any of
its intellectual property violates the rights of any third party.
(w) Business Relations.
There exists no actual or threatened termination, cancellation, or
adverse limitation of, or any adverse modification or change in, the
contractual and/or business relationship between any Obligor and any
governmental agency, bureau or instrumentality, and there exists no present
condition or state of facts or circumstances in such relations, which in
either case could have a Material Adverse Effect.
(x) Year 2000.
The Obligors have developed and are actively executing a plan and
implementation strategy that adequately addresses the calendar year 2000 so
that no Obligor will experience invalid or incorrect results or abnormal
software or hardware operation related to calendar year 2000. Such plan
includes the creation of software systems which include calendar year 2000
date conversion and compatibility capabilities, including, but not limited to,
date data century recognition, same century and multiple century formula and
date value calculations, and user interface data values that reflect the
appropriate year. The Obligors are proceeding in accordance with the
implementation schedule under such plan.
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(y) Subordinated Debt and Subordinated Debentures.
There is no event of default or event which, with the giving of
notice or passage of time or both, would constitute an event of default under
the documents evidencing or securing the Subordinated Debt or the Subordinated
Debentures.
(z) Facility Contracts.
Schedule 4.1(z) is a correct and complete list of all material
Facility Contracts. The Obligors have furnished the Syndication Agent with
true, correct and complete copies of the Facility Contracts requested by the
Syndication Agent, and all Facility Contracts are in full force and effect.
The Obligors are not in default under any of the Facility Contracts and have
performed in all material respects all of the terms, covenants, conditions or
warranties to be performed and observed by the Obligors thereunder.
(aa) Default of Indebtedness, Use Permits, Orders and Other
Agreements.
No Obligor is in breach or default of, and no event of default or
event, which with the passage of time or giving of notice or both, would
constitute, mature into or become a default or event of default, has occurred
and is continuing with respect to (i) any Indebtedness of any kind or nature,
(ii) any Use Permit, (iii) any judgment, order, award or decree issued by any
court or governmental or administrative agency, or (iv) any agreement to which
it is a party, which breach or default might have a Material Adverse Effect.
(bb) Compliance with Laws.
(i) Each Obligor has complied in all material respects with
all Laws applicable to it or to the conduct of its business, noncompliance
with which could have a Material Adverse Effect.
(ii) To the best of the Obligors' knowledge, no Federal, state,
local or foreign authorities have proposed any limitations in any ordinance,
regulation, plan or contract with any Obligor with respect to such Obligor's
business as it is presently being conducted which limitation, if enacted,
might have a Material Adverse Effect.
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SECTION 4.2 Survival of Representations and Effect of Fundings.
(a) Survival of Representations and Warranties.
All representations and warranties made in Section 4.1 shall
survive delivery of the Operative Documents and every Funding, and shall
remain in effect until all of the Obligations are fully and irrevocably paid.
(b) Each Funding a Representation.
Each Funding accepted by a Lessee or the Construction Agent shall
be deemed to constitute a representation and warranty by the Company and each
Obligor to the effect of Section 4.1.
SECTION 4.3 Representations of the Lessor.
Effective as of the date of execution hereof, as of each Closing Date
and as of each Funding Date, in each case, with respect to each of the Leased
Properties, the Lessor represents and warrants to the Syndication Agent, the
Lenders and the Lessees as follows:
(a) Securities Act.
The interest being acquired or to be acquired by the Lessor in
such Leased Property is being acquired for its own account, without any view
to the distribution thereof or any interest therein, provided that the Lessor
shall be entitled to assign, convey or transfer its interest in accordance
with Section 6.1.
(b) Due Organization, etc.
The Lessor is a limited partnership duly organized and validly
existing in good standing under the laws of Texas and each state in which a
Leased Property is located and has full power, authority and legal right to
execute, deliver and perform its obligations under the Lease, this Master
Agreement and each other Operative Document to which it is or will be a party.
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(c) Due Authorization; Enforceability, etc.
This Master Agreement and each other Operative Document to which
the Lessor is or will be a party have been or will be duly authorized,
executed and delivered by or on behalf of the Lessor and are, or upon
execution and delivery will be, legal, valid and binding obligations of the
Lessor enforceable against it in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting creditors' rights generally and by
general equitable principles.
(d) No Conflict.
The execution and delivery by the Lessor of the Lease, this Master
Agreement and each other Operative Document to which the Lessor is or will be
a party, are not or will not be, and the performance by the Lessor of its
obligations under each will not be, inconsistent with its Partnership
Agreement or certificate of limited partnership, do not and will not
contravene any Applicable Law applicable generally to parties providing
financing and do not and will not contravene any provision of, or constitute a
default under, any Contractual Obligation of, or any judgment, order, award or
decree binding upon, Lessor, do not and will not require the consent or
approval of, the giving of notice to, the registration with or taking of any
action in respect of or by, any Governmental Authority applicable generally to
parties providing financing, except such as have been obtained, given or
accomplished, and the Lessor possesses all requisite regulatory authority to
undertake and perform its obligations under the Operative Documents.
(e) Litigation.
There are no pending or, to the knowledge of the Lessor,
threatened actions or proceedings against the Lessor before any court,
arbitrator or administrative agency with respect to any Operative Document or
that would have a material adverse effect upon the ability of the Lessor to
perform its obligations under this Master Agreement or any other Operative
Documents to which it is or will be a party. There are no outstanding
judgments, rulings, orders, awards or decrees rendered by any court, arbitral,
administrative, governmental or quasi-judicial body binding upon the Lessor.
(f) Lessor Liens.
No Lessor Liens (other than those created by the Operative
Documents) exist on any Closing Date on the Leased Property, or any portion
thereof, and the execution, delivery and performance by the Lessor of this
Master Agreement or any other Operative Document to which it is or will be a
party will not subject any Leased Property, or any portion thereof, to any
Lessor Liens (other than those created by the Operative Documents).
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(g) Employee Benefit Plans.
The Lessor is not and will not be making its investment hereunder,
and is not performing its obligations under the Operative Documents, with the
assets of an "employee benefit plan" (as defined in Section 3(3) of ERISA)
which is subject to Title I of ERISA, or "plan" (as defined in
Section 4975(e)(1)) of the Code.
(h) General Partner.
The sole general partner of the Lessor is Atlantic Financial
Managers, Inc., a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas. The sole business of the
General Partner is to act as the general partner of the Lessor.
(i) Financial Information.
(A) The unaudited balance sheet of the Lessor as of
December 31, 1998 and the related statements of income, partners' capital and
cash flows for the year then ended, copies of which have been delivered to the
Syndication Agent, fairly present, in conformity with sound accounting
principles, the financial condition of the Lessor as of such date and the
results of operations and cash flows for such period. The Lessor has
delivered to the Syndication Agent a copy of its most recently filed federal
tax return, which is true, correct and complete.
(B) Since December 31, 1998, there has been no event, act,
condition or occurrence having a material adverse effect upon the financial
condition, operations, performance or properties of the Lessor, or the ability
of the Lessor to perform in any material respect its obligations under the
Operative Documents.
(C) The Lessor has no recourse indebtedness, and the Lessor
has not entered into any other transactions, purchases, leases or other
agreements, other than immaterial transactions, purchases, leases and other
agreements entered into by the Lessor in the ordinary course of its business,
in which the Lessor has any liability to the other parties to such
transactions, purchases, leases or other agreements that is in excess of the
Lessor's ownership or other interest in the property subject to such
transactions, purchases, leases or other agreements other than liability for
required fundings, breach of contract, misrepresentation, gross negligence,
willful misconduct, fraud, failure to turn over funds and similar exceptions
to limitations on recourse.
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(j) No Offering.
The Lessor has not offered the Notes to any Person in any manner
that would subject the issuance thereof to registration under the Securities
Act or any applicable state securities laws.
(k) Investment Company.
The Lessor is not an "investment company" or a company
"controlled" by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended.
(l) Business Activity.
The Lessor is not engaged in any business or activity, and has not
invested in any Person, except for the Transaction and lease transactions
similar to the Transaction.
(m) Net Worth.
The Lessor has a tangible net worth in an amount no less than the
sum of (i) $100,000, plus (ii) 3% of its total assets (calculated assuming no
reduction in the value of any leased property from its original cost to the
Lessor) and is solvent (as defined in the Bankruptcy Code).
(n) Guaranties.
The Lessor has not guaranteed the liabilities of any Person.
SECTION 4.4 Representations of each Lender.
Effective as of the date of execution hereof, as of each Closing Date
and as of each Funding Date, each Lender represents and warrants to the Lessor
and to the Lessees as follows:
(a) Securities Act.
The interest being acquired or to be acquired by such Lender in
the Funded Amounts is being acquired for its own account, without any view to
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the distribution thereof or any interest therein, provided that such Lender
shall be entitled to assign, convey or transfer, or sell participations in,
its interest in accordance with Section 6.2.
(b) Employee Benefit Plans.
Such Lender is not and will not be making its investment
hereunder, and is not performing its obligations under the Operative
Documents, with the assets of an "employee benefit plan" (as defined in
Section 3(3) of ERISA) which is subject to Title I of ERISA, or "plan" (as
defined in Section 4975(e)(1)) of the Code.
ARTICLE V.
COVENANTS OF COMPANY AND THE LESSOR
SECTION 5.1 Affirmative Covenants.
The Company covenants and agrees that:
(a) Financial Statements; Etc.
The Company shall deliver to each of the Syndication Agent, the
Lessor and the Lenders (in such form as shall be satisfactory to the
Syndication Agent):
(i) as soon as available and in any event within 20 days
after the end of each calendar month, consolidated and consolidating
statements of income and retained earnings of the Company and its
Subsidiaries for such month and for the period from the beginning of the
respective fiscal year to the end of such month, and the related
consolidated balance sheets of the Company and its Subsidiaries as at
the end of such month, accompanied by a certificate of a senior
financial officer of the Company, which certificate shall state that
said consolidated financial statements fairly present the consolidated
financial condition and results of operations of the Company and its
Subsidiaries, and said consolidating financial statements fairly present
the respective individual unconsolidated financial condition and results
of operations of the Company and of each of its Subsidiaries, in each
case in accordance with generally accepted accounting principles,
consistently applied, as at the end of, and for, such month (subject to
normal year-end audit adjustments with the absence of footnotes);
(ii) as soon as available and in any event within 45 days
after the end of each quarterly fiscal period of each fiscal year of the
Company, (A) a statement of occupancy rates at each of the facilities
owned or maintained by the Company and its Subsidiaries as at the end of
such period, for each Facility Contract for such period and for the
period from the beginning of the respective fiscal year to the end of
such fiscal quarter, and (B) an analysis of the chief financial officer
of the financial condition of the Company and its Subsidiaries, on a
consolidated and consolidating basis, as of the end of such period;
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(iii) as soon as available and in any event (x) within 90
days after the end of each fiscal year of the Company, consolidated and
consolidating statements of income and retained earnings, and a
consolidated statement of cash flows, of the Company and its
Subsidiaries for such fiscal year and the related consolidated and
consolidating balance sheets of the Company and its Subsidiaries as at
the end of such fiscal year, setting forth in each case in comparative
form the corresponding consolidated and consolidating figures for the
preceding fiscal year, and accompanied (A) in the case of said
consolidated statements and balance sheet of the Company, by an opinion
thereon of independent certified public accountants of recognized
national standing (which opinion shall not contain any impermissible
qualification), which opinion shall state that said consolidated
financial statements fairly present the consolidated financial condition
and results of operations of the Company and its Subsidiaries as at the
end of, and for, such fiscal year in accordance with generally accepted
accounting principles, and by a management letter or similar letter
submitted to the Company by such accountants and (B) in the case of said
consolidating statements and balance sheets, by a certificate of a
senior financial officer of the Company, which certificate shall state
that said consolidating financial statements fairly present the
respective individual unconsolidated financial condition and results of
operations of the Company and of each of its Subsidiaries, in each case
in accordance with generally accepted accounting principles,
consistently applied, as at the end of, and for, such fiscal year and
(y) within sixty (60) days after the end of each fiscal year of the
Company, annual projections for the Company and its Subsidiaries (aa)
for such year (including the year in which the Lease Termination Date
occurs); and promptly after any material revision to such projections,
such projections as so revised and (bb) as the Syndication Agent may
otherwise reasonably request;
(iv) promptly upon their becoming available, copies of
all registration statements and regular periodic reports, if any, that
the Company shall have filed with the Securities and Exchange Commission
(or any governmental agency substituted therefor) or any national
securities exchange;
(v) to the extent not previously furnished to the
Lessor, the Lenders or the Syndication Agent in such capacity, promptly
upon the mailing thereof to the shareholders of the Company generally,
copies of all financial statements, reports and proxy statements so
mailed;
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(vi) without duplication of any provision of
subsection (iii) above, promptly after the receipt by the Company
thereof, copies of each report submitted to any Obligor by independent
accountants in connection with any annual, interim or special audit of
the books of any Obligor made by such accountants, or any management
letters or similar documents submitted to any Obligor by such
accountants;
(vii) as soon as possible, and in any event within ten
days after the Company knows or has reason to believe that any of the
events or conditions specified below with respect to any Plan or
Multiemployer Plan has occurred or exists, a statement signed by a
senior financial officer of the Company setting forth details respecting
such event or condition and the action, if any, that the Company or its
ERISA Affiliate proposes to take with respect thereto (and a copy of any
report or notice required to be filed with or given to PBGC by the
Company or an ERISA Affiliate with respect to such event or condition):
(1) any reportable event, as defined in
Section 4043(b) of ERISA and the regulations issued thereunder,
with respect to a Plan, as to which PBGC has not by regulation
waived the requirement of Section 4043(a) of ERISA that it be
notified within 30 days of the occurrence of such event (provided
that a failure to meet the minimum funding standard of Section 412
of the Code or Section 302 of ERISA, including, without
limitation, the failure to make on or before its due date a
required installment under Section 412(m) of the Code or
Section 302(e) of ERISA, shall be a reportable event regardless of
the issuance of any waivers in accordance with Section 412(d) of
the Code); and any request for a waiver under Section 412(d) of
the Code for any Plan;
(2) the distribution under Section 4041 of ERISA of
a notice of intent to terminate any Plan or any action taken by
the Company or an ERISA Affiliate to terminate any Plan;
(3) the institution by PBGC of proceedings under
Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan, or the receipt by the
Company or any ERISA Affiliate of a notice from a Multiemployer
Plan that such action has been taken by PBGC with respect to such
Multiemployer Plan;
(4) the complete or partial withdrawal from a
Multiemployer Plan by the Company or any ERISA Affiliate that
results in liability under Section 4201 or 4204 of ERISA
(including the obligation to satisfy secondary liability as a
result of a purchaser default) or the receipt by the Company or
any ERISA Affiliate of notice from a Multiemployer Plan that it is
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in reorganization or insolvency pursuant to Section 4241 or 4245
of ERISA or that it intends to terminate or has terminated under
Section 4041A of ERISA;
(5) the institution of a proceeding by a fiduciary
of any Multiemployer Plan against the Company or any ERISA
Affiliate to enforce Section 515 of ERISA, which proceeding is not
dismissed within 30 days; and
(6) the adoption of an amendment to any Plan that,
pursuant to Section 401(a)(29) of the Code or Section 307 of
ERISA, would result in the loss of tax-exempt status of the trust
of which such Plan is a part if the Company or an ERISA Affiliate
fails to timely provide security to the Plan in accordance with
the provisions of said Sections;
(viii) without prejudice as to whether a Potential Event of
Default or Event of Default has occurred, promptly after the Company
knows or has reason to believe that any Potential Event of Default or
Event of Default has occurred, a notice of such Potential Event of
Default or Event of Default describing the same in reasonable detail
and, together with such notice or as soon thereafter as possible, a
description of the action that the Company has taken or proposes to take
with respect thereto;
(ix) within 20 days after the end of each calendar month,
a Borrowing Base Certificate (as such term is defined in the Credit
Agreement) as of the end of the immediately preceding month;
(x) within 20 days after the end of each calendar month,
an accounts receivable aging schedule for the Company and its
Subsidiaries on a consolidated basis;
(xi) from time to time such other information regarding
the financial condition, operations, business or prospects of the
Company or any of its Subsidiaries (including, without limitation, any
Plan or Multiemployer Plan and any reports or other information required
to be filed under ERISA) available to the Company, as any Lender, the
Lessor or the Syndication Agent may reasonably request.
(xii) at the time it furnishes each set of financial
statements pursuant to subsections (ii) or (iii) above, a Compliance
Certificate of a senior financial officer of the Company to the effect
that no Event of Default has occurred and is continuing (or, if any
Event of Default has occurred and is continuing, describing the same in
reasonable detail and describing the action that the Company has taken
or proposes to take with respect thereto). In addition, at the time the
Company furnishes to the Syndication Agent, the Lessor and each Lender,
the financial statements required pursuant to subsection (ii) above, the
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Company shall furnish to the Syndication Agent, the Lessor and each
Lender, a certificate of a senior financial officer setting forth in
reasonable detail the computations necessary to determine whether the
Company is in compliance with Sections 5.1(j) through and
including 5.1(n) hereof as of the date as of which such financial
statements have been provided. Further, upon the request of the
Syndication Agent from and after the occurrence of an Event of Default,
at the time the Company furnishes the financial statements required
pursuant to subsection (i) above, the Company shall furnish to the
Syndication Agent each Lender, a certificate of a senior financial
officer setting forth in reasonable detail the computations necessary to
determine whether the Company is in compliance with Sections 5.1(j)
through and including 5.1(n) hereof as of date as of which such
financial statements have been provided;
(xiii) as soon as practicable and, in any event, at least
five Business Days prior to the consummation thereof, notice of a
Capital Event;
(xiv) prompt notice of the occurrence of any event or
condition, or the obtaining of any knowledge by the Obligors which, if
the same had occurred or been obtained as of any Closing Date, would
result in any representation or warranty herein being false or
misleading in any material respect;
(xv) promptly upon any Obligor's becoming aware thereof,
notice of any proposed Laws, or amendments thereto, which would restrict
or prohibit any Obligor from operating its business in substantially the
same manner in which it is presently conducted;
(xvi) promptly upon discovery thereof, notice of any
development, event or condition, financial or otherwise, which might
have a Material Adverse Effect;
(xvii) prompt notice of the entry by any Obligor, as
lessor, into a lease with a third party (that is not an Affiliate of
such Obligor), as lessee, for any material portion of any Property owned
by such Obligor and, promptly upon the request of the Syndication Agent,
the Obligor shall execute and deliver in recordable form, and pay all
recording fees in connection with, an assignment of leases and rents to
be recorded against the Property in question;
(xviii) prompt notice of the assertion of any Environmental
Claim by any Person against, or with respect to the activities of, any
Obligor and notice of any alleged violation of or non-compliance with
any Environmental Permit, which, if adversely determined, could
reasonably be expected to have a Material Adverse Effect;
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(xix) promptly upon any Obligor's becoming aware thereof,
notice of any violation or breach by any Obligor of the terms of, or any
revocation or suspension or threatened revocation or suspension of, any
Use Permit or other permit of an Obligor, if the same could reasonably
be expected to have a Material Adverse Effect;
(xx) prompt notice of the termination or non-renewal of
any of the Facility Contracts which, individually or in the aggregate
with all other Facility Contracts terminated or not renewed during the
prior six-month period, provided for annual payments to the Obligors of
not less than $10,000,000; and
(xxi) prompt notice of the entry by the Obligors into new
Facility Contracts (i) which, individually or in the aggregate with all
other Facility Contracts entered into during the prior six-month period,
provide for annual payments to the Obligors of not less than $10,000,000
and (ii) under which the other party is the United States government or
any bureau, agency or instrumentality thereof. Promptly upon the
request of the Syndication Agent or any Funding Party, the Company or
the Obligor that is a party to each such Facility Contract shall
(A) provide a copy of the same to the requesting party and (B) in the
case of a Facility Contract described in clause (ii) above, execute and
deliver such notices and assignments as may be required to comply with
the Assignment of Claims Act of 1940.
(b) Litigation.
The Company will promptly give to each Lender, the Lessor and the
Syndication Agent notice of all legal or arbitral proceedings, and of all
proceedings by or before any governmental or regulatory authority or agency,
and any material development in respect of such legal or other proceedings,
affecting the Company or any of its Subsidiaries, except proceedings that, if
adversely determined, would not (either individually or in the aggregate) have
a Material Adverse Effect.
(c) Existence, Etc.
The Company will, and will cause each of its Subsidiaries to:
(i) preserve and maintain its legal existence and all of
its material rights, privileges, licenses and franchises; provided,
however, upon at least 30 days' prior written notice to the Syndication
Agent, the Lessor and the Lenders and so long as the Company has taken
such actions and executed and delivered such documents (including,
without limitation, such modifications of the Operative Documents as may
be necessary to make Youth Services International, Inc. a co-borrower
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under the Credit Agreement) as the Syndication Agent may reasonably
request or may deem necessary or desirable to perfect or continue the
perfection of any Liens granted by the Company or its Subsidiaries to or
for the benefit of the Syndication Agent, the Lessor and the Lenders,
some or all of its Subsidiaries may be merged with and into Youth
Services International, Inc.;
(ii) comply with the requirements of all applicable Laws,
if failure to comply therewith could be reasonably expected to (either
individually or in the aggregate) have a Material Adverse Effect;
(iii) pay and discharge all taxes, assessments and
governmental charges or levies imposed on it or on its income or profits
or on any of its Property prior to the date on which penalties attach
thereto, except for any such tax, assessment, charge or levy the payment
of which is being contested in good faith and by proper proceedings and
against which adequate reserves are being maintained;
(iv) maintain all of its Properties necessary to the
conduct of its business in good working order and condition, ordinary
wear and tear excepted;
(v) keep adequate records and books of account, in which
complete entries will be made in accordance with generally accepted
accounting principles consistently applied; and
(vi) upon notice to the Company, permit representatives
of any Lender, the Lessor or the Syndication Agent, during normal
business hours, to examine, copy and make extracts from its books and
records, to inspect any of its Properties, and to discuss its business
and affairs with its officers, all to the extent reasonably requested by
such Lender, the Lessor or the Syndication Agent (as the case may be).
(d) Insurance.
(i) The Company will, and will cause each of its
Subsidiaries to, maintain insurance with financially sound and reputable
insurance companies in such amounts and covering such casualties and
risks as are customary in accordance with prudent business practice in
the case of companies engaged in the same or a similar business and
similarly situated, which insurance may provide for reasonable
deductibility from coverage thereof. The Company will, upon request,
furnish to the Syndication Agent from time to time a certificate from an
executive office of the Company setting forth the nature and extent of
all insurance maintained by the Company and its Subsidiaries.
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(ii) Such insurance shall name the Syndication Agent as
loss payee (to the extent covering risk of loss or damage to tangible
property) and as an additional named insured as its interests may appear
(to the extent covering any other risk). Each policy referred to in
this Section 5.1(d) shall provide that it will not be canceled or
reduced, or allowed to lapse without renewal, except after not less than
30 days' notice to the Syndication Agent and shall also provide that the
interests of the Syndication Agent, the Lessor and the Lenders shall not
be invalidated by any act or negligence of the Obligors or any Person
having an interest in any Property covered by a mortgage nor by
occupancy or use of any such Property for purposes more hazardous than
permitted by such policy nor by any foreclosure or other proceedings
relating to such Property. The Company will advise the Syndication
Agent promptly of any significant policy cancellation (other than any
such cancellation in connection with the replacement thereof), reduction
or amendment.
(iii) On or before the Initial Closing Date, and
periodically thereafter at least 30 days prior to the applicable policy
expiration dates, the Company will deliver to the Syndication Agent
certificates of insurance satisfactory to the Syndication Agent
evidencing the existence of all insurance required to be maintained by
the Company hereunder setting forth the respective coverages, limits of
liability, carrier, policy number and period of coverage. The Company
will not obtain or carry separate insurance concurrent in form or
contributing in the event of loss with that required by this Section
5.1(d) unless the Syndication Agent is the named insured thereunder,
with loss payable as provided herein. The Company will immediately
notify the Syndication Agent whenever any such separate insurance is
obtained and shall deliver to the Syndication Agent certificates
evidencing the same.
(iv) Without limiting the obligations of the Company
under the foregoing provisions of this Section 5.1(d), in the event the
Company shall fail to maintain in full force and effect insurance as
required by the foregoing provisions of this Section 5.1(d), then the
Syndication Agent may (upon notice to the Company), but shall have no
obligation so to do, procure insurance covering the interests of the
Syndicated Agent, the Lessor and the Lenders in such amounts and against
such risks as the Syndication Agent (or the Required Funding Parties)
shall deem appropriate, and the Company shall reimburse the Syndication
Agent in respect of any premiums paid by the Syndication Agent in
respect thereof.
(e) Prohibition of Fundamental Changes.
(i) Except as otherwise permitted under
Sections 5.1(c)(i) and 5.1(e)(ii) hereof, the Company will not, nor will
it permit any of its Subsidiaries to, enter into any transaction of
merger or consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution). The Company
will not, nor will it permit any of its Subsidiaries to, acquire any
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business or property from, or capital stock of, or be a party to any
acquisition of, any Person except for (w) purchases of inventory and
other property to be sold or used in the ordinary course of business,
(x) Investments permitted under Section 5.1(h) hereof, (y) Capital
Expenditures permitted under Section 5.1(w) hereof and (z) acquisitions
permitted under Section 5.1(e)(ii) below.
(ii) (A) An Obligor may merge with any Person other than
another Obligor, so long as the Obligor is the surviving corporation in
any such merger and no Potential Event of Default or Event of Default
would result therefrom immediately after giving effect thereto; and
(B) any Obligor may acquire stock in a new Subsidiary, or acquire all or
substantially all of the assets or properties of, any Person or any
division or operations of any Person, or create a new Subsidiary,
provided that no Potential Event of Default or Event of Default would
result therefrom immediately after giving effect thereto and that the
provisions of Section 5.1(t), if applicable, are complied with;
provided, however, that (1) any individual transaction described in
clause (A) or (B) above that involves total consideration (as defined
below) to be paid by the Obligors in excess of twenty-five (25%) percent
of the Consolidated Net Worth of the Obligors as at the date of the most
recent quarterly financial statements delivered to the Syndication
Agent, the Lessor and the Lenders pursuant to Section 5.1(a)(ii) hereof,
or (2) if within any 12-month period the aggregate amount of
consideration paid by the Obligors for all transactions of a nature
described in clause (A) or (B) above exceeds $30,000,000, the
transaction whose consideration when aggregated with the transactions
over the previous 12 months exceeds $30,000,000 and each transaction
thereafter during such period must also be approved in advance in
writing by the Syndication Agent and:
(1) The Company must deliver to the Syndication
Agent, no less than 15 Business Days prior to the consummation of
such transaction, a certificate executed by the senior financial
officer of the Company certifying to the Syndication Agent that no
Potential Event of Default or Event of Default will result from
such transaction after giving effect thereto, and also certifying
and demonstrating to the reasonable satisfaction of the
Syndication Agent that the Obligors are in compliance with each of
the financial covenants set forth in Sections 5.1(j) through and
including 5.1(n) hereof calculated on a Historical Pro Forma Basis
(as defined below);
(2) The transaction shall be subject to the
Company's standard due diligence review, which due diligence
materials shall be delivered to the Syndication Agent at least 15
Business Days prior to the consummation of such transaction. The
results of such due diligence shall be acceptable to the
Syndication Agent in its sole discretion, and shall include,
without limitation, environmental and accounting due diligence,
including disclosure of contingent liabilities, documentation of
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reserves for remediation, clean-up, closure and/or monitoring, as
necessary or applicable;
(3) The Company will supply the Syndication Agent at
least 15 Business Days prior to the consummation of such
transaction with detailed information on the target company,
including but not limited to, three years of historical financial
statements, together with updated consolidating projections
through the Lease Termination Date;
(4) The Company will supply the Syndication Agent at
least 15 Business Days prior to the consummation of such
transaction with (i) evidence satisfactory to the Syndication
Agent that the target company is Year 2000 compliant or ready, or
(ii) an action plan to cure any deficiencies, which shall be
acceptable to the Syndication Agent in its sole discretion;
(5) The target company must have EBITDA of at least
$1 for its four fiscal quarters immediately preceding the proposed
closing date for such transaction; and
(6) The Company will supply the Syndication Agent
with such additional information and reports as the Syndication
Agent may request.
For purposes of this Section: "consideration" means the total purchase price
(including cash expended, stock or other non-cash consideration paid, Debt
incurred, and liabilities incurred or assumed) paid or to be paid; and
"Historical Pro Forma Basis" means, for any period ending as at the end of the
month preceding the month in which Obligors propose to make any such
acquisition permitted hereunder, the relevant financial terms (i.e., those
included in calculating the financial covenants set forth in Sections 5.1(j)
through and including 5.1(n) hereof) as calculated and determined for the
Obligors including any Subsidiaries acquired during the measurement period and
to be acquired and with respect to which the calculation of the various
financial covenants on a Historical Pro Forma Basis is being made, all
determined in accordance with GAAP and calculated as if all such acquired and
to be acquired Subsidiaries had been owned by the Obligors through the
measurement period involved, with any adjustments to historical financial
statements to be approved by the Syndication Agent.
(f) Limitation on Liens.
The Company will not, nor will it permit any of its Subsidiaries
to, create, incur, assume or suffer to exist any Lien upon any of its
Property, whether now owned or hereafter acquired, except (without
duplication) the following ("General Permitted Liens"):
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(i) Liens created pursuant to the Security Documents (as
defined in the Credit Agreement) or the Operative Documents;
(ii) Liens in existence on the date hereof and listed in
Part B of Schedule 4.1(l) hereto;
(iii) Liens imposed by any governmental authority for
taxes, assessments or charges not yet due or that are being contested in
good faith and by appropriate proceedings if adequate reserves with
respect thereto are maintained on the books of the Company or the
affected Subsidiaries, as the case may be, in accordance with GAAP;
(iv) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising in the ordinary
course of business that are not overdue for a period of more than
30 days or that are being contested in good faith and by appropriate
proceedings and Liens securing judgments but only to the extent for an
amount and for a period not resulting in an Event of Default under
Article XII(j) of the Lease;
(v) pledges or deposits under worker's compensation,
unemployment insurance and other social security legislation;
(vi) deposits to secure the performance of bids, trade
contracts (other than for Indebtedness), leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a
like nature incurred in the ordinary course of business;
(vii) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of business and
encumbrances consisting of zoning restrictions, easements, licenses,
restrictions on the use of Property or minor imperfections in title
thereto that, in the aggregate, are not material in amount, and that do
not in any case materially detract from the value of the Property
subject thereto or interfere with the ordinary conduct of the business
of the Company or any of its Subsidiaries;
(viii) Liens upon Property acquired after the date
hereof (by purchase, construction or otherwise) by a Special Purpose
Subsidiary, each of which Liens either (A) existed on such Property
before the time of its acquisition and was not created in anticipation
thereof or (B) was created solely for the purpose of securing
Indebtedness representing, or incurred to finance, refinance or refund,
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the cost (including the cost of construction) of such Property; provided
that (i) no such Lien shall extend to or cover any Property of the
Company or its Subsidiaries (or other than such Special Purpose
Subsidiary) and (ii) the principal amount of Indebtedness secured by any
such Lien shall at no time exceed 80% of the fair market value (as
determined in good faith by a senior financial officer of the Company)
of such Property at the time it was acquired (by purchase, construction
or otherwise); and
(ix) Liens securing any future Synthetic Lease Financing
that are pari passu with the Liens under the Security Documents.
(g) Indebtedness.
The Company will not, nor will it permit any of its Subsidiaries
to, create, incur or suffer to exist any Indebtedness except (without
duplication):
(i) Indebtedness arising pursuant to the Operative
Documents and Indebtedness arising under the Credit Agreement;
(ii) Indebtedness outstanding on the date hereof and
listed in Part A of Schedule 5.1(g) hereto;
(iii) Indebtedness of Subsidiaries of the Company to the
Company or to other Subsidiaries of the Company;
(iv) Indebtedness of the Company and its Subsidiaries
secured by Liens permitted under Section 5.1(f) (other than Section
5.1(f)(viii)) hereof up to but not exceeding $500,000 at any one time
outstanding;
(v) Indebtedness of one or more Special Purpose
Subsidiaries in an aggregate amount not exceeding $20,000,000 at any one
time outstanding;
(vi) Indebtedness consisting of the Obligations and any
future Synthetic Lease Financing;
(vii) additional Indebtedness of the Company and its
Subsidiaries (including, without limitation, Capital Lease Obligations)
up to but not exceeding $500,000 at any one time outstanding; and
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(viii) Subordinated Debt of the Company.
(8) Investments.
The Company will not, nor will it permit any of its Subsidiaries
to, make or permit to remain outstanding any Investments except:
(i) Investments outstanding on the date hereof and
identified in Part B of Schedule 4.1(n) hereto;
(ii) Operating and payroll deposit accounts with banks;
(iii) Permitted Investments;
(iv) Investments by the Company and its Subsidiaries in
capital stock of Subsidiaries of the Company to the extent outstanding
on the date of the financial statements of the Company and its
Subsidiaries referred to in Section 4.1(b) hereof and advances by the
Company and its Subsidiaries to Subsidiaries of the Company in the
ordinary course of business;
(v) Interest Rate Protection Agreements, if any,
required to be maintained under the Credit Agreement;
(vi) additional Investments (A) up to but not exceeding
$5,000,000 in the aggregate, so long as the Syndication Agent in its
sole and absolute discretion, has consented thereto or (B) exceeding
$5,000,000 in the aggregate, so long as the Required Lenders, in their
sole and absolute discretion, have consented thereto;
(vii) existing and future Investments comprised of stocks,
bonds and notes of existing or former account debtors of the Obligors if
such Investment was received pursuant to the consummation of a
bankruptcy plan of reorganization or similar proceedings of such account
debtor; and
(viii) loans or advances by the Company or any of its
Subsidiaries to employees in the ordinary course of business in an
aggregate amount at anyone time outstanding not to exceed $250,000.
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(i) Dividend Payments.
The Company will not, nor will it permit any of its Subsidiaries
to, declare or make any Dividend Payment at any time, except Dividend Payments
from a Subsidiary to the Company in order to fund the mandatory prepayment
required under the Credit Agreement upon the occurrence of a Capital Event
involving such Subsidiary.
(j) Total Indebtedness to Adjusted EBITDA Ratio.
The Company will not permit the ratio of (i) consolidated
Indebtedness of the Company and its Subsidiaries as of the last day of any
fiscal quarter of the Company ending during any test period set forth in the
table below, to (ii) Adjusted EBITDA for the period of four consecutive fiscal
quarters ending on the same day, to be greater than the ratio set forth
opposite such test period below:
Four Fiscal Quarters Ending Ratio
Closing Date 4.25:1
09/30/99 4.25:1
12/31/99 4.00:1
03/31/00 4.00:1
06/30/00 4.00:1
09/30/00 4.00:1
12/31/00 and thereafter 3.50:1
(k) Senior Debt to Adjusted EBITDA Ratio.
The Company will not permit the ratio of (i) Senior Debt of the
Company and its Subsidiaries as of the last day of any fiscal quarter of the
Company ending during any test period set forth on the table below, to
(ii) Adjusted EBITDA for the period of four consecutive fiscal quarters ending
on the same day, to be greater than the ratio set forth opposite such test
period below:
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Four Fiscal Quarters Ending Ratio
Closing Date 3.75:1
09/30/99 3.75:1
12/31/99 3.25:1
03/31/00 3.25:1
06/30/00 3.25:1
09/30/00 3.25:1
12/31/00 and thereafter 2.50:1
(l) Consolidated Net Worth.
The Company will not permit its Consolidated Net Worth to be less
than $41,733,000 plus the sum of the following through the date of
determination (i) 90% of cumulative, positive (any loss shall be treated as
zero) Consolidated Net Income earned in each fiscal year on and after the end
of the most recent fiscal quarter prior to the Initial Closing Date through
such date of determination and (ii) 100% of net proceeds of Equity Issuances
from the Initial Closing Date through such date of determination.
(m) Consolidated Indebtedness to Net Worth Ratio.
The Company will not permit the ratio of (i) consolidated
Indebtedness of the Company and its Subsidiaries to (ii) the sum of
consolidated Indebtedness of the Company and its Subsidiaries plus
consolidated Net Worth to exceed 70% at any time prior to December 31, 2001 or
65% from and after such date.
(n) Minimum Fixed Charge Coverage.
The Company will not permit the Fixed Charge Coverage Ratio to be
less than 1.50 to 1.0 as of the date hereof and thereafter; provided, however
for purposes of calculating the Fixed Charge Coverage Ratio at each fiscal
quarter end through and including December 31, 1999, (i) the results of
operations of Youth Services International, Inc. and its Subsidiaries and the
effects of SOP 98-5 for 1998 shall be excluded from EBITDA and (ii) non-cash
merger charges incurred plus legal fees in 1999 by the Obligors in connection
with the merger with Youth Services International, Inc. and its Subsidiaries
shall be added to EBITDA. The parties hereto acknowledge that, due to the
need to position certain documents to be recorded prior to the Initial Closing
Date the definition of Fixed Charge Coverage Ratio set forth in Appendix A to
such recorded documents is different than the definition thereof set forth in
Appendix A to this Master Agreement; to the extent of any such inconsistency,
the definitions set forth in Appendix A to this Master Agreement shall
control.
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(o) Sale Lease-back Transactions.
The Company will not, and will not permit any of its Subsidiaries
to, enter into any arrangement with any Person whereby the Company or such
Subsidiary shall sell or otherwise transfer any of its Property, whether now
owned or hereafter acquired, and thereafter rent or lease such Property or
similar Property for substantially the same use or uses as the Property sold
or transferred unless both of the following conditions are satisfied: (1) the
consideration received by the Company or such Subsidiary in connection with
such transfer is at least equal to the fair market value of the Property so
transferred (as reasonably determined by the board of directors of the
Company), and (2) all of the net proceeds received by the Company or any of
its Subsidiaries in connection with any such transaction are used by the
Company, within 12 months of the receipt thereof, to either (a) acquire other
Property in compliance with the term of this Master Agreement and/or (b) repay
or prepay Indebtedness of the Company or any of its Subsidiaries in accordance
with the Credit Agreement.
(p) Discount of Accounts.
The Company will not, and will not permit any of its Subsidiaries
to, sell (with or without recourse) or discount any of their Accounts.
(q) Lines of Business.
Neither the Company nor any of its Subsidiaries will engage to any
substantial extent in any line or lines of business activity other than the
business of operating or providing services to correctional and/or detention
facilities, substance abuse rehabilitation facilities, facilities for at-risk
or troubled juveniles and related lines of business.
(r) Transactions with Affiliates.
Except as expressly permitted by this Master Agreement, the
Company will not, nor will it permit any of its Subsidiaries to, directly or
indirectly: (a) make any Investment in an Affiliate; (b) transfer, sell,
lease, assign or otherwise dispose of any Property to an Affiliate; (c) merge
into or consolidate with or purchase or acquire Property from an Affiliate; or
(d) enter into any other transaction directly or indirectly with or for the
benefit of an Affiliate (including, without limitation, Guarantees and
assumptions of obligations of an Affiliate); provided that (x) any Affiliate
who is an individual may serve as a director, officer or employee of the
Company or any of its Subsidiaries and receive reasonable compensation for his
or her services in such capacity and (y) the Company and its Subsidiaries may
enter into transactions (other than extensions of credit by the Company or any
of its Subsidiaries to an Affiliate or the payment of management or similar
fees by the Company or a Subsidiary to an Affiliate) providing for the leasing
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of Property, the rendering or receipt of services or the purchase or sale of
inventory and other Property in the ordinary course of business if the
monetary or business consideration arising therefrom would be substantially as
advantageous to the Company and its Subsidiaries as the monetary or business
consideration that would obtain in a comparable transaction with a Person not
an Affiliate.
(s) Use of Proceeds.
The Lessees will use the proceeds of the Fundings solely to
acquire Land and Buildings and fund Construction and related costs.
(t) Certain Obligations Respecting Subsidiaries.
(i) The Company will, and will cause each of its
Subsidiaries to, take such action from time to time as shall be
necessary to ensure that each of its Subsidiaries is a Wholly Owned
Subsidiary.
(ii) The Company will take such action, and will cause
each of its Subsidiaries (other than the Dormant Subsidiaries and any
Special Purpose Subsidiaries) to take such action, from time to time as
shall be necessary to ensure that all Subsidiaries of the Company are
Subsidiary Guarantors and, thereby, "Obligors" hereunder. Without
limiting the generality of the foregoing, in the event that the Company
or any of its Subsidiaries shall form or acquire any new Subsidiary, the
Company or the respective Subsidiary will cause such new Subsidiary to
become a "Subsidiary Guarantor" (and, thereby, an "Obligor") hereunder
pursuant to a written instrument in form and substance satisfactory to
each Lender, the Lessor and the Syndication Agent, and to deliver such
proof of corporate action, incumbency of officers, opinions of counsel,
judgment and lien searches and other documents as any Funding Party or
the Syndication Agent shall have requested.
(iii) Neither the Company nor any of the other Obligors
shall suffer, cause or permit any of the Dormant Subsidiaries to start
conducting business or acquire assets having a fair market value in
excess of $25,000, unless prior to doing so, the Company and each such
entity shall have complied with the provisions of Section 5.1(t)(ii)
that would otherwise be applicable, had such entity not been a Dormant
Subsidiary.
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(u) Modifications of Certain Documents.
No Obligor will consent to any modification, supplement or waiver
of (i) any of the provisions of any Facility Contract which, individually or
in the aggregate with all other such modifications, supplements or waivers,
would have or be likely to have a Material Adverse Effect or (ii) any of the
subordination provisions governing the Subordinated Debentures or any other
Subordinated Debt.
(v) Qualifying Properties.
The Company will cause, in the manner hereinafter set forth, each
Leased Property to become a Qualifying Property, except for the Leased
Properties located in Mangonia Park, Florida, Eagle Lake, Texas, and Eloy,
Arizona. If the Company has received Pre-Development Costs Fundings with
respect to a Leased Property while it was in the pre-development phase (and
before it was a Leased Property), the Leased Property must become a
Qualifying Property on or before the date that is nine months after the date
of the initial Pre-Development Costs Funding with respect thereto. If the
Company has not received Pre-Development Costs Fundings with respect to a
Leased Property, the Leased Property must become a Qualifying Property on or
before the date that is nine months after the date of the initial funding
(excluding any funding to acquire raw land) hereunder or under another
Synthetic Lease Financing.
(w) Capital Expenditures.
The Company will not, and will not permit any of its Subsidiaries
to, make any Capital Expenditures at any time, except for the following:
(i) Capital Expenditures in an aggregate amount not to
exceed $50,000,000 per year; and
(ii) Capital Expenditures made in connection with
acquisitions permitted under Section 5.1(e) hereof.
(x) Dispositions of Assets or Subsidiaries.
Each of the Obligors shall not, and shall not permit any of its
Subsidiaries to, sell, convey, assign, lease, abandon or otherwise transfer or
dispose of, voluntarily or involuntarily, any of its properties or assets,
tangible or intangible (including sale, assignment, discount or other
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disposition of accounts, contract rights, chattel paper, equipment or general
intangibles with or without recourse or of capital stock, shares of beneficial
interest, partnership interests or limited liability company interests of a
Subsidiary of such Obligor), except:
(i) any sale, transfer or lease of assets (A) by any
Wholly Owned Subsidiary of such Obligor to another Obligor, (B) in the
ordinary course of business and on commercially reasonable terms,
(C) consisting of obsolete or worn-out property, tools or equipment no
longer used or useful in its business, (D) permitted under Section
5.1(o) or (E) constituting the Obligor's Tampa Bay Academy;
(ii) any sale of a Leased Property subject to the
requirements for such a sale in the Operative Documents; or
(iii) any sale, transfer or lease of assets, other than
those specifically excepted pursuant to clauses (i) and (ii) above, so
long as (A) the net proceeds therefrom are applied as a mandatory
prepayment of the loans in accordance with the provisions of the Credit
Agreement and (B) (1) the Syndication Agent, in its sole and absolute
discretion, has consented to such disposition, in the event the
aggregate fair market value of all property so disposed of does not
exceed $6,000,000 or (2) the Required Lenders, in their sole and
absolute discretion, have consented to such disposition, in the event
the aggregate fair market value of all property so disposed of exceeds
$6,000,000.
SECTION 5.2 Regulations T, U and X.
The Company will not nor will it permit any Subsidiary to take any
action that would result in any non-compliance of the Fundings made hereunder
with Regulations T, U and X of the Board of Governors of the Federal Reserve
System.
SECTION 5.3 Further Assurances.
Upon the written request of the Lessor or the Syndication Agent, each
Lessee, at its own cost and expense, will cause all financing statements
(including precautionary financing statements), fixture filings and other
similar documents, to be recorded or filed at such places and times in such
manner, as may be necessary or reasonably desirable to preserve, protect and
perfect the interest of the Lessor, the Syndication Agent and the Lenders in
the Leased Properties as contemplated by the Operative Documents.
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SECTION 5.4 Additional Required Appraisals.
If, as a result of any change in Applicable Law after the date hereof,
an appraisal of all or any of the Leased Properties is required during the
Lease Term under Applicable Law with respect to any Funding Party's interest
therein, such Funding Party's Funded Amount with respect thereto or the
Operative Documents, then the related Lessee shall pay the reasonable cost of
such appraisal.
SECTION 5.5 Lessor's Covenants.
The Lessor covenants and agrees that, unless the Syndication Agent, the
Company and the Lenders shall have otherwise consented in writing:
(a) the proceeds of the Loans received from the Lenders will
be used by the Lessor solely to acquire the related Leased Property and to pay
the Construction Agent or the related Lessee for certain closing, development
and transaction costs associated therewith and, if applicable, for the costs
of Construction and Pre-Development Costs. No portion of the proceeds of the
Loans will be used by the Lessor (i) in connection with, whether directly or
indirectly, any tender offer for, or other acquisition of, stock of any
corporation with a view towards obtaining control of such other corporation or
(ii) directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any Margin Stock;
(b) it shall not engage in any business or activity, or invest
in any Person, except for activities similar to its activities conducted on
the date hereof, the Transaction and lease transactions similar to the
Transaction;
(c) it will maintain tangible net worth in an amount no less
than the sum of (i) $100,000 plus (ii) 3% of its total assets (calculated
assuming no reduction in the value of any leased property from its original
cost to the Lessor) and will at all times be solvent (as defined in the
Bankruptcy Code);
(d) it will deliver to the Syndication Agent and the Company,
as soon as available and in any event within 90 days after the end of each
fiscal year, a balance sheet of the Lessor as of the end of such fiscal year
and the related statements of income, partners' capital and cash flows for
such fiscal year, setting forth in each case in comparative form the figures
for the previous fiscal year, together with copies of its filed tax returns,
all certified by an officer of the General Partner (and if the Lessor ever
prepares audited financial statements, it shall deliver copies thereof to the
Syndication Agent and the Company);
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(e) it will permit the Syndication Agent and the Company and
their respective representatives to examine, and make copies from, the
Lessor's books and records, and to visit the offices and properties of the
Lessor for the purpose of examining such materials, and to discuss the
Lessor's performance hereunder with any of its, or the General Partner's,
officers and employees, in each case during normal business hours and upon
reasonable notice;
(f) it shall not consent to or permit the creation of any
easement or other restriction against any Leased Property other than as
permitted pursuant to Article VI of the Lease;
(g) it shall not incur or permit to exist, and will promptly
discharge each Lessor Lien and shall indemnify the Lenders and the Lessees for
any loss, cost, expense or diminution in value of any Leased Property
resulting from, or incurred as a result of, such Lessor Liens;
(h) it shall not enter into any other transactions, leases,
purchases or other agreements, other than immaterial transactions, purchases,
leases and other agreements entered into by the Lessor in the ordinary course
of its business, in which the other parties to said transactions, leases,
purchases or other agreements will have any recourse against the Lessor other
than recourse to the Lessor's ownership or other interest in the property
subject to such transactions, purchases, leases or other agreements, other
than liability for required fundings, breach of contract, misrepresentation,
gross negligence, willful misconduct, fraud, failure to turn over funds and
similar exceptions to limitations on recourse;
(i) it shall not guaranty the liabilities of any other Person;
(j) it shall pay its debts as such debts become due unless
such debts are the subject of a bona fide dispute;
(k) it shall promptly notify the Company and the Agent of any
claim against the Lessor that would reasonably be expected to result in a
material liability of the Lessor for which it is not indemnified;
(l) it may not consolidate with or merge into any other
Person;
(m) it shall comply with all of its obligations under the
Operative Documents, except to the extent that compliance is prevented by any
failure on the part of any Lessee or the Company to perform its obligations
under the Lease or any other Operative Document; and
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(n) upon the written request of the Syndication Agent, it
shall, at the sole cost and expense of the Lessees, take such action and
execute and deliver such documents as may be specified in such request as may
be reasonably necessary to preserve, protect and perfect the interests of the
Syndication Agent in the Leased Properties as contemplated by the Operative
Documents.
ARTICLE VI.
TRANSFERS BY LESSOR AND LENDERS
SECTION 6.1 Lessor Transfers and Replacement.
The Lessor shall not assign, convey or otherwise transfer all or any
portion of its right, title or interest in, to or under any Leased Property or
any of the Operative Documents without the prior written consent of the
Lenders and the Company. Any proposed transferee of the Lessor shall make the
representation set forth in Section 4.3 to the other parties hereto.
SECTION 6.2 Lender Transfers.
(a) Any Lender may make, carry or transfer Loans at, to or for
the account of, any of its branch offices or the office of an Affiliate of
such Lender.
(b) Each Lender may, with the consent of the Syndication
Agent, assign all or a portion of its interests, rights and obligations under
this Master Agreement and the Loan Agreement (including all or a portion of
its Commitment and the Loans at the time owing to it) to an Eligible Assignee;
provided, however, that (i) no such consent of the Syndication Agent shall be
required in the case of any assignment to another Lender or an Affiliate of
the assigning Lender, (ii) unless such Lender is assigning all of its
Commitment, after giving effect to such assignment, the Commitment of both the
assignor and the assignee is at least $1,000,000, unless the assignee is an
Affiliate of an assigning Lender, and (iii) the parties to each such
assignment shall execute and deliver to the Syndication Agent an Assignment
and Acceptance, and, unless such assignment is to an Affiliate of such Lender,
a processing and recordation fee of $3,500. Any such assignment of the Loans
shall include both the A Loans and the B Loans of such assigning Lender, on a
pro rata basis. No Lessee shall be responsible for such processing and
recordation fee or any costs or expenses incurred by any Lender or the
Syndication Agent in connection with such assignment. From and after the
effective date specified in each Assignment and Acceptance, which effective
date shall be at least five (5) Business Days after the execution thereof, the
assignee thereunder shall be a party hereto and to the extent of the interest
assigned by such Assignment and Acceptance, have the rights and obligations of
a Lender under this Master Agreement and the Loan Agreement.
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(c) Each Lender may, without the consent of the Company or any
Lessee, sell participations to one or more banks or other entities in all or a
portion of its rights and obligations under this Master Agreement and the Loan
Agreement (including all or a portion of its Commitments in the Loans owing to
it), provided, however, that (i) no Lender may sell a participation in its
Commitment (after giving effect to any permitted assignment hereunder) in an
amount in excess of fifty percent (50%) of such Commitment (provided further
that (1) sales of participations to an Affiliate of such Lender shall not be
included in such calculation and (2) no such maximum amount shall be
applicable to any participation sold at any time there exists an Event of
Default), (ii) such Lender's obligations under this Master Agreement and the
Loan Agreement shall remain unchanged, (iii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (iv) the participating bank or other entity shall not be entitled
to any greater benefit than its selling Lender under the cost protection
provisions contained in Section 7.5 of this Master Agreement, and (v) the
Company, each Lessee, the Syndication Agent and the other Lenders shall
continue to deal solely and directly with each Lender in connection with such
Lender's rights and obligations under this Master Agreement and the other
Operative Documents, and such Lender shall retain the sole right to enforce
the obligations of the Lessor relating to the Loans and to approve any
amendment, modification or waiver of any provisions of this Master Agreement
and the Loan Agreement (except that such Lender may permit the participant to
approve any amendment, modification or waiver which would reduce the principal
of or the interest rate on its Loan, extend the term of such Lender's
Commitment, reduce the amount of any fees to which such participant is
entitled or extend the final scheduled payment date of any Loan). Any Lender
selling a participation hereunder shall provide prompt written notice to the
Syndication Agent of the name of such participant.
(d) Any Lender or participant may, in connection with the
assignment or participation or proposed assignment or participation, pursuant
to this Section, disclose to the assignee or participant or proposed assignee
or participant any information relating the Company or its Subsidiaries
furnished to such Lender by or on behalf of the Company. With respect to any
disclosure of confidential, non-public, proprietary information, such proposed
assignee or participant shall agree in writing to use the information only for
the purpose of making any necessary credit judgments with respect to this
facility and not to use the information in any manner prohibited by any law,
including without limitation, the securities laws of the United States. The
proposed participant or assignee shall agree not to disclose any of such
information except as permitted by this Master Agreement. The proposed
participant or assignee shall further agree to return all documents or other
written material and copies thereof received from any Lender, the Syndication
Agent or any Lessee relating to such confidential information unless otherwise
properly disposed of by such entity.
(e) Any Lender may at any time assign all or any portion of
its rights under this Master Agreement and the Notes to a Federal Reserve Bank
without complying with the requirements of paragraph (b) above; provided that
no such assignment shall release such Lender from any of its obligations
hereunder.
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ARTICLE VII.
INDEMNIFICATION
SECTION 7.1 General Indemnification.
Each of the Company and each Lessee, jointly and severally, agrees,
whether or not any of the transactions contemplated hereby shall be
consummated, to assume liability for, and to indemnify, protect, defend, save
and hold harmless each Indemnitee, on an After-Tax Basis, from and against,
any and all Claims that may be imposed on, incurred by or asserted, or
threatened to be asserted, against such Indemnitee, whether or not such
Indemnitee shall also be indemnified as to any such Claim by any other Person
and whether or not such Claim arises or accrues prior to any Closing Date or
after the Lease Termination Date, or results from such Indemnitee's
negligence, in any way relating to or arising out of:
(a) any of the Operative Documents or any of the transactions
contemplated thereby, and any amendment, modification or waiver in respect
thereof; or
(b) any Land, any Building or any part thereof or interest
therein, including any Ground Lease;
(c) the purchase, design, construction, preparation,
installation, inspection, delivery, non-delivery, acceptance, rejection,
ownership, management, possession, operation, rental, lease, sublease,
repossession, maintenance, repair, alteration, modification, addition,
substitution, storage, transfer of title, redelivery, use, financing,
refinancing, disposition, operation, condition, sale (including, without
limitation, any sale pursuant to the Lease), return or other disposition of
all or any part of any interest in any Leased Property or the imposition of
any Lien, other than a Lessor Lien (or incurring of any liability to refund or
pay over any amount as a result of any Lien, other than a Lessor Lien)
thereon, including, without limitation: (i) Claims or penalties arising from
any violation or alleged violation of law or in tort (strict liability or
otherwise), (ii) latent or other defects, whether or not discoverable,
(iii) any Claim based upon a violation or alleged violation of the terms of
any restriction, easement, condition or covenant or other matter affecting
title to any Leased Property or any part thereof, (iv) the making of any
Alterations in violation of any standards imposed by any insurance policies
required to be maintained by any Lessee pursuant to the Lease which are in
effect at any time with respect to any Leased Property or any part thereof,
(v) any Claim for patent, trademark or copyright infringement, (vi) Claims
arising from any public improvements with respect to any Leased Property
resulting in any charge or special assessments being levied against any Leased
Property or any Claim for utility "tap-in" fees, and (vii) Claims for personal
injury or real or personal property damage occurring, or allegedly occurring,
on any Land, Building or Leased Property;
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(d) the breach (other than a breach wrongfully alleged by such
Indemnitee) by the Company or any Lessee of any representation or warranty
made by it or deemed made by it in any Operative Document or any certificate
required to be delivered by any Operative Document;
(e) the retaining or employment of any broker, finder or
financial advisor by the Company or any Lessee to act on its behalf in
connection with this Master Agreement, or the incurring of any fees or
commissions to which the Lessor, the Syndication Agent or any Lender might be
subjected by virtue of their entering into the transactions contemplated by
this Master Agreement (other than fees or commissions due to any broker,
finder or financial advisor retained by the Lessor, the Syndication Agent or
any Lender);
(f) the existence of any Lien on or with respect to any Leased
Property, the Construction, any Basic Rent or Supplemental Rent, title
thereto, or any interest therein, including any Liens which arise out of the
possession, use, occupancy, construction, repair or rebuilding of any Leased
Property or by reason of labor or materials furnished or claimed to have been
furnished to the Construction Agent, any Lessee, or any of its contractors or
agents or by reason of the financing of any personalty or equipment purchased
or leased by any Lessee or Alterations constructed by any Lessee;
(g) the transactions contemplated hereby or by any other
Operative Document, in respect of the application of Parts 4 and 5 of
Subtitle B of Title I of ERISA and any prohibited transaction described in
Section 4975(c) of the Code; or
(h) any act or omission by the Company or any Lessee under any
Purchase Agreement or any other Operative Document, or any breach by the
Company or any Lessee of any requirement, condition, restriction or limitation
in any Deed, Purchase Agreement or Ground Lease;
provided, however, no Lessee shall be required to indemnify any Indemnitee
under this Section 7.1 for any Claim to the extent that such Claim results
from the willful misconduct, gross negligence, breach of contract or
misrepresentation of such Indemnitee; and, provided, further, that with
respect to each Construction Land Interest, each Lessee's indemnity
obligations with respect to such Leased Property shall be governed by
Section 3.3 of the Construction Agency Agreement during the Construction Term
therefor. It is expressly understood and agreed that the indemnity provided
for herein shall survive the expiration or termination of, and shall be
separate and independent from any other remedy under, this Master Agreement,
the Lease or any other Operative Document.
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SECTION 7.2 Environmental Indemnity.
In addition to and without limitation of Section 7.1 or Section 3.3 of
the Construction Agency Agreement, each of the Company and each Lessee,
jointly and severally, agrees to indemnify, hold harmless and defend each
Indemnitee, on an After-Tax Basis, from and against any and all claims
(including without limitation third party claims for personal injury or real
or personal property damage), losses (including but not limited to any loss of
value of any Leased Property), damages, liabilities, fines, penalties,
charges, suits, settlements, demands, administrative and judicial proceedings
(including informal proceedings and investigations) and orders, judgments,
remedial action, requirements, enforcement actions of any kind, and all
reasonable costs and expenses actually incurred in connection therewith
(including, but not limited to, reasonable attorneys' and/or paralegals' fees
and expenses), including, but not limited to, all costs incurred in connection
with any investigation or monitoring of site conditions or any clean-up,
remedial, removal or restoration work by any federal, state or local
government agency, arising directly or indirectly, in whole or in part, out of
(i) the presence on or under any Land of any Hazardous
Materials, or any releases or discharges of any Hazardous
Materials on, under, from or onto any Land,
(ii) any activity, including, without limitation,
construction, carried on or undertaken on or off any Land, and
whether by a Lessee or any predecessor in title or any employees,
agents, contractors or subcontractors of a Lessee or any
predecessor in title, or any other Person, in connection with the
handling, treatment, removal, storage, decontamination, clean-up,
transport or disposal of any Hazardous Materials that at any time
are located or present on or under or that at any time migrate,
flow, percolate, diffuse or in any way move onto or under any
Land,
(iii) loss of or damage to any property or the environment
(including, without limitation, clean-up costs, response costs,
remediation and removal costs, cost of corrective action, costs of
financial assurance, fines and penalties and natural resource
damages), or death or injury to any Person, and all expenses
associated with the protection of wildlife, aquatic species,
vegetation, flora and fauna, and any mitigative action required by
or under Environmental Laws, in each case to the extent related to
any Leased Property,
(iv) any claim concerning any Leased Property's lack of
compliance with Environmental Laws, or any act or omission causing
an environmental condition on or with respect to any Leased
Property that requires remediation or would allow any governmental
agency to record a lien or encumbrance on the land records, or
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(v) any residual contamination on or under any Land, or
affecting any natural resources on any Land, and to any
contamination of any property or natural resources arising in
connection with the generation, use, handling, storage, transport
or disposal of any such Hazardous Materials on or from any Leased
Property; in each case irrespective of whether any of such
activities were or will be undertaken in accordance with
applicable laws, regulations, codes and ordinances;
in any case with respect to the matters described in the foregoing clauses (i)
through (v) that arise or occur
(w) prior to or during the Lease Term,
(x) at any time during which a Lessee or any Affiliate
thereof owns any interest in or otherwise occupies or possesses
any Leased Property or any portion thereof, or
(y) during any period after and during the continuance
of any Event of Default;
provided, however, no Lessee shall be required to indemnify any Indemnitee
under this Section 7.2 for any Claim to the extent that such Claim results
from the willful misconduct or gross negligence of such Indemnitee. It is
expressly understood and agreed that the indemnity provided for herein shall
survive the expiration or termination of, and shall be separate and
independent from any other remedy under, this Master Agreement, the Lease or
any other Operative Document.
SECTION 7.3 Proceedings in Respect of Claims.
With respect to any amount that a Lessee is requested by an Indemnitee
to pay by reason of Section 7.1 or 7.2, such Indemnitee shall, if so requested
by such Lessee and prior to any payment, submit such additional information to
such Lessee as such Lessee may reasonably request and which is in the
possession of, or under the control of, such Indemnitee to substantiate
properly the requested payment. In case any action, suit or proceeding shall
be brought against any Indemnitee, such Indemnitee promptly shall notify the
Company of the commencement thereof (provided that the failure of such
Indemnitee to promptly notify the Company shall not affect the Company's or
any Lessee's obligation to indemnify hereunder except to the extent that a
Lessee's rights to contest or defenses otherwise available to such Lessee are
materially prejudiced by such failure), and such Lessee shall be entitled, at
its expense, to participate in, and, to the extent that such Lessee desires
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to, assume and control the defense thereof with counsel reasonably
satisfactory to such Indemnitee; provided, however, that such Indemnitee may
pursue a motion to dismiss such Indemnitee from such action, suit or
proceeding with counsel of such Indemnitee's choice at the Lessees' expense;
and provided further that a Lessee may assume and control the defense of such
proceeding only if the Company shall have acknowledged in writing its and each
Lessee's obligations to fully indemnify such Indemnitee in respect of such
action, suit or proceeding, the Lessees shall pay all reasonable costs and
expenses related to such action, suit or proceeding as and when incurred and
the related Lessee shall keep such Indemnitee fully apprised of the status of
such action suit or proceeding and shall provide such Indemnitee with all
information with respect to such action suit or proceeding as such Indemnitee
shall reasonably request; and, provided further, that no Lessee shall be
entitled to assume and control the defense of any such action, suit or
proceeding if and to the extent that, (A) in the reasonable opinion of such
Indemnitee, (x) such action, suit or proceeding involves any possibility of
imposition of criminal liability or any material risk of civil liability on
such Indemnitee in excess of $1,000,000 or (y) such action, suit or proceeding
will involve a material risk of the sale, forfeiture or loss of, or the
creation of any Lien (other than a Permitted Lien) on any Leased Property or
any part thereof unless the related Lessee or the Company shall have posted a
bond or other security satisfactory to the relevant Indemnitees in respect to
such risk or (z) the control of such action, suit or proceeding would involve
an actual or potential conflict of interest, (B) such proceeding involves
Claims not fully indemnified by the Lessees which the related Lessee and the
Indemnitee have been unable to sever from the indemnified claim(s), or (C) an
Event of Default has occurred and is continuing. The Indemnitee may
participate in a reasonable manner at its own expense and with its own counsel
in any proceeding conducted by a Lessee in accordance with the foregoing.
If a Lessee fails to fulfill the conditions to such Lessee's assuming
the defense of any claim after receiving notice thereof on or prior to the
date that is fifteen (15) days prior to the date that an answer, response or
other action on the part of the Indemnitee is required, the Indemnitee may
undertake such defense, at the Lessees' expense. No Lessee shall enter into
any settlement or other compromise with respect to any Claim in excess of
$1,000,000 which is entitled to be indemnified under Section 7.1 or 7.2
without the prior written consent of the related Indemnitee, which consent
shall not be unreasonably withheld. Unless an Event of Default shall have
occurred and be continuing, no Indemnitee shall enter into any settlement or
other compromise with respect to any claim which is entitled to be indemnified
under Section 7.1 or 7.2 without the prior written consent of the Company,
which consent shall not be unreasonably withheld, unless such Indemnitee
waives its right to be indemnified under Section 7.1 or 7.2 with respect to
such Claim.
Upon payment in full of any Claim by the Lessees pursuant to Section 7.1
or 7.2 to or on behalf of an Indemnitee, the Lessees, without any further
action, shall be subrogated to any and all claims that such Indemnitee may
have relating thereto (other than claims in respect of insurance policies
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maintained by such Indemnitee at its own expense), and such Indemnitee shall
execute such instruments of assignment and conveyance, evidence of claims and
payment and such other documents, instruments and agreements as may be
reasonably necessary to preserve any such claims and otherwise cooperate with
the Lessees and give such further assurances as are reasonably necessary or
advisable to enable the Lessees vigorously to pursue such claims.
Any amount payable to an Indemnitee pursuant to Section 7.1 or 7.2 shall
be paid to such Indemnitee promptly upon, but in no event later than thirty
(30) days after, receipt of a written demand therefor from such Indemnitee,
accompanied by a written statement describing in reasonable detail the basis
for such indemnity and the computation of the amount so payable.
If for any reason the indemnification provided for in Section 7.1 or 7.2
is unavailable to an Indemnitee or is insufficient to hold an Indemnitee
harmless, then each of the Company and each Lessee agrees to contribute to the
amount paid or payable by such Indemnitee as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect not only
the relative benefits received by such Indemnitee on the one hand and by the
Company and the Lessees on the other hand but also the relative fault of such
Indemnitee as well as any other relevant equitable considerations. It is
expressly understood and agreed that the right to contribution provided for
herein shall survive the expiration or termination of and shall be separate
and independent from any other remedy under this Master Agreement, the Lease
or any other Operative Document.
SECTION 7.4 General Tax Indemnity.
(a) Tax Indemnity.
Except as otherwise provided in this Section 7.4, each of the
Company and each Lessee, jointly and severally, shall pay on an After-Tax
Basis, and on written demand shall indemnify and hold each Tax Indemnitee
harmless from and against, any and all fees (including, without limitation,
documentation, recording, license and registration fees), taxes (including,
without limitation, income, gross receipts, sales, rental, use, turnover,
value-added, property, excise and stamp taxes), levies, imposts, duties,
charges, assessments or withholdings of any nature whatsoever, together with
any penalties, fines or interest thereon or additions thereto (any of the
foregoing being referred to herein as "Taxes" and individually as a "Tax" (for
the purposes of this Section 7.4, the definition of "Taxes" includes amounts
imposed on, incurred by, or asserted against each Tax Indemnitee as the result
of any prohibited transaction, within the meaning of Section 406 or 407 of
ERISA or Section 4975(c) of the Code, arising out of the transactions
contemplated hereby or by any other Operative Document)) imposed on or with
respect to any Tax Indemnitee, any Lessee, the Company, any Leased Property or
any portion thereof or any Land, or any sublessee or user thereof, by the
United States or by any state or local government or other taxing authority in
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the United States in connection with or in any way relating to (i) the
acquisition, financing, mortgaging, construction, preparation, installation,
inspection, delivery, non-delivery, acceptance, rejection, purchase,
ownership, possession, rental, lease, sublease, maintenance, repair, storage,
transfer of title, redelivery, use, operation, condition, sale, return or
other application or disposition of all or any part of any Leased Property or
the imposition of any Lien (or incurrence of any liability to refund or pay
over any amount as a result of any Lien) thereon, (ii) Basic Rent or
Supplemental Rent or the receipts or earnings arising from or received with
respect to any Leased Property or any part thereof, or any interest therein or
any applications or dispositions thereof, (iii) any other amount paid or
payable pursuant to the Notes or any other Operative Documents, (iv) any
Leased Property, any Land or any part thereof or any interest therein
(including, without limitation, all assessments payable in respect thereof,
including, without limitation, all assessments noted on the related Title
Policy), (v) all or any of the Operative Documents, any other documents
contemplated thereby, any amendments and supplements thereto, and
(vi) otherwise with respect to or in connection with the transactions
contemplated by the Operative Documents.
(b) Exclusions from General Tax Indemnity.
Section 7.4(a) shall not apply to:
(i) Taxes on, based on, or measured by or with respect
to net income of the Lessor, the Syndication Agent and the Lenders
(including, without limitation, minimum Taxes, capital gains
Taxes, Taxes on or measured by items of tax preference or
alternative minimum Taxes) other than (A) any such Taxes that are,
or are in the nature of, sales, use, license, rental or property
Taxes, and (B) withholding Taxes imposed by the United States or
any state in which Leased Property is located (i) on payments with
respect to the Notes, to the extent imposed by reason of a change
in Applicable Law occurring after the Initial Closing Date or
(ii) on Rent, to the extent the net payment of Rent after
deduction of such withholding Taxes would be less than amounts
currently payable with respect to the Funded Amounts;
(ii) Taxes on doing business and business privilege,
franchise, capital, capital stock, net worth, gross receipts or
similar Taxes, other than (A) any increase in such Taxes imposed
on such Tax Indemnitee by any state in which Leased Property is
located, net of any decrease in such taxes realized by such Tax
Indemnitee, to the extent that such tax increase would not have
occurred if on each Funding Date the Lessor and the Lenders had
advanced funds to a Lessee or the Construction Agent in the form
of loans secured by the Leased Property in an amount equal to the
Funded Amounts funded on such Funding Date, with debt service for
such loans equal to the Basic Rent payable on each Payment Date
and a principal balance at the maturity of such loans in a total
amount equal to the Funded Amounts at the end of the Lease Term,
or (B) any Taxes that are or are in the nature of sales, use,
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rental, license or property Taxes relating to any Leased Property;
(iii) Taxes that are based on, or measured by, the fees or
other compensation received by a Person acting as Syndication
Agent (in its individual capacities) or any Affiliate of any
thereof for acting as trustee under the Loan Agreement;
(iv) Taxes that result from any act, event or omission,
or are attributable to any period of time, that occurs after the
earlier of (A) the expiration of the Lease Term with respect to
any Leased Property and, if such Leased Property is required to be
returned to the Lessor in accordance with the Lease, such return
and (B) the discharge in full of the Lessees' obligations to pay
the Lease Balance, or any amount determined by reference thereto,
with respect to any Leased Property and all other amounts due
under the Lease, unless such Taxes relate to acts, events or
matters occurring prior to the earlier of such times or are
imposed on or with respect to any payments due under the Operative
Documents after such expiration or discharge;
(v) Taxes imposed on a Tax Indemnitee that result from
any voluntary sale, assignment, transfer or other disposition or
bankruptcy by such Tax Indemnitee or any related Tax Indemnitee of
any interest in any Leased Property or any part thereof, or any
interest therein or any interest or obligation arising under the
Operative Documents, or from any sale, assignment, transfer or
other disposition of any interest in such Tax Indemnitee or any
related Tax Indemnitee, it being understood that each of the
following shall not be considered a voluntary sale: (A) any
substitution, replacement or removal of any of the Leased Property
by any Lessee, (B) any sale or transfer resulting from the
exercise by any Lessee of any termination option, any purchase
option or sale option, (C) any sale or transfer while an Event of
Default shall have occurred and be continuing under the Lease, and
(D) any sale or transfer resulting from the Lessor's exercise of
remedies under the Lease;
(vi) any Tax which is being contested in accordance with
the provisions of Section 7.4(c), during the pendency of such
contest;
(vii) any Tax that is imposed on a Tax Indemnitee as a
result of such Tax Indemnitee's gross negligence or willful
misconduct (other than gross negligence or willful misconduct
imputed to such Tax Indemnitee solely by reason of its interest in
any Leased Property);
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(viii) to the extent any interest, penalties or
additions to tax result in whole or in part from the failure of a
Tax Indemnitee to file a return or pay a Tax that it is required
to file or pay in a proper and timely manner, unless such failure
(A) results from the transactions contemplated by the Operative
Documents in circumstances where Lessee did not give timely notice
to such Tax Indemnitee of such filing or payment requirement that
would have permitted a proper and timely filing of such return or
payment of such Tax, as the case may be, or (B) results from the
failure of Lessee to supply information necessary for the proper
and timely filing of such return or payment of such Tax, as the
case may be, that was not in the possession of such Tax
Indemnitee; and
(ix) as to Lessor, any Tax that results from the breach
by the Lessor of its representation and warranty made in
Section 4.3(g) or as to any Lender the breach of such Lender of
its representation and warranty made in Section 4.4(b).
(c) Contests.
If any claim shall be made against any Tax Indemnitee or if any
proceeding shall be commenced against any Tax Indemnitee (including a written
notice of such proceeding) for any Taxes as to which the Lessees may have an
indemnity obligation pursuant to Section 7.4, or if any Tax Indemnitee shall
determine that any Taxes as to which the Lessees may have an indemnity
obligation pursuant to Section 7.4 may be payable, such Tax Indemnitee shall
promptly notify the Company. The Company shall be entitled, at its expense,
to participate in, and, to the extent that the Company desires to, assume and
control the defense thereof; provided, however, that the Company shall have
acknowledged in writing its and each Lessee's obligation to fully indemnify
such Tax Indemnitee in respect of such action, suit or proceeding if the
contest is unsuccessful; and, provided further, that the Company shall not be
entitled to assume and control the defense of any such action, suit or
proceeding (but the Tax Indemnitee shall then contest, at the sole cost and
expense of the Company and the Lessees, on behalf of the Company with
representatives reasonably satisfactory to the Company or a Lessee) if and to
the extent that, (A) in the reasonable opinion of such Tax Indemnitee, such
action, suit or proceeding (x) involves any meaningful risk of imposition of
criminal liability or any material risk of material civil liability on such
Tax Indemnitee or (y) will involve a material risk of the sale, forfeiture or
loss of, or the creation of any Lien (other than a Permitted Lien) on any
Leased Property or any part thereof unless the Company or a Lessee shall have
posted a bond or other security satisfactory to the relevant Tax Indemnitees
in respect to such risk, (B) such proceeding involves Claims not fully
indemnified by the Lessees which the Company and the Tax Indemnitee have been
unable to sever from the indemnified claim(s), (C) an Event of Default has
occurred and is continuing, (D) such action, suit or proceeding involves
matters which extend beyond or are unrelated to the Transaction and if
determined adversely could be materially detrimental to the interests of such
Tax Indemnitee notwithstanding indemnification by the Lessees or (E) such
action, suit or proceeding involves the federal or any state income tax
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liability of the Tax Indemnitee. With respect to any contests controlled by a
Tax Indemnitee, (i) if such contest relates to the federal or any state income
tax liability of such Tax Indemnitee, such Tax Indemnitee shall be required to
conduct such contest only if the Company shall have provided to such Tax
Indemnitee an opinion of independent tax counsel selected by the Tax
Indemnitee and reasonably satisfactory to the Company stating that a
reasonable basis exists to contest such claim or (ii) in the case of an appeal
of an adverse determination of any contest relating to any Taxes, an opinion
of such counsel to the effect that such appeal is more likely than not to be
successful, provided, however, such Tax Indemnitee shall in no event be
required to appeal an adverse determination to the United States Supreme
Court. The Tax Indemnitee may participate in a reasonable manner at its own
expense and with its own counsel in any proceeding conducted by the Company in
accordance with the foregoing.
Each Tax Indemnitee shall, at the Company's and the Lessees' expense,
supply the Company with such information and documents in such Tax
Indemnitee's possession as are reasonably requested by the Company and are
necessary or advisable for the Company to participate in any action, suit or
proceeding to the extent permitted by this Section 7.4. Unless an Event of
Default shall have occurred and be continuing, no Tax Indemnitee shall enter
into any settlement or other compromise with respect to any Claim which is
entitled to be indemnified under this Section 7.4 without the prior written
consent of the Company, which consent shall not be unreasonably withheld,
unless such Tax Indemnitee waives its right to be indemnified under this
Section 7.4 with respect to such Claim.
Notwithstanding anything contained herein to the contrary, (a) a Tax
Indemnitee will not be required to contest (and the Company shall not be
permitted to contest except on its own behalf if it is subject thereto) a
claim with respect to the imposition of any Tax if such Tax Indemnitee shall
waive its right to indemnification under this Section 7.4 with respect to such
claim (and any related claim with respect to other taxable years the contest
of which is precluded as a result of such waiver) and (b) no Tax Indemnitee
shall be required to contest any claim if the subject matter thereof shall be
of a continuing nature and shall have previously been decided adversely,
unless there has been a change in law which in the opinion of Tax Indemnitee's
counsel creates substantial authority for the success of such contest. Each
Tax Indemnitee and the Company shall consult in good faith with each other
regarding the conduct of such contest controlled by either.
(d) Reimbursement for Tax Savings.
If (x) a Tax Indemnitee shall obtain a credit or refund of any
Taxes paid by the Company or any Lessee pursuant to this Section 7.4 or (y) by
reason of the incurrence or imposition of any Tax for which a Tax Indemnitee
is indemnified hereunder or any payment made to or for the account of such Tax
Indemnitee by the Company or any Lessee pursuant to this Section 7.4, such Tax
Indemnitee at any time realizes a reduction in any Taxes for which the Lessees
are not required to indemnify such Tax Indemnitee pursuant to this
Section 7.4, which reduction in Taxes was not taken into account in computing
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such payment by the Company or any Lessee to or for the account of such Tax
Indemnitee, then such Tax Indemnitee shall promptly pay to the Company
(xx) the amount of such credit or refund, together with the amount of any
interest received by such Tax Indemnitee on account of such credit or refund
or (yy) an amount equal to such reduction in Taxes, as the case may be;
provided that no such payment shall be made so long as an Event of Default
shall have occurred and be continuing (but shall be paid promptly after all
Events of Default have been cured) and, provided, further, that the amount
payable to the Company by any Tax Indemnitee pursuant to this Section 7.4(d)
shall not at any time exceed the aggregate amount of all indemnity payments
made by the Company and the Lessees under this Section 7.4 to such Tax
Indemnitee with respect to the Taxes which gave rise to the credit or refund
or with respect to the Tax which gave rise to the reduction in Taxes less the
amount of all prior payments made to the Company by such Tax Indemnitee under
this Section 7.4(d). Each Tax Indemnitee agrees to act in good faith to claim
such refunds and other available Tax benefits, and take such other actions as
may be reasonable to minimize any payment due from the Company or the Lessees
pursuant to this Section 7.4. The disallowance or reduction of any credit,
refund or other tax savings with respect to which a Tax Indemnitee has made a
payment to the Company and the Lessees under this Section 7.4(d) shall be
treated as a Tax for which the Company and the Lessees are obligated to
indemnify such Tax Indemnitee hereunder without regard to Section 7.4(b)
hereof.
(e) Payments.
Any Tax indemnifiable under this Section 7.4 shall be paid by the
Company or a Lessee directly when due to the applicable taxing authority if
direct payment is practicable and permitted. If direct payment to the
applicable taxing authority is not permitted or is otherwise not made, any
amount payable to a Tax Indemnitee pursuant to Section 7.4 shall be paid
within thirty (30) days after receipt of a written demand therefor from such
Tax Indemnitee accompanied by a written statement describing in reasonable
detail the amount so payable, but not before the date that the relevant Taxes
are due. Any payments made pursuant to Section 7.4 shall be made to the Tax
Indemnitee entitled thereto or the Company, as the case may be, in immediately
available funds at such bank or to such account as specified by the payee in
written directions to the payor, or, if no such direction shall have been
given, by check of the payor payable to the order of the payee by certified
mail, postage prepaid at its address as set forth in this Master Agreement.
Upon the request of any Tax Indemnitee with respect to a Tax that the Company
and the Lessees are required to pay, the Company shall furnish to such Tax
Indemnitee the original or a certified copy of a receipt for the Company's or
a Lessee's payment of such Tax or such other evidence of payment as is
reasonably acceptable to such Tax Indemnitee.
(f) Reports.
If the Company or any Lessee knows of any report, return or
statement required to be filed with respect to any Taxes that are subject to
indemnification under this Section 7.4, such Lessee shall, if such Lessee is
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permitted by Applicable Law, timely file such report, return or statement
(and, to the extent permitted by law, show ownership of the applicable Leased
Property in such Lessee); provided, however, that if such Lessee is not
permitted by Applicable Law or does not have access to the information
required to file any such report, return or statement, such Lessee will
promptly so notify the appropriate Tax Indemnitee, in which case Tax
Indemnitee will file such report. In any case in which the Tax Indemnitee
will file any such report, return or statement, the related Lessee shall, upon
written request of such Tax Indemnitee, prepare such report, return or
statement for filing by such Tax Indemnitee or, if such Tax Indemnitee so
requests, provide such Tax Indemnitee with such information as is reasonably
available to such Lessee.
(g) Verification.
At the Company's request, the amount of any indemnity payment by a
Lessee or any payment by a Tax Indemnitee to Company pursuant to this
Section 7.4 shall be verified and certified by an independent public
accounting firm selected by the Company and reasonably acceptable to the Tax
Indemnitee. Unless such verification shall disclose an error in the Company's
favor of 5% or more of the related indemnity payment, the costs of such
verification shall be borne by the Company. In no event shall the Company or
any Lessee have the right to review the Tax Indemnitee's tax returns or
receive any other confidential information from the Tax Indemnitee in
connection with such verification. The Tax Indemnitee agrees to cooperate
with the independent public accounting firm performing the verification and to
supply such firm with all information reasonably necessary to permit it to
accomplish such verification, provided that the information provided to such
firm by such Tax Indemnitee shall be for its confidential use. The parties
agree that the sole responsibility of the independent public accounting firm
shall be to verify the amount of a payment pursuant to this Master Agreement
and that matters of interpretation of this Master Agreement are not within the
scope of the independent accounting firm's responsibilities.
SECTION 7.5 Increased Costs, etc.
(a) Sharing of Payments, Etc.
(i) The Company agrees that, in addition to (and without
limitation of) any right of set-off, banker's lien or counterclaim a
Funding Party may otherwise have, each Funding Party shall be entitled,
at its option, to offset balances held by it for the account of the
Company at any of its offices, in Dollars or in any other currency,
against any principal of or interest on any of such Funding Party's
Funded Amounts or any other amount payable to such Funding Party
hereunder, that is not paid when due (regardless of whether such
balances are then due to the Company), in which case it shall promptly
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notify the Company and the Syndication Agent thereof, provided that such
Funding Party's failure to give such notice shall not affect the
validity thereof.
(ii) If any Funding Party shall obtain from any Obligor
payment of any principal of or interest on any Funded Amount owing to it
or payment of any other amount under this Master Agreement or any other
Operative Document through the exercise of any right of set-off,
banker's lien or counterclaim or similar right or otherwise (other than
from the Syndication Agent as provided herein or in any other Operative
Document), and, as a result of such payment, such Funding Party shall
have received a greater percentage of the principal of or interest on
such Funded Amounts or such other amounts then due hereunder or
thereunder by such Obligor to such Funding Party than the percentage
received by any other Funding Party, it shall promptly purchase from
such other Funding Parties participations in (or, if and to the extent
specified by such Funding Party, direct interests in) Funded Amounts or
such other amounts, respectively, owing to such other Funding Parties
(or in interest due thereon, as the case may be) in such amounts, and
make such other adjustments from time to time as shall be equitable, to
the end that all the Funding Parties shall share the benefit of such
excess payment (net of any expenses that may be incurred by such Funding
Party in obtaining or preserving such excess payment) pro rata in
accordance with the unpaid principal of and/or interest on the Funded
Amounts or such other amounts, respectively, owing to each of the
Funding Parties. To such end all the Funding Parties shall make
appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must
otherwise be restored.
(iii) The Company agrees that any Funding Party so
purchasing such a participation (or direct interest) may exercise all
rights of set-off, banker's lien, counterclaim or similar rights with
respect to such participation as fully as if such Funding Party were a
direct holder of Funded Amounts or other amounts (as the case may be)
owing to such Funding Party in the amount of such participation.
(iv) Nothing contained herein shall require any Funding
Party to exercise any such right or shall affect the right of any
Funding Party to exercise, and retain the benefits of exercising, any
such right with respect to any other indebtedness or obligation of any
Obligor. If, under any applicable bankruptcy, insolvency or other
similar law, any Funding Party receives a secured claim in lieu of a
set-off to which this Section 7.5(a) applies, such Funding Party shall,
to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Funding
Parties entitled under this Section 7.5(a) to share in the benefits of
any recovery on such secured claim.
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(b) Yield Protection, Etc.
(i) Additional Costs.
(1) The Company shall pay directly to each Funding
Party from time to time such amounts as such Funding Party may
determine to be necessary to compensate such Funding Party for any
costs actually incurred by such Funding Party that such Funding
Party determines are attributable to its making or maintaining of
any LIBOR Advances or its obligation to make any LIBOR Advances
under the Operative Documents, or any reduction in any amount
receivable by such Funding Party under the Operative Documents in
respect of any of such Advances or such obligation (such increases
in costs and reductions in amounts receivable being herein called
"Additional Costs"), resulting from any Regulatory Change that:
(A) shall subject any Funding Party (or its
Applicable Lending Office for any of such Advances) to any
tax, duty or other charge in respect of such Funded
Amounts or changes the basis of taxation of any amounts
payable to such Funding Party under the Operative
Documents in respect of any of such Funded Amounts
(excluding (A) franchise taxes imposed on it or
(B) changes in the rate of tax on the overall net income
of such Funding Party or of such Applicable Lending
Office, in each case, by the jurisdiction in which such
Funding Party has its principal office or such Applicable
Lending Office); or
(B) imposes or modifies any reserve, special
deposit or similar requirements (other than, in the case
of any Funding Party for any period as to which the
Company is required to pay any amount under paragraph 2)
below, the reserves and "Eurocurrency liabilities" under
Regulation D referred to therein) relating to any
extensions of credit or other assets of, or any deposits
with or other liabilities of, such Funding Party
(including, without limitation, any of such Advances or
any deposits referred to in the definition of "LIBOR
Rate") or any commitment of such Funding Party (including,
without limitation, the Commitments of such Funding Party
hereunder); or
(C) imposes any other condition affecting the
Operative Documents (or any of such extensions of credit
or liabilities) or its Commitments.
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If any Funding Party requests compensation from the Company under this
Section 7.5(b), the Company may, by notice to such Funding Party (with a copy
to the Syndication Agent), suspend the obligation of such Funding Party
thereafter to make or continue LIBOR Advances, or to convert Base Rate
Advances into LIBOR Advances, until the Regulatory Change giving rise to such
request ceases to be in effect (in which case the provisions of Section 7.5(e)
hereof shall be applicable), provided that such suspension shall not affect
the right of such Funding Party to receive the compensation so requested.
(2) Without limiting the effect of the other
provisions of this Section 7.5(b), in the event that, by reason of
any Regulatory Change, any Funding Party either (i) incurs
Additional Costs based on or measured by the excess above a
specified level of the amount of a category of deposits or other
liabilities of such Funding Party that includes deposits by
reference to which the interest rate on LIBOR Advances is
determined as provided in this Master Agreement or a category of
extensions of credit or other assets of such Funding Party that
includes LIBOR Advances or (ii) becomes subject to restrictions on
the amount of such a category of liabilities or assets that it may
hold, then, if such Funding Party so elects by notice to the
Company (with a copy to the Syndication Agent), the obligation of
such Funding Party to make or continue, or to convert Base Rate
Advances into, LIBOR Advances hereunder shall be suspended until
such Regulatory Change ceases to be in effect (in which case the
provisions of Section 7.5(e) hereof shall be applicable).
(3) Without limiting the effect of the foregoing
provisions of this Section 7.5(b) (but without duplication), the
Company shall pay directly to each Funding Party from time to time
on request such amounts as such Funding Party may determine to be
necessary to compensate such Funding Party (or, without
duplication, the bank holding company of which such Funding Party
is a subsidiary) for any costs actually incurred by such Funding
Party that it determines are attributable to the maintenance by
such Funding Party (or any Applicable Lending Office or such bank
holding company), pursuant to any law or regulation or any
interpretation, directive or request (whether or not having the
force of law and whether or not failure to comply therewith would
be unlawful) of any court or governmental or monetary authority
(i) following any Regulatory Change or (ii) implementing any
risk-based capital guideline or other requirement (whether or not
having the force of law and whether or not the failure to comply
therewith would be unlawful) heretofore or hereafter issued by any
government or governmental or supervisory authority implementing
at the national level the Basle Accord (including, without
limitation, the Final Risk-Based Capital Guidelines of the Board
of Governors of the Federal Reserve System (12 C.F.R. Part 208,
Appendix A; 12 C.F.R. Part 225, Appendix A) and the Final
Risk-Based Capital Guidelines of the Office of the Comptroller of
the Currency (12 C.F.R. Part 3, Appendix A)), of capital in
respect of its Commitments or Advances (such compensation to
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include, without limitation, an amount equal to any reduction of
the rate of return on assets or equity of such Funding Party (or
any Applicable Lending Office or such bank holding company) to a
level below that which such Funding Party (or any Applicable
Lending Office or such bank holding company) could have achieved
but for such law, regulation, interpretation, directive or
request). For purposes of this Section 7.5(b) and Section 7.5(f)
hereof, "Basle Accord" shall mean the proposals for risk-based
capital framework described by the Basle Committee on Banking
Regulations and Supervisory Practices in its paper entitled
"International Convergence of Capital Measurement and Capital
Standards" dated July 1988, as amended, modified and supplemented
and in effect from time to time or any replacement thereof.
(4) Each Funding Party shall notify the Company of
any event occurring after the date of this Master Agreement
entitling such Funding Party to compensation under paragraph 1)
or 3) of this Section 7.5(b) as promptly as practicable, but in
any event within 45 days, after such Funding Party obtains actual
knowledge thereof; provided that (i) if any Funding Party fails to
give such notice within 45 days after it obtains actual knowledge
of such an event, such Funding Party shall, with respect to
compensation payable pursuant to this Section 7.5(b) in respect of
any costs resulting from such event, only be entitled to payment
under this Section 7.5(b) for costs incurred from and after the
date 45 days prior to the date that such Funding Party does give
such notice and (ii) each Funding Party will designate a different
Applicable Lending Office for the Funded Amounts of such Funding
Party affected by such event if such designation will avoid the
need for, or reduce the amount of, such compensation and will not,
in the sole opinion of such Funding Party, be disadvantageous to
such Funding Party, except that such Funding Party shall have no
obligation to designate an Applicable Lending Office located in
the United States of America. Each Funding Party will furnish to
the Company a certificate setting forth the basis and amount of
each request by such Funding Party for compensation under
paragraph 1) or 3) of this Section 7.5(b) Determinations and
allocations by any Funding Party for purposes of this
Section 7.5(b) of the effect of any Regulatory Change pursuant to
paragraph 1) or 3) of this Section 7.5(b), or of the effect of
capital maintained pursuant to paragraph 3) of this
Section 7.5(b), on its costs or rate of return of maintaining
Funded Amounts or its obligation to make Funded Amounts, or on
amounts receivable by it in respect of Funded Amounts, and of the
amounts required to compensate such Funding Party under this
Section 7.5(b), shall be conclusive, absent demonstrable error,
provided that such determinations and allocations are made and
attributed on a reasonable basis.
(5) Notwithstanding anything in this Section 7.5(b)
to the contrary, to the extent that any Funding Party does not
charge all of its customers who are similarly situated to the
Company in respect of any Additional Costs or other cost or
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compensation referred to this Section 7.5(b), such Funding Party
shall not charge the Company for such Additional Cost or other
cost or compensation.
(c) Limitation on Types of Advances.
Anything herein to the contrary notwithstanding, if, on or prior
to the determination of any LIBOR Rate for any Rent Period:
(i) the Syndication Agent determines, which
determination shall be conclusive, that quotations of interest rates for
the relevant deposits referred to in the definition of "LIBOR Rate" are
not being provided in the relevant amounts or for the relevant
maturities for purposes of determining rates of interest for LIBOR
Advances as provided herein; or
(ii) if the Required Funding Parties determine, which
determination shall be conclusive, and notify (or notifies, as the case
may be) the Syndication Agent that the relevant rates of interest
referred to in the definition of "LIBOR Rate" upon the basis of which
the rate of interest for LIBOR Advances for such Rent Period is to be
determined do not adequately cover the cost to such Funding Parties of
making or maintaining LIBOR Advances for such Rent Period;
then the Syndication Agent shall give the Company and each Funding Party
prompt notice thereof and, so long as such condition remains in effect, the
Funding Parties shall be under no obligation to make additional LIBOR
Advances, to continue LIBOR Advances or to convert Base Rate Advances into
LIBOR Advances, and the Company shall, on the last day(s) of the then current
Rent Period(s) for the outstanding LIBOR Advances, either prepay such Advances
or convert such Advances into Base Rate Advances in accordance with
Section 2.3(d) hereof.
(d) Illegality.
Notwithstanding any other provision of this Master Agreement, in
the event that it becomes unlawful for any Funding Party or its Applicable
Lending Office to honor its obligation to make or maintain LIBOR Advances
hereunder, then such Funding Party shall promptly notify the Company thereof
(with a copy to the Syndication Agent) and such Funding Party's obligation to
make or continue, or to convert Base Rate Advances into, LIBOR Advances shall
be suspended until such time as such Funding Party may again make and maintain
LIBOR Advances (in which case the provisions of Section 7.5(e) hereof shall be
applicable).
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(e) Treatment of LIBOR Advances.
If the obligation of any Funding Party to make LIBOR Advances or
to continue, or to convert Base Rate Advances into, LIBOR Advances shall be
suspended pursuant to Section 7.5(b) or 7.5(d) hereof, such Funding Party's
LIBOR Advances shall be automatically converted into Base Rate Advances on the
last day(s) of the then current Rent Period(s) for LIBOR Advances (or, in the
case of a conversion required by Section 7.5(b) or 7.5(d) hereof, on such
earlier date as such Funding Party may specify to the Company with a copy to
the Syndication Agent) and, unless and until such Funding Party gives notice
as provided below that the circumstances specified in Section 7.5(b) or 7.5(d)
hereof that gave rise to such conversion no longer exist:
(i) to the extent that such Funding Party's LIBOR
Advances have been so converted, all payments and prepayments of
principal that would otherwise be applied to such Funding Party's LIBOR
Advances shall be applied instead to its Base Rate Advances; and
(ii) all Advances that would otherwise be made or
continued by such Funding Party as LIBOR Advances shall be made or
continued instead as Base Rate Advances, and all Advances of such
Funding Party that would otherwise be converted into LIBOR Advances
shall be converted instead into (or shall remain as) Base Rate Advances.
If such Funding Party gives notice to the Company with a copy to
the Syndication Agent that the circumstances specified in Section 7.5(b)
or 7.5(d) hereof that gave rise to the conversion of such Funding Party's
LIBOR Advances pursuant to this Section 7.5(e) no longer exist (which such
Funding Party agrees to do promptly upon such circumstances ceasing to exist)
at a time when LIBOR Advances made by other Funding Parties are outstanding,
such Funding Party's Base Rate Advances shall be automatically converted, on
the first day(s) of the next succeeding Rent Period(s) for such outstanding
LIBOR Advances, to the extent necessary so that, after giving effect thereto,
all Advances held by the Funding Parties holding LIBOR Advances and by such
Funding Party are held pro rata (as to principal amounts, types and Rent
Periods) in accordance with their respective Commitments.
(f) Compensation.
The Company shall pay to the Syndication Agent for account of each
Funding Party, upon the request of such Funding Party through the Syndication
Agent, such amount or amounts as shall be sufficient (in the reasonable
opinion of such Funding Party) to compensate it for any loss, cost or expense
actually incurred that such Funding Party determines is attributable to:
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(i) any payment, mandatory or optional prepayment or
Conversion of a LIBOR Advance made by such Funding Party for any reason
on a date other than the last day of the Rent Period for such Advance;
or
(ii) any failure by the Company for any reason
(including, without limitation, the failure of any of the conditions
precedent specified in Section 3 hereof to be satisfied) to draw a LIBOR
Advance from such Funding Party on the date for such borrowing specified
in the relevant Funding Notice.
Without limiting the effect of the preceding sentence, such
compensation shall include an amount equal to the excess, if any, of (i) the
amount of interest that otherwise would have accrued on the principal amount
so paid, prepaid, converted or not funded (other than the portion thereof
consisting of the Applicable Margin) for the period from the date of such
payment, prepayment, conversion or failure to fund to the last day of the then
current Rent Period for such Advance (or, in the case of a failure to fund,
the Rent Period for such Advance that would have commenced on the date
specified for such Funding) at the applicable rate of interest for such
Advance provided for herein or in the Loan Agreement over (ii) the amount of
interest that otherwise would have accrued on such principal amount at a rate
per annum equal to the interest component of the amount such Funding Party
would have bid in the London interbank market for Dollar deposits of leading
banks in amounts comparable to such principal amount and with maturities
comparable to such period (as reasonably determined by such Funding Party).
Notwithstanding anything to the contrary set forth herein or in any of the
other Operative Documents, neither any Lessee, any Guarantor or the Company
shall have any obligation to pay or reimburse any other Person for breakage
costs payable under this Master Agreement or any other Operative Document
which arise solely by reason of acceleration of the maturity of Lessor's
obligations under the Loan Agreement at a time when no Event of Default
exists.
(g) Substitution of Funding Parties.
In the event that the Company becomes obligated to pay additional
amounts to any Funding Party pursuant to Section 7.5(b) hereof, then (unless
such Funding Party has theretofore taken steps to remove or cure, and has
removed or cured, the conditions creating the cause for such obligation to pay
such additional amounts), then the Company may, so long as no Default shall be
continuing, within 60 days after the demand by such Funding Party for such
additional amounts, designate another bank which is acceptable to the
Syndication Agent and the Required Funding Parties (such other bank being
herein called a "Replacement Funding Party") to purchase all of the Funded
Amounts of such Funding Party and all of such Funding Party's rights and
obligations hereunder (without recourse to or warranty by, or expense to, such
Funding Party) for a purchase price equal to the outstanding principal amount
of such Funding Party's Funded Amount plus any accrued but unpaid interest
thereon and any accrued but unpaid fees in respect of such Funding Party's
Commitments and any other amounts then payable to such Funding Party under the
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Operative Documents, and to assume all of the obligations of such Funding
Party hereunder (except for such rights as survive the repayment of the
Advances) and, upon such purchase such Funding Party shall no longer be a
party hereto or have any rights hereunder (except for those that survive
repayment of the Advances) and shall be released from all of its obligations
under the Operative Documents, and the Replacement Funding Party shall succeed
to the rights and obligations of such Funding Party under the Operative
Documents.
SECTION 7.6 End of Term Indemnity.
In the event that at the end of the Lease Term for the Leased
Properties: (i) the related Lessee elects the option set forth in Section
14.6 of the Lease, and (ii) after the Lessor receives the sales proceeds from
the Leased Properties under Section 14.6 or 14.7 of the Lease, together with
Lessees' payment of the Recourse Deficiency Amount, the Lessor shall not have
received the entire Lease Balance, then, within 90 days after the end of the
Lease Term, the Lessor or the Syndication Agent may obtain, at the Lessees'
sole cost and expense, a report from the Appraiser (or, if the Appraiser is
not available, another appraiser reasonably satisfactory to the Lessor or the
Syndication Agent, as the case may be, and approved by the Company, such
approval not to be unreasonably withheld) in form and substance reasonably
satisfactory to the Lessor and Syndication Agent (the "Report") to establish
the reason for any decline in value of the Leased Properties from the Lease
Balance. The Lessees, jointly and severally, shall promptly reimburse the
Lessor for the amount equal to such decline in value to the extent that the
Report indicates that such decline was due to
(w) during the time while any property was a Leased Property,
extraordinary use, failure to maintain, to repair, to restore, to rebuild or
to replace, failure to comply with all Applicable Laws, failure to use good
workmanship, method of installation or removal or maintenance, repair,
rebuilding or replacement, or any other cause or condition within the power of
a Lessee to control or effect resulting in the Building failing to be of the
type and quality contemplated by the Appraisal (excepting in each case
ordinary wear and tear), or
(x) any Alteration made to, or any rebuilding of, any Leased
Property or any part thereof by any Lessee, or
(y) any restoration or rebuilding carried out by any Lessee or
any condemnation of any portion of any Leased Property pursuant to Article X
of the Lease, or
(z) any use of any Leased Property or any part thereof by any
Lessee other than as permitted by the Lease, or any act or omission
constituting a breach of any requirement, condition, restriction or limitation
set forth in the related Deed or the related Purchase Agreement.
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SECTION 7.7 Guarantee.
(a) The Guarantee.
The Subsidiary Guarantors hereby jointly and severally guarantee
to each Funding Party and the Syndication Agent and their respective
successors and assigns the prompt payment in full when due (whether at stated
maturity, by acceleration or otherwise) of the Obligations and all other
amounts from time to time owing to the Funding Parties hereunder or under the
other Operative Documents, in each case strictly in accordance with the terms
thereof (such obligations being herein collectively called the "Guaranteed
Obligations"). The Subsidiary Guarantors hereby further jointly and severally
agree that if the Company shall fail to pay in full when due (whether at
stated maturity, by acceleration or otherwise) any of the Guaranteed
Obligations, the Subsidiary Guarantors will promptly pay the same, without any
demand or notice whatsoever, and that in the case of any extension of time of
payment or renewal of any of the Guaranteed Obligations, the same will be
promptly paid in full when due (whether at extended maturity, by acceleration
or otherwise) in accordance with the terms of such extension or renewal.
(b) Obligations Unconditional.
The obligations of the Subsidiary Guarantors under Section 7.7(a)
hereof are absolute and unconditional, joint and several, irrespective of the
value, genuineness, validity, regularity or enforceability of the obligations
of the Company under this Master Agreement, or any other agreement or
instrument referred to herein or therein, or any substitution, release or
exchange of any other guarantee of or security for any of the Guaranteed
Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Section 7.7(b) that the obligations of the
Subsidiary Guarantors hereunder shall be absolute and unconditional, joint and
several, under any and all circumstances. Without limiting the generality of
the foregoing, it is agreed that the occurrence of any one or more of the
following shall not alter or impair the liability of the Subsidiary Guarantors
hereunder which shall remain absolute and unconditional as described above:
(i) at any time or from time to time, without notice to
the Subsidiary Guarantors, the time for any performance of or compliance
with any of the Guaranteed Obligations shall be extended, or such
performance or compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions
of this Master Agreement or any other agreement or instrument referred
to herein shall be done or omitted;
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(iii) the maturity of any of the Guaranteed Obligations
shall be accelerated, or any of the Guaranteed Obligations shall be
modified, supplemented or amended in any respect, or any right under
this Master Agreement or any other agreement or instrument referred to
herein shall be waived or any other guarantee of any of the Guaranteed
Obligations or any security therefor shall be released or exchanged in
whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in
favor of, the Syndication Agent, the Lessor or any Lender or Lenders as
security for any of the Guaranteed Obligations shall fail to be
perfected.
The Subsidiary Guarantors hereby expressly waive diligence,
presentment, demand of payment, protest and all notices whatsoever, and any
requirement that the Syndication Agent, the Lessor or any Lender exhaust any
right, power or remedy or proceed against the Company under any Operative
Document or any other agreement or instrument referred to herein or therein,
or against any other Person under any other guarantee of, or security for, any
of the Guaranteed Obligations.
(c) Reinstatement.
The obligations of the Subsidiary Guarantors under this
Section 7.7 shall be automatically reinstated if and to the extent that for
any reason any payment by or on behalf of the Company in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any
holder of any of the Guaranteed Obligations, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise and the Subsidiary
Guarantors jointly and severally agree that they will indemnify the
Syndication Agent, the Lessor and each Lender on demand for all reasonable
costs and expenses (including, without limitation, fees of counsel) incurred
by the Syndication Agent, the Lessor or such Lender in connection with such
rescission or restoration, including any such costs and expenses incurred in
defending against any claim alleging that such payment constituted a
preference, fraudulent transfer or similar payment under any bankruptcy,
insolvency or similar law.
(d) Subrogation.
The Subsidiary Guarantors hereby jointly and severally agree that
until the payment and satisfaction in full of all Guaranteed Obligations and
the expiration and termination of the Commitments of the Funding Parties under
this Master Agreement they shall not exercise any right or remedy arising by
reason of any performance by them of their guarantee in Section 7.7(a) hereof,
whether by subrogation or otherwise, against the Company or any other
guarantor of any of the Guaranteed Obligations or any security for any of the
Guaranteed Obligations.
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(e) Remedies.
The Subsidiary Guarantors jointly and severally agree that, as
between the Subsidiary Guarantors and the Funding Parties, the obligations of
the Lessees under the Lease may be declared to be forthwith due and payable as
provided in Article XIII of the Lease (and shall be deemed to have become
automatically due and payable in the circumstances provided in Article XIII of
the Lease) for purposes of Section 7.7(a) hereof notwithstanding any stay,
injunction or other prohibition preventing such declaration (or such
obligations from becoming automatically due and payable) as against the
Company or any Lessee and that, in the event of such declaration (or such
obligations being deemed to have become automatically due and payable), such
obligations (whether or not due and payable by the Company) shall forthwith
become due and payable by the Subsidiary Guarantors for purposes of said
Section 7.7(a).
(f) Continuing Guarantee.
The guarantee in this Section 7.7 is a continuing guarantee, and
shall apply to all Guaranteed Obligations whenever arising.
(g) Rights of Contribution.
The Subsidiary Guarantors hereby agree, as between themselves,
that if any Subsidiary Guarantor shall become an Excess Funding Guarantor (as
defined below) by reason of the payment by such Subsidiary Guarantor of any
Guaranteed Obligations, each other Subsidiary Guarantor shall, on demand of
such Excess Funding Guarantor (but subject to the next sentence), pay to such
Excess Funding Guarantor an amount equal to such Subsidiary Guarantor's Pro
Rata Share (as defined below and determined, for this purpose, without
reference to the Properties, debts and liabilities of such Excess Funding
Guarantor) of the Excess Payment (as defined below) in respect of such
Guaranteed Obligations. The payment obligation of a Subsidiary Guarantor to
any Excess Funding Guarantor under this Section 7.7(g) shall be subordinate
and subject in right of payment to the prior payment in full of the
obligations of such Subsidiary Guarantor under the other provisions of this
Section 7.7 and such Excess Funding Guarantor shall not exercise any right or
remedy with respect to such excess until payment and satisfaction in full of
all of such obligations.
For purposes of this Section 7.7(g), (i) "Excess Funding
Guarantor" shall mean, in respect of any Guaranteed Obligations, a Subsidiary
Guarantor that has paid an amount in excess of its Pro Rata Share of such
Guaranteed Obligations, (ii) "Excess Payment" shall mean, in respect of any
Guaranteed Obligations, the amount paid by an Excess Funding Guarantor in
excess of its Pro Rata Share of such Guaranteed Obligations and (iii) "Pro
Rata Share" shall mean, for any Subsidiary Guarantor, the ratio (expressed as
a percentage) of (x) the amount by which the aggregate present fair saleable
value of all Properties of such Subsidiary Guarantor (excluding any shares of
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stock of any other Subsidiary Guarantor) exceeds the amount of all the debts
and liabilities of such Subsidiary Guarantor (including contingent,
subordinated, unmatured and unliquidated liabilities, but excluding the
obligations of such Subsidiary Guarantor hereunder and any obligations of any
other Subsidiary Guarantor that have been Guaranteed by such Subsidiary
Guarantor) to (y) the amount by which the aggregate fair saleable value of all
Properties of the Company and all of the Subsidiary Guarantors exceeds the
amount of all the debts and liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities, but excluding the obligations of the
Company and the Subsidiary Guarantors hereunder) of the Company and all of the
Subsidiary Guarantors, all as of the Initial Closing Date. If any Subsidiary
becomes a Subsidiary Guarantor hereunder subsequent to the Initial Closing
Date, then for purposes of this Section 7.7(g) such subsequent Subsidiary
Guarantor shall be deemed to have been a Subsidiary Guarantor as of the
Initial Closing Date and the aggregate present fair saleable value of the
Properties, and the amount of the debts and liabilities, of such Subsidiary
Guarantor as of the Initial Closing Date shall be deemed to be equal to such
value and amount on the date such Subsidiary Guarantor becomes a Subsidiary
Guarantor hereunder.
(h) General Limitation on Guarantee Obligations.
In any action or proceeding involving any state corporate law, or
any state or Federal bankruptcy, insolvency, reorganization or other law
affecting the rights of creditors generally, if the obligations of any
Subsidiary Guarantor under Section 7.7(a) hereof would otherwise, taking into
account the provisions of Section 7.7(g) hereof, be held or determined to be
void, invalid or unenforceable, or subordinated to the claims of any other
creditors, on account of the amount of its liability under said
Section 7.7(a), then, notwithstanding any other provision hereof to the
contrary, the amount of such liability shall, without any further action by
such Subsidiary Guarantor, any Lender, the Syndication Agent, the Lessor or
any other Person, be automatically limited and reduced to the highest amount
that is valid and enforceable and not subordinated to the claims of other
creditors as determined in such action or proceeding.
(i) Instrument of the Payment of Money.
Each Subsidiary Guarantor hereby acknowledges that the guarantee
in this Section 7.7 constitutes an instrument for the payment of money, and
consents and agrees that any Lender, the Lessor or the Syndication Agent, at
its sole option, in the event of a dispute by such Subsidiary Guarantor in the
payment of any moneys due hereunder, shall have the right, to the fullest
extent permitted by law, to bring motion action under New York CPLR
Section 3213.
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ARTICLE VIII.
MISCELLANEOUS
SECTION 8.1 Survival of Agreements.
The representations, warranties, covenants, indemnities and agreements
of the parties provided for in the Operative Documents, and the parties'
obligations under any and all thereof, shall survive the execution and
delivery of this Master Agreement and any of the Operative Documents, the
transfer of any Land to the Lessor as provided herein (and shall not be merged
into any Deed), any disposition of any interest of the Lessor in any Leased
Property, the purchase and sale of the Notes, payment therefor and any
disposition thereof and shall be and continue in effect notwithstanding any
investigation made by any party hereto or to any of the other Operative
Documents and the fact that any such party may waive compliance with any of
the other terms, provisions or conditions of any of the Operative Documents.
SECTION 8.2 Notices.
Unless otherwise specified herein, all notices, requests, demands or
other communications to or upon the respective parties hereto shall be
addressed to such parties at the addresses therefor as set forth in
Schedule 8.2, or such other address as any such party shall specify to the
other parties hereto, and shall be deemed to have been given (i) the Business
Day after being sent, if sent by overnight courier service; (ii) the Business
Day received, if sent by messenger; (iii) the day sent, if sent by facsimile
and confirmed electronically or otherwise during business hours of a Business
Day (or on the next Business Day if otherwise sent by facsimile and confirmed
electronically or otherwise); or (iv) three Business Days after being sent, if
sent by registered or certified mail, postage prepaid.
SECTION 8.3 Counterparts.
This Master Agreement may be executed by the parties hereto in separate
counterparts (including by facsimile), each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 8.4 Amendments.
No Operative Document nor any of the terms thereof may be terminated,
amended, supplemented, waived or modified with respect to the Company, any
Lessee or any Funding Party, except (a) in the case of a termination,
amendment, supplement, waiver or modification to be binding on the Lessees,
with the written agreement or consent of the Company, and (b) in the case of a
termination, amendment, supplement, waiver or modification to be binding on
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the Funding Parties, with the written agreement or consent of the Syndication
Agent and the Required Funding Parties; provided, however, that
(x) notwithstanding the foregoing provisions of this
Section 8.4 or clause (y) below, the consent of each Funding Party affected
thereby shall be required for any amendment, modification or waiver directly:
(i) modifying any of the provisions of this Section 8.4,
changing the definition of "Required Funding Parties" or "Required
Lenders", or increasing or extending the term for the Commitment of such
Funding Party;
(ii) amending, modifying, waiving or supplementing any of
the provisions of Section 3 of the Loan Agreement or the representations
of such Funding Party in Section 4.2 or 4.3 or the covenants of such
Funding Party in Section 6 of this Master Agreement;
(iii) reducing the rate of interest or yield on the Funded
Amounts or any amount payable to such Funding Party under the Operative
Documents or extending the time for payment of any such amount,
including, without limitation, any Rent, any Funded Amount, any fees,
any indemnity, any Leased Property Balance, the Lease Balance, any
Funding Party Balance, the Recourse Deficiency Amount, interest or
Yield; or
(iv) consenting to any assignment of the Lease or the
extension of the Lease Term, releasing any of the collateral assigned to
the Syndication Agent and the Lenders pursuant to any Mortgage and any
Assignment of Lease and Rents (but excluding a release of any rights
that the Lenders may have in any Leased Property, or the proceeds
thereof as contemplated in the definition of "Release Date"), releasing
any Lessee from its obligations in respect of the payments of Rent and
the Lease Balance, releasing the Company from its obligations under the
Operative Documents or changing the absolute and unconditional character
of any such obligation; and
(y) no such termination, amendment, supplement, waiver or
modification shall, without the written agreement or consent of the Lessor,
the Syndication Agent and the Required Lenders, be made to the Lease, the
Construction Agency Agreement or any Security Agreement and Assignment; and
(z) subject to the foregoing clauses (x) and (y), so long as
no Event of Default has occurred and is continuing, the Lessor, the
Syndication Agent and the Lenders may not amend, supplement, waive or modify
any terms of the Loan Agreement, the Notes, the Mortgages and the Assignments
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of Lease and Rents without the consent of the Company (such consent not to be
unreasonably withheld or delayed); provided that in no event may any Operative
Document be amended so as to increase the obligations of the Company or any
Lessee, or deprive the Company or any Lessee of any rights thereunder, without
the written consent of the Company.
SECTION 8.5 Headings, etc.
The Table of Contents and headings of the various Articles and Sections
of this Master Agreement are for convenience of reference only and shall not
modify, define, expand or limit any of the terms or provisions hereof.
SECTION 8.6 Parties in Interest.
Except as expressly provided herein, none of the provisions of this
Master Agreement is intended for the benefit of any Person except the parties
hereto and their respective successors and permitted assigns.
SECTION 8.7 GOVERNING LAW.
THIS MASTER AGREEMENT HAS BEEN DELIVERED IN, AND SHALL IN ALL RESPECTS
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH
STATE, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
SECTION 8.8 Expenses.
Whether or not the transactions herein contemplated are consummated,
each of the Company and the Lessees, jointly and severally, agrees to pay, as
Supplemental Rent, all actual, reasonable and documented out-of-pocket costs
and expenses of the Lessor, the Syndication Agent and the Lenders in
connection with the preparation, execution and delivery of the Operative
Documents and the documents and instruments referred to therein and any
amendment, waiver or consent relating thereto (including, without limitation,
the reasonable fees and disbursements of each outside counsel representing the
Lessor or the Syndication Agent, but not including any fees and disbursements
for any other outside counsel representing any Lender) and of the Lessor, the
Syndication Agent and the Lenders in connection with endeavoring to enforce
the Operative Documents and the documents and instruments referred to therein
(including, without limitation, the reasonable fees actually incurred and
disbursements of counsel for the Lessor, the Syndication Agent and the
Lenders), unless such enforcement action is finally denied by a court on the
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merits. All references in the Operative Documents to "attorneys' fees" or
"reasonable attorneys fees" shall mean reasonable attorneys' fees actually
incurred, without regard to any statutory definition thereof.
SECTION 8.9 Severability.
Any provision of this Master Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 8.10 Liabilities of the Funding Parties.
No Funding Party shall have any obligation to any other Funding Party or
to Lessee with respect to the transactions contemplated by the Operative
Documents except those obligations of such Funding Party expressly set forth
in the Operative Documents or except as set forth in the instruments delivered
in connection therewith, and no Funding Party shall be liable for performance
by any other party hereto of such other party's obligations under the
Operative Documents except as otherwise so set forth. No Lender shall have
any obligation or duty to the Company or any Lessee, any other Funding Parties
or any other Person with respect to the transactions contemplated hereby
except to the extent of the obligations and duties expressly set forth in this
Master Agreement or the Loan Agreement.
SECTION 8.11 Submission to Jurisdiction; Waivers.
Each party hereto hereby irrevocably and unconditionally:
(i) submits for itself and its property in any legal
action or proceeding relating to this Master Agreement or any other
Operative Document, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the
United States District Court for the District of New Jersey and of the
Superior Court of the State of New Jersey;
(ii) consents that any such action or proceedings may be
brought to such courts, and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
court or that such action or proceeding was brought in an inconvenient
court and agrees not to plead or claim the same;
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(iii) agrees that, to the fullest extent enforceable under
applicable law, service of process in any such action or proceeding may
be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
party at its address set forth in Schedule 8.2 or at such other address
of which the other parties hereto shall have been notified pursuant to
Section 8.2; and
(iv) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law.
SECTION 8.12 Liabilities of the Syndication Agent.
The Syndication Agent shall have no duty, liability or obligation to any
party to this Master Agreement with respect to the transactions contemplated
hereby except those duties, liabilities or obligations expressly set forth in
this Master Agreement or the Loan Agreement, and any such duty, liability or
obligations of the Syndication Agent shall be as expressly limited by this
Master Agreement or the Loan Agreement, as the case may be. All parties to
this Master Agreement acknowledge that the Syndication Agent is not, and will
not be, performing any due diligence with respect to documents and information
received pursuant to this Master Agreement or any other Operative Agreement
including, without limitation, any Environmental Audit, Title Policy or
survey. The acceptance by the Syndication Agent of any such document or
information shall not constitute a waiver by any Funding Party of any
representation or warranty of the Company or any Lessee even if such document
or information indicates that any such representation or warranty is untrue.
SECTION 8.13 Intercreditor Agreement. Each Obligor and each Funding
Party now or hereafter party hereto acknowledges receipt of a copy of, and
consents to and agrees to be bound by, the provisions of the Intercreditor
Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Master Agreement
to be duly executed by their respective officers thereunto duly authorized as
of the day and year first above written.
CORRECTIONAL SERVICES CORPORATION, as
Guarantor and a Lessee
By: \s\Ira M. Cotler
Name Printed: Ira M. Cotler
Title: Executive Vice President
CSC MANAGEMENT DE PUERTO RICO, INC.,
as a Lessee
By: \s\Ira M. Cotler
Name Printed: Ira M. Cotler
Title: Executive Vice President
SUBSIDIARY GUARANTORS:
YOUTH SERVICES INTERNATIONAL, INC., a
Maryland corporation
By: \s\Ira M. Cotler
Name Printed: Ira M. Cotler
Title: Executive Vice President
S-1
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FF&E, INC., a New Jersey corporation
By: \s\Ira M. Cotler
Name Printed: Ira M. Cotler
Title: Executive Vice President
COMMUNITY CORRECTIONS, INC., a Texas
corporation
By: \s\Ira M. Cotler
Name Printed: Ira M. Cotler
Title: Executive Vice President
YOUTH SERVICES INTERNATIONAL OF
NORTHERN IOWA, INC., an Iowa corporation
By: \s\Ira M. Cotler
Name Printed: Ira M. Cotler
Title: Executive Vice President
YOUTH SERVICES INTERNATIONAL OF
BALTIMORE, INC., a Maryland corporation
By: \s\Ira M. Cotler
Name Printed: Ira M. Cotler
Title: Executive Vice President
S-2
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YOUTH SERVICES INTERNATIONAL OF
VIRGINIA, INC., a Virginia corporation
By: \s\Ira M. Cotler
Name Printed: Ira M. Cotler
Title: Executive Vice President
YOUTH SERVICES INTERNATIONAL HOLDINGS,
INC., a Delaware corporation
By: \s\Ira M. Cotler
Name Printed: Ira M. Cotler
Title: Executive Vice President
YOUTH SERVICES INTERNATIONAL REAL
PROPERTY PARTNERSHIP, LLP, a Maryland
limited liability partnership
By: \s\Ira M. Cotler
Name Printed: Ira M. Cotler
Title: Executive Vice President
YOUTH SERVICES INTERNATIONAL OF
DELAWARE, INC., a Delaware corporation
By: \s\Ira M. Cotler
Name Printed: Ira M. Cotler
Title: Executive Vice President
S-3
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YOUTH SERVICES INTERNATIONAL OF
ILLINOIS, INC., a Maryland corporation
By: \s\Ira M. Cotler
Name Printed: Ira M. Cotler
Title: Executive Vice President
YOUTH SERVICES INTERNATIONAL OF
MARYLAND, INC., a Maryland corporation
By: \s\Ira M. Cotler
Name Printed: Ira M. Cotler
Title: Executive Vice President
YOUTH SERVICES INTERNATIONAL OF
MINNESOTA, INC., a Maryland
corporation
By: \s\Ira M. Cotler
Name Printed: Ira M. Cotler
Title: Executive Vice President
YOUTH SERVICES INTERNATIONAL OF
SOUTH DAKOTA, INC., a South Dakota
corporation
By: \s\Ira M. Cotler
Name Printed: Ira M. Cotler
Title: Executive Vice President
S-4
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YOUTH SERVICES INTERNATIONAL OF
TEXAS, INC., a Texas corporation
By: \s\Ira M. Cotler
Name Printed: Ira M. Cotler
Title: Executive Vice President
YSI OF CENTRAL IOWA, INC., an Iowa
corporation
By: \s\Ira M. Cotler
Name Printed: Ira M. Cotler
Title: Executive Vice President
YOUTH SERVICES INTERNATIONAL OF IOWA,
INC., a Maryland corporation
By: \s\Ira M. Cotler
Name Printed: Ira M. Cotler
Title: Executive Vice President
YOUTH SERVICES INTERNATIONAL OF
MICHIGAN, INC., a Michigan corporation
By: \s\Ira M. Cotler
Name Printed: Ira M. Cotler
Title: Executive Vice President
S-5
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YOUTH SERVICES INTERNATIONAL OF
MISSOURI, INC., a Missouri corporation
By: \s\Ira M. Cotler
Name Printed: Ira M. Cotler
Title: Executive Vice President
YOUTH SERVICES INTERNATIONAL OF
TENNESSEE, INC., a Tennessee
corporation
By: \s\Ira M. Cotler
Name Printed: Ira M. Cotler
Title: Executive Vice President
YOUTH SERVICES INTERNATIONAL
SOUTHEASTERN PROGRAMS, INC., a
Maryland corporation
By:
Name Printed: Ira M. Cotler
Title: Executive Vice President
CSC MANAGEMENT DE PUERTO RICO, INC., a
Puerto Rico corporation
By:
Name Printed: Ira M. Cotler
Title: Executive Vice President
S-6
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ATLANTIC FINANCIAL GROUP, LTD.,
as Lessor
By: Atlantic Financial Managers,
Inc.,
its General Partner
By: \s\Stephen Brookshire
Name Printed: Stephen Brookshire
Title: President
S-7
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SUMMIT BANK,
as Syndication Agent and as a Lender
By: \s\Lisa Cohen
Name Printed: Lisa Cohen
Title: Vice President
S-8
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