<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarterly Period Ended April 30, 1997
COMMISSION FILE NUMBER: 0-24420
PMT SERVICES, INC.
(Exact name of registrant as specified in its charter)
TENNESSEE 62-1215125
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
TWO MARYLAND FARMS
SUITE 200
BRENTWOOD, TN 37027
(Address of principal executive offices)
(Zip Code)
(615) 254-1539
(Registrant's telephone number, including zip code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
As of June 13, 1997, 38,085,795 shares of the Registrant's Common Stock, $.01
par value, were outstanding.
<PAGE>
PMT SERVICES, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
APRIL 30, JULY 31,
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 4,867,807 $106,329,848
Investments........................................ 68,040,264 --
Accounts receivable................................ 13,589,579 8,403,918
Inventory.......................................... 1,283,668 760,620
Deferred income taxes.............................. 214,165 265,661
Other current assets............................... 3,248,837 798,266
------------ ------------
Total current assets............................ 91,244,320 116,558,313
Purchased merchant portfolios, net of accumulated
amortization of $16,082,794 and $9,668,705...... 81,942,663 62,075,590
Property and equipment, net........................ 8,055,805 4,751,080
Deferred income taxes.............................. 1,695,832 1,343,867
Note receivable (Note 4)........................... 8,025,000 --
Intangible and other assets........................ 8,600,411 6,219,235
------------ ------------
Total assets.................................... $199,564,031 $190,948,085
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.................... $ 119,837 $ 40,000
Accounts payable..................................... 4,018,085 4,736,939
Accrued liabilities.................................. 2,397,772 4,937,445
Deferred revenues.................................... 245,803 230,496
------------ ------------
Total current liabilities....................... 6,781,497 9,944,880
Long-term debt....................................... 570,000 1,014,991
------------ ------------
Total liabilities............................... 7,351,497 10,959,871
------------ ------------
Shareholders' equity:
Preferred stock, $0.01 par value, authorized:
10,000,000 shares; no shares outstanding
Common stock, $0.01 par value, authorized:
100,000,000 shares; outstanding:
38,081,695 and 36,435,860 shares................ 380,817 364,359
Additional paid-in capital........................... 169,154,942 166,637,622
Treasury stock, at cost: 1,188 shares............... (12,000) (12,000)
Accumulated earnings................................. 22,688,775 12,998,233
------------ ------------
192,212,534 179,988,214
------------ ------------
Commitments and contingent liabilities (Notes 4 & 5)
Total liabilities and shareholders' equity........... $199,564,031 $190,948,085
============ ============
</TABLE>
The accompanying notes are an integral part of this financial statement.
2
<PAGE>
PMT SERVICES, INC.
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED NINE MONTH PERIOD ENDED
APRIL 30, APRIL 30,
--------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Revenues...................................... $60,446,768 $49,535,436 $186,132,223 $135,785,023
Cost of revenues.............................. 44,813,510 37,459,139 139,133,265 102,651,848
----------- ----------- ------------ ------------
Gross margin................................ 15,633,258 12,076,297 46,998,958 33,133,175
----------- ----------- ------------ ------------
Selling, general and administrative expenses.. 7,483,426 6,569,504 23,121,543 18,541,081
Depreciation and amortization expense......... 3,158,777 2,068,400 8,930,620 5,283,565
Provision for merchant losses................. 379,977 407,889 964,814 1,151,143
Nonrecurring operating expense, net........... 8,873 -- 593,626 --
----------- ----------- ------------ ------------
11,031,053 9,045,793 33,610,603 24,975,789
----------- ----------- ------------ ------------
Income from operations...................... 4,602,205 3,030,504 13,388,355 8,157,386
Interest income, net.......................... 1,233,521 261,528 3,762,864 385,873
Other expense, net............................ (185,716) -- (719,426) --
----------- ----------- ------------ ------------
Income before provision for income taxes.... 5,650,010 3,292,032 16,431,793 8,543,259
Provision for income taxes.................... 2,119,012 1,361,753 6,144,930 3,497,769
----------- ----------- ------------ ------------
Net income.................................. $ 3,530,998 $ 1,930,279 $ 10,286,863 $ 5,045,490
=========== =========== ============ ============
Net income per share.......................... $0.09 $0.06 $0.27 $0.16
=========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of this financial statement.
3
<PAGE>
PMT SERVICES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN TREASURY ACCUMULATED SHAREHOLDERS'
STOCK CAPITAL STOCK EARNINGS EQUITY
--------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at July 31, 1996........... $364,359 $166,637,622 $ (12,000) $12,998,233 $179,988,214
Stock options exercised.......... 3,458 2,528,320 2,531,778
August 1996 pooling.............. 5,000 (4,000) (115,762) (114,762)
March 1997 pooling............... 8,000 (7,000) 141,303 142,303
Distributions to Subchapter S
Corporations, prior to merger.. (621,862) (621,862)
Net income for the period........ 10,286,863 10,286,863
------- ------------ ---------- ----------- -------------
Balance at April 30, 1997.......... $380,817 $169,154,942 $ (12,000) $22,688,775 $192,212,534
======== ============ ========== =========== =============
</TABLE>
The accompanying notes are an integral part of this financial statement.
4
<PAGE>
PMT SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTH PERIOD ENDED
APRIL 30,
----------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income........................................... $ 10,286,863 $ 5,045,490
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization expense................ 8,930,620 5,283,565
Gain on sale of property and equipment............... (47,875) --
Provision for merchant losses........................ 964,814 1,151,143
Deferred income taxes................................ (300,469) (562,890)
Changes in assets and liabilities:...................
Accounts receivable............................... (5,026,604) (2,599,395)
Inventory......................................... (468,610) (61,336)
Other assets...................................... (2,700,024) (441,025)
Accounts payable.................................. (737,082) (35,044)
Accrued liabilities............................... (1,806,811) (1,072,126)
Deferred revenues................................. 15,307 (119,519)
------------- ------------
Net cash provided by operating activities......... 9,110,129 6,588,863
------------- ------------
Cash flows from investing activities:
Purchase of merchant portfolios...................... (26,385,888) (28,200,033)
Purchase of other intangible assets.................. (3,391,148) (880,000)
Purchase of investments, net......................... (68,040,264) --
Purchase of property and equipment................... (4,580,657) (1,414,280)
Proceeds from sale of equipment...................... 293,000 --
------------- ------------
Net cash used in investing activities............. (102,104,957) (30,494,313)
------------- ------------
Cash flows from financing activities:
Payments on long-term debt........................... (444,991) (14,574,751)
Issuance of note receivable.......................... (8,025,000) --
Proceeds from issuance of common stock............... 624,640 140,978,197
Purchase of treasury stock........................... -- (12,000)
Reissuance of treasury stock......................... -- 68,500
Distributions of Subchapter S Corporations........... (621,862) (202,946)
------------- ------------
Net cash (used) provided by financing activities.. (8,467,213) 126,257,000
------------- ------------
Net increase (decrease) in cash and cash equivalents.. (101,462,041) 102,351,550
Cash and cash equivalents at beginning of the period.. 106,329,848 1,351,311
------------- ------------
Cash and cash equivalents at end of the period........ $ 4,867,807 $103,702,861
============= ============
Cash paid during the period for:
Interest $ 34,368 $ 241,554
Income taxes 2,895,171 3,910,276
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES:
For the nine months ended April 1997, in connection with separate
mergers with two companies in August 1996 and March 1997, the Company issued
1,300,000 shares of common stock. The acquisitions were accounted for as
poolings of interests which did not require retroactive restatement, as they had
an insignificant impact on the Company.
The accompanying notes are an integral part of this financial statement.
5
<PAGE>
PMT SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - INTERIM FINANCIAL STATEMENTS:
The accompanying interim consolidated financial statements are
unaudited, except for the balance sheet at July 31, 1996. Certain information
and disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted,
although the Company believes the disclosures included herein are adequate to
make the information presented not misleading. These interim consolidated
financial statements should be read in conjunction with the Company's
consolidated financial statements for the fiscal year ended July 31, 1996.
The accompanying interim consolidated financial statements contain all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the Company's financial position at April 30, 1997 and the
results of its operations and its cash flows for the fiscal nine month periods
ended April 30, 1997 and 1996. The results of operations for the interim
periods presented are not necessarily indicative of results for the full fiscal
year. The growth in the Company's income and profitability from fiscal 1996 has
resulted largely from mergers and acquisitions, including the purchase of
merchant portfolios. Future growth is dependent upon, among other factors, the
Company's ability to continue to consummate such mergers and acquisitions.
The consolidated financial statements give retroactive effect to
certain acquisitions consummated in the fourth quarter of fiscal 1996 and the
second quarter of fiscal 1997 which were accounted for as poolings of interests.
For the three and nine months ended April 30, 1996, revenues of these pooled
entities included in the consolidated results of the Company were $16,635,896
and $48,485,541, respectively. Net losses of the pooled entities for the three
and nine months ended April 30, 1996 were $70,913 and $387,444, respectively.
The Company presents its consolidated statement of cash flows on the
indirect method as allowed by FAS 95. Certain amounts in the prior periods
presented have been reclassified to conform with this presentation.
Net income per share for the three month periods ended April 30, 1997
and 1996 is calculated based on the weighted average number of shares of common
stock outstanding of 38,578,240 and 33,001,236, respectively. Net income per
share for the fiscal nine month periods ended April 30, 1997 and 1996 is
calculated based on the weighted average number of shares of common stock
outstanding of 38,524,027 and 31,036,326, respectively.
6
<PAGE>
PMT SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 128 (SFAS 128). SFAS 128
requires companies with complex capital structures that have publicly held
common stock or common stock equivalents to present both basic and diluted
earnings per share (EPS) on the face of the income statement. The presentation
of basic EPS replaces the presentation of primary EPS previously required by
Accounting Principles Board Opinion No. 15 (ABP 15). Basic EPS is calculated as
income available to common shareholders divided by the weighted average number
of shares outstanding during the period. Diluted EPS (previously referred to as
fully diluted EPS) is calculated using the "if converted" method for convertible
securities and the treasury stock method for options and warrants as prescribed
by APB 15. This statement is effective for financial statements issued for
interim periods and annual periods ending after December 15, 1997. Earlier
application is not permitted. The Company will adopt the provisions of this
statement in the quarter ended January 31, 1998. Management believes the
provisions of this statement will not have a material effect on net income per
share.
NOTE 2 - PUBLIC OFFERINGS:
In October 1995, the Company consummated a second public offering of
2,156,250 (6,468,750 post-splits) shares of common stock, 1,931,250 (5,793,750
post-splits) of which were offered by the Company. The Company received net
proceeds of approximately $40.8 million, after deducting underwriting discounts
and commissions and expenses of the offering, and repaid all borrowings
outstanding under its revolving line of credit.
The Company offered 3,910,000 (5,865,000 post-split) shares of its
common stock in a third public offering in April 1996. The Company received net
proceeds of approximately $100 million after deducting underwriting discounts
and commissions and estimated expenses of the offering.
NOTE 3 - MERGERS AND ASSET PURCHASES:
MERGERS
In the third quarter of fiscal year 1997, the Company consummated a
merger by issuing common stock in exchange for all the outstanding common stock
of the company acquired. This transaction was accounted for as a pooling of
interests which was not considered material for retroactive restatement.
Subsequent to April 30, 1997, the Company consummated a merger with
CVE Corporation, a provider of check verification and credit card processing.
The merger will be accounted for as a pooling of interests.
7
<PAGE>
PMT SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
ASSET PURCHASES
The Company purchases merchant portfolios which provide the Company the
right to service specific merchants under contract to processing banks for
electronic authorization and payment processing. The Company purchased certain
assets of three portfolios and purchased residual rights from several agents in
the third quarter of fiscal 1997.
In conjunction with the purchase of merchant portfolios, the Company may
enter into a noncompetition agreement with the sellers of the portfolios. In
such cases, a portion of the purchase price of each merchant portfolio is
allocated to the related noncompetition agreement.
NOTE 4 - NOTE RECEIVABLE:
The Company entered into a leasing arrangement in March 1997 for a portion
of the office space in a building that will serve as the Company's corporate
headquarters upon completion of renovations to the building, currently scheduled
for September 1997. The Company has advanced funds to an independent, third
party who purchased the building and is responsible for its renovation. The
loan provided by the Company has a maximum available balance of $13,300,000
which bears interest at 5%, payable monthly in arrears. The loan amount is
being advanced in various draws by the building owner based on certain achieved
milestones in the renovation. The outstanding principal balance at April 30,
1997 is $8,025,000. The Company's note receivable is secured by a first lien on
the property and has a term of ten years. The Company obtained an independent
appraisal of the property in determining its fair value for the purpose of
classifying the related leasing transaction in accordance with SFAS 13
"Accounting for Leases." The lease has a term of ten years and is classified as
an operating lease. The Company's minimum lease commitment related to the
property is as follows, subject to completion of the renovation on schedule:
<TABLE>
<CAPTION>
Fiscal Year Ending July 31
---------------------------
<S> <C> <C>
1997 --
1998 $ 758,000
1999 940,875
2000 940,875
2001 940,875
Thereafter 4,704,375
</TABLE>
8
<PAGE>
PMT SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 5 - COMMITMENTS AND CONTINGENCIES:
In connection with the purchase of a merchant portfolio from Bankcard
America, Inc. ("ABC") in April 1995, the Company signed a guaranty for a
$1,000,000 note payable to the current processing bank by ABC expiring May 9,
1998. The Company received a security interest in stock warrants to purchase
120,000 shares of the Company's common stock currently held by a shareholder of
ABC.
The Company entered into an agreement in July 1995 to purchase the rights
to service merchant accounts to be generated by another independent sales and
service provider ("service provider") under a contract with the Company's
primary processing bank. The Company's option to purchase may be exercised upon
the earlier of default by the service provider under its loan agreement with a
third party or December 1, 1997 and expires on January 31, 1998. The purchase
price will be derived as a multiple of average monthly cash flow generated by
the merchant accounts for the three months immediately prior to the purchase.
The Company's agreement with its primary processing bank was amended to
require the Company to purchase the service provider's merchant accounts by
January 31, 1998. Additionally, the Company has indemnified the processing bank
for any losses incurred by the processing bank with respect to the service
provider's merchant accounts.
In connection with the option agreement, the Company has guaranteed the
service provider's loan to a third party in the amount of $250,000. The Company
has also entered into a service agreement whereby the Company will provide
customer service, processing equipment deployment and related services to the
service provider's merchant accounts for a monthly fee per merchant.
VISA and MasterCard require merchants accepting VISA and MasterCard credit
cards to contract directly with a processing bank that is a member bank of the
VISA or MasterCard associations. The Company is not the principal party to the
merchant processing agreements and is therefore dependent upon its contractual
arrangements with its processing banks in order to continue to service its
merchant portfolio. Generally, the Company has a contractual right to receive
revenues derived from the discount rate and fees earned on its merchant
portfolio so long as the merchant continues to process transactions on the
processing bank's system and the Company provides adequate service to the
merchant and remains in compliance under its agreement with the processing bank.
Under the terms of the Company's agreement with its primary processing bank, the
Company is permitted to transfer merchants to another processing bank subject to
time limitations and termination fees. This agreement provides mobility for a
substantial portion of the Company's merchant base. However, in order to
transfer merchant contracts, the Company must pay the processing bank a fee
determined by a formula related to the annualized aggregate transaction volume
of the merchants transferred.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
PMT Services, Inc. is an independent service organization which markets
and services electronic credit card authorization and payment systems to retail
merchants located throughout the United States. The Company's principal sources
of revenues are discount and merchant service fees. The remaining revenues
consist of rentals, commissions and sales relating to credit card processing
equipment and installation fees. The Company initiates the credit card
processing relationship with a merchant and negotiates a "discount rate," within
the terms of the Company's agreements with processing banks. The discount is a
percentage of the dollar amount of each credit card transaction.
Revenues derived from the electronic processing of transactions are
recognized at the time the merchants' transactions are processed. Revenues
related to the direct sale of credit card authorization equipment are recognized
when the equipment is shipped. Fees related to both the direct sale and
marketing of this equipment are recognized when installation is completed. Fees
received in advance of shipment or installation are deferred until realized.
Acquisitions and Mergers
In fiscal 1996, the Company purchased five merchant portfolios
consisting of approximately 34,500 merchants. One of these purchases, consisting
of approximately 5,000 merchants, was consummated in the first quarter of fiscal
1996. In the third quarter of fiscal 1996 the Company purchased approximately
22,000 merchants through two merchant portfolio acquisitions. Additionally, the
Company acquired two merchant portfolios, in the fourth quarter of fiscal 1996,
one of which was accounted for as a pooling of interests.
The Company purchased a merchant portfolio from Imperial Bank consisting
of approximately 5,000 merchant accounts effective October 1, 1995. The Company
paid $8,650,000 for the portfolio from proceeds of the Company's second public
offering. In the third quarter of fiscal 1996 the Company purchased two merchant
portfolios. The Company purchased approximately 15,000 merchant accounts from
UMB Bank, N.A. ("UMB") for a purchase price of $13,500,000 effective March 1,
1996. Effective April 1, 1996 the Company purchased approximately 7,000 merchant
accounts from Bankcard America, Inc. ("ABC") for a purchase price of $6,300,000.
In the fourth quarter of fiscal 1996, the Company completed two
acquisitions consisting of approximately 7,500 merchant accounts. The Company
accounted for the larger of these two acquisitions as a pooling of interests. On
July 1, 1996 the Company issued 594,011 shares of its common stock in exchange
for all the outstanding common stock of Martin Howe Associates ("MHA"). The
Company's consolidated financial statements have been restated to include the
accounts of MHA for all periods prior to the merger.
10
<PAGE>
In the first quarter of fiscal 1997, the Company completed three
acquisitions consisting of approximately 13,500 merchant accounts. On August 2,
1996, the Company issued shares of its common stock in exchange for all the
outstanding stock of Data Transfer Associates, Inc. ("DTA"). The acquisition was
accounted for as an immaterial pooling of interests. The shares were issued to
the shareholders of DTA in reliance upon the exemption provided by Section 4(2)
of the Securities Act of 1933 (the "Act").
The other two merchant portfolio acquisitions accounted for
approximately 9,500 merchant accounts and operating results of the merchant
portfolios have been included in the Company's financial statements beginning
August 1, 1996, the effective date of the purchases.
In addition to these acquisitions, on September 16, 1996, the Company
paid cash and issued warrants to purchase 10,000 shares of the Company's common
stock as consideration in a transaction related to the purchase of certain
rights and obligations with respect to the solicitation and maintenance of a
merchant portfolio. The warrants were issued to the two individual sellers in
reliance upon the exemption provided by Section 4(2) of the Act. The warrants
are currently fully exercisable, at an exercise price of $17.00 per share, and
expire September 16, 2006.
In the second quarter of fiscal 1997, the Company consummated five
acquisitions representing approximately 19,000 merchant accounts. Three of the
acquisitions in fiscal 1997 were accounted for as poolings of interests. On
December 23, 1996 the Company issued 424,999 shares of its common stock in
exchange for all the outstanding common stock of Fairway Marketing Group
("Fairway"). On January 27, 1997, 3,131,250 shares of the Company's common
stock were issued in exchange for all the outstanding common stock of Bancard
Systems, Inc. ("BSI"). On January 30, 1997 the Company issued 567,519 shares
of its common stock in exchange for all the outstanding common stock of Retail
Payment Services, Inc. ("RPS"). The above referenced shares were issued to the
shareholders of Fairway, BSI and RPS in reliance upon the exemption provided by
Section 4(2) of the Act. The other two acquisitions' operating results have
been included in the Company's financial statements beginning November 1, 1996
and December 1, 1996, the effective dates of the transactions.
In the third quarter of fiscal 1997, the Company consummated four
acquisitions representing approximately 7,500 merchant accounts. On March 31,
1997 the Company issued shares of its common stock in exchange for all the
outstanding common stock of IMA Bancard, Inc. ("IMA"). The shares were issued
to the shareholders of IMA in reliance upon the exemption provided by Section 4
(2) of the Act. The acquisition was accounted for as an immaterial pooling of
interests. The other three acquisitions' operating results have been included
in the Company's financial statements beginning March 1, 1997 and April 1, 1997,
the effective dates of the transactions.
The growth in the Company's revenues and profitability from fiscal 1996
has resulted largely from the purchase of merchant portfolios. Future growth is
dependent upon, among other factors, the Company's ability to continue to
consummate such purchases of merchant portfolios. There can be no assurance that
the Company will be able to make successful portfolio acquisitions or that the
attrition of merchants from acquired portfolios will not exceed anticipated
attrition, thus resulting in lower revenues from the purchased portfolios.
11
<PAGE>
Results of Operations
The following table presents, for the periods indicated, the percentage of
revenues represented by certain line items in the Company's statement of income:
<TABLE>
<CAPTION>
Three Month Period Percentage/Increase Nine Month Period Percentage/Increase
Ended April 30, (Decrease) Ended April 30, (Decrease)
------------------ ------------------- ------------------ --------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues 100.0% 100.0% 22.0% 100.0% 100.0% 37.1%
Cost of revenues 74.1 75.6 19.6 74.7 75.6 35.5
----- ----- ----- -----
Gross margin 25.9 24.4 29.5 25.3 24.4 41.8
Selling, general and
administrative expenses 12.4 13.3 13.9 12.5 13.7 24.7
Deprec. and amortization 5.3 4.2 52.7 4.8 3.9 69.0
Provision for merchant losses 0.6 0.8 (6.8) 0.5 0.8 (16.2)
Nonrecurring expense -- -- -- 0.3 -- --
----- ----- ----- -----
Income from operations 7.6 6.1 51.9 7.2 6.0 64.1
Interest (income), net (2.0) (0.5) 371.7 (2.0) (0.3) 875.2
Other expense, net 0.3 -- -- 0.4 -- --
----- ----- ----- -----
Income before provision for
taxes 9.3 6.6 71.6 8.8 6.3 92.3
Provision for income taxes 3.5 2.7 55.6 3.3 2.6 75.7
----- ----- ----- -----
Net Income 5.8% 3.9% 82.9% 5.5% 3.7% 103.9%
===== ===== ===== =====
</TABLE>
- -- = Not meaningful
Revenues
Revenues for the third quarter of fiscal 1997 increased to $60.4
million, an increase of 22.0% over the same period last year. For the first nine
months of fiscal 1997, the Company reported revenues of $186.1 million, 37.1%
higher than revenues of $135.8 million for the same period in fiscal 1996. The
growth in revenues has resulted in an increase in the Company's accounts
receivable. The increase in revenues resulted primarily from the purchase of
merchant portfolios, revenue enhancement programs, growth from a Visa and
MasterCard sales solicitation program launched in fiscal 1995 with one of the
Company's major association relationships and growth generated from new
merchants added through internal sales. Merchant portfolio purchases accounted
for 78.9% of the increase in revenues in the third quarter of fiscal 1997 and
79.8% of the increase in the first nine months of fiscal 1997.
Cost of Revenues
Cost of revenues increased from $37.5 million in the third quarter of
fiscal 1996 to $44.8 million in the third quarter of fiscal 1997. Additionally,
for the nine month period ended April 30, 1997, cost of revenues increased to
$139.1 million from $102.7 million for the same period in fiscal 1996. Cost
decreased as a percentage of revenues for the three month and nine month periods
ended April 30, 1997 by 1.5% and 0.9%, respectively. The percentage decreases
were principally a result of revenue enhancement programs including
approximately $1.5 million in annual fees charged to merchants in the second and
third quarters of fiscal 1997 and earned in December 1996 and April 1997. In
December 1995, the Company charged to and earned from merchants approximately
$382,000 in annual fees. Additionally, cost decreased as a percentage of
revenues from negotiated price reductions from major vendors.
12
<PAGE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $7.5 million in the
third quarter of fiscal 1997 and $6.6 million for the third quarter of fiscal
1996. For the first nine months of fiscal 1997, selling, general and
administrative expenses increased to $23.1 million from $18.5 million for the
same period in fiscal 1996. As a percentage of revenues, selling, general and
administrative expenses have decreased for the third quarter of fiscal 1997 and
for the nine month period ended April 30, 1997 by 0.9% and 1.2%, respectively,
when compared to the same periods in fiscal 1996. The decrease in selling,
general and administrative expenses as a percentage of revenues continues to
reflect the Company's overall improvement in utilization of personnel. The
addition of revenues from purchased merchant portfolios have not caused a
proportionate increase in selling, general and administrative expenses.
Additionally, the Company's selling expenses decreased as a result of the
Company's purchase of agent residual rights thereby lowering referral
compensation.
Depreciation and Amortization
Depreciation and amortization expense increased from $2.1 million for
the quarter ended April 30, 1996 to $3.2 million for the quarter ended April 30,
1997 which represents a 52.7% increase. For the first nine months of fiscal
1997, depreciation and amortization increased 69.0% to $8.9 million from $5.3
million for the same period in fiscal 1996. The increase in depreciation and
amortization was primarily the result of additional expenditures related to the
Company's management information systems and amortization of purchased merchant
portfolios.
Nonrecurring Operating Expense
In the third quarter of fiscal 1997, and the nine months year to date,
the Company incurred nonrecurring duplicative net costs of approximately $9,000
and $594,000, respectively. These net costs relate to a sales force included in
a merchant portfolio acquisition.
Interest Income
For the third quarter of fiscal 1997, the Company recognized $1.2
million net interest income. For the same quarter in fiscal 1996, the Company
recognized approximately $262,000 net interest income. For the nine month
periods ended April 30, 1997 and 1996, the Company recognized $3.8 million and
approximately $386,000 net interest income, respectively. The Company
consummated an initial public offering in August 1994, a second public offering
in October 1995 and a third public offering in April 1996. The Company received
net proceeds from the initial, second and third public offerings of
approximately $15.9 million, $40.8 million and $100 million (after deducting
underwriting discounts and commissions and expenses of the offerings),
respectively. With the first two offerings, the Company repaid all borrowings
outstanding under its credit facility. The Company received interest income from
the investment of the remaining net proceeds from the initial and second
offerings and on the total net proceeds from the April 1996 offering.
Other Expense
In the third quarter of fiscal 1997, and the nine months year to date,
the Company incurred other expenses of approximately $186,000 and $719,000,
respectively. These transaction costs relate to the acquisitions which were
accounted for as pooling of interests.
13
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Income Tax
Income tax expense increased in the third quarter and year-to-date
periods of fiscal 1997 in relation to the comparable periods in fiscal 1996,
principally as a result of the Company's increased profitability in fiscal 1997.
For the nine months ended April 30, 1997, the income tax expense of $6.1 million
represented an effective income tax rate of 37.4% as compared to the income tax
expense of $3.5 million (40.9% effective income tax rate) in the first nine
months of fiscal 1996. The principal reasons for the decrease in the effective
tax rate were losses without a corresponding income tax benefit incurred by a
subsidiary of MHA prior to its combination with PMT, partially offset by income
generated in the restated prior year by Subchapter S corporations which were not
taxed at the corporate level.
Liquidity and Capital Resources
The Company received net proceeds from the initial, second and third
public offerings of approximately $15.9 million, $40.8 million and $100 million
(after deducting underwriting discounts and commissions and expenses of the
offerings), respectively. The Company's management invests excess cash in
overnight investments and U.S. Government Treasury notes and bills.
The Company's cash flow is generated by collecting monthly revenues from
the merchants. Payments to suppliers and vendors are typically paid within 30
days, except for interchange which is paid daily to the card-issuing banks.
Historically, the Company's primary uses of its capital resources include debt
service, acquisitions of merchant portfolios, capital expenditures and working
capital.
The Company expects that cash generated from operations and the excess
cash on hand will be adequate to meet the Company's immediate cash needs. In
addition, on January 31, 1997 the Company amended and restated its credit
facility with First Union National Bank of Tennessee to provide a $20.0 million
revolving credit.
Working Capital
Net cash flow provided by operating activities was $9.1 million for the
first nine months of fiscal 1997 as compared to net cash flow provided by
operating activities of $6.6 million for the first nine months of fiscal 1996.
Merchant portfolio purchases and increased interest income as a result of the
Company's public offerings accounted for most of the increase in cash provided
by operating activities. However, this increase was partially offset by
increased income tax payments in fiscal 1997.
Capital Expenditures and Investing Activities
Cash used in investing activities was approximately $102.1 million for
the nine month period ended April 30, 1997 as compared to $30.5 million for the
same period in fiscal 1996. During fiscal 1997 approximately $68.0 million of
the net proceeds received in the third public offering in April 1996 have been
reinvested in U.S. Treasury securities. Following the consummation of the second
public offering in October 1995, the Company purchased a merchant portfolio from
Imperial Bank. In the first nine months of fiscal 1997, the Company purchased
six merchant portfolios The increase in capital expenditures was also
attributable to additional expenditures related to the upgrade of the Company's
management information systems and the purchase of additional credit card
terminal and peripheral equipment for lease to merchants.
14
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Financing Activities
Net cash provided by financing activities for the first nine months of
fiscal 1996 was $126.3 million, which reflects the net proceeds of the public
offering after retirement of the Company's outstanding indebtedness to First
Union National Bank of Tennessee. For the first nine months ended April 30,
1997, the Company did not complete an equity offering.
Net cash used by financing activities for the first nine months of
fiscal 1997 was $8.5 million, which reflects the issuance of a note receivable
of $8.0 million. The Company entered into a leasing arrangement in March 1997
for a portion of the office space in a building that will serve as the Company's
corporate headquarters upon completion of renovations to the building, currently
scheduled for September 1997. The Company has advanced funds to an independent,
third party who purchased the building and is responsible for its renovation.
The loan provided by the Company has a maximum available balance of $13.3
million which bears interest at 5%, payable monthly in arrears. The loan amount
is being advanced in various draws by the building owner based on certain
achieved milestones in the renovation. The Company's note receivable is secured
by a first lien on the property and has a term of ten years with the payments
during the first year restricted to interest only. The Company obtained an
independent appraisal of the property in determining its fair value for the
purpose of classifying the related transaction as an operating lease.
Future Capital Needs
Management believes that significant expenditures for the purchase of
additional merchant portfolios may be required for the Company to sustain its
growth in the future.
Management expects to fund such purchases through cash on hand, cash
generated from operations and bank borrowings. The Company believes that the
combination of these sources will be sufficient to meet the Company's
anticipated liquidity needs and its growth plans through fiscal 1997. The
Company, however, may pursue additional expansion opportunities, including
merger agreements accounted for as poolings requiring the issuance of additional
shares of stock. Additionally, the Company may make purchases of additional
merchant portfolios, which may require additional capital, and the Company may
incur, from time to time, additional short-term and long-term indebtedness or
issue, in public or private transactions, equity or debt securities, the
availability and terms of which will depend upon then prevailing market and
other conditions. There can be no assurance that any such financing will be
obtained on terms acceptable to the Company.
In October 1995, the Company repaid all indebtedness on its revolving
credit facility to First Union National Bank of Tennessee from the proceeds of
its second public offering. The revolving credit facility was amended and
restated during fiscal 1997 to increase the facility to $20.0 million. The
current amendment expires January 31, 1998. Borrowings, if any, under the new
credit facility will be used to finance future purchases of merchant portfolios
and equipment and for general corporate purposes.
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This report contains certain forward-looking statements. Specifically,
the forward-looking statements relate to future growth through portfolio
acquisitions and the availability of capital to support such acquisitions. The
ability of the Company to achieve the expectations expressed in these forward-
looking statements will be subject to several factors that could cause actual
results to differ materially from those expressed in the forward-looking
statements, such as merchant attrition, difficulties in integrating newly
acquired businesses and portfolios, the availability of capital, the cost of
acquired businesses and portfolios, the Company's continued ability to account
for acquisitions as poolings of interests, industry price increases and the
ability of the Company's processing banks to process merchant transactions
effectively. Results actually achieved thus may differ materially from the
expectations expressed in such statements.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1(a) Lease Agreement, dated April 2, 1997, between the Registrant and
Battleship, LLC.
10.1(b) Purchase Option Agreement, dated April 2, 1997, between the
Registrant and Battleship, LLC.
10.2 1997 Nonqualified Stock Option Plan.
10.3(a) Loan Agreement, dated April 2, 1997, between the Registrant and
Battleship, LLC.
10.3(b) Note, dated April 2, 1997, between the Registrant and Battleship, LLC.
10.3(c) Deed of Trust and Security Agreement, dated April 2, 1997, between
the Registrant and Battleship, LLC.
27.0 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated April 8, 1997
discussing the retroactive effect in the consolidated financial
statements for mergers accounted for as poolings of interests.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PMT SERVICES, INC.
By:/s/Vickie G. Johnson
--------------------
Vickie G. Johnson
Chief Accounting Officer
(principal accounting officer)
Date: June 16, 1997
<PAGE>
Exhibit 10.1(a)
LEASE AGREEMENT
---------------
THIS LEASE AGREEMENT (as it may be amended from time to time, this "Lease")
is made as of the 2nd day of April, 1997 (the "Effective Date"), by and between
BATTLESHIP, LLC, a Tennessee limited liability company ("Landlord"), and PMT
SERVICES, INC., a Tennessee corporation ("Tenant").
R E C I T A L S:
----------------
WHEREAS, Tenant desires to lease for its principal place of business the
Leased Premises as more particularly described herein, which Leased Premises
shall be located in an office building located in Nashville, Davidson County,
Tennessee (the "Building"); and
WHEREAS, the Building is situated on the tract of land described on Exhibit
A attached hereto and incorporated herein by this reference ("Land"); and
WHEREAS, Landlord has a contract to purchase the Land, is willing to
renovate the Building on the Land and lease the Leased Premises to Tenant; and
WHEREAS, pursuant to a Real Estate Contract dated as of April 2, 1997
between Green Hills Commons, LLC as seller therein and Landlord as buyer therein
(as it may be amended from time to time, the "Real Estate Contract"), Landlord
has agreed to purchase the Land and the Building subject to this Lease and the
terms and conditions contained in the Real Estate Contract.
NOW, THEREFORE, for valuable consideration and the mutual covenants herein
contained, the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
1.01 As used in this Lease, including without limitation the Recitals
hereof, the following terms shall have the following meanings, unless the
context requires otherwise:
"Abandoned Retail Space" has the meaning set forth in Section 3.6 hereof.
"Actual Adjustment Amount" has the meaning set forth in Section 3.3(e)
hereof.
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"Additional Leases" means collectively the leases with tenants in the
Building other than Tenant, as they may be amended and/or restated from time to
time.
"Additional Rent" has the meaning set forth in Section 3.5 hereof.
"Additional Tenant's HVAC Payment" has the meaning set forth in Section 3.4
hereof.
"Adjustment Date" means the first day of the calendar month in which the
first regularly scheduled monthly payment of principal and interest (as opposed
to an interest payment only) payable by Landlord to Tenant in connection with
the Loan becomes due and payable.
"Alterations" has the meaning set forth in Section 7.1 hereof.
"Annual Certificate" has the meaning set forth in Section 3.3(e) hereof.
"Architect" means HKW Associates, PC.
"Bankruptcy Code" has the meaning set forth in Section 19.1 hereof.
"Base Rent" has the meaning set forth in Section 3.1 hereof.
"Base Rent Adjustment" means collectively the Utility Base Rent Adjustment,
the TIP Base Rent Adjustment and the Remaining Operating Base Rent Adjustment.
"Budget" means the Budget in the form of Exhibit B attached hereto and
incorporated herein by this reference, as such Budget may be amended in writing
from time to time by Landlord and Tenant.
"Building" has the meaning set forth in the Recitals.
"Building Plans" has the meaning set forth in Section 4.1 hereof.
"Business Day" means any day on which commercial lending institutions
having an office in Nashville, Tennessee are officially open for business.
"Commencement Date" has the meaning set forth in Section 2.1 hereof.
"Common Areas" refers to the areas of the Building and the Land that are
designed for use in common by all tenants of the Building and their respective
employees, agents, customers, invitees and others, and includes, by way of
illustration and not
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limitation, entrances and exits, hallways on multi-tenant floors, stairwells,
elevators, restrooms on multi-tenant floors, sidewalks, driveways, parking
areas, landscaped areas and other areas as may be designated by Landlord as part
of the Common Areas of the Building. Tenant shall have the non-exclusive right,
in common with others, to the use of the Common Areas, subject to such
nondiscriminatory rules and regulations as may be adopted from time to time by
Landlord, including without limitation those set forth in Exhibit C attached
hereto and incorporated herein by this reference.
"Compliance Work" has the meaning set forth in Section 6.5 hereof.
"Contractor" means R.C. Mathews Contractor, LLC, a Tennessee limited
liability company.
"CPI" shall mean the consumer price index published by the Bureau of Labor
Statistics of the United States Department of Labor that is entitled "Consumer
Price Indexes for All Urban Consumers, United States City Average, All Items
1982-84 = 100 unadjusted" or in the event said index is no longer provided by
the Bureau of Labor Statistics, the index furnished by the Bureau of Labor
Statistics that most accurately and completely replaces the above-referenced
index.
"CPI Adjustment" is defined as a percentage obtained by dividing the CPI in
effect for the month of JANUARY of the Lease Year in question by the CPI that
was in effect for the month of JANUARY of the prior Lease Year; provided,
however, in no event shall the CPI Adjustment ever be less than one (1).
"Defaulting Retail Tenant" has the meaning set forth in Section 3.6 hereof.
"Default Rate" means three (3) percentage points higher than the Prime
Rate, but not to exceed the Maximum Rate.
"Development Agreement" means that certain Parking Facility Development
Agreement dated as of April 2, 1997 and executed by and between Landlord and
Green Hills Commons, LLC, a Tennessee limited liability company.
"Easement Agreement" means that certain Easement Agreement dated as of
April 2, 1997, of record in Book 10404, page 704, Register's Office for
Davidson County, Tennessee, as it may be amended from time to time in accordance
with the terms thereof.
"Escrow Account" has the meaning set forth in Section 19.2(c) hereof.
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"Estimated Adjustment Payment" has the meaning set forth in Section 3.3(e)
hereof.
"Estimated TIP Base Rent Adjustment" has the meaning set forth in Section
3.3(c) hereof.
"Estimated Remaining Operating Base Rent Adjustment" has the meaning set
forth in Section 3.3(d) hereof.
"Estimated Utility Costs" has the meaning set forth in Section 3.3(a)
hereof.
"Event of Default" has the meaning set forth in Section 18.1 hereof.
"Expansion Period" has the meaning set forth in Section 31.2(b) hereof.
"Fourth Floor Lease" has the meaning set forth in Section 31.2(a) hereof.
"Fourth Floor Renewal Term" has the meaning set forth in Section 31.2(a)
hereof.
"Fourth Floor Term" has the meaning set forth in Section 31.2(a) hereof.
"Holdover Period" has the meaning set forth in Section 20.1 hereof.
"HVAC Rate" means the charge equal to $109.00 per hour to heat and cool the
Building.
"Insolvency Laws" has the meaning set forth in Section 19.1 hereof.
"Insurance Costs" means the costs for casualty, liability and rent loss
insurance applicable to the Building and Common Areas and Landlord's personal
property used in connection therewith.
"Investigation" has the meaning set forth in Section 3.3(e) hereof.
"Land" has the meaning set forth in the Recitals.
"Laws" means all laws, ordinances, rules, regulations, statutes, codes,
acts and ordinances, including without limitation, the Americans with
Disabilities Act and regulations thereunder and the Metropolitan Codes of Law of
Nashville and Davidson County, Tennessee, as the same may be amended from time
to time.
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"Leased Premises" means the Office Space and the Storage Space.
"Lease Term" has the meaning set forth in Section 2.1 hereof.
"Lease Year" means any twelve (12) month period that commences on the
Measurement Date or any subsequent anniversary of the Measurement Date, except
for the first Lease Year, which shall commence on the Commencement Date and
shall have a term longer than twelve (12) months.
"Loan" means the loan from Tenant to Landlord to finance the acquisition of
the Land and the Building and the renovation of the Building, which Loan shall
be evidenced by the Loan Documents.
"Loan Documents" means the loan documents evidencing and/or securing the
Loan, which Loan Documents shall be in a form acceptable to Landlord, Tenant and
their respective counsel.
"Market Rate" means, for the time period in question, the prevailing market
rate for the renting of comparable space in office buildings in the Green Hills
market that are similar to the Building. In the event Landlord and Tenant are
unable to agree upon the amount of the "Market Rate," the amount of the "Market
Rate" shall be determined in accordance with the baseball arbitration procedures
set forth in Section 5 of the Option Agreement.
"Maximum Rate" means the greater of (a) the maximum interest rate allowable
by Tennessee law on the Effective Date, or (b) the maximum interest rate from
time to time then allowable by Tennessee law, or (c) the maximum rate allowable
by any other law found to apply to the interest rate provisions of this Lease on
the Effective Date, or (d) the maximum rate from time to time then allowable by
any other law then determined to apply to the interest rate provisions of this
Lease.
"Measurement Date" means the first day of the month immediately succeeding
the Commencement Date.
"Minimum Usage Hours" means the following hours: (a) Monday through Friday
from 7 a.m. until 6 p.m. and (b) Saturday 8 a.m. until Noon.
"notice" has the meaning set forth in Section 34.14 hereof.
"Offer" has the meaning set forth in Section 31.1 hereof.
"Office Space" means that portion of the Leased Premises more particularly
described as follows, whether the same should be more or less Rentable Square
Feet as a result of variations resulting from actual construction and completion
of the Office Space for occupancy:
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Location in Building Rentable Square Feet
--------------------- --------------------
3rd Floor (full floor 33,250
- single tenant)
2nd Floor (also known as
the Lobby) (partial floor
- multi tenant - the
Retail Space is located
on the 2nd Floor/Lobby) 24,750
Ground Floor (full floor 33,250
- single tenant)
True and correct copies of the floor plans for the Office Space are attached
hereto as Exhibit D and incorporated herein by this reference.
"Operating Component" has the meaning set forth in Section 3.3(b) hereof.
"Operating Costs" shall mean all operating expenses of the Building and all
Common Areas as computed on the cash basis in accordance with generally accepted
accounting principles consistently applied and shall include all expenses, costs
and disbursements of every kind and nature that Landlord shall pay or become
obligated to pay because of or in connection with the ownership and operation of
the Building or Common Areas, including but not limited to, the following
(collectively the "Enumerated Operating Costs"):
(a) Wages, salaries, taxes, insurance and benefits directly
attributable to all employees engaged in operating, maintaining or
providing security for the Building or Common Areas and to personnel who
may provide traffic control relating to ingress and egress between the
parking areas and adjacent public streets.
(b) Amortization of the cost of installation of capital investment
items over the useful life of such items, which capital investments are
primarily for the purpose of reducing Operating Costs; provided, however,
the amount of such amortization included in Operating Costs during any
Lease Year shall not exceed the amount by which Operating Costs were
reduced during such Lease Year as a result of the installation of such
capital investment items.
(c) Legal consultants', appraisers' and auditing fees incurred in
connection with an appeal for reduction of taxes or for other management
purposes directly incurred in the operation of the Building and all Common
Areas.
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(d) Repairs and general maintenance of the Building and Common Areas
as required by Section 6.1 hereof (including all supplies and materials
used in the operation and maintenance of the Building and Common Areas but
excluding repairs and general maintenance paid by proceeds of insurance or
by Tenant or other third parties).
(e) Janitorial and security for the Building and Common Areas, the
sidewalks and common areas appurtenant to the Building and the equipment
therein.
(f) Insurance Costs.
(g) Tax Costs.
(h) Parking Facility Costs.
(i) Fees paid by Landlord for management of the Building and the
Common Areas, not to exceed $.40 per Rentable Square Foot of space in the
Building per annum.
(j) Service contracts regarding sweeping, landscaping, window cleaning
and other similar services in connection with the Building and Common
Areas.
Notwithstanding the foregoing, in no event shall the following be included in
the definition of "Operating Costs":
(i) Payments of principal and interest on notes and other indebtedness
incurred by Landlord in connection with its ownership and/or operation of
the Building, except as otherwise listed above as an Enumerated Operating
Cost.
(ii) Capital investment items related to the renovation of the shell
of the Building and Common Areas and replacements thereof.
(iii) Any other capital investment items, regardless of whether or not
required by governmental authority by the passage of new Laws, except as
otherwise listed above as an Enumerated Operating Cost.
(iv) Costs specially billed to specific tenants of the Building.
(v) The cost of alterations to space in the Building leased or to be
leased to tenants other than the Tenant.
(vi) Any federal, state or city income, excess profit, gift, estate,
succession, inheritance, franchise and transfer taxes or any other taxes
relating to the operation of Landlord's business but not the Building or
Land.
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(vii) Utility Costs.
"Option Agreement" has the meaning set forth in Section 32.1 hereof.
"Parking Facility" has the meaning set forth in Section 11.1 hereof.
"Parking Facility Costs" means the costs incurred by Landlord in connection
with the Parking Facility as set forth in the Easement Agreement but excluding
Utility Costs attributable to the Parking Facility.
"Payment Period" has the meaning set forth in Section 3.6 hereof.
"Permitted Capacity" has the meaning set forth in Section 5.3 hereof.
"Permitted Increase" means the lesser of three percent (3%) or the CPI
Adjustment.
"Prime Rate means the prime commercial lending rate as quoted in The Wall
Street Journal (or similar publication if The Wall Street Journal is no longer
published) in Money Rates as the prime rate on corporate loans at large United
States money center commercial banks. The Prime Rate shall be adjusted on the
date such prime rate changes.
"Property" has the meaning set forth in Section 15.5 hereof.
"Real Estate Contract" has the meaning set forth in the Recitals.
"Reduction Event" has the meaning set forth in Section 3.6 hereof.
"Reletting Terms" has the meaning set forth in Section 3.6 hereof.
"Remaining Operating Base Rent Adjustment" has the meaning set forth in
Section 3.3(d) hereof.
"Remaining Operating Component" has the meaning set forth in Section 3.3(b)
hereof.
"Remaining Operating Costs" means the Operating Costs for the Lease Year in
question minus the TIP Costs for the Lease Year in question.
"Remaining Operating Excess" means the excess of Remaining Operating Costs
for the Lease Year in question over the Remaining
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Operating Component; provided, however, that in no event shall the Remaining
Operating Excess for the Lease Year in question exceed the product of the
applicable Remaining Operating Sum multiplied by the Permitted Increase.
"Remaining Operating Sum" means the sum of (a) the Remaining Operating
Component, and (b) the sum of the Remaining Operating Excesses for all Lease
Years prior to the Lease Year in question.
"Remaining Space" has the meaning set forth in Section 31.1 hereof.
"Renewal Term" has the meaning set forth in Section 30.1 hereof.
"Rent" has the meaning set forth in Section 3.5 hereof.
"Rentable Square Feet" means the rentable area or areas of space within the
Building.
"Retail Space" means that certain area of space located on the Second Floor
or Lobby of the Building and containing approximately 6,000 Rentable Square
Feet, which Retail Space is more particularly shown on Exhibit E attached hereto
and incorporated herein by this reference.
"Revised Punchlist" has the meaning set forth in Section 4.3 hereof.
"Right of Expansion" has the meaning set forth in Section 31.2(b) hereof.
"Shell Completion Date" has the meaning set forth in Section 4.3 hereof.
"Stairs" has the meaning set forth in Section 4.5 hereof.
"Storage Rent" has the meaning set forth in Section 3.2 hereof.
"Storage Space" means 11,000 Rentable Square Feet of space to be located in
the basement of the Building and more particularly described on Exhibit F
attached hereto and incorporated herein by this reference.
"Target Date" has the meaning set forth in Section 2.2 hereof.
"Tax Costs" means costs for taxes, assessments and governmental charges
attributable to the Building and all Common Areas.
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"Temporary Parking Agreement" has the meaning set forth in Section 11.1
hereof.
"Tenant's HVAC System" means that certain HVAC system that Tenant may
install to service a portion of the Office Space; provided that Tenant shall be
solely liable for the installation, servicing and operation costs thereof,
including without limitation the monthly utility costs associated therewith.
"Tenant's Plan Revisions" has the meaning set forth in Section 4.1 hereof.
"Tenant's Pro-Rata Share" is 70.5%.
"Tenant's Punchlist" has the meaning set forth in Section 4.3 hereof.
"Tenant Work" has the meaning set forth in Section 4.2 hereof.
"Tenant Work Fund" has the meaning set forth in Section 4.4 hereof.
"Termination Period" has the meaning set forth in Section 2.2 hereof.
"TIP Base Rent Adjustment" has the meaning set forth in Section 3.3(c)
hereof.
"TIP Component" has the meaning set forth in Section 3.3(b) hereof.
"TIP Costs" means collectively the Tax Costs, Insurance Costs and Parking
Facility Costs for any Lease Year in question.
"TIP Excess" means the excess of TIP Costs for the Lease Year in question
over the TIP Component.
"Trustee" has the meaning set forth in Section 19.2(a) hereof.
"Unavoidable Delays" means delays due to labor disputes, lockouts, acts of
God, enemy action, civil commotion, any pending or actual action or ruling by a
court or administrative body prohibiting either party hereto from performing in
accordance with the terms hereof, riot, governmental regulations not in effect
at the date of execution of this Lease, conditions that could not have been
reasonably foreseen by the claiming party, inability to obtain construction
materials or energy, fire, unavoidable casualty or delays caused by arbitration
(unless the arbitration was unreasonably requested by the claiming party),
provided such matters are beyond the reasonable control of the party claiming
such delay.
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"Utility Adjustment" is calculated for each Utility Component having a
Utility Rate Change during the Lease Year in question and is calculated by
multiplying the applicable Utility Rate Change by the then existing Weighted
Amount for the applicable Utility Component.
"Utility Base Rent Adjustment" has the meaning set forth in Section 3.3(a)
hereof.
"Utility Component" means each type of cost forming a part of the Utility
Costs, so that as used herein the following are each examples of an individual
Utility Component: electrical costs, gas costs, water costs and sewer costs are
each a separate Utility Component.
"Utility Costs" means (a) Landlord's share of the costs for utilities for
the Parking Facility as set forth in the Easement Agreement, and (b) the costs
for utilities for the Building, including without limitation the cost of
providing electricity, gas, water, sewer and heating and cooling as a result of
operating the HVAC system serving the Building, but excluding any costs
associated with Tenant's HVAC System or the HVAC system serving the Retail
Space.
"Utility Credit" means Sixty Four Thousand Two Hundred and No/100 Dollars
($64,200.00) for the first Lease Year, as such Utility Credit shall be adjusted
each Lease Year commencing with the second Lease Year and each Lease Year
thereafter during the Lease Term by multiplying the Utility Credit for the
immediately preceding Lease Year by an amount equal to one (1) plus the sum of
the Utility Adjustments, if any, for the Lease Year in question.
"Utility Rate Change" means for any individual Utility Component, a rate
increase or decrease, as applicable, weighted for the number of months that such
increase or decrease was in effect, for such Utility Component as announced by
the provider of such Utility Component during the Lease Year in question.
"Utility Statement" has the meaning set forth in Section 3.3(a) hereof.
"Violation" has the meaning set forth in Section 2.2 hereof.
"Weighted Amount" means for each Utility Component that has experienced a
Utility Rate Change during the Lease Year in question, the Utility Costs from
the prior Lease Year for the applicable Utility Component divided by the total
Utility Costs for the prior Lease Year.
1.02 The words "hereof," "herein," "hereunder," and words of similar
import, when used in this Lease, shall refer to this Lease as a whole and not to
any particular provision of this Lease. Words
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importing a particular gender mean and include every other gender, and words
importing the singular number mean and include the plural number, and vice
versa, as the concept shall require.
ARTICLE II
LEASE TERM
2.1 Subject to and upon the terms, provisions and conditions herein
set forth, Landlord does hereby lease to Tenant and Tenant does hereby lease
from Landlord the Leased Premises. The term of the Lease shall commence on the
Commencement Date, as determined pursuant to Section 2.2 hereof (the
"Commencement Date"). The term of this Lease shall be for ten (10) years;
provided, however, if the Commencement Date is not the first day of a month,
then the term of the Lease shall be ten (10) years plus the partial month in
which the Commencement Date occurs unless earlier terminated in accordance with
the terms of this Lease (the "Lease Term"). In addition, the Lease Term shall
include any and all renewals and extensions of the Lease Term.
2.2 The Commencement Date shall be the earlier of (a) the date Tenant
commences occupancy of the Office Space for the operation of its business
operations, or (b) the later of (i) sixty (60) days after Shell Completion Date,
or (ii) one hundred twenty (120) days after the date on which Landlord acquires
fee simple title to the Land and the Building pursuant to the Real Estate
Contract; provided, however that in the event Tenant is unable to obtain a
certificate of occupancy for the Leased Premises solely because the Property
(OTHER THAN THE LEASED PREMISES) fails to comply with the Metropolitan Codes of
Law of Nashville and Davidson County, Tennessee (the "Violation"), the
Commencement Date shall be extended to the earlier of (A) the date that the
Violation is remedied, or (B) the date that a waiver or variance of the
Violation is obtained from the appropriate governmental authority.
Notwithstanding the foregoing, in the event the Commencement Date does not occur
on or before January 1, 1998 (the "Target Date"), Tenant shall have the right to
terminate this Lease by providing written notice to Landlord of such termination
within the ten (10) day period following the Target Date (the "Termination
Period"), provided that if Tenant fails to provide such notice during the
Termination Period, Tenant shall be deemed to have waived its right to terminate
this Lease as set forth in this Section 2.2.
ARTICLE III
RENT
3.1 During the first Lease Year, Tenant shall pay to Landlord for the
Office Space annual base rent in an amount equal to Seven Hundred Twenty Five
Thousand and No/100 Dollars ($725,000) and for EACH Lease Year beginning with
the second Lease Year and ending
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with the tenth Lease Year, Tenant shall pay to Landlord for the Office Space
annual base rent in an amount equal to Nine Hundred Seven Thousand Eight Hundred
Seventy Five and No/100 Dollars ($907,875.00) ("Base Rent"). Base Rent shall be
due and payable in twelve (12) equal monthly installments in advance on the
first day of each calendar month during the Lease Term; provided, however, if
the Commencement Date occurs on any day other than the first day of a month,
then the first payment of Base Rent shall be due and payable on the first day of
the first full calendar month occurring after the Commencement Date, and at the
same time as Tenant pays such first payment of Base Rent, Tenant also shall pay
to Landlord pro-rata Base Rent on a per diem basis for the number of days of the
Lease Term occurring in the month in which the Commencement Date occurs.
Notwithstanding the foregoing, on the Adjustment Date, monthly Base Rent shall
be reduced by an amount equal to the amount by which Seventy Seven Thousand
Seven Hundred Fifty One and No/100 Dollars ($77,751.00) exceeds the amount of
the first regularly scheduled monthly payment of principal and interest (as
opposed to any interest payment only) payable by Landlord to Tenant in
connection with the Loan. Furthermore, on the first day of any month in which
the amount of regularly scheduled monthly payments of principal and interest
owed by Landlord to Tenant in connection with the Loan are reduced in accordance
with the terms of the Loan Documents, the amount of monthly Base Rent shall be
reduced accordingly on a dollar for dollar basis with such reduction in the
monthly payments in connection with the Loan.
3.2 During each Lease Year, Tenant shall pay to Landlord for the
Storage Space annual base rent in an amount equal to Thirty Three Thousand and
No/100 Dollars ($33,000.00) ("Storage Rent"). Storage Rent shall be due and
payable in twelve (12) equal monthly installments in advance on the first day of
each calendar month during the Lease Term.
3.3 In addition to the payment of Base Rent and Storage Rent, Tenant
shall pay to Landlord the Base Rent Adjustment, which shall be calculated and
paid as follows:
(a) As Additional Rent commencing with the first Lease Year and
continuing during each Lease Year thereafter during the Lease Term, Tenant
shall pay Landlord an amount equal to the Utility Costs as adjusted
pursuant to this Section 3.3(a) (the "Utility Base Rent Adjustment").
Tenant shall pay to Landlord on the same day the Base Rent is due and
payable an amount estimated by Landlord to be Tenant's monthly Utility
Costs, as adjusted pursuant to this Section 3.3(a) (the "Estimated Utility
Costs"), which Estimated Utility Costs shall be estimated by Landlord in
good faith. Within ten (10) Business Days of the end of each month during
the Lease Term, Landlord shall deliver an accounting to Tenant of the
actual Utility Costs as adjusted pursuant to this Section 3.3(a) (each a
"Utility Statement"). Tenant shall receive a credit
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against the monthly Utility Costs owed to Landlord in an amount equal to
(i) the Additional Tenant's HVAC Payments due and payable to Landlord for
the month in question, which amounts shall be reflected in each month's
Utility Statement, and (ii) the then existing Utility Credit divided by
twelve (12), whether or not such amount is actually received and collected
by Landlord, which amount shall be reflected in each month's Utility
Statement.
(b) Tenant's Base Rent includes a Lease Year component applicable to
Operating Costs equal to Three Hundred Fifty Five Thousand Eight Hundred
Seventy Five and No/100 Dollars ($355,875.00) (the "Operating Component").
The Operating Component allocable to Tax Costs, Insurance Costs and Parking
Facility Costs is broken down as follows:
Tax Costs $123,187.50
Insurance Costs $ 18,250.00
Parking Facility Costs $ 13,687.50
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Total $155,125.00 (the "TIP Component")
The part of the Operating Component other than the TIP Component shall be
referred to herein as the "Remaining Operating Component."
(c) As Additional Rent commencing with the second Lease Year and
continuing during each Lease Year thereafter during the Lease Term, Tenant
shall pay Landlord an amount equal to the TIP Excess multiplied by Tenant's
Pro-Rata Share (the "TIP Base Rent Adjustment"). Each Lease Year during the
Lease Term beginning with the second Lease Year, Landlord may estimate the
TIP Base Rent Adjustment (the "Estimated TIP Base Rent Adjustment"), which
Estimated TIP Base Rent Adjustment shall be estimated by Landlord in good
faith. Thereafter, Landlord shall notify Tenant of such Estimated TIP Base
Rent Adjustment. Said Estimated TIP Base Rent Adjustment shall be divided
by twelve (12) and the quotient paid to Landlord monthly together with Base
Rent on the same day the Base Rent is due and payable.
(d) As Additional Rent commencing with the second Lease Year and
continuing during each Lease Year thereafter during the Lease Term, Tenant
shall pay Landlord an amount equal to the Remaining Operating Excess
multiplied by Tenant's Pro-Rata Share (the "Remaining Operating Base Rent
Adjustment"). Each Lease Year during the Lease Term beginning with the
second Lease Year, Landlord may estimate the Remaining Operating Base Rent
Adjustment (the "Estimated Remaining Operating Base Rent Adjustment"),
which Estimated Remaining Operating Base Rent Adjustment shall be estimated
by Landlord in good faith. Thereafter, Landlord shall notify Tenant of such
Estimated
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Remaining Operating Base Rent Adjustment. Said Estimated Remaining
Operating Base Rent Adjustment shall be divided by twelve (12) and the
quotient paid to Landlord monthly together with the Base Rent on the same
day the Base Rent is due and payable.
(e) Within one hundred fifty (150) days or as soon thereafter as may
be reasonably practicable after the conclusion of each Lease Year, Landlord
shall furnish to Tenant a certificate (each an "Annual Certificate"), which
Annual Certificate shall describe for the Lease Year in question (i) the
Additional Tenant's HVAC Payments due and payable to Landlord, (ii) the
actual amount of the Utility Credit, (iii) the actual amount of each of the
Utility Costs, the TIP Costs and the Remaining Operating Costs, (iv) the
actual amount of each of the Utility Base Rent Adjustment, the TIP Base
Rent Adjustment and the Remaining Operating Base Rent Adjustment (the sum
of the actual Utility Base Rent Adjustment plus the actual TIP Base Rent
Adjustment plus the actual Remaining Operating Base Rent Adjustment for the
Lease Year in question shall be referred to herein collectively as the
"Actual Adjustment Amount"), and (v) the amount of each of the Estimated
Utility Costs, the Estimated TIP Base Rent Adjustment and the Estimated
Remaining Operating Base Rent Adjustment paid by Tenant (the sum of the
Estimated Utility Costs plus the Estimated TIP Base Rent Adjustment plus
the Estimated Remaining Operating Base Rent Adjustment paid by Tenant for
the Lease Year in question shall be referred to herein collectively as the
"Estimated Adjustment Payment"). If the Actual Adjustment Amount for the
Lease Year in question exceeds the Estimated Adjustment Payment for the
Lease Year in question, then Tenant shall pay such excess to Landlord
within thirty (30) days after the delivery of such Annual Certificate. If
the Estimated Adjustment Payment exceeds the Actual Adjustment Amount for
the Lease Year in question, a credit shall be given by Landlord to Tenant
against future Estimated Adjustment Payments as they become due in an
amount equal to such excess, or if such Annual Certificate is delivered in
connection with the last Lease Year of the Lease Term, then Landlord shall
pay such excess to Tenant within thirty (30) days after the delivery of
such Annual Certificate to Tenant. For a ninety (90) day period following
the delivery of each Annual Certificate, (A) Landlord shall afford Tenant
reasonable access to Landlord's books and records with respect to the
information set forth in such Annual Certificate to enable Tenant to verify
the amounts set forth in such Annual Certificate, and (B) Tenant, at its
own expense except as provided hereinbelow, shall have the right to audit
or cause to be audited by its accountants or other authorized
representatives the information set forth in such Annual Certificate (the
"Investigation"). If any such Investigation correctly discloses an
inaccuracy in the information set forth
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in the applicable Annual Certificate, Landlord and Tenant, as necessary,
shall pay to the other within thirty (30) days of written demand therefor
the amounts required to correctly adjust between the parties hereto the
accurate amount of Base Rent Adjustment owed by Tenant to Landlord for the
Lease Year in question. Any Investigation conducted hereunder will be
conducted during normal business hours and will not unreasonably interfere
with normal business operations of Landlord. No such Investigation shall be
commenced by Tenant more than ninety (90) days after the Annual Certificate
for such Lease Year is received by Tenant. If any such Investigation
discloses that Tenant has overpaid the Base Rent Adjustment to which such
Investigation relates by more than five percent (5%), Landlord shall pay to
Tenant the costs of the Investigation incurred by Tenant. Any proprietary
or confidential information obtained by Tenant pursuant to the provisions
of this Section 3.3(e) shall be treated as confidential. The rights and
obligations set forth in this Section 3.3(e) shall survive the expiration
of the Lease Term.
3.4 Landlord shall provide in each Additional Lease that the applicable
tenant shall pay Landlord additional rent thereunder (each an "Additional
Tenant's HVAC Payment") if such tenant requests that Landlord provide, and
Landlord provides, heating and cooling services at times in excess of those
times such services are being provided pursuant to Section 5.1(a) hereof. Each
Additional Tenant's HVAC Payment shall be calculated as follows: (the HVAC Rate)
X (the number of hours the heating and cooling services are provided in excess
of those times such services are being provided pursuant to Section 5.1(a)
hereof) = the applicable Additional Tenant's HVAC Payment.
3.5 In addition, Tenant shall pay as additional rent all such other sums
of money as shall become due from and payable by Tenant to Landlord under this
Lease ("Additional Rent") (the Base Rent, Storage Rent, Base Rent Adjustment and
Additional Rent shall be referred to herein collectively as the "Rent"). Tenant
shall pay to Landlord any sales, use or other tax (excepting income tax) that
may be levied upon this Lease or the Rent payable by Tenant, notwithstanding the
fact that a statute, ordinance or enactment imposing the same may endeavor to
impose such tax upon Landlord. All Rent shall be paid without demand, notice,
reduction, setoff or any defense, and, if not paid when due, shall bear interest
at the Default Rate from the date due until paid. In addition, Tenant shall pay
to Landlord all reasonable costs of collection of the sums due hereunder,
including reasonable attorneys' fees. In the event the Commencement Date occurs
on other than the first day of a calendar month or the Lease Term terminates on
other than the last day of a calendar month, then the Rent allocable to such
month or months shall be prorated.
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3.6 At any time after the second Lease Year, in the event (a) the number
of Tenant's employees working at the Leased Premises falls below three hundred
(300) (each a "Reduction Event"), (b) a tenant of the Retail Space experiences a
reduction in gross revenues of fifty percent (50%) or more following the
occurrence of a Reduction Event (each a "Defaulting Retail Tenant"), (c) the
Defaulting Retail Tenant vacates its Retail Space (each "Abandoned
Retail Space") prior to the expiration of the term of its Additional Lease and
quits paying rent thereunder, and (d) during the six (6) month period commencing
on the date that the Defaulting Retail Tenant vacates the Abandoned Retail
Space, Landlord has not relet the Abandoned Retail Space, then, Tenant shall pay
to Landlord as Additional Rent hereunder an amount equal to the rent payable
under the Additional Lease for the Abandoned Retail Space at the times and rates
set forth in the Additional Lease for the Abandoned Retail Space, commencing six
(6) months after the date the Abandoned Retail Space is vacated and the tenant
thereof quits paying rent and continuing thereafter until the earlier to occur
of (i) twelve (12) months commencing on the date that the Defaulting Retail
Tenant vacates the Abandoned Retail Space and the tenant thereof quits paying
rent, or (ii) Landlord's entering into a lease for the Abandoned Retail Space
(the "Payment Period"). Landlord shall use reasonable good faith efforts to
enter into a lease with acceptable tenants for any such Abandoned Retail Space.
Landlord shall not be obligated to relet the Abandoned Retail Space unless such
reletting is upon economic terms comparable to those set forth in the Additional
Lease for such Abandoned Retail Space, taking into account customary start-up
expenses incurred by landlords in connection with the execution of new leases
(the "Reletting Terms"). Notwithstanding the foregoing and in addition to any
other amount owed by Tenant to Landlord pursuant to this Section 3.6, if
Landlord enters into a lease for Abandoned Retail Space pursuant to terms that
are inferior to the Reletting Terms, Tenant shall pay to Landlord during the
Payment Period the amount necessary to ensure that Landlord receives the amount
that Landlord would have received during the Payment Period had Landlord entered
into a lease for such Abandoned Retail Space upon terms comparable to the
Reletting Terms.
ARTICLE IV
RENOVATION OF THE SHELL OF THE BUILDING BY LANDLORD AND
TENANT IMPROVEMENTS TO THE LEASED PREMISES BY TENANT
4.1 Landlord agrees to furnish Tenant with plans and specifications for
the renovation of the shell of the Building and interior Common Areas thereof
("Building Plans") on or before April 15, 1997. Within ten (10) Business Days of
Tenant's receipt of the Building Plans, Tenant shall notify Landlord in writing
of Tenant's approval of the Building Plans or any suggested revisions to be
incorporated in the Building Plans ("Tenant's Plan Revisions"). Landlord shall
incorporate all of Tenant's Plan
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Revisions into the Building Plans as long as such Tenant's Plan Revisions are in
compliance with (a) the Budget and (b) all applicable Laws. Tenant's failure to
respond to Landlord within said ten (10) Business Days shall constitute Tenant's
written approval of the Building Plans.
4.2 Landlord and Tenant hereby agree that Tenant shall have the right to
(a) replace carpets, install Tenant's HVAC System, and paint and refinish the
interior of the Building in a manner that is in keeping with general office
usage without Landlord's prior written consent, and (b) make such other interior
alterations and improvements as Landlord shall approve in writing, which
approval shall not be unreasonably delayed or withheld (the "Tenant Work");
provided that such Tenant Work shall not affect the structural components of the
Building or the Building systems and shall be completed in accordance with all
applicable Laws.
4.3 After receipt and approval of the Building Plans as revised by
Tenant's Plan Revisions, Landlord will cause the shell of the Building together
with the interior Common Areas thereof to be renovated in accordance therewith.
Tenant and its employees, agents, representatives and contractors shall be
granted access to the Building and the Leased Premises for the purpose of
performing the Tenant Work. The shell of the Building together with the interior
Common Areas thereof shall be deemed to be completed in accordance with the
Building Plans as revised by Tenant's Plan Revisions upon the issuance by the
Contractor and the Architect of a certificate of substantial completion in
accordance with the AIA form G704 (the "Shell Completion Date"). At any time
after the Shell Completion Date, Tenant shall have the right to inspect the
shell of the Building together with the interior common areas thereof and
deliver to Landlord a punchlist of items that Tenant believes fail to comply
with the Building Plans as revised by Tenant's Plan Revisions ("Tenant's
Punchlist"). In the event Landlord disagrees with any items on Tenant's
Punchlist, the Contractor and Architect shall review such disputed items and
jointly issue a revised punchlist containing those items that the Contractor and
Architect determine fail to comply with the Building Plans as revised by the
Tenant's Plan Revisions (the "Revised Punchlist"), which Revised Punchlist shall
be binding on Landlord and Tenant. Landlord shall make the repairs and
renovations required by the Revised Punchlist on or before the Commencement
Date. In the event Landlord fails to make all of the repairs and renovations
required by the Revised Punchlist by the Commencement Date and Tenant gives
Landlord written notice and same and Landlord fails to make such repairs and
renovations as required by the Revised Punchlist within thirty (30) days of
Landlord's receipt of such notice, then Tenant shall have the right to correct
and repair such items and Landlord shall reimburse Tenant for such work within
thirty (30) days of Tenant's written demand for same from Landlord.
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4.4 Landlord shall pay to Tenant Two Million Six Hundred Fifty Thousand and
No/100 Dollars ($2,650,000.00) (the "Tenant Work Fund") to apply toward
completion of the construction of the Tenant Work. Whenever Tenant desires to
request a withdrawal from the Tenant Work Fund, the chief financial officer of
Tenant shall deliver to Landlord (a) a written request that Landlord withdraw
from the Tenant Work Fund a stated amount, and (b) invoices for which Tenant is
seeking payment in the amount of such stated amount. Landlord shall disburse
funds from the Tenant Work Fund within ten (10) Business Days of Tenant's
submission of a request for withdrawal as described in this Section 4.4. Any
costs incurred to complete the Tenant Work in excess of the Tenant Work Fund
shall be paid solely by Tenant and Landlord shall have no responsibility for any
such costs. At the end of the first Lease Year, Tenant may withdraw the balance
of the Tenant Work Fund and at that time Tenant must certify to Landlord that
such Tenant Work Fund will be used to fund Tenant Work or will be returned to
Landlord to be applied as a prepayment to the Loan on or before the end of the
second Lease Year. Landlord agrees to prepay the Loan with any such funds
promptly upon Landlord's receipt of same.
4.5 Tenant has advised Landlord that as part of the Tenant Work, Tenant
intends to construct between one or more floors in the Office Space staircase(s)
connecting the floor(s) in the Office Space (the "Stairs"). At the expiration or
earlier termination of the Lease Term, Landlord shall have the right, at
Tenant's sole expense, to remove the Stairs and return the Leased Premises to
the condition as it would have existed had the Stairs not been installed as part
of the Tenant Work, or to require Tenant to do the same upon demand by Landlord.
ARTICLE V
BUILDING SERVICES
5.1 Provided an Event of Default has not occurred or has occurred but is
not continuing hereunder, Landlord shall furnish to Tenant, except as noted
below, the following building services to the extent reasonably necessary for
Tenant's comfortable use and occupancy of the Leased Premises for general office
use or as may be required by Law or directed by governmental authority:
(a) Heating, ventilation and air-conditioning twenty four (24) hours a
day, seven (7) days a week, provided that such service shall not be
provided for the twenty four (24) hours constituting New Years Day,
Memorial Day, the Fourth of July, Labor Day, Thanksgiving Day, the Friday
immediately following Thanksgiving Day, Christmas Eve and Christmas Day or
for any other time period requested in writing by Tenant as long as such
other time period does not result in such services not being provided
during the Minimum Usage Hours.
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(b) Electric service in an amount at least equal to the Permitted
Capacity.
(c) Water and sewer.
(d) Elevator service.
(e) Cleaning and janitorial service on each Business Day.
(f) Washing of windows at intervals reasonably established by
Landlord, but not less than two (2) times per year.
(g) Replacement of all lamps, bulbs, starters and ballasts as required
from time to time as a result of normal usage, within two (2) days notice
from Tenant.
(h) Cleaning and maintenance of the Common Areas, including the
removal of rubbish and snow.
(i) Repair and maintenance to the extent specified elsewhere in this
Lease.
5.2 If Tenant requests any other building services in addition to those
identified above or any of the above building services in frequency, scope,
quality or quantity substantially greater than those that are required by other
tenants in the Building for general office use, the Landlord shall use
reasonable efforts to attempt to furnish Tenant with such additional building
services. In the event Landlord is able to and does furnish additional building
services, the direct cost thereof shall be determined by Landlord, exercising
its reasonable business judgment, and shall be borne by Tenant, who shall
reimburse Landlord monthly for the same as Additional Rent at the same time Base
Rent is due.
5.3 Without Landlord's prior written consent, Tenant's use of electric
current in the Leased Premises shall not exceed the capacity of the feeders to
the Building and the risers and wiring installations in existence on the
Effective Date (the "Permitted Capacity"). If Landlord determines that Tenant's
electrical usage exceeds the Permitted Capacity or otherwise exceeds the
designed load capacity of the Building's electrical system or is in any way
incompatible therewith, then Landlord shall have the right, as a condition to
granting its consent, to make such modifications to the electrical system or
other parts of the Building or Leased Premises, or to require Tenant to make
such modifications to the equipment to be installed or connected, as Landlord
considers to be reasonably necessary. The cost of any such modifications shall
be borne by Tenant, who shall reimburse Landlord for the same (or any portion
thereof paid by Landlord) within thirty (30) days after
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receipt of a written demand by Landlord, provided that Landlord first obtains
Tenant's approval for such expenditures.
5.4 Tenant understands, acknowledges and agrees that any one or more of the
building services identified in this Article V may be interrupted by reason of
accident, emergency or other causes beyond Landlord's control, or may be
discontinued or diminished temporarily by Landlord or other persons to
effectuate repairs and/or alterations thereto, and that any such interruption
shall not be deemed an eviction or disturbance of Tenant's right to possession,
occupancy and use of the Leased Premises otherwise, or relieve Tenant from the
obligation to perform its covenants under this Lease. Landlord agrees to provide
Tenant with at least 24 hours written notice of any anticipated interruptions in
the services identified in Section 5.1 hereof. Notwithstanding the foregoing
provisions of this Section 5.4, any interruption of electrical current to
effectuate anticipated REPAIRS AND/OR ALTERATIONS described in this Section 5.4
(but not matters of an emergency nature) shall only occur between the hours of
7:00 p.m. and 9:00 a.m. Monday night through Saturday morning and between the
hours of 1:00 p.m. and 9:00 a.m. Saturday afternoon through Monday morning.
ARTICLE VI
MAINTENANCE AND REPAIRS
6.1 Except as otherwise provided in this Lease, Landlord shall not be
required to make any improvements to or repairs of any kind or character in the
Building or Common Areas during the Lease Term, except that Landlord shall keep
and maintain in good and clean order, condition and state of repair (a) the
structural portions of the Building (including, without limitation, the roof,
walls, floors and other structural components of the Building), (b) the
plumbing, heating, air conditioning and electrical systems servicing the entire
Building and (c) the Common Area facilities provided by Landlord under the
provisions hereof, including without limitation the removal of snow and ice
therefrom in a manner that is reasonable under the circumstances; provided,
however, Landlord's obligation to make such repairs shall not relieve Tenant of
the obligation to pay all sums that become due under this Lease except as
provided herein. In amplification of the foregoing and not as a limitation
thereto, Landlord shall make all repairs and replacements, whether foreseen or
unforeseen, ordinary or extraordinary, and do such other things as may be
required to maintain the Building, mechanical systems and Common Areas in the
condition required above in this Section 6.1. Tenant shall reimburse Landlord
within thirty (30) days after receipt of a written demand for payment for the
caused by the deliberate act or negligent act of Tenant or its employees, agents
or invitees not covered by insurance. In the event Landlord fails
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to comply with the requirements of this Section 6.1, Tenant, after thirty (30)
days prior written notice to Landlord of its failure to comply with this Section
6.1 or such longer time as is required to complete such compliance if such
compliance cannot with diligence be completed within such thirty (30) day period
(as long as Landlord is proceeding promptly to complete such compliance and
thereafter shall prosecute the completion of such compliance with diligence and
continuity), may complete such compliance and the cost thereof, plus fifteen
percent (15%) of said costs to cover overhead with interest at the Default Rate,
shall be payable to Tenant within thirty (30) days after receipt of a written
demand for payment.
6.2 Tenant shall, at its expense, keep in good order, condition and state
of repair all portions of the Leased Premises with the exception of those to be
maintained and/or repaired by Landlord under Section 4.3 or Section 6.1 hereof.
In the event Tenant fails to comply with the requirements of this Section 6.2,
Landlord, after thirty (30) days prior written notice to Tenant of its failure
to comply with this Section 6.2 or such longer time as is required to complete
such compliance if such compliance cannot with diligence be completed within
such thirty (30) day period (as long as Tenant is proceeding promptly to
complete such compliance and thereafter shall prosecute the completion of such
compliance with diligence and continuity), may complete such compliance and the
cost thereof, plus fifteen percent (15%) of said costs to cover overhead with
interest at the Default Rate, shall be payable to Landlord as Additional Rent
within thirty (30) days after receipt of a written demand for payment.
6.3 Tenant shall, at its own cost and expense, repair or replace any
damage or injury done to the Leased Premises or the Building, caused by Tenant
or Tenant's agents, employees, invitees, movers or visitors; provided, however,
if Tenant fails to make such repairs or replacements promptly, Landlord may, at
its option after thirty (30) days prior written notice to Tenant of its failure
to comply with this Section 6.3 or such longer time as is required to complete
such compliance if such compliance cannot with diligence be completed within
such thirty (30) day period (as long as Tenant is proceeding promptly to
complete such compliance and thereafter shall prosecute the completion of such
compliance with diligence and continuity) or without such notice for matters of
an emergency nature, may complete such compliance and the cost thereof, plus
fifteen percent (15%) of said costs to cover overhead with interest at the
Default Rate, shall be payable to Landlord as Additional Rent within thirty (30)
days after receipt of a written demand for payment. In no event shall Tenant be
obligated to pay for cost and expense, repair or replace any damage or injury
done to the Leased Premises or the Building caused by Landlord, Landlord's
agents, employees, invitees, movers or visitors, or any other tenant of the
Building or such tenant's agents, employees, invitees, movers or visitors.
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6.4 Tenant shall maintain all fixtures, furnishings and equipment located
in or serving the Leased Premises in clean, safe and sanitary condition, shall
take good care thereof and make all required repairs and replacements thereto.
Tenant shall not commit or allow any waste or damage to be committed on any
portion of the Leased Premises, and at the termination of this Lease, Tenant
shall deliver possession of the Leased Premises to Landlord in as good
condition as at date of possession by Tenant, or as the same may have been
improved during the Lease Term, ordinary wear and tear or damage resulting from
fire or other unavoidable casualty excepted.
6.5 Notwithstanding any other provision of this Lease to the contrary,
Tenant, at Tenant's expense, shall cause the Leased Premises to be in compliance
with all applicable Laws in effect on the Commencement Date. During the Lease
Term if Tenant shall make any Alteration to the Leased Premises and the making
of such Alteration necessitates that additional work be completed in order for
the Leased Premises to comply with all applicable Laws (the "Compliance Work"),
Tenant, at Tenant's expense, shall cause the Compliance Work to be complete.
Except as otherwise set forth in this Section 6.5, Landlord, at Landlord's
expense, shall cause the Building, including without limitation the Leased
Premises and the Common Areas, to be in compliance with all applicable Laws in
effect during the Lease Term.
ARTICLE VII
ALTERATIONS
7.1 Tenant will not make or permit anyone to make any alterations,
additions, improvements or other changes (collectively the "Alterations"),
structural or otherwise, in or to the Leased Premises without the prior written
consent of Landlord, except as provided in Section 7.2 hereof, which consent may
be withheld or granted in Landlord's sole and absolute discretion. Any
Alterations made by Tenant shall be made: (a) in a good, workmanlike, first-
class and prompt manner; (b) by a contractor approved in writing by Landlord and
in accordance with plans and specifications approved in writing by Landlord,
which approvals shall not be unreasonably withheld or delayed; (c) in accordance
with all applicable legal requirements and the requirements of any insurance
company insuring the Leased Premises or portion thereof; and (d) after Tenant
has obtained public liability and workmen's compensation insurance policies
approved in writing by Landlord, which approval shall not be unreasonably
withheld or delayed, which policies shall cover every person who will perform
any work with respect to such Alterations.
7.2 Notwithstanding the foregoing, Tenant shall have the right to
make Alterations without the Landlord's consent, provided such Alterations (a)
are made to the interior tenant space of the Building, (b) do not adversely
affect the structural integrity or
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exterior of the Building, (c) do not affect the Common Areas of the Building,
including but not limited to the elevators and lobby, and (d) do not adversely
affect the electrical, heating or plumbing systems servicing the Building. In
the event Tenant makes any Alterations estimated to cost at least Ten Thousand
and No/100 Dollars ($10,000.00), Tenant shall provide written notice of such
Alterations to Landlord prior to commencing the installation of such
Alterations. Additionally Tenant shall comply with the provisions of Section
7.1(a) and Section 7.1(c) hereof.
7.3 If any Alterations other than those permitted by Section 7.2
hereof are made without the prior written consent or approval of Landlord,
Landlord shall have the right at Tenant's expense to remove and correct such
Alterations and restore the Leased Premises to its condition immediately prior
thereto, or to require Tenant to do the same. All Alterations to the Leased
Premises made by either party shall immediately become the property of Landlord
and shall remain upon and be surrendered with the Leased Premises as a part
thereof at the expiration or earlier termination of the Lease Term; provided,
however, that if an Event of Default has not occurred or has occurred but is not
continuing hereunder, then Tenant shall have the right to remove, prior to the
expiration or earlier termination of the Lease Term, all MOVABLE furniture,
furnishings, equipment, fixtures and Alterations installed in the Leased
Premises solely at the expense of Tenant. As consideration for Landlord not
requiring that Tenant repair any damage to the Leased Premises caused by such
removal, whether or not such removal actually occurs, Tenant shall pay to
Landlord Seven Hundred Eighty Five Thousand and No/100 Dollars ($785,000.00) on
or before the expiration of the initial ten (10) year Lease Term; provided,
however that if Tenant elects to extend the Lease Term in accordance with
Section 30.1 hereof, Tenant shall not be obligated to pay to Landlord Seven
Hundred Eighty Five Thousand and No/100 Dollars ($785,000.00) on or before the
expiration of the initial ten (10) year Lease Term, but Tenant shall then be
obligated to pay to Landlord Six Hundred Fifteen Thousand and No/100 Dollars
($615,000.00) on or before the expiration of the five (5) year Renewal Term.
Landlord and Tenant acknowledge and agree that the payment required by the
preceding sentence shall be accomplished by an offset of the amount of such
required payment against the same amount of principal owed by Landlord to Tenant
in connection with the Loan, which offset shall be effected on the date such
required payment is due and payable. If any MOVABLE furniture, furnishings,
equipment, fixtures and Alterations installed in the Leased Premises solely at
the expense of Tenant and that Landlord is permitted to remove pursuant to the
first sentence of this Section 7.3 are not removed by Tenant prior to the
expiration or earlier termination of the Lease Term, Landlord shall have the
right at Tenant's expense to remove from the Leased Premises such furniture,
furnishings, equipment, fixtures and any Alterations that Landlord designates in
writing for removal and to repair any damage to the Leased Premises caused by
such removal or to require Tenant to do
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the same and Tenant shall pay to Landlord the cost of such removal and repair.
In such event, such movables will automatically become the property of Landlord
and may be disposed of by Landlord in its sole discretion, without any right of
reimbursement therefor to Tenant.
7.4 If any mechanics' or materialmen's lien (or a petition to
establish such lien) is filed against the Leased Premises or any equipment
within the Leased Premises for work claimed to have been done for, or materials
claimed to have been furnished to, the Leased Premises pursuant to Section 7.1,
Section 7.2 or Section 7.3 hereof, Tenant shall either discharge the lien within
ten (10) days thereafter, at Tenant's sole cost and expense, by the payment
thereof or file a bond acceptable to Landlord transferring the lien to the bond.
ARTICLE VIII
SIGNS AND FURNISHINGS
8.1 No sign, advertisement or notice referring to Tenant shall be
inscribed, painted, affixed or otherwise displayed on any part of the exterior
of the Building (including Tenant's windows and doors) that violates (a) any
applicable Law, or (b) the Easement Agreement. Tenant shall have the right to
install at its own expense any sign on the Building, provided that such sign and
its location (i) otherwise comply with the terms of this Section 8.1 and (ii)
have been approved by Landlord, such approval to not be unreasonably delayed or
withheld. If any exterior sign, advertisement or notice that does not conform to
the requirements set forth in the preceding sentence is exhibited or installed
by Tenant, Landlord shall have the right to remove the same at Tenant's expense.
All of Tenant's signs shall be: (a) installed after Tenant has obtained, at
Tenant's sole cost and expense, all permits, approvals and licenses required
therefor, and delivered copies thereof to Landlord, and (b) at Tenant's sole
cost and expense (unless paid from the Tenant Work Fund), installed, maintained,
repaired and replaced in a first-class manner. Landlord reserves the right to
affix, install and display signs, advertisements and notices on any part of the
exterior or interior of the Leased Premises to sell or lease the Leased Premises
during the last twelve (12) months of the Lease Term.
ARTICLE IX
INSPECTION BY LANDLORD
9.1 Landlord or its agents or representatives shall have the right to
enter into and upon any part of the Leased Premises at all reasonable hours to
inspect the same as Landlord may deem necessary or desirable upon not less than
twenty four (24) hours prior notice of such inspection or without such notice
for matters of an
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emergency nature. Landlord further reserves the right to show the Leased
Premises to prospective tenants or brokers during the last twelve (12) months of
the Lease Term and to prospective purchasers or mortgagees at all reasonable
times upon not less than twenty four (24) hours prior notice of such showing.
Notwithstanding the foregoing, no inspection or showing by Landlord pursuant to
this Section 9.1 shall materially inconvenience Tenant's use and occupancy of
the Leased Premises, except as may be necessary in connection with matters of an
emergency nature. Tenant shall not be entitled to any abatement or reduction of
Rent by reason of the exercise of the foregoing rights on the part of Landlord.
ARTICLE X
COMMON AREAS
10.1 For as long as an Event of Default has not occurred or has
occurred but is not continuing, Landlord grants Tenant a non-exclusive license
to use and occupy in common with others so entitled the Common Areas.
ARTICLE XI
PARKING
11.1 Upon completion of the parking facility to be located on the
Land pursuant to the terms of the Development Agreement (the "Parking
Facility"), Tenant shall have the non-exclusive right to use the Parking
Facility at no cost to Tenant except as otherwise provided herein. During
construction of the Parking Facility, temporary parking for the Tenant and its
employees, agents, customers and invitees shall be provided pursuant to the
terms of that certain letter agreement, a copy of which is attached hereto as
Exhibit G and incorporated herein by this reference (the "Temporary Parking
Agreement"). Landlord and Tenant hereby approve the Temporary Parking Agreement
and agree that the Tenant and its employees, agents, customers and invitees
shall have the benefit of the Temporary Parking Agreement. The Parking Facility
shall have approximately 1,178 parking spaces. In addition and at no cost to
Tenant except as otherwise provided herein, Tenant shall have the right to use
all of the parking spaces in the basement of the Building and all of the visitor
spaces on the east side of the Building, subject to the terms and conditions of
the Easement Agreement. Tenant shall have the right upon written demand by
Tenant to Landlord to cause Landlord to exercise its rights under the Easement
Agreement to construct Additional Level(s) (as defined in the Easement
Agreement); provided that Tenant shall pay for all costs and expenses incurred
in connection with such construction and Tenant shall comply in all respects
with the terms and provisions of the Easement Agreement regarding the
construction and use of the Additional Levels. Tenant shall pay Landlord a
reasonable development fee in an amount to be determined by the
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Landlord and Tenant at the time of the construction of each Additional Level as
compensation to Landlord for its supervision and coordination of the
construction of each Additional Level.
ARTICLE XII
PERMITTED USES
12.1 Tenant shall use and occupy the Leased Premises for general
office space and shall not use the Leased Premises for any other purpose except
with the prior written consent of Landlord; provided, however Tenant shall not
occupy or use, or permit any portion of the Leased Premises to be occupied or
used, for any business or purpose that is unlawful or deemed to be extra-
hazardous on account of fire, or permit anything to be done that would in any
way increase the rate of fire or liability or any other insurance coverage on
the Building and/or its contents, cause the load upon any floor of the Building
to exceed the load for which the floor was designed or the amount permitted by
Law, or use electrical service in the Leased Premises in an amount exceeding the
Permitted Capacity. Tenant shall further conduct its business and control its
agents, employees, invitees and visitors in such a manner as not to create any
nuisance, or interfere with, annoy or disturb any other tenant of the Building.
12.2 Landlord shall not use or permit the use of the Remaining Space
or the Retail Space for any purposes other than general office and retail
purposes.
ARTICLE XIII
LAWS
13.1 Subject to the terms of Section 6.5 hereof, Tenant shall comply
with all applicable Laws and the Easement Agreement relating to the use,
condition or occupancy of the Leased Premises and all Common Areas.
ARTICLE XIV
PEACEFUL ENJOYMENT
14.1 Landlord covenants that Tenant shall have the right to
peacefully and quietly occupy, use and enjoy the Leased Premises during the
Lease Term, subject to the other terms hereof and the exceptions to Landlord's
title set forth on Exhibit H attached hereto and incorporated herein by this
reference, provided Tenant pays the Rent and other sums herein required to be
paid by Tenant and performs all of Tenant's covenants and agreements herein
contained.
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ARTICLE XV
LIMITATION OF LANDLORD'S LIABILITY
15.1 Landlord and its employees and agents shall not be liable to
Tenant, Tenant's employees, agents, assignees, subtenants, licensees,
concessionaires or to any other person or entity for any damage (including
indirect and consequential damage), injury, loss, compensation or claim,
including but not limited to claims for the interruption of or loss to Tenant's
business, based on, arising out of or resulting from any cause whatsoever
(except as otherwise provided in this Section 15.1), including but not limited
to the following: repairs to any portion of the Leased Premises that are the
obligation of Tenant; interruption in the use of the Leased Premises or any
equipment therein; any accident or damage resulting from the use or operation
(by Landlord, Tenant or any other person or entity) of the heating, cooling,
electrical, sewerage or plumbing equipment or apparatus; the termination of this
Lease by reason of the destruction of the Leased Premises; any fire, robbery,
theft, vandalism, mysterious disappearance and/or any other casualty; the
actions of any other tenants of the Leased Premises or of any other person or
entity; and any leakage in any part or portion of the Leased Premises, or from
water, rain, ice or snow that may leak into, or flow from, any part of the
Leased Premises, or from drains, pipes or plumbing fixtures in the Leased
Premises. It further is understood and agreed that any failure or inability to
furnish any services required by this Lease to be furnished by Landlord shall
not be considered an eviction, actual or constructive, of Tenant from the Leased
Premises and shall not entitle Tenant to terminate this Lease or to an abatement
of any Rent payable hereunder. Any goods, property or personal effects stored or
placed by Tenant, its employees or agents in or about the Leased Premises shall
be at the sole risk of Tenant, and Landlord shall not in any manner be held
responsible therefor. Notwithstanding the foregoing provisions of this Section
15.1, Landlord shall not be released from liability to Tenant for any physical
injury to any natural person or damage to personal property caused by the
negligence or willful misconduct of Landlord or its employees to the extent such
injury or damage is not covered by insurance (a) carried by Landlord or such
person, or (b) required by this Lease to be carried by Landlord.
15.2 Tenant shall indemnify and hold Landlord harmless from and
against all costs, damages, claims, liabilities and expenses (including
reasonable attorneys' fees) suffered by or claimed against Landlord, directly or
indirectly, based on, arising out of or resulting from (a) use and occupancy of
the Leased Premises, (b) repair or maintenance of the Leased Premises that are
the obligations of Tenant, (c) any act or omission by Tenant or Tenant's
employees, agents, assignees, subtenants, contractors, licensees or invitees, or
(d) the occurrence and/or continuation of any Event of Default.
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15.3 In the event that at any time any landlord hereunder shall sell
or transfer the Leased Premises or the entirety of such landlord's interest
therein, said landlord shall not be liable to Tenant for any obligations or
liabilities based on or arising out of events or conditions occurring after the
date of such sale or transfer. Within five (5) days after the written request of
any purchaser or transferee of the Leased Premises of any landlord's
interest therein, Tenant shall attorn to such purchaser or transferee.
15.4 In the event that at any time during the Lease Term Tenant shall
have a claim against Landlord, Tenant shall not have the right to set off or
deduct the amount owed or allegedly owed to Tenant from any Rent or other sums
payable to Landlord except with respect to claims made by Tenant concerning
Landlord's failure to make timely repairs to the Leased Premises' roof and/or
structural systems, it being understood that Tenant's sole remedy for recovering
upon a claim not concerning the roof or structural systems shall be to institute
an independent action against Landlord.
15.5 Tenant agrees that in the event Tenant or any of Tenant's
employees, agents, subtenants, licensees or concessionaires is awarded a money
judgment against Landlord, the sole recourse for satisfaction of such judgment
shall be limited to execution against the estate and interest of Landlord in (a)
the Land, the Building and all other improvements located on the Land
(collectively the "Property"), (b) any insurance proceeds and/or condemnation
awards paid or payable to Landlord in connection with the Property, and (c) any
rents, profits, proceeds, revenues, income, rights or other benefits arising
from any lease, license or other agreement pertaining to all or any part of the
Property, including without limitation any Additional Leases. In no event shall
any other assets of Landlord, or of any officer, director or employee of
Landlord or of any other person or entity associated with Landlord be available
to satisfy or subject to such judgment, nor shall any officer, director or
employee of Landlord or any other person or entity be held to have any personal
liability for satisfaction of any claims or judgments against Landlord and/or
any officer, director or employee of Landlord in such person's capacity as an
officer, director or employee of Landlord.
ARTICLE XVI
DAMAGE OR DESTRUCTION
16.1 If the Leased Premises are totally or partially damaged or
destroyed from any cause, thereby rendering the Leased Premises totally or
partially inaccessible or unusable, Landlord shall diligently restore and repair
the Leased Premises to substantially the same condition it was in prior to such
damage; provided however, that if in the judgment of an independent consultant
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mutually selected by Landlord and Tenant such repairs and restoration cannot be
completed within one (1) year after the occurrence of such damage or destruction
(taking into account the time needed for effecting a satisfactory settlement
with any insurance company involved, removal of debris, preparation of plans and
issuance of all required governmental permits), or if such damage or destruction
occurred within twelve (12) months prior to the expiration of the Lease Term,
then either Landlord or Tenant shall have the right to terminate this Lease by
giving written notice of termination to the other party hereto within forty five
(45) days after the occurrence of such damage or destruction. If this Lease is
terminated in accordance with the above procedure, then Base Rent and Additional
Rent payable hereunder shall be apportioned and paid to the date of said damage
or destruction. If this Lease is not terminated as a result of such damage or
destruction, then until such repair and restoration of the Leased Premises are
substantially complete, the Base Rent and Additional Rent shall be abated as to
that portion of the Leased Premises that is unsuitable for occupancy by Tenant
until such repair or restoration is completed. If this Lease is not terminated
as a result of such damage or destruction, then except as otherwise specified in
Section 16.2 hereof, Landlord shall bear the cost and expenses of such repair
and restoration of the Leased Premises; provided, however, that if such damage
or destruction was caused by the act or omission of Tenant, or any of its
employees, agents, invitees, assignees, subtenants, licensees or
concessionaires, then Tenant shall pay to Landlord the amount by which such
costs and expenses exceed the insurance proceeds, if any, actually received by
Landlord on account of such damage or destruction. Notwithstanding anything
above to the contrary, Landlord shall have the right to terminate this Lease in
the event (a) the Tenant as lender fails or refuses to make such insurance
proceeds available for such repair and restoration, or (b) zoning or other
applicable Laws do not permit such repair and restoration.
16.2 Notwithstanding anything above to the contrary, if Landlord
repairs and restores the Leased Premises as provided in Section 16.1 hereof,
Landlord shall not be required to repair, restore or replace any decorations or
Alterations to the Leased Premises previously made by Tenant unless adequate
insurance proceeds are available to pay the full costs thereof. It shall be
Tenant's sole responsibility to repair, restore or replace any trade fixtures,
furnishings, equipment or personal property belonging to Tenant to substantially
their same condition prior to such damage or destruction; provided, however,
Tenant shall not be obligated to restore or replace such items.
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ARTICLE XVII
CONDEMNATION
17.1 If the whole or a substantial part (as hereinafter defined) of
the Leased Premises, or the use or occupancy of the Leased Premises, shall be
taken or condemned by any governmental or quasi-governmental authority for any
public or quasi-public use or purpose (including a sale thereof under threat of
such a taking), then either Landlord or Tenant shall have the right to terminate
this Lease by giving written notice of termination to the other party hereto on
or before the date title thereto vests in such governmental or quasi-
governmental authority, and all Rent payable hereunder shall be apportioned as
of such date. If less than a substantial part of the Leased Premises, or if the
use or occupancy of less than a substantial part of the Leased Premises, is
taken or condemned by any government or quasi-governmental authority for any
public or quasi-public use or purpose (including a sale thereof under threat of
such a taking) then this Lease shall continue in full force and effect as to the
portion of the Leased Premises not so taken or condemned, except that as of the
date title vests in the governmental or quasi-governmental authority, Tenant
shall not be required to pay Base Rent and Additional Rent with respect to the
portion of the Leased Premises taken or condemned. For purposes of this Section
17.1, a substantial part of the Leased Premises shall be considered to have been
taken if (a) more than thirty percent (30%) of the Rentable Square Feet of the
Leased Premises is rendered unusable as a result of such condemnation, or (b)
fewer than seven hundred fifty (750) parking spaces are available in the Parking
Facility as a result of such condemnation.
17.2 All awards, damages and other compensation paid by the
condemning authority on account of such taking or condemnation (or sale under
threat of such a taking) shall belong to Landlord, and Tenant hereby assigns to
Landlord all rights to such awards, damages and compensation. Tenant agrees not
to make any claim against the Landlord or the condemning authority for any
portion of such award or compensation attributable to damages to the Leased
Premises' leasehold improvements, except for expenses of leasehold improvements
paid for by Tenant or severance damages. Nothing contained herein, however,
shall prevent Tenant from pursuing a separate claim against the condemning
authority for relocation expenses, the value of furnishings, equipment and trade
fixtures installed in the Leased Premises at Tenant's expense and that Tenant is
entitled pursuant to this Lease to remove at the expiration or earlier
termination of the Lease Term, the value of the unexpired Lease Term, and loss
of profits, provided that such claim shall in no way diminish the award or
compensation payable to or recoverable by Landlord in connection with such
taking or condemnation.
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ARTICLE XVIII
EVENT OF DEFAULT
18.1 The occurrence of any of the following shall constitute a default by
Tenant under this Lease:
(a) If Tenant shall fail to pay any payment of Base Rent when due.
(b) If Tenant shall fail to pay any payment of Additional Rent when
due, or shall fail to make when due any other payment required by this
Lease.
(c) If Tenant shall violate or fail to perform any term, condition,
covenant or agreement to be performed or observed by Tenant under this
Lease other than as otherwise set forth in this Section 18.1.
(d) An Event of Bankruptcy occurs as specified in Article XIX hereof
with respect to Tenant.
(e) A dissolution of Tenant or liquidation of substantially all of
Tenant's assets occurs.
The occurrence of any default described in Section 18.1(d) or Section
18.1(e) shall be an "Event of Default." The occurrence of any default described
in Section 18.1(a) or Section 18.1(b) shall be an "Event of Default" following
the passage of ten (10) days following Tenant's receipt of written notice from
Landlord of the occurrence of said default, provided such default is not cured
during such cure period. The occurrence of any other default described in this
Section 18.1 not specifically set forth in this paragraph shall be an "Event of
Default" following the passage of thirty (30) days following Tenant's receipt of
written notice from Landlord of the occurrence of said default, provided such
default is not cured during such cure period (provided that in the case of any
default described in Section 18.1 not specifically set forth in this paragraph
that cannot be cured by the payment of money and cannot with diligence be cured
within such thirty (30) day period, if Tenant shall proceed promptly to cure the
same and thereafter shall prosecute the curing of such default with diligence
and continuity, then the time within which such default may be cured shall be
extended for up to an additional sixty (60) days (for a total of ninety (90)
days)).
18.2 If any Event of Default shall occur hereunder, Landlord shall have the
right, at its sole option, to terminate this Lease. In addition, with or without
terminating this Lease, Landlord may re-enter, terminate Tenant's right of
possession as to all or any part of the Leased Premises and take possession of
the Leased Premises and the provisions of this Article XVIII shall operate as
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a notice to quit, any other notice to quit or of Landlord's intention to re-
enter the Leased Premises being hereby expressly waived. If necessary, Landlord
may proceed to recover possession of the Leased Premises under and by virtue of
the Laws of the jurisdiction in which the Leased Premises are located, or by
such other proceedings, including re-entry and possession, as may be applicable.
If Landlord does not elect to terminate this Lease, Landlord also shall have the
right, at its sole option, at any time following the occurrence and during the
continuation of an Event of Default hereunder to terminate all renewal options
granted to Tenant pursuant to this Lease. If Landlord elects to terminate this
Lease and/or elects to terminate Tenant's right of possession, everything
contained in this Lease on the part of Landlord to be done and performed shall
cease without prejudice, subject, however, to the right of Landlord to recover
from Tenant all Rent and other sums accrued up to the time of termination or
recovery of possession by Landlord, whichever is later. Upon the occurrence and
during the continuation of an Event of Default hereunder, then whether or not
this Lease and/or Tenant's right of possession is terminated by reason of such
Event of Default, Landlord may relet the Leased Premises or any part thereof,
alone or together with other premises, for such term(s) (that may be greater or
less than the period that otherwise would have constituted the balance of the
Lease Term) and on such terms and conditions (that may include concessions or
free rent and alterations of the Leased Premises) as Landlord, in its sole
discretion, may determine, but Landlord shall not be liable for, nor shall
Tenant's obligations hereunder be diminished by reason of, any failure by
Landlord to relet the Leased Premises or any failure by Landlord to collect any
rent due upon such reletting. Upon the occurrence and during the continuation of
an Event of Default, then whether or not this Lease is terminated by reason of
such Event of Default, Tenant nevertheless shall remain liable for any Base
Rent, Additional Rent or damages that may be due or sustained prior to such
Event of Default, all reasonable costs, fees and expenses including, but not
limited to, reasonable attorneys' fees, reasonable brokerage fees, expenses
incurred in placing the Leased Premises in good rentable condition, and
reasonable costs and expenses incurred by Landlord in pursuit of its remedies
hereunder and in renting the Leased Premises to others from time to time. In
addition, Tenant also shall be liable for an amount equal to Base Rent and
Additional Rent that would have become due during the remainder of the Lease
Term, less the amount of rental, if any, that Landlord receives during such
period from others to whom the Leased Premises may be rented (other than any
additional rent received by Landlord as a result of any failure of such other
person to perform any of its obligations to Landlord), which shall be computed
and payable in monthly installments, in advance, on the first day of each
calendar month, following Tenant's Event of Default and continuing until the
date on which the Lease Term would have expired but for Tenant's Event of
Default. Separate suits or actions may be brought to collect any such damages
for any month(s), and such separate suits
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or action shall not in any manner prejudice the right of Landlord to collect any
damages for any subsequent month(s) by similar proceedings, or Landlord may
defer any suits or actions until after the expiration of the Lease Term, in
which event Tenant hereby agrees that such suit or actions shall be deemed not
to have accrued until the expiration of the Lease Term. The provisions contained
in this Section 18.2 shall be in addition to, and shall not prevent the
enforcement of, any claim Landlord may have against Tenant for anticipatory
breach of this Lease.
18.3 All rights and remedies of Landlord set forth in this Lease are in
addition to all other rights and remedies available to Landlord at law or in
equity. All rights and remedies available to Landlord pursuant to this Lease or
at law or in equity are expressly declared to be cumulative. The exercise by
Landlord of any such right or remedy shall not prevent the concurrent or
subsequent exercise of any other right or remedy. No delay or failure by
Landlord to exercise or enforce any of Landlord's rights or remedies or Tenant's
obligations shall constitute a waiver of any such rights, remedies or
obligations. Landlord shall not be deemed to have waived any Event of Default by
Tenant unless such waiver expressly is set forth in a written instrument signed
by Landlord. If Landlord waives in writing any Event of Default by Tenant, such
waiver shall not be construed as a waiver of any covenant, condition or
agreement set forth in this Lease except as to the specific circumstances
described in such written waiver.
18.4 If Landlord shall institute proceedings against Tenant and a
compromise or settlement thereof shall be made, then the same shall not
constitute a waiver of any subsequent Event of Default of a similar nature or of
any covenant, condition or agreement set forth herein, nor of any of Landlord's
rights hereunder. Neither the payment by Tenant of a lesser amount than the
monthly installment of Base Rent, Additional Rent or of any sums due hereunder
nor any endorsement or statement on any check or letter accompanying a check for
payment of Rent or other sums payable hereunder shall be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such Rent or other sums or to pursue
any other remedy available to Landlord. No re-entry by Landlord, and no
acceptance by Landlord of keys from Tenant, shall be considered an acceptance of
a surrender of this Lease.
18.5 If Tenant defaults in the making of any payment to any third party,
then Landlord may, but shall not be required to, make such payment upon not less
than thirty (30) days prior written notice or without such notice for matters of
an emergency nature. Upon the occurrence of an Event of Default, then Landlord
may, but shall not be required to, remedy such Event of Default. The taking of
such action by Landlord shall not be considered as a cure of such Event of
Default by Tenant or prevent Landlord from pursuing any remedy it is otherwise
entitled to in connection with such
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Event of Default. If Landlord elects to make such payment or do such act, then
all costs and expenses incurred by Landlord, plus interest thereon at the
Default Rate, from the date incurred by Landlord to the date of payment thereof
by Tenant, shall constitute Additional Rent due hereunder; provided however,
that nothing contained herein shall be construed to permit Landlord to charge or
receive interest in excess of the Maximum Rate.
18.6 If Tenant fails to make any payment of Base Rent, Additional Rent or
any other sum due hereunder on or before the date such payment is due and
payable (without regard to any grace period specified in Section 18.1 hereof),
then Tenant shall pay to Landlord a late charge of five percent (5%) of the
amount of such payment. In addition, such payment and such late fee shall bear
interest at the Default Rate from the date such payment or late fee,
respectively, became due to the date of payment hereof by Tenant; provided,
however, that nothing contained herein shall be construed as permitting Landlord
to charge or receive interest in excess of the Maximum Rate. Such late charge
and interest shall constitute Additional Rent due hereunder.
18.7 Tenant hereby expressly waives, for itself and all persons claiming
by, through, or under it, any right of redemption or for the restoration of the
operation of this Lease under any present or future Law, including without
limitation any such right that Tenant would otherwise have in case Tenant shall
be dispossessed for any cause, or in case Landlord shall obtain possession of
the Leased Premises as herein provided.
18.8 In the event Landlord fails to comply with any of the requirements of
this Lease, Tenant, after thirty (30) days prior written notice to Landlord of
its failure to comply with such terms of this Lease or such longer time as is
required to complete such compliance if such compliance cannot with diligence be
completed within such thirty (30) day period (as long as Landlord is proceeding
promptly to complete such compliance and thereafter shall prosecute the
completion of such compliance with diligence and continuity), may complete such
compliance and the cost thereof, plus fifteen percent (15%) of said costs to
cover overhead with interest at the Default Rate, shall be payable to Tenant
within thirty (30) days after receipt of a written demand for payment.
ARTICLE XIX
BANKRUPTCY
19.1 The following shall be Events of Bankruptcy under this Lease: (a)
Tenant becoming insolvent, as that term is defined in Title 11 of the United
States Code (the "Bankruptcy Code"), or under the insolvency laws of any state,
district, commonwealth or territory of the United States (the "Insolvency
Laws"); (b) the appointment of a receiver or custodian for any or all of
Tenant's
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property or assets or the institution of a foreclosure action upon any of
Tenant's real or personal property; (c) Tenant's filing or consenting to a
petition under the provisions of the Bankruptcy Code or the Insolvency Laws or
in any bankruptcy, reorganization, composition, extension, arrangement or
insolvency proceeding; (d) the filing of a petition against Tenant as the
subject debtor under the Bankruptcy Code or Insolvency Laws, which is not
consented to by such subject debtor and which either (i) is not dismissed within
sixty (60) days of filing, or (ii) results in the issuance of an order for
relief against the debtor; or (e) Tenant's making or consenting to an assignment
for the benefit of creditors or a common law composition of creditors.
19.2 (a) Upon occurrence of an Event of Bankruptcy, Landlord shall have all
rights and remedies available to Landlord pursuant to Article XVIII hereof;
provided, however, that while a case in which Tenant is the subject debtor
under the Bankruptcy Code is pending, Landlord shall not exercise its
rights and remedies pursuant to Article XVIII hereof so long as both (i)
the Bankruptcy Code prohibits the exercise of such rights and remedies and
(ii) Tenant or its Trustee in Bankruptcy (the "Trustee") is in compliance
with the provisions of Section 19.2(b) and Section 19.2(c) hereof.
(b) In the event Tenant becomes the subject debtor in a case pending
under the Bankruptcy Code, Landlord's right to terminate this Lease
pursuant to Section 19.2(a) hereof shall be subject, to the extent required
by the Bankruptcy Code, to any rights of Trustee to assume or assign this
Lease pursuant to the Bankruptcy Code. Trustee shall not have the right to
assume or assign this Lease unless Trustee promptly (i) cures all Events of
Default under this Lease (ii) compensates Landlord for monetary damages
incurred as a result of such Events of Default, (iii) provides adequate
assurance of future performance (as defined in Section 19.2(c) hereof) on
the part of Tenant as debtor in possession or on the part of the assignee
of Tenant, and (iv) complies with all other requirements of the Bankruptcy
Code. Tenant agrees in advance that this Lease may be terminated by
Landlord in accordance with Section 19.2(a) hereof if the foregoing
criteria for assumption or assignment are not met, or if, after such
assumption or assignment, an Event of Default occurs hereunder.
(c) Landlord and Tenant hereby agree in advance that adequate
assurance of future performance, as used in Section 19.2(b) hereof, shall
mean that all of the following minimum criteria must be met: (i) Tenant's
gross receipts during the thirty (30) day period immediately preceding the
initiation of the case under the Bankruptcy Code must be equal to or
greater than the next monthly installment of Base Rent due under this
Lease; (ii) Both the average and median of Tenant's gross
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receipts (calculated on a monthly basis) during the six (6) month period
immediately preceding the initiation of the case under the Bankruptcy Code
must be equal to or greater than the next monthly installment of Base Rent
due under this Lease; (iii) Tenant must pay its estimated pro rata share of
the cost of all services provided by Landlord (whether directly or through
agents or contractors and whether or not previously included as part of
Base Rent), in advance of the performance or provision of such services;
(iv) Trustee must agree that Tenant's business shall be conducted in a
first class manner, and that no liquidating sales, auctions or other non-
first class business operations shall be conducted on the Leased Premises;
(v) Trustee must agree that the use of the Leased Premises as stated in
this Lease will remain unchanged and that no prohibited use shall be
permitted; (vi) Trustee must agree that the assumption or assignment of
this Lease will not violate or affect the rights of other tenants in the
Leased Premises if any; (vii) Trustee must pay to Landlord at the time the
next monthly installment of Base Rent is due under this Lease, in addition
to such installment of Base Rent, an amount equal to the monthly
installments of Base Rent and Additional Rent due under this Lease for the
next two (2) months thereafter, said amount to be held by Landlord in
escrow (the "Escrow Account") until either Trustee or Tenant defaults in
its payment of Rent or other obligations under this Lease (whereupon
Landlord shall have the right to draw on the Escrow Account) or until the
expiration or earlier termination of the Lease Term (whereupon the funds
shall be returned to Trustee or Tenant); (viii) Tenant or Trustee must
agree to pay to Landlord at any time Landlord is authorized to and does
draw on the Escrow Account the amount necessary to restore the Escrow
Account to the original level required by Section 19.2(c)(vii) hereof; and
(ix) all assurances of future performance specified in the Bankruptcy Code
must be provided.
ARTICLE XX
HOLDING OVER
20.1 Provided Tenant gives written notice to Landlord of Tenant's intent
not to exercise any renewal options provided herein or negotiate a new lease for
the Leased Premises, Tenant shall have the right to hold over for a period not
exceeding one (1) year from the expiration of the Lease Term (the "Holdover
Period"). Said right shall be contingent upon Landlord receiving the aforesaid
written notice six (6) months prior to the expiration of the Lease Term, which
notice shall specify the length of the Holdover Period. If Tenant retains
possession of the Leased Premises or any part thereof after the termination of
this Lease, Tenant shall pay Rent during the Holdover Period commencing upon the
termination of the Lease Term at the then prevailing Market Rate computed on a
daily basis for each day that Tenant remains in possession. Except for
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the adjusted Rent, all other terms and conditions of this Lease shall remain in
full force and effect during the Holdover Period. Upon the expiration of the
Holdover Period specified in Tenant's notice to Landlord, Tenant shall be liable
for and pay to Landlord, all damages, consequential as well as direct, sustained
by reason of Tenant's holding over beyond the Holdover Period, if any.
ARTICLE XXI
CASUALTY AND RENT LOSS INSURANCE
21.1 Landlord shall at all times during the Lease Term carry or cause to be
carried a policy of insurance that insures the Property, including the Leased
Premises, against loss or damage by fire or other casualty (namely, the perils
against which insurance is afforded by a standard "all-risk" and extended
coverage casualty insurance policy) in an amount equal to the full replacement
cost of the Property; provided, however, that Tenant shall insure against, and
Landlord shall not be responsible for and shall not be obligated to insure
against, any loss of or damage to any personal property of Tenant or that Tenant
may have in the Building or the Leased Premises or any trade fixtures installed
by or paid for by Tenant on the Leased Premises or any additional improvements
that Tenant may construct on the Leased Premises, and Landlord shall not be
liable for any loss or damage to such property, regardless of cause, including
the negligence of Landlord and its employees, agents, customers and invitees. If
any Alterations made by Tenant pursuant to Section 7.1 hereof result in an
increase in the premiums charged during the term of this Lease on the casualty
insurance carried by Landlord on the Building, then Landlord shall immediately
notify Tenant in writing, and, upon such notification, the cost of such increase
in insurance premiums shall be borne by Tenant, who shall reimburse Landlord for
the same as Additional Rent after being separately billed therefor. Said
notification shall include a statement from Landlord's insurance carrier
verifying that said increase in premiums is the direct and sole result of
Alterations made by Tenant pursuant to Section 7.1 hereof. In addition, Landlord
shall at all times during the Lease Term carry rental value or business
interruption insurance in an amount equal to twelve (12) months of Rent.
ARTICLE XXII
LIABILITY INSURANCE
22.1 Landlord shall at all times during the Lease Term maintain broad form
comprehensive general public liability insurance against claims for bodily
injury, death or property damage occurring in, on or about the parking areas,
Building or the Leased Premises in a combined single limit of not less than Five
Million and No/100 Dollars ($5,000,000.00). Such insurance shall be
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effected under policies satisfactory to Landlord and Tenant that shall name
Landlord and Tenant as an additional insured thereunder.
ARTICLE XXIII
INSURANCE REQUIREMENTS
23.1 Each insurance policy referred to in Article XXI and Article XXII
hereof shall: (a) be issued by a company licensed to conduct business in the
jurisdiction in which the Leased Premises are located; (b) contain an
endorsement that such policy shall remain in full force and effect
notwithstanding the insured may have waived its right of action against any
party prior to the occurrence of a loss, and shall provide that the insurer
waives all right of recovery by way of subrogation against Landlord and Tenant,
their agents, employees and representatives in connection with any loss or
damage covered by such policy; (c) be reasonably acceptable in form and content
to Landlord and Tenant; (d) be primary and non-contributory; and (e) contain an
endorsement prohibiting cancellation, failure to renew, reduction of amount of
insurance or change in coverage without the insurer's first giving Landlord and
Tenant thirty (30) days prior written notice of such proposed action.
ARTICLE XXIV
WAIVER OF SUBROGATION
24.1 Anything in this Lease to the contrary notwithstanding, Landlord and
Tenant each hereby waive any and all rights of recovery, claim, action or cause
of action against the other, its agents, officers, or employees, for any loss or
damage that may occur to the Leased Premises, or any improvements thereto, or to
the Building, or any improvements thereto, or any personal property of such
party therein, by reason of fire, the elements, or any other cause to the extent
that such rights of recovery, claim, action or cause of action are or would be
covered by insurance required under this Lease (regardless of whether or not the
party required to carry such insurance in fact carries such insurance),
regardless of cause or origin, including negligence of the other party hereto,
its agents, officers or employees, and covenants that no insurer shall have any
right of subrogation against such other party.
ARTICLE XXV
ESTOPPEL LETTER
25.1 Tenant shall at any time, upon not less than ten (10) days' prior
written request, execute and deliver in form and substance reasonably
satisfactory to Landlord an estoppel letter certifying:
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(a) The date upon which the Lease Term commences and expires;
(b) The date to which Rent has been paid;
(c) That Tenant has accepted the Leased Premises and that all
improvements have been satisfactorily completed (or if not so accepted or
completed, the matters objected to by Tenant);
(d) That the Lease is in full force and effect and has not been
modified or amended (or if modified or amended, a description of same);
(e) That there are no defaults by Landlord under the Lease nor any
existing condition with respect to which the giving of notice or lapse of
time would constitute a default or if Tenant has knowledge of any default
or any such condition, a brief description thereof;
(f) That Tenant has received no notice within the past twenty four
(24) months from any insurance company of any defects or inadequacies in
the Leased Premises;
(g) That Tenant, as tenant under this Lease, has no options or rights
other than as set forth in this Lease or any amendment thereto described in
such letter; and
(h) Such other matters that may be necessary or appropriate to qualify
Tenant's response to any of the foregoing agreements or that Landlord may
reasonably request.
If such letter is to be delivered to a purchaser of the Building, it shall
further include the agreement of Tenant to recognize such purchaser as Landlord
under this Lease, and thereafter to pay Rent to the purchaser or its designee in
accordance with the terms of this Lease. Tenant acknowledges that any purchaser
of the Building may rely upon such estoppel letter and that Landlord may incur
substantial damages by reason of any failure on the part of Tenant to provide
such letter in a timely manner.
25.2 Landlord shall at any time, upon not less than ten (10) days' prior
written request, execute and deliver in form and substance reasonably
satisfactory to Tenant an estoppel letter certifying:
(a) The date upon which the Lease Term commences and expires;
(b) The date to which Rent has been received;
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(c) That Tenant has accepted the Leased Premises and that all
improvements have been satisfactorily completed (or if not so accepted or
completed, the matters objected to by Tenant);
(d) That the Lease is in full force and effect and has not been
modified or amended (or if modified or amended, a description of same);
(e) That there are no defaults by Tenant under the Lease nor any
existing condition with respect to which the giving of notice or lapse of
time would constitute a default or if Landlord has knowledge of any default
or any such condition, a brief description thereof;
(f) That Landlord has received no notice from any insurance company
within the past twenty four (24) months of any defects or inadequacies in
the Leased Premises;
(g) That Landlord, as landlord under this Lease, has no options or
rights other than as set forth in this Lease or any amendment thereto
described in such letter; and
(h) Such other matters that may be necessary or appropriate to qualify
Landlord's response to any of the foregoing agreements or that Tenant may
reasonably request.
ARTICLE XXVI
BROKERS
26.1 Tenant represents and warrants that Tenant has dealt with and only
with Landlord's broker, Frank L. Smith, in connection with this Lease and Tenant
hereby indemnifies and holds harmless Landlord and any broker employed by
Landlord from any claims of any other broker(s) in connection with this Lease
resulting from the actions of Tenant. Tenant hereby indemnifies and holds
harmless Landlord and any broker employed by Landlord from any claims of any
broker(s) claiming a commission in connection with any renewal, extension or any
type of option relating to this Lease resulting from the actions of Tenant.
Landlord represents and warrants that Landlord has dealt with and only with
Landlord's broker, Frank L. Smith, in connection with this Lease and Landlord
hereby indemnifies and holds harmless Tenant and any broker employed by Tenant
from any claims of Frank L. Smith and any other broker(s) in connection with
this Lease resulting from the actions of Landlord. Landlord hereby indemnifies
and holds harmless Tenant and any broker employed by Tenant from any claims of
any broker(s) claiming a commission in connection with any renewal, extension or
any type of option relating to this Lease resulting from the actions of
Landlord.
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ARTICLE XXVII
ASSIGNMENT BY LANDLORD
27.1 Landlord shall have the right to transfer and assign, in whole or in
part, all its rights and obligations hereunder and in the Leased Premises. In
such event and upon such transfer, no further liability or obligation shall
accrue against the assigning Landlord from the date of such transfer.
ARTICLE XXVIII
ASSIGNMENT AND SUBLETTING
28.1 Except as specifically permitted by this Section 28.1, Tenant shall
not transfer, mortgage or otherwise encumber this Lease or all or any portion of
or any of Tenant's rights hereunder or interest herein without obtaining the
prior written consent of Landlord, which consent may be withheld or granted in
Landlord's sole and absolute discretion; provided, however, that Tenant's
assignment of this Lease to a purchaser of all or substantially all of the
assets of Tenant or to any successor to Tenant by merger shall be permitted
hereunder without the prior written consent of Landlord. Tenant shall be
permitted to assign this Lease or any portion thereof or sublet the Leased
Premises or any portion thereof without obtaining the prior written consent of
Landlord, provided that no such assignment or subletting shall be construed as a
waiver or release of PMT Services, Inc. from liability for the performance of
any covenant or obligation to be performed by Tenant under this Lease during the
Lease Term, nor shall the collection or acceptance of Rent from any assignee,
subtenant or occupant constitute a waiver or release of PMT Services, Inc. from
any of the liabilities or obligations of the Tenant under this Lease during the
Lease Term. Except as specifically permitted by this Section 28.1, no assignment
or transfer of this Lease or the right of occupancy hereunder may be effectuated
by operation of law or otherwise without the prior written consent of Landlord.
Landlord's giving of its consent under this Section 28.1 shall not be construed
as relieving Tenant or any assignee, subtenant or occupant from the obligation
of obtaining Landlord's prior written consent if subsequently required under the
terms of this Section 28.1. For any period during which an Event of Default has
occurred and is continuing, Tenant hereby assigns to Landlord the Rent due from
any assignee, subtenant, licensee, concessionaire or occupant of Tenant and
hereby authorizes each such assignee, subtenant or occupant to pay said Rent
directly to Landlord. Any attempted assignment or sublease by Tenant in
violation of the terms and covenants of this Lease shall be null and void.
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ARTICLE XXIX
CONTINGENCIES
29.1 Landlord's performance under the terms of this Lease is contingent
upon (a) Landlord's and Tenant's execution of the Loan Documents and funding of
the first advance thereunder, and (b) Landlord's acquisition of fee simple title
to the Land and the Building pursuant to the Real Estate Contract.
29.2 This Lease shall terminate if Landlord has not satisfied the
contingencies set forth in Section 29.1 hereof within the sixty (60) day period
following the Effective Date.
ARTICLE XXX
RENEWAL
30.1 Tenant shall have one (1) option to renew this Lease under the same
terms and conditions as provided herein except as set forth below for a
consecutive five (5) year term (the "Renewal Term"), exercisable by providing
Landlord written notice of Tenant's intent to exercise the renewal option on or
before the later of (a) thirteen (13) months prior to the expiration date of the
then existing Lease Term, or (b) within thirty (30) days after Tenant's receipt
of written notice from Landlord stating that Tenant failed to exercise the right
to extend the Lease Term in accordance with Section 30.1(a) hereof. The terms of
this Lease during the Renewal Term shall be the same as set forth in this Lease
for the initial ten (10) year Lease Term, including without limitation the
amount of Rent payable hereunder; provided, however, that if Tenant exercises
the renewal option set forth in this Section 30.1 and Tenant does not extend the
term of the Loan so that the term of the Loan remains coterminous with the
extended Lease Term, Tenant shall pay Rent during the Renewal Term at the then
prevailing Market Rate.
ARTICLE XXXI
RIGHT OF FIRST REFUSAL AND RIGHT OF EXPANSION
31.1 Tenant shall have the right of first refusal to lease rentable space
in the Building other than the Leased Premises and the Retail Space (the
"Remaining Space") as provided in this Section 31.1. If at any time during the
Lease Term Landlord shall receive a bona fide offer from a third person for the
leasing of all or any portion of the Remaining Space (each an "Offer"), which
Offer Landlord shall desire to accept, Landlord shall promptly deliver to Tenant
a copy of such Offer, and Tenant may, within five (5) days thereafter, elect to
lease such Remaining Space on the same terms as those set forth in such Offer.
Landlord and Tenant shall enter into a new lease agreement regarding any such
Remaining
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Space so leased by Tenant, subject to the terms and conditions of the applicable
Offer. The right of first refusal set forth in this Section 31.1 shall be
applicable to all Offers received in connection with the Remaining Space,
whether or not Landlord shall have failed to exercise a right of first refusal
under this Section 31.1 in connection with such Remaining Space in the past.
31.2 (a) Landlord and Tenant hereby agree that at any time during the Lease
Term Landlord shall have the right to enter into Additional Leases with third
parties for the Remaining Space or any portion thereof (each a "Fourth Floor
Lease"), but each Fourth Floor Lease shall have an initial term of five (5)
years or less and renewal term, if permitted pursuant to this Section 31.2(a)
and Section 31.2(c) hereof, of five (5) year or less (each a "Fourth Floor
Term"). Landlord and Tenant agree that each Fourth Floor Lease may have a
renewal option of two (2) years or fewer without Tenant's prior written consent
and a renewal option in excess of two (2) years only with Tenant's prior written
consent (each a "Fourth Floor Renewal Term"). Within ninety (90) days of
Landlord's entering into a Fourth Floor Lease, Landlord shall give Tenant
written notice of the Fourth Floor Term and Fourth Floor Renewal Term, if any,
for such Fourth Floor Lease.
(b) Tenant shall have the right to expand into the Remaining Space as
provided in this Section 31.2(b) (each a "Right of Expansion"). Tenant shall
only have the right to exercise a Right of Expansion with respect to a Fourth
Floor Lease in the event Tenant notifies Landlord in writing of its exercise of
its Right of Expansion in connection with such Fourth Floor Lease at least nine
(9) months prior to the expiration of the Fourth Floor Term or the Fourth Floor
Renewal Term, as applicable, of such Fourth Floor Lease (each an "Expansion
Period"). Tenant shall only be permitted to exercise its Right of Expansion with
respect to a Fourth Floor Lease during the applicable Expansion Period and at no
other time. In the event Landlord receives notice of Tenant's exercise of a
Right of Expansion in connection with a Fourth Floor Lease within the applicable
Expansion Period, Tenant shall be obligated to lease all of the Remaining Space
described in such Fourth Floor Lease at the then prevailing Market Rate in an
"as is condition" for a term that is coterminous with the Lease Term, which term
shall commence upon the expiration of the Fourth Floor Term or Fourth Floor
Renewal Term, as applicable, for such Fourth Floor Lease, and upon such other
terms and conditions as Landlord and Tenant shall agree. Landlord and Tenant
shall enter into a new lease agreement regarding any such Remaining Space so
leased by Tenant, subject to the terms and conditions of the preceding sentence.
(c) In the event Tenant fails to notify Landlord of the exercise of its
Right of Expansion during the applicable Expansion Period, then (i) any Fourth
Floor Renewal Term shall commence and continue in accordance with the terms of
the applicable Fourth Floor Lease, or (ii) Landlord shall have the right to
relet such
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Remaining Space for an additional Fourth Floor Term, and Landlord shall have no
Right of Expansion with respect to such Remaining Space except during the
Expansion Period for such Fourth Floor Renewal Term or Fourth Floor Term, as
applicable.
(d) In the event any Remaining Space is vacated prior to the expiration of
the applicable Fourth Floor Term, such space shall be subject to the terms and
provisions of Section 31.1 hereof.
ARTICLE XXXII
PURCHASE OPTION
32.1 Tenant shall have a right to purchase the Building in accordance with
the Option Agreement attached hereto as Exhibit I and incorporated herein by
this reference (the "Option Agreement"). Landlord and Tenant shall execute the
Option Agreement as of the Effective Date.
ARTICLE XXXIII
FORCE MAJEURE
33.1 Neither the Landlord nor the Tenant shall be deemed to be in default
in the performance of any obligation on such party's part to be performed under
this Lease if and so long as the non-performance of such obligation shall be
directly caused by Unavoidable Delays; provided, that within fifteen (15) days
after the commencement of such Unavoidable Delay, the non-performing party shall
notify the other party in writing of the existence and nature of any such
Unavoidable Delay and the steps, if any, that the non-performing party shall
have taken or plans to take to eliminate such Unavoidable Delay. Thereafter, the
non-performing party shall, from time to time, on written request of the other
party, keep the other party fully informed, in writing, of further developments
concerning such Unavoidable Delay and the effort being made by the non-
performing party to perform such obligation as to which it is in default. All
provisions of this Lease shall be adjusted in accordance with such Unavoidable
Delays except for the Lease Term, which shall not be so adjusted. Nothing in
this Article XXXIII shall prohibit either Landlord or Tenant from pursuing any
and all remedies available at law or equity against persons or entities not a
party to this Lease.
ARTICLE XXXIV
GENERAL PROVISIONS
34.1 This Lease may not be altered or amended, except by an instrument in
writing signed by all parties hereto.
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34.2 This Lease shall be binding upon and inure to the benefit of the
permitted successors and assigns of Landlord and Tenant.
34.3 The pronouns of any gender shall include the other genders, and either
the singular or the plural shall include the other.
34.4 This Lease shall be governed, construed and enforced in accordance
with the laws of the State of Tennessee.
34.5 This Lease, including the Exhibits attached hereto, contains and
embodies the entire agreement of the parties hereto and supersedes all prior
agreements, negotiations, letters of intent, proposals, representations,
warranties, understandings and discussions between the parties hereto. Any
representation, inducement, warranty, understanding or agreement that is not
contained in this Lease shall not be of any force or effect.
34.6 Any payment or notice required or permitted hereunder shall be deemed
to have been duly made or given when personally delivered or received via the
United States mail, or express mailed with a widely recognized, reputable
organization, postage prepaid, and addressed to Landlord at the address
specified in the preamble and to Tenant at the address specified in the preamble
until the commencement of the Lease Term and thereafter at the address of the
Building, or to such other address as either party may have been previously
furnished in writing to the other party.
34.7 Nothing contained in this Lease shall be construed as creating a
partnership or joint venture of or between Landlord and Tenant, or to create any
other relationship between the parties hereto other than that of lessor and
lessee.
34.8 Time is of the essence with respect to each of Landlord's obligations
under this Lease.
34.9 This Lease may be executed in multiple counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same document.
34.10 This Lease shall not be recorded except that upon the request of
Landlord or Tenant, whereupon Landlord and Tenant shall execute, in recordable
form, a short form memorandum of this Lease. Such memorandum may be recorded at
the expense of the party requesting the recordation in the land records of the
jurisdiction in which the Leased Premises are located.
34.11 Except as otherwise provided in this Lease, any Additional Rent or
other sum owed by Tenant to Landlord, and any cost, expense, damage or liability
incurred by Landlord for which Tenant is liable hereunder, shall be paid by
Tenant to Landlord no later than ten (10) days after the date Landlord notifies
Tenant of
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the amount of such Additional Rent, sum, cost, expense, damage or liability.
Except as otherwise provided in this Lease, any sum owed by Landlord to Tenant,
and any cost, expense, damage or liability incurred by Tenant for which Landlord
is liable hereunder, shall be paid by Landlord to Tenant no later than ten (10)
days after the date Tenant notifies Landlord of the amount of such sum, cost,
expense, damage or liability.
34.12 Any liability of Tenant to Landlord existing hereunder as of the
expiration or earlier termination of the Lease Term shall survive such
expiration or earlier termination. Any liability of Landlord to Tenant existing
hereunder as of the expiration or earlier termination of the Lease Term shall
survive such expiration or earlier termination.
34.13 At the expiration or earlier termination of the Lease Term, Tenant
shall deliver to Landlord all keys to the Leased Premises, whether such keys
were furnished by Landlord or otherwise procured by Tenant, and shall inform
Landlord of the combination of each lock, safe and vault, if any, in the Leased
Premises.
34.14 All notices, requests, demands, directions and other communications
(collectively, "notices") required under this Lease shall be in writing
(including communication by facsimile transmission) and shall be sent by hand to
an officer or partner of the receiving party, by registered or certified mail
return receipt requested, by nationally recognized and reputable overnight
courier service maintaining records of receipt, or by facsimile transmission
with confirmation in writing mailed first-class, in all cases with charges
prepaid. Any such properly given notice shall be effective upon the earlier of
receipt or (a) the date delivered by hand, or (b) the third Business Day after
being mailed, or (c) the following Business Day if sent by overnight courier
service, or (d) when sent by facsimile, upon sender's receipt of transmission
confirmation during normal business hours or on the next Business Day if not
confirmed during normal business hours. All notices shall be addressed as
follows:
LANDLORD: Battleship, LLC
c/o Newton Oldacre McDonald
200 31st Avenue North, Suite 200
Nashville, TN 37203
Telephone: (615) 269-5444
Facsimile: (615) 383-6866
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With copies of all notices to be sent to:
W. Fred Williams
Farris, Warfield & Kanaday
424 Church Street
SunTrust Center
Suite 1900
Nashville, TN 37219
Telephone: (615) 782-2242
Facsimile: (615) 726-3185
TENANT: PMT Services, Inc.
Two Maryland Farms
Suite 200
Brentwood, TN 37027
Telephone: (615) 254-1539
Facsimile: (615) 254-1501
With copies of all notices to be sent to:
Stephen C. Baker
Waller Lansden Dortch & Davis
511 Union
Nashville, TN 37219
Telephone: (615) 252-2472
Facsimile: (615) 244-6804
All notices shall be sent to the applicable party at the address stated above or
in accordance with the last unrevoked written direction from such party to the
party hereto giving the notice. Rejection or other refusal to accept or
inability to deliver because of a changed address of which no notice has been
given pursuant to the terms of this Section 34.14 shall nevertheless constitute
receipt of the communication sent.
IN WITNESS WHEREOF, the parties hereto have executed the foregoing Lease as
of the Effective Date.
LANDLORD:
BATTLESHIP, LLC, a Tennessee limited
liability company
By: /s/ Mark McDonald
----------------------------------
Mark McDonald, Chief Manager
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<PAGE>
TENANT:
PMT SERVICES, INC., a Tennessee corporation
By: /s/ Clay Whitson
------------------------------------
Print Name: Clay Whitson
----------------------------
Title: CFO
---------------------------------
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<PAGE>
Exhibit 10.1(b)
EXHIBIT I
Purchase Option Agreement
THIS PURCHASE OPTION AGREEMENT (as it may be amended and/or restated from
time to time, this "Agreement") is made effective as of the 2nd day of April,
1997, by and between BATTLESHIP, LLC, a Tennessee limited liability company
("Landlord"), and PMT SERVICES, INC., a Tennessee corporation ("Tenant").
R E C I T A L S:
- - - - - - - -
The parties hereto, for and in consideration of the mutual promises herein
contained and other good and valuable consideration, the receipt of which is
hereby acknowledged, agree as follows:
1. DEFINED TERMS. All other capitalized terms not otherwise defined in
this Agreement, including its preamble, recitals and exhibits, shall have the
meanings set forth in that certain Lease Agreement between Landlord and Tenant
dated as of the 2nd day of April, 1997 (the "Lease Agreement"). All capitalized
terms shall be equally applicable to the singular and plural forms thereof and
to any gender form thereof.
2. GRANT OF PURCHASE OPTION. Subject to the terms and conditions as
hereinafter set forth, Landlord, in consideration of the sum of Ten and no/100
Dollars ($10.00) paid by Tenant, the receipt of which is hereby acknowledged,
hereby gives and grants to Tenant the exclusive option of purchasing (the
"Option") that certain real estate described legally on Exhibit A attached
hereto and incorporated herein by this reference, including the building located
thereon containing approximately one hundred thirty two thousand one hundred
four (132,104) Rentable Square Feet of space and all other buildings and
structures located thereon ("Property").
3. TERM OF PURCHASE OPTION. The term of the Option shall commence on the
Commencement Date and shall expire at the expiration or earlier termination of
the Lease Term as set forth in the Lease Agreement, unless sooner exercised or
terminated as provided herein (the "Option Term").
4. METHOD OF EXERCISE. The Option may be exercised by Tenant at any time
during the Option Term by delivering to Landlord at the address set forth in
Section 16 hereof a written notice (the "Notice of Exercise") stating that
Tenant is exercising the Option pursuant to the terms of this Agreement and
fixing a date for the conveyance of the Property to Tenant, which date shall not
be later than sixty (60) days after Landlord's receipt of the Notice of Exercise
or such other date as Landlord and Tenant shall agree to in writing (the
"Closing Date").
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<PAGE>
5. PURCHASE PRICE. (a) If the Option is duly exercised as provided in
Section 4 hereof, Tenant shall pay the Landlord in cash a purchase price for the
Property (the "Purchase Price") equal to the market value of the Property as
determined in this Section 5 (the "Market Value") but in no event shall the
Purchase Price be less than the aggregate outstanding balance(s) owed on the
Closing Date on loan(s) secured by encumbrances on the Property (collectively
the "Existing Loans"). The Market Value shall be based upon prevailing purchase
prices for comparable space in office buildings in the Green Hills market that
are similar to the Building, assuming the Lease Premises has a one hundred
percent (100%) occupancy rate and the Remaining Space and Retail Space have a
ninety five percent (95%) occupancy rate pursuant to leases having rent rates at
the prevailing market rate for the renting of comparable space in office
buildings in the Green Hills market that are similar to the Building. The
Landlord and Tenant in good faith will attempt to agree on the Market Value. If
the Landlord and Tenant are unable to agree on the Market Value within fifteen
(15) days of Landlord's receipt of the Notice of Exercise (the "Negotiation
Period"), then, within five (5) days after the last day of the Negotiation
Period, the Landlord and Tenant shall each present to the other party hereto its
final written determinations of the Market Value (the "Final Offers"). If the
Market Values as set forth in the Final Offers are not consistent, then the
Market Value shall be determined by baseball arbitration in accordance with the
procedure in Section 5(b) hereof.
(b) For all purposes of this Agreement, baseball arbitration shall follow
the following procedures:
(i) Within ten (10) days after the last day of the Negotiation Period,
the Owners shall each select an arbitrator (collectively the
"Arbitrators"), who shall be qualified and impartial persons licensed in
the State of Tennessee as an MAI appraiser with at least ten (10) years of
experience in appraising the type of matters for which they are called on
to appraise hereunder.
(ii) The Arbitrators shall name a third Arbitrator, similarly
qualified, within ten (10) days after the appointment of the Arbitrators.
(iii) Said three (3) Arbitrators shall, by majority vote, after
hearing whatever evidence they deem appropriate from the Landlord and
Tenant and obtaining any other information they deem necessary, in good
faith, make their own determination of Market Value (the "Arbitrators'
Initial Determination") and thereafter by majority vote selecting either
the Landlord's Final Offer or the Tenant's Final Offer but no other,
whichever is closest to the Arbitrators' Initial Determination (the "Final
Determination"), such Final Determination to be made within thirty (30)
days after the appointment of the
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<PAGE>
third Arbitrator. The Arbitrators' Initial Determination and Final
Determination shall be in writing and counterparts thereof shall be
delivered to the Landlord and Tenant within said thirty (30) day period.
The Arbitrators shall have no right or ability to determine the Market
Value in any other manner other than as set forth in this Section 5(b). The
Final Determination shall be binding upon the Landlord and Tenant.
(iv) The costs and fees of all three (3) Arbitrators and the costs of
all attorneys' fees, experts and witnesses' fees incurred by the Landlord
and Tenant shall be paid by the party hereto whose Final Offer was not the
basis for the Final Determination.
(v) If either Landlord or Tenant fails to appoint its appraiser in the
manner and within the time specified in Section 5(b)(i) hereof, then the
Market Value shall be determined by the Final Offer of the other party
hereto.
6. TITLE INSURANCE. Upon exercise by Tenant of the Option, Landlord
shall, within ten (10) days after such exercise, deliver to Tenant, at Tenant's
sole expense, evidence of title to the Property, in the form of a preliminary
title commitment (the "Commitment") issued by a title insurance company
authorized to insure titles in the State of Tennessee, agreeing to issue to the
Tenant, upon the recording of the Deed (as defined in Section 7), its standard
Owner's Title Insurance Policy in the amount of the Purchase Price insuring
merchantable fee simple title to the Property in the Tenant, free and clear of
all liens and encumbrances, except taxes and assessments for the year of
closing, exceptions, easements, covenants and restrictions of record as of the
date hereof and such other exceptions as Tenant shall agree to in writing (the
"Permitted Exceptions").
7. DELIVERY OF DEED. Upon exercise by Tenant of its rights hereunder,
Landlord will deliver to Tenant on the Closing Date a good and sufficient
Special Warranty Deed (the "Deed"), subject to the Permitted Exceptions, with
Tenant to pay all costs associated with such delivery, including but not limited
to recording costs, transfer taxes and closing costs. Landlord shall pay all
costs associated with the payoff of the Existing Loans and the release of same,
including but not limited to recording costs. Each party shall pay its own
attorneys' fees.
8. MEMORANDUM OF OPTION. The parties hereto agree to execute a Memorandum
of Option Agreement, such Memorandum creating notice of this Agreement to be
recorded in the Office of the Register of Deeds of Davidson County, Tennessee,
recording costs for same to be borne by Tenant.
9. APPORTIONMENTS. All income and all operating expenses and taxes
applicable to the Property for the year during which the
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<PAGE>
Property is transferred from Landlord to Tenant pursuant to the terms of the
Option shall be apportioned between Landlord and Tenant as of the Closing Date.
10. SURVEY. Landlord agrees to provide to Tenant at Tenant's sole expense
a survey of the Property on or before the Closing Date.
11. POSSESSION. Possession of the Property shall be delivered to Tenant
and Tenant shall be entitled to such possession on the Closing Date, subject to
the terms of any then existing leases of the Property or any part thereof.
12. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties with respect to the transactions hereinabove set forth, and this
Agreement may not be amended, modified, released, or discharged, in whole or in
part, except by an instrument in writing signed by both of the parties hereto.
13. BINDING EFFECT. This Agreement shall bind and inure to the benefit of
the respective personal representatives, heirs, successors and assigns of the
parties hereto.
14. FAILURE TO EXERCISE OPTION. If the Tenant does not exercise the Option
as herein provided, neither party shall have any further rights or claims
against the other under the terms of this Agreement.
15. REAL ESTATE COMMISSION. It is expressly agreed and understood by all
parties hereto that no sales commissions arise out of or from this transaction.
Tenant agrees to hold Landlord harmless from any claims of any broker(s) in
connection with this Agreement resulting from the actions of Tenant, including
reasonable attorneys' fees. Landlord agrees to hold Tenant harmless from any
claims of any broker(s) in connection with this Agreement resulting from the
actions of Landlord, including reasonable attorneys' fees.
16. NOTICE. The terms and provisions of Section 34.14 of the Lease
Agreement are incorporated herein by this reference.
17. DEFAULT UNDER LEASE. During the continuation of an Event of Default by
Tenant under the Lease, Tenant shall not be entitled to exercise the Option.
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<PAGE>
IN WITNESS WHEREOF, said parties hereunto subscribe their names.
LANDLORD:
BATTLESHIP, LLC, a Tennessee limited
liability company
By: /s/ MARK MCDONALD
--------------------------------
Mark McDonald, Chief Manager
TENANT:
PMT SERVICES, INC., a Tennessee
corporation
By: /s/ CLAY WHITSON
---------------------------------
Print Name: Clay Whitson
-------------------------
Title: CFO
-----------------------------
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<PAGE>
Exhibit 10.2
PMT SERVICES, INC.
1997 NONQUALIFIED STOCK OPTION PLAN
EFFECTIVE APRIL 23, 1997
<PAGE>
PMT SERVICES, INC. 1997 NONQUALIFIED STOCK OPTION PLAN
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS
1.1 Affiliate 1
1.2 Agreement 1
1.3 Board 1
1.4 Code 1
1.5 Committee 1
1.6 Company 1
1.7 Date of Exercise 1
1.8 Exchange Act 1
1.9 Fair Market Value 2
1.10 Option 2
1.11 Participant 2
1.12 Plan 2
1.13 Stock 2
1.14 Ten Percent Stockholder 2
ARTICLE II. PURPOSE OF PLAN
ARTICLE III. ADMINISTRATION
3.1 Administration of Plan 2
3.2 Authority to Grant Options 3
3.3 Action of Committee 3
3.4 Persons Subject to Section 16(b) 3
ARTICLE IV. ELIGIBILITY FOR GRANTS
4.1 Participation 3
4.2 Grant of Options 3
4.3 Committee Delegate 4
ARTICLE V. STOCK SUBJECT TO PLAN
5.1 Source of Shares 4
5.2 Maximum Number of Shares 4
5.3 Forfeitures 4
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<PAGE>
ARTICLE VI. EXERCISE OF OPTIONS
6.1 Exercise Price 4
6.2 Right to Exercise 4
6.3 Maximum Exercise Period 4
6.4 Transferability 4
6.5 Service Status 4
ARTICLE VII. METHOD OF EXERCISE
7.1 Exercise 5
7.2 Payment 5
7.3 Federal Withholding Tax Requirements 5
7.4 Stockholder Rights 5
7.5 Issuance and Delivery of Shares 5
ARTICLE VIII. ADJUSTMENT UPON CORPORATE CHANGES
8.1 Adjustments to Shares 5
8.2 Substitution of Options on Merger or Acquisition 6
8.3 Effect of Certain Transactions 6
8.4 No Preemptive Rights 6
8.5 Fractional Shares 6
ARTICLE IX. COMPLIANCE WITH LAW AND APPROVAL OF
REGULATORY BODIES
9.1 General 7
9.2 Representations by Participants 7
ARTICLE X. GENERAL PROVISIONS
10.1 Effect on Employment 7
10.2 Unfunded Plan 7
10.3 Rules of Construction 8
10.4 Governing Law 8
10.5 Compliance With Section 16 of the Exchange Act 8
10.6 Amendment 8
10.7 Effective Date of Plan 8
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<PAGE>
PMT SERVICES, INC. 1997 NONQUALIFIED STOCK OPTION PLAN
PREAMBLE
WHEREAS, PMT Services, Inc. (the "Company") desires to establish a plan
through which the Company may grant options to purchase the common stock of the
Company to directors, officers, employees, and consultants of the Company and
its affiliates;
WHEREAS, the Company intends that all options granted hereunder shall not
be treated as "incentive stock options" within the meaning of section 422 of the
Code; and
WHEREAS, the Company intends that this stock option plan and the options
granted hereunder (i) not qualify as "performance-based compensation" described
in section 162(m)(4)(C) of the Code, and (ii) conform to the provisions of Rule
16b-3 of the Securities Exchange Act of 1934, as amended;
NOW, THEREFORE, the Company hereby establishes the PMT Services, Inc. 1997
Nonqualified Stock Option Plan (the "Plan"), effective April 23, 1997:
ARTICLE I. DEFINITIONS
1.1 Affiliate. A "parent corporation," as defined in section 424(e) of
the Code, or "subsidiary corporation," as defined in section 424(f) of the Code,
of the Company.
1.2 Agreement. A written agreement (including any amendment or supplement
thereto) between the Company or Affiliate and a Participant specifying the terms
and conditions of an Option granted to such Participant.
1.3 Board. The board of directors of the Company.
1.4 Code. The Internal Revenue Code of 1986, as amended.
1.5 Committee. A committee composed of at least two individuals who are
members of the Board and are not employees of the Company or an Affiliate, and
who are designated by the Board as the "compensation committee" or are otherwise
designated to administer the Plan.
1.6 Company. PMT Services, Inc. and its successors.
1.7 Date of Exercise. The date that the Company accepts tender of the
Option exercise price.
1.8 Exchange Act. The Securities Exchange Act of 1934, as amended.
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1.9 Fair Market Value. On any given date, Fair Market Value shall be
(unless, where appropriate, the Committee determines in good faith the fair
market value of the Stock to be otherwise) the closing price of the Stock on the
Nasdaq National Market, as so published, on the trading day immediately
preceding the date as of which Fair Market Value is being determined, or the
closing price on the next preceding trading day on which such prices were
published if no Stock was traded on such trading day.
1.10 Option. The right that is granted hereunder to a Participant to
purchase from the Company a stated number of shares of Stock at the price set
forth in an Agreement.
1.11 Participant. A Board member, employee, consultant or advisor of the
Company or of an Affiliate who: either satisfies the requirements of Article IV,
4.3 and is selected by the Committee to receive an Option, or receives an Option
pursuant to grant specified in this Plan.
1.12 Plan. The PMT Services, Inc. 1997 Nonqualified Stock Option Plan.
1.13 Stock. The common stock of the Company.
1.14 Ten Percent Stockholder. An individual who owns more than 10% of the
total combined voting power of all classes of stock of the Company or an
Affiliate at the time he is granted an Option. For the purpose of determining
if an individual is a Ten Percent Stockholder, he shall be deemed to own any
voting stock owned (directly or indirectly) by or for his brothers and sisters
(whether by whole or half blood), spouse, ancestors or lineal descendants and
shall be considered to own proportionately any voting stock owned (directly or
indirectly) by or for a corporation, partnership, estate or trust of which such
individual is a stockholder, partner or beneficiary.
ARTICLE II. PURPOSE OF PLAN
The purpose of the Plan is to provide a performance incentive and to
encourage stock ownership by officers, directors, consultants and advisors of
the Company and its Affiliates, and to align the interests of such individuals
with those of the Company, its Affiliates and its stockholders. It is intended
that Participants may acquire or increase their proprietary interests in the
Company and be encouraged to remain in the employ or directorship of the Company
or of its Affiliates. The proceeds received by the Company from the sale of
Stock pursuant to this Plan may be used for general corporate purposes.
ARTICLE III. ADMINISTRATION
3.1 Administration of Plan. The Plan shall be administered by the
Committee. The express grant in the Plan of any specific power to the Committee
shall not be construed as limiting any power or authority of the Committee. Any
decision made or action taken by the Committee to administer the Plan shall be
final and conclusive. No member of the Committee shall be liable for any act
done in good faith with respect to this Plan or any Agreement or
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Option. The Company shall bear all expenses of Plan administration. In
addition to all other authority vested with the Committee under the Plan, the
Committee shall have complete authority to:
(a) Interpret all provisions of this Plan;
(b) Prescribe the form of any Agreement and notice and manner for
executing or giving the same;
(c) Make amendments to all Agreements;
(d) Adopt, amend, and rescind rules for Plan administration; and
(e) Make all determinations it deems advisable for the administration of
this Plan.
3.2 Authority to Grant Options. The Committee shall have authority to
grant Options upon such terms as the Committee deems appropriate and that are
not inconsistent with the provisions of this Plan. Such terms may include
conditions on the exercise of all or any part of an Option. The Committee may
delegate authority to grant options to one or more officers of the Company,
provided that such delegation is approved by the Board.
3.3 Action of Committee. The Committee generally may act through any
authorized member. In addition, an action of the Committee shall be authorized
by a majority of the members present in person or by proxy for a meeting, or,
alternatively, by a majority of the members of the Board in a meeting attended
by the members of the Committee.
3.4 Persons Subject to Section 16(b). Notwithstanding anything in the
Plan to the contrary, the Committee, in its absolute discretion, may bifurcate
the Plan so as to restrict, limit or condition the use of any provision of the
Plan to participants who are officers and directors subject to section 16(b) of
the Exchange Act, without so restricting, limiting or conditioning the Plan with
respect to other Participants.
ARTICLE IV. ELIGIBILITY FOR GRANTS
4.1 Participation. The Committee may from time to time designate
employees, consultants and advisors to whom Options are to be granted and who
are eligible to become Participants. Such designation shall specify the number
of shares of Stock, if any, subject to each Option. All Options granted under
this Plan shall be evidenced by Agreements which shall be subject to applicable
provisions of this Plan or such other provisions as the Committee may adopt that
are not inconsistent with the Plan.
4.2 Grant of Options. An Option shall be deemed to be granted to a
Participant at the time that the Committee designates in a writing that is
adopted by the Committee as the grant
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of an Option, and that makes reference to the name of the Participant and the
number of shares of Stock that may be purchased under the Option.
4.3 Committee Delegate. If the Committee delegates authority to grant
Options to a delegate, in the manner described in Section 3.2, such delegate
shall have the authorities described in this Article IV.
ARTICLE V. STOCK SUBJECT TO PLAN
5.1 Source of Shares. Upon the exercise of an Option, the Company shall
deliver to the Participant authorized but unissued Stock.
5.2 Maximum Number of Shares. The maximum number of shares of Stock that
may be issued pursuant to an award of Options at any time, when aggregated with
the shares subject to outstanding Options at such time, is 53,000.
5.3 Forfeitures. If any Option granted hereunder expires or terminates
for any reason without having been exercised in full, the unpurchased shares
subject thereto shall again be available for issuance under this Plan.
ARTICLE VI. EXERCISE OF OPTIONS
6.1 Exercise Price. The exercise price of an Option shall be the price
determined by the Committee at the time the Option is granted. If the exercise
price of an Option is changed after the date it is granted, such change shall be
deemed to be a termination of the existing Option and the issuance of a new
Option.
6.2 Right to Exercise. An Option shall be exercisable on the date of
grant or on any other date established by the Committee or provided for in an
Agreement.
6.3 Maximum Exercise Period. The maximum period in which an Option may be
exercised shall be determined by the Committee on the date of grant. All
Options shall terminate on the date the Participant's employment with the
Company terminates, except as otherwise provided in the Agreement with respect
to termination of employment, death, disability or a "change of control" (as
defined in any change of control agreement to which the Company and any such
Participant are parties).
6.4 Transferability. Any Option granted under this Plan shall be
transferable by will or by the laws of descent and distribution only, except as
otherwise expressly provided for in an Agreement. No right or interest of a
Participant in any Option shall be liable for, or subject to, any lien,
obligation or liability of such Participant.
6.5 Service Status. The Committee shall determine the extent to which a
leave of absence for military or government service, illness, temporary
disability, or other reasons shall
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<PAGE>
be treated as a termination or interruption of service for purposes of
determining questions of forfeiture and exercise of an Option after termination
of employment.
ARTICLE VII. METHOD OF EXERCISE
7.1 Exercise. An Option granted hereunder shall be deemed to have been
exercised on the Date of Exercise. Subject to the provisions of Articles VI and
IX, an Option may be exercised in whole or in part at such times and in
compliance with such requirements as the Committee shall determine.
7.2 Payment. Unless otherwise provided by the Agreement, payment of the
Option price shall be made in cash or, to the extent approved by the Committee,
Stock that was acquired prior to the exercise of the Option, other consideration
acceptable to the Committee, or a combination thereof.
7.3 Federal Withholding Tax Requirements. Upon exercise of an Option by a
Participant who is an employee of the Company or an Affiliate, the Participant
shall, upon notification of the amount due and prior to or concurrently with the
delivery of the certificates representing the shares, pay to the Company amounts
necessary to satisfy applicable federal, state and local withholding tax
requirements or shall otherwise make arrangements satisfactory to the Company
for such requirements.
7.4 Stockholder Rights. No Participant shall have any rights as a
stockholder with respect to shares subject to his Option prior to the Date of
Exercise of such Option.
7.5 Issuance and Delivery of Shares. Shares of Stock issued pursuant to
the exercise of Options hereunder shall be delivered to Participants by the
Company (or its transfer agent) as soon as administratively feasible after a
Participant exercises an Option hereunder and executes any applicable
stockholder agreement or agreement described in Section 9.2 that the Company
requires at the time of exercise.
ARTICLE VIII. ADJUSTMENT UPON CORPORATE CHANGES
8.1 Adjustments to Shares. The maximum number and kind of shares of stock
with respect to which Options hereunder may be granted and which are the subject
of outstanding Options shall be adjusted by way of increase or decrease as the
Committee determines (in its sole discretion) to be appropriate, in the event
that:
(a) the Company or an Affiliate effects one or more stock dividends, stock
splits, reverse stock splits, subdivisions, consolidations or other
similar events;
(b) the Company or an Affiliate engages in a transaction to which section
424 of the Code applies; or
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<PAGE>
(c) there occurs any other event which in the judgment of the Committee
necessitates such action.
Provided, however, that if an event described in paragraph (a) or (b) occurs,
the Committee shall make adjustments to the limits on Options specified in
Section 5.2 that are proportionate to the modifications of the Stock that are on
account of such corporate changes.
8.2 Substitution of Options on Merger or Acquisition. The Committee may
grant Options in substitution for stock awards, stock options, stock
appreciation rights or similar awards held by an individual who becomes an
employee or consultant of the Company or an Affiliate in connection with a
transaction to which section 424(a) of the Code applies. The terms of such
substituted Options shall be determined by the Committee in its sole discretion,
subject only to the limitations of Article V.
8.3 Effect of Certain Transactions. Upon a merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation of
the Company, as a result of which the stockholders of the Company receive cash,
stock or other property in exchange for their shares of Stock (but not a public
offering of Stock by the Company), and the Company is not the surviving entity,
any Option granted hereunder shall terminate, provided that the Participant
shall have the right immediately prior to any such merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation to
exercise his Options in whole or in part whether or not the vesting requirements
set forth in any Agreement have been satisfied, unless the Committee elects to
convert all Options hereunder into options to purchase stock of an acquiring
corporation. Provided, however, that, notwithstanding the foregoing, a portion
of the acceleration of exercisability of Options shall not occur with respect to
any holder to the extent that such portion of acceleration would cause the
grantee or holder of such Option to be liable for the payment of taxes pursuant
to section 4999 of the Code. If the Committee so elects to convert the Options,
the amount and price of such converted options shall be determined by adjusting
the amount and price of the Options granted hereunder in the same proportion as
used for determining the number of shares of stock of the acquiring corporation
the holders of the Stock receive in such merger, consolidation, acquisition of
property or stock, separation or reorganization, and the vesting schedule set
forth in the Agreement shall continue to apply to the converted options.
8.4 No Preemptive Rights. The issuance by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, for
cash or property, or for labor or services rendered, either upon direct sale or
upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, outstanding Options.
8.5 Fractional Shares. Only whole shares of Stock may be acquired through
the exercise of an Option. Any amounts tendered in the exercise of an Option
remaining after the maximum number of whole shares have been purchased will be
returned to the Participant.
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ARTICLE IX. COMPLIANCE WITH LAW AND APPROVAL OF
REGULATORY BODIES
9.1 General. No Option shall be exercisable, no Stock shall be issued, no
certificates for shares of Stock shall be delivered, and no payment shall be
made under this Plan except in compliance with all federal or state laws and
regulations (including, without limitation, withholding tax requirements),
federal and state securities laws and regulations and the rules of all
securities exchanges or self-regulatory organizations on which the Company's
shares may be listed. The Company shall have the right to rely on an opinion of
its counsel as to such compliance. Any certificate issued to evidence shares of
Stock for which an Option is exercised may bear such legends and statements as
the Committee upon advice of counsel may deem advisable to assure compliance
with federal or state laws and regulations. No Option shall be exercisable, no
Stock shall be issued, no certificate for shares shall be delivered and no
payment shall be made under this Plan until the Company has obtained such
consent or approval as the Committee may deem advisable from any regulatory
bodies having jurisdiction over such matters.
9.2 Representations by Participants. As a condition to the exercise of an
Option, the Company may require a Participant to represent and warrant at the
time of any such exercise that the shares are being purchased only for
investment and without any present intention to sell or distribute such shares,
if, in the opinion of counsel for the Company, such representation is required
by any relevant provision of the laws referred to in Section 9.1. At the option
of the Company, a stop transfer order against any shares of stock may be placed
on the official stock books and records of the Company, and a legend indicating
that the stock may not be pledged, sold or otherwise transferred unless an
opinion of counsel was provided (concurred in by counsel for the Company) and
stating that such transfer is not in violation of any applicable law or
regulation may be stamped on the stock certificate in order to assure exemption
from registration. The Committee may also require such other action or
agreement by the Participants as may from time to time be necessary to comply
with federal or state securities laws. This provision shall not obligate the
Company or any Affiliate to undertake registration of Options or stock
hereunder.
ARTICLE X. GENERAL PROVISIONS
10.1 Effect on Employment. Neither the adoption of this Plan, its
operation, nor any documents describing or referring to this Plan (or any part
thereof) shall confer upon any employee any right to continue in the employ of
the Company or an Affiliate or in any way affect any right and power of the
Company or an Affiliate to terminate the employment of any employee at any time
with or without assigning a reason therefor.
10.2 Unfunded Plan. The Plan, insofar as it provides for grants, shall be
unfunded, and the Company shall not be required to segregate any assets that may
at any time be represented by grants under this Plan. Any liability of the
Company to any person with respect to any grant under this Plan shall be based
solely upon contractual obligations that may be
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created hereunder. No such obligation of the Company shall be deemed to be
secured by any pledge of, or other encumbrance on, any property of the Company.
10.3 Rules of Construction. Headings are given to the articles and
sections of this Plan solely as a convenience to facilitate reference. The
masculine gender when used herein refers to both masculine and feminine. The
reference to any statute, regulation or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
10.4 Governing Law. The laws of the State of Tennessee shall apply to all
matters arising under this Plan, to the extent that federal law does not apply.
10.5 Compliance With Section 16 of the Exchange Act. With respect to
persons subject to section 16 of the Exchange Act, transactions under this Plan
are intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the Exchange Act, including the minimum six-month holding
period for options granted by delegates of the Committee pursuant to Section
4.3. To the extent any provision of this Plan or action by Committee fails to
so comply, it shall be deemed null and void to the extent permitted by law and
deemed advisable by the Committee.
10.6 Amendment. The Board may amend or terminate this Plan at any time;
provided, however, an amendment that would have a material adverse effect on the
rights of a Participant under an outstanding Option is not valid with respect to
such Option without the Participant's consent.
10.7 Effective Date of Plan. This Plan shall be effective on the date of
its adoption by the Board, and Options may be granted hereunder at any time
after such adoption.
8
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EXECUTION PAGE
IN WITNESS WHEREOF, the undersigned officer has executed this Plan on this
the 23rd day of April, 1997.
PMT SERVICES, INC.
By: /s/ Gregory S. Daily
---------------------
Its: President
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Exhibit 10.3(a)
LOAN AGREEMENT
--------------
THIS AGREEMENT, made and entered into this 2nd day of April, 1997, in
Nashville, Tennessee, by and between Battleship, LLC, a Tennessee limited
liability company (hereinafter referred to as "Borrower"), and PMT Services,
Inc., a Tennessee corporation whose address for the purposes of this Agreement
is Two Maryland Farms, Suite 200, Brentwood, Tennessee 37027 (hereinafter
referred to as "Lender").
RECITALS:
A. Borrower desires to acquire from Green Hills Commons, LLC, a
Tennessee limited liability company ("Seller") a parcel of land located in
Nashville, Davidson County, Tennessee, more particularly described on Exhibit A
attached hereto and by reference incorporated herein (the "Land"), together with
the improvements now and hereafter to be located thereon, known generally as the
Green Hills Office Building (the "Building").
B. Borrower shall cause a portion of the existing building to be
demolished and the removal, disposal, or containment of asbestos materials from
the existing building (collectively, the "Demolition") and Borrower shall cause
a wall to be constructed and repaired along the side of the Building adjacent to
the Demolition and renovate the lobby areas (the "Reconstruction").
C. Borrower and Seller shall cause a multi-level parking garage
facility consisting of five (5) levels and having the capacity for the parking
of not less than 1,178 vehicles to be constructed on the portion of the Land
described as the "Parking Garage Area" on Exhibit A hereto (the "Parking
Facility").
D. Lender has agreed to loan to Borrower amounts not to exceed
Thirteen Million Three Hundred Thousand and 00/100 Dollars ($13,300,000.00) (the
"Loan"), the proceeds of the Loan to be used by Borrower to finance the
acquisition of the Property, the construction of the Parking Facility and the
Reconstruction (the acquisition of the Property, the construction of the Parking
Facility, and the Reconstruction are hereinafter collectively referred to as the
"Project" and the Building, Parking Facility and other improvements located or
to be located on the Land are hereinafter collectively referred to as the
"Improvements"); and the Land and the Improvements are hereinafter collectively
referred to as the "Property").
E. Lender has also agreed to loan to Borrower amounts not to exceed
Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) for a working
capital line of credit expiring September 5, 1998 to be used by Borrower to pay
operating and other approved expenses ("Working Capital Loan"). After the
expiration and payment of the Working Capital Loan, Lender has agreed to loan to
Borrower amounts not to exceed Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00) for a nine (9) year structural repair revolving loan
<PAGE>
to be used by Borrower to pay extraordinary repair and maintenance expenses with
respect to the Improvements ("Structural Repair Revolving Loan").
F. The Loan, Working Capital Loan, and Structural Repair Revolving
Loan may hereinafter be referred to collectively as the "Loans."
ARTICLE 1
---------
THE LOAN
--------
1.1 Loan Purpose - The proceeds of the Loan, together with
approximately $415,000.00 in equity to be provided by the Borrower (the
"Borrower's Equity"), shall be used to fund approved costs related to the
Project in accordance with the terms of this Agreement. Total disbursements
under the Loan shall not at any time exceed 97% of approved costs incurred by
Borrower related to the Project. No proceeds of the Loan, or any portion of the
Borrower's Equity, are to be utilized by Borrower for any purpose other than
paying for the approved costs of constructing the Project. To the extent Lender
reasonably determines that the Borrower's Equity plus the proceeds available
under the Loan are not sufficient to complete the Project, Borrower shall,
within ten (10) days, following notice from Lender, deposit with Lender such
amount as Lender deems reasonably necessary to complete the Project in
accordance with the plans and specifications approved by Lender. Lender shall
have no obligation to advance funds under the Loan until such deposit is made.
1.2 Form and Amount - The Loan is to be in the form of a non-
revolving commitment with aggregate advances, subject to the conditions set
forth herein, to be the lesser of (a) Thirteen Million Three Hundred Thousand
and 00/100 Dollars ($13,300,000.00), or (b) the total costs actually incurred by
Borrower and approved by Lender for funding pursuant to the terms of this
Agreement less the Borrower's Equity.
1.3 Interest Rate on Loan - Interest on so much of the principal
balance as may be outstanding from time to time shall accrue at the rate of five
percent (5%) per annum. Said interest rate is to be computed on a 365-day year
basis.
1.4 Repayment Schedule - Interest on so much of the outstanding
principal balance as may be outstanding from time to time shall be due and
payable monthly on the fifth day of each consecutive month, the first such
payment being due and payable on May 5, 1997 and the fifth day of each
consecutive month thereafter through August 5, 1998. Thereafter, principal and
interest shall be due and payable monthly on the fifth day of each month
beginning September 5, 1998 in the amount required to amortize the outstanding
balance of the loan in equal monthly installments over twenty-five (25) years.
A final payment in the amount of all remaining principal and interest shall be
due and payable on August 5, 2007 (the "Maturity Date"), unless extended
pursuant to 1.6 below.
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<PAGE>
1.5 Additional Principal Payments - The following additional
principal payments shall be due and payable with respect to the Loan:
a. Any funds in excess of $100,000.00 remaining after August 5,
1999 in the escrow account established for tenant improvements pursuant to
Paragraph 8.5 hereof shall, at the request of Lender, be applied to the
repayment of the outstanding principal balance of the Loan within five (5) days
of the date of such request.
b. Any refund to Borrower of the tenant improvement allowance paid by
Borrower to Lender pursuant to the terms of the Lease shall be applied to the
repayment of the outstanding principal balance of this Note. Such principal
payment shall be due and payable on the date such refund is paid to Borrower.
c. Annual cash flow ("Annual Cash Flow") in excess of the sum of (i)
One Hundred Thousand and 00/100 Dollars ($100,000.00); (ii) the outstanding
principal balance of the Structural Repair Revolving Loan and (iii) the amount
required to increase the balance of the Structural Reserve Fund to $250,000
("Excess Cash Flow") shall be applied to reduce the principal balance of the
Loan. Annual Cash Flow shall mean all cash receipts ("Cash Receipts") of
Borrower less all cash expenses ("Cash Expenses") of Borrower during a 12-month
period. Cash Expenses shall not include any payments to members of Borrower,
including payments to any persons related to such members or to entities
controlled or owned by Borrower, except for payments pursuant to a management
contract approved by Lender or other disbursements approved by Lender. Annual
Cash Flow shall be measured for each consecutive 12-month period ("Cash Flow
Year") during the term of the Loan. The first Cash Flow Year shall commence on
the first day of the first full month of the Lease, as defined in Paragraph
6.26, and shall end on the last day of the first full 12 months of the Lease.
Borrower shall deliver to Lender an annual statement (the "Annual Cash Flow
Report") within 45 days of the end of each Cash Flow Year in form and substance
satisfactory to Lender containing a summary in the form of Exhibit B setting
forth Cash Receipts, Cash Expenditures and Annual Cash Flow during such year.
The first One Hundred Thousand and 00/100 Dollars ($100,000.00) of Annual Cash
Flow may be disbursed by Borrower without restriction 15 days after Borrower has
delivered the Annual Cash Flow Report to Lender ("Cash Flow Disbursement Date"),
provided Lender has not delivered written objection to the Annual Cash Flow
Report to Borrower prior to the Cash Flow Disbursement Date. If Lender delivers
such objections to Borrower, Borrower shall revise the Annual Cash Flow Report
as reasonably requested by Lender within 10 days of the receipt of such
objection and such revised Report shall be deemed to be the Annual Cash Flow
Report. Annual Cash Flow in excess of One Hundred Thousand and 00/100 Dollars
($100,000.00) shall be disbursed in the following order:
i. To the payment of any outstanding indebtedness on the
Structural Repair Revolving Loan;
3
<PAGE>
ii. To fund a reserve account established by Borrower to fund
extraordinary repair and maintenance expenditures (the "Structural Repair
Reserve Fund") until such fund equals the sum of Two Hundred Fifty Thousand and
00/100 Dollars ($250,000.00);
iii. To the repayment of the outstanding principal balance of the
Loan.
d. All of the payments described in c. i., ii, and iii. shall be due
and payable on the fifth day of the month following the month in which the
Annual Cash Flow Report is required to be delivered to Lender.
1.6 Maturity of Loan - The Loan shall mature and be due and payable
in full on the Maturity Date. To the extent the Borrower is not in default
under the Loan, and if Lender exercises its right to extend the term of the
Lease, as defined in Paragraph 6.26, then the Maturity Date shall be
automatically extended to the expiration date of the Lease.
1.7 Optional Prepayment - The Borrower shall have the right to prepay
the Loan in whole or in part at any time without prepayment penalty or premium.
1.8 Loan Subject to Offset Provided in Lease - The payment required
to be made by Lender to Borrower as required pursuant to the third sentence of
Paragraph 7.3 of the Lease shall be accomplished by an offset or credit of the
amount of such required payment against the same amount of principal
indebtedness outstanding under the Loan. Such offset shall be effected on the
date such required payment is due and payable.
ARTICLE 2
---------
THE WORKING CAPITAL LOAN
------------------------
2.1 Loan Purpose - The proceeds of the Working Capital Loan shall be
used to pay operating deficits and other approved expenses in connection with
the Property.
2.2 Form and Amount - The Working Capital Loan is to be in the form
of a revolving commitment up to a maximum amount of Two Hundred Fifty Thousand
and 00/100 Dollars ($250,000.00).
2.3 Interest Rate on Working Capital Loan - Interest on so much of
the principal balance as may be outstanding from time to time shall accrue at
the rate of five percent (5%) per annum. Said interest rate is to be computed
on a 365-day year basis.
2.4 Repayment Schedule - Interest on so much of the outstanding
principal balance of the Working Capital Loan as may be outstanding from time to
time should be due and payable monthly on the fifth day of each consecutive
month, the first such payment being due and payable on May 5, 1997 and the fifth
day of each consecutive month thereafter through
4
<PAGE>
August 5, 1998. A final payment in the amount of all remaining principal and
interest shall be due and payable on September 5, 1998 (the "Maturity Date of
the Working Capital Loan").
2.5 Optional Prepayment - The Borrower shall have the right to reduce
the outstanding balance of the Working Capital Loan to zero at any time without
prepayment penalty or premium and without prejudice to Borrower's right to
request additional advances during the term of the Working Capital Loan.
2.6 Disbursements - The Borrower's request for disbursement of
proceeds from the Working Capital Loan shall be made at least five (5) days
before the requested advance. Disbursement of proceeds from the Working Capital
Loan shall be subject to submission by Borrower of such additional information
as Lender may reasonably require.
ARTICLE 3
---------
STRUCTURAL REPAIR REVOLVING LOAN
--------------------------------
3.1 Loan Purpose - The proceeds of the Structural Repair Revolving
Loan shall be used to fund approved extraordinary repair and maintenance
expenses with respect to the Improvements.
3.2 Form and Amount - The Structural Repair Revolving Loan is to be
in the form of a revolving commitment with a maximum outstanding balance of Two
Hundred Fifty Thousand and 00/100 Dollars ($250,000.00).
3.3 Advances - Advances shall not be made on the Structural Repair
Revolving Loan until after the Maturity Date of the Working Capital Loan and
only after the Working Capital Loan has been paid in full. Furthermore, advances
shall not be made on the Structural Repair Revolving Loan until the Borrower has
drawn all available funds from the Structural Repair Reserve Fund described in
Article 4 below.
3.4. Interest Rate on Loan - Interest on so much of the principal
balance as may be outstanding from time to time shall accrue at the rate of five
percent (5%) per annum. Said interest rate is to be computed on a 365-day year
basis.
3.5 Repayment Schedule - Interest on so much of the outstanding
principal balance of the Structural Repair Revolving Loan as may be outstanding
from time to time shall be due and payable monthly on the fifth day of each
consecutive month, the first such payment being due and payable on October 5,
1998 and the fifth day of each consecutive month thereafter through July 5,
2007. A final payment in the amount of all remaining principal and interest
shall be due and payable on August 5, 2007 (the "Maturity Date of the Structural
Repair Revolving Loan").
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<PAGE>
3.6 Optional Prepayment - The Borrower shall have the right to reduce
the outstanding balance of the Structural Repair Revolving Loan to zero at any
time without prepayment penalty or premium and without prejudice to Borrower's
right to request additional advances during the term of the Structural Repair
Revolving Loan.
3.7 Disbursements - The Borrower's request for disbursement of
proceeds from the Structural Repair Revolving Loan shall be made at least five
(5) days before the requested advance. Disbursement of proceeds from this
Structural Repair Revolving Loan shall be subject to the submission by Borrower
of such additional information as Lender may reasonably require.
ARTICLE 4
---------
STRUCTURAL REPAIR RESERVE FUND
------------------------------
4.1 Establishment of Fund - Borrower shall pay all Annual Cash Flow
in excess of the sum of (i) $100,000.00 and (ii) the outstanding principal
balance of the Structural Repair Revolving Loan into a bank account in the name
of Lender established at First Union National Bank or another Bank acceptable to
Lender (the "Structural Repair Reserve Fund") until the Structural Repair
Reserve Fund has a balance of $250,000.00. Such payments may be made at any
time by Borrower and shall be made annually on or before the date the additional
principal payments are due on the Structural Repair Revolving Loan.
4.2 Fund Purpose - The amounts in the Structural Repair Reserve Fund
shall be used to fund extraordinary repair and maintenance expenses with respect
to the Improvements.
4.3 Form and Amount - The Structural Repair Reserve Fund shall be an
account funded by Borrower with a maximum funding amount of Two Hundred Fifty
Thousand and No/100 Dollars ($250,000.00). Lender shall be the only party
entitled to withdraw funds from such account.
4.4 Interest on Fund - Any interest on the Structural Repair Reserve
Fund shall be deemed income of Borrower and shall be paid to Borrower. The
Structural Repair Reserve Fund shall be invested as determined by Lender.
4.5 Disbursements - Borrower's request for disbursement of proceeds
from the Structural Repair Reserve Fund shall be made at least five (5) days
before the requested advance. Such request shall include invoices for the
completed repair and maintenance expense to be paid by such disbursement and
such additional information as Lender may reasonably require.
6
<PAGE>
4.6 Security Interest - Borrower hereby grants Lender a security
interest in the Structural Repair Reserve Fund to secure the Loans.
4.7 Default - Upon the occurrence of an Event of Default, Lender may
use the proceeds of the Structural Repair Reserve Fund to pay any repairs or
expenses of the Property or to pay the outstanding balance of the Loans.
ARTICLE 5
---------
LOAN DOCUMENTS
--------------
5.0 Borrower has duly authorized, executed and delivered to Lender or
caused to be duly authorized, executed and delivered the following documents
(hereinafter together with this Agreement collectively referred to as the "Loan
Documents"):
a. Notes - A Note (hereinafter referred to as "Note") of even
date herewith, payable to the order of Lender, in the principal amount of
Thirteen Million Three Hundred Thousand and 00/100 Dollars ($13,300,000.00); a
Working Capital Loan Note of even date herewith, payable to the order of Lender,
in the principal amount of Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00); a Structural Repair Revolving Loan Note of even date herewith,
payable to the order of Lender, in the principal amount of Two Hundred Fifty
Thousand and 00/100 Dollars ($250,000.00) (the Note, Working Capital Loan Note,
and the Structural Repair Revolving Loan Note are hereinafter collectively
referred to as the "Notes").
b. Mortgage - A Deed of Trust and Security Agreement executed
by Borrower (hereinafter the "Mortgage") securing to Lender the repayment of the
Notes and granting Lender (1) a first priority lien on the Property, together
with all appurtenances thereto, (2) a first priority security interest in all of
Borrower's right, title, and interest in and to (i) all supplies and building
materials delivered to the site during completion of the Project, (ii) all
machinery, equipment, furniture, fixtures and furnishings owned by Borrower and
located at the Property during construction of the Project or thereafter,
whether now owned or hereafter acquired, (iii) all of Borrower's attachments,
accessories, parts and special tools used in connection with the Improvements,
(iv) all contract rights, accounts, instruments, documents, chattel paper, and
general intangibles now owned or hereafter acquired by Borrower relating to the
Property, (v) any other form of tangible personal property now owned or
hereafter acquired by Borrower relating to the Property, and (vi) all of the
proceeds therefrom (the "Collateral"). The priority of the lien of the Mortgage
as a good and valid first lien on the Property shall be evidenced by a mortgagee
title insurance policy (ALTA-B) issued by a title company acceptable to Lender.
The policy shall be subject to no exception other than the current year's taxes
and such other exceptions as Lender shall agree to in writing, and specifically
containing no exception for unfiled mechanics', materialmen's, or laborers
liens, matters which would be disclosed by an accurate survey, exception for
parties in possession, or other exceptions not acceptable to counsel for the
Lender. The policy shall show no delinquent taxes or assessments
7
<PAGE>
affecting the Property or any part thereof, and shall specifically insure
pedestrian and vehicular avenues of ingress and egress to and from the Property
and public rights-of-way satisfactory to Lender and its counsel. Such policy
shall include such endorsements as Lender deems necessary and customary for this
type of loan and Project, including, but not limited to, comprehensive,
contiguity and access endorsements. The title policy shall be in the face
amount of the Loan plus $250,000.00. The above-mentioned security interest in
the Collateral shall be perfected to our counsel's satisfaction by the signing
of all financing statements deemed reasonably necessary by our counsel.
c. Assignment of Rentals and Leases - A first priority
collateral, conditional assignment of the landlord's interest in all present and
future leases on the Property from Borrower to Lender (hereinafter referred to
as the "Assignment of Rents"), in form and substance reasonably acceptable to
Lender.
d. UCC Financing Statements - Statements giving notice of and
perfecting, when appropriately filed, the security interest of Lender in all
fixtures and personal property described in the Loan Documents, executed by the
Borrower as necessary to perfect Lender's interest in such fixtures and personal
property (hereinafter referred to as "Financing Statements").
e. Collateral Assignment - A collateral assignment to the
Lender of Borrower's rights under the contracts for the Demolition, Parking
Facility and Reconstruction, the Purchase and Sale Agreement, the Parking
Facility Development Agreement, the Parking Facility Escrow Agreement, the
architect's contract, and Guaranty of Completion and Payment agreements executed
by Rochford Realty and Construction Co., Inc. with respect to the Demolition and
Parking Facility Contracts (the "Collateral Assignment of Contracts") which
shall be in form and substance acceptable to Lender. Agreements consenting to
the Collateral Assignment of Contracts shall be obtained from the Seller and the
contractors under the Parking Facility Contract and the Reconstruction Contract
and the architects who are a party to such contracts.
f. Contractor's Lien Subordination Agreement - A Lien
Subordination Agreement signed by the contractors under the Demolition,
Reconstruction and Parking Facility Construction Contracts, subordinating any
lien rights of such contractors to the rights of Lender under the Mortgage.
g. Certificate Regarding Hazardous Substances - A certificate
regarding hazardous substances in favor of the Lender executed by the Borrower
in form and substance satisfactory to Lender.
h. Guaranty and Suretyship Agreement. A Guaranty and
Suretyship Agreement executed by Mark McDonald, William Oldacre and Tom Newton,
providing for joint and several liability, in form and substance acceptable to
Lender in the amount of $150,000.00, and a Guaranty and Suretyship Agreement
executed by John Rochford and Ed Cooper, providing
8
<PAGE>
for joint and several liability, in form and substance acceptable to Lender in
the amount of $150,000.00. The individuals executing such Guaranty and
Suretyship Agreements may collectively be referred to as the "Guarantors."
i. Other Documents - Such other documents or instruments as
Lender deems necessary to evidence or secure the Loan.
ARTICLE 6
---------
CONDITIONS PRECEDENT
--------------------
6.0 The following are conditions precedent to the Lender's obligation
to close the Loan and/or fund any monies from the Loan, pursuant to a draw
request submitted by the Borrower in accordance with the terms of this
Agreement. Borrower's compliance with each condition set forth herein must be
approved by the Lender. Lender reserves the right to waive or postpone
compliance with any or all of such conditions from time to time, provided that
nothing contained herein shall obligate Lender to waive or postpone compliance
with any of the following conditions precedent prior to disbursing any monies
from the Loan.
6.1 Survey - Delivery to Lender prior to Closing, of a current as-
built survey of the Property, in form and substance acceptable to Lender,
prepared and certified by a duly registered land surveyor acceptable to Lender.
Following completion of construction of the Demolition, Reconstruction and
Parking Facility, Borrower shall deliver to Lender an updated as-built survey of
the Project, which shall be in form and substance acceptable to Lender, and
shall be prepared and certified by a duly registered land surveyor acceptable to
Lender.
6.2 Title Insurance - Delivery to Lender, prior to Closing, of the
binding commitment of a title insurance company acceptable to Lender to issue a
mortgagee title insurance policy in the form described in paragraph 5. b.
hereof.
6.3 Loan Documents - Execution and delivery, at Closing of the Loan
Documents.
6.4 Financial Statements - Delivery to Lender, prior to Closing, of
current financial statements, for the Borrower and the Guarantors, which shall
be in form and substance acceptable to Lender.
6.5 Opinion Letter - Delivery to Lender, at Closing, of a favorable
written opinion of Borrower's counsel in form and substance satisfactory to
Lender.
6.6 Plans and Specifications - Delivery to Lender, prior to Closing,
of two (2) copies of the final plans and specifications for the Project, which
shall be initialled by the Borrower, the general contractor(s), and the
architect(s) for the Project (hereinafter referred to
9
<PAGE>
as "Plans and Specifications"), together with evidence that the Plans and
Specifications have been approved by all governmental agencies of the city,
county, state and utility districts having jurisdiction over the Property, the
Improvements, the construction of the Improvements or over any utility services
serving the Property. Borrower shall deliver copies to Lender of all material
revisions to the Plans and Specifications as the same are completed.
6.7 Approval of Plans and Specifications - Approval of the Plans and
Specifications by Lender, as well as delivery to Lender of satisfactory evidence
that (i) the Plans and Specifications as prepared and as to be constructed meet
all applicable governmental regulations and requirements, including, without
limitation, the provisions of the Americans with Disabilities Act, and (ii) all
necessary governmental approvals and authorizations related to the Plans and
Specifications have been obtained, including a building permit and any other
permits or approvals deemed reasonably necessary by the Lender.
6.8 Architects Contracts - Delivery to Lender, prior to Closing, of a
copy of each architect's contract between Borrower or Seller and the architect
for the Reconstruction, which shall be in the current AIA form and shall be
otherwise approved by Lender.
6.9 Construction Contracts - Delivery to Lender, prior to Closing, of
a copy of each construction contract for the Demolition, Reconstruction, and
Parking Facility, providing for completion of construction at a date reasonably
satisfactory to Lender and at a guaranteed maximum cost that is reasonably
satisfactory to Lender. The construction contracts shall be in the current AIA
form or shall be otherwise acceptable to Lender. Additionally, the performance
of the contractors under the contracts for the Demolition and construction of
the Parking Facility shall be guaranteed by Rochford Realty and Construction
Co., Inc. as evidenced by Guaranty of Completion and Payment agreements in form
satisfactory to Lender. Borrower's rights under the Guaranty of Completion and
Payment agreements shall be assigned to Lender pursuant to the Collateral
Assignment of Contracts.
6.10 Permits - Delivery to Lender, prior to Closing, of copies of all
necessary, building, curb cut, sewer and water tap, and other permits required
for the Project.
6.11 Compliance with Zoning - Delivery to Lender, prior to Closing, of
evidence satisfactory to Lender that the Property is zoned properly for
construction of the Project, as contemplated by the Plans and Specifications.
6.12 Insurance - Delivery to Lender, at Closing, of the following
original policies of insurance (or certified copies), evidencing general
liability, hazard loss, and such other insurance on the Project as may be
required by Lender, including, without limitation, flood insurance, if
necessary. All policies shall contain appropriate mortgagee endorsements, and
shall otherwise be in amount, form and substance acceptable to Lender.
6.13 Licenses - Delivery to Lender, at Closing, of reasonably
satisfactory evidence that the general contractor(s), and the architect(s), are
duly licensed in the State of
10
<PAGE>
Tennessee, and that each such entity possesses all of the necessary licenses and
permits to do business therein.
6.14 Consultant Certification - Delivery to Lender, prior to Closing,
of a letter agreement, in form and substance reasonably acceptable to Lender,
executed by the Borrower, the Lender, and an engineer acceptable to Lender (the
"Consultant"), pursuant to which the Consultant shall (i) complete a front-end
analysis of the Plans and Specifications, and (ii) advise and consult with
Lender on matters related to draw requests. The costs and expenses charged by
the Consultant shall be paid by, and shall be the responsibility of the
Borrower.
6.15 Budget - Delivery to Lender of a finalized budget for the Project
(the "Budget"), containing a construction schedule and showing all signed
contracts to be within the agreed budget amount and supported by a comprehensive
breakdown of all major costs, as well as "soft" costs, such as interest, fees
and insurance premiums, and specifically including a breakdown of costs related
to tenant improvements. The Budget may not be revised without Lender's prior
written approval, except for change orders less than $25,000.00 up to an
aggregate of $100,000.00. Any change order in excess of $25,000.00, in
connection with the Project, must be approved in advance, in writing, by the
Lender.
6.16 Appraisal - Delivery to Lender of an appraisal of the Project, as
completed, which, when reviewed by the Lender, indicates a value of not less
than $15,100,000.00, and is otherwise acceptable to Lender. The costs of the
Appraisal shall be paid by the Borrower.
6.17 Environmental Compliance - Delivery to Lender of proof,
reasonably satisfactory to Lender in all respects, that the Land has not been
used for the storage or disposal of any toxic or hazardous substances and that
the Improvements will be in compliance with all federal, state and local laws,
ordinances, regulations and statutes imposing environmental or ecological
protection restrictions on the Improvements, including without limitation,
delivery to Lender of a Phase I environmental report in form and substance
reasonably acceptable to Lender.
6.18 Soil Test - Delivery to Lender of a soil test report with respect
to the Parking Facility site, in form and substance acceptable to Lender,
6.19 Easement Agreement - Delivery to Lender of an Easement Agreement
with respect to reciprocal parking and access easements and the operation and
maintenance of the Parking Facility executed by Seller and Borrower, in form and
substance satisfactory to Lender.
6.20 Parking Facility Development Agreement - Delivery to Lender,
prior to closing, of a copy of the Parking Facility Development Agreement
executed by Seller and Borrower providing for the construction and equipping of
the Parking Facility, together with the budget for construction of the Parking
Facility.
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6.21 Demolition Escrow Agreement - Delivery to Lender of an escrow
agreement in form and substance satisfactory to Lender requiring the deposit of
funds in an amount satisfactory to Lender to pay for any unpaid portion of the
Demolition, whether such work has been performed or is to be performed.
6.22 Parking Facility Escrow Agreement - An escrow agreement in form
and substance satisfactory to Lender providing for the deposit by Seller and
Borrower of the cost of constructing the Parking Facility, as approved by
Lender. Borrower's share of the cost of building the Parking Facility shall not
exceed Four Hundred Thousand and 00/100 Dollars ($400,000.00).
6.23 Subdivision Plat - Delivery to Lender of a recorded subdivision
plat setting forth the Land as a separate parcel, in form and substance
satisfactory to Lender.
6.24 Engineer's Report - Delivery to Lender of a report certified to
Lender by an engineer acceptable to Lender confirming that the structural
condition of the Building and the Building's mechanical, electrical, plumbing,
and heating and air conditioning systems are in good working order and are
satisfactory for Borrower's intended use.
6.25 Organizational Documents - Delivery to Lender of certified copies
of Borrower's Articles of Organization and Operating Agreement, together with a
Certificate of Existence issued by the Secretary of State of Tennessee and such
resolutions or evidence of authority for Borrower to enter into the Loan
transaction, and naming the party authorized to execute the Loan Documents, all
of which shall be in form and substance acceptable to Lender.
6.26 Lease With Lender - The execution by Lender and Borrower of a
Lease satisfactory to Lender with respect to space in the Building (the
"Lease").
6.27 Additional Documents - Delivery to Lender of such other documents
or information as Lender shall deem reasonably necessary in connection with the
evidencing, securing, or funding of the Loan.
ARTICLE 7
---------
WARRANTIES OF THE BORROWER
--------------------------
7.0 Borrower hereby warrants to Lender as follows:
7.1 Validity of Loan Documents - The Loan Documents are, to the best
of Borrower's knowledge, in all respects legal, valid and binding according to
their terms and grant to Lender a direct, valid and enforceable first lien
security interest in the Property and the personalty located thereon.
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7.2 Priority of Lien on Personalty - No chattel mortgage, bill of
sale, security agreement, financing statement or other title retention agreement
has or will be executed with respect to any personal property or fixture used in
conjunction with the construction, operation or maintenance of the Improvements.
7.3 Conflicting Transactions of Borrower - The consummation of the
transactions hereby contemplated and the performance of the obligations of
Borrower under and by virtue of the Loan Documents will not result in any breach
of, or constitute a default under, any mortgage, security deed, deed of trust,
lease, bank loan or credit agreement, or other agreement to which Borrower is a
party.
7.4 Pending Litigation - There are no actions, suits or proceedings
pending, or to the knowledge of Borrower threatened, against or affecting
Borrower, the Property, or involving the validity or enforceability of any of
the Loan Documents or the priority of the lien thereof, at law or in equity, or
before or by any governmental authority, except actions, suits and proceedings
which are fully covered by insurance or which, if adversely determined, would
not impair the ability of Borrower to perform each and every one of their
obligations under and by virtue of the Loan Documents; further, to the best of
Borrower's knowledge, it is not in default with respect to any order, writ,
injunction, decree or demand of any court or any governmental authority.
7.5 Violations of Governmental Law, Ordinances, or Relations -
Borrower has no knowledge of any violations or notices of violations of any
federal, state or municipal law, ordinance, order or requirements of any
governmental authority or utility district having jurisdiction affecting the
Property, which violations in any way relate to or affect the Property.
7.6 Compliance with Zoning Ordinances and Similar Laws - To the best
of Borrower's knowledge, the Plans and Specifications and construction pursuant
thereto, and the use of the Property contemplated thereby, comply, and will
comply, in all material respects, with all governmental laws and regulations,
and requirements, standards and regulations of appropriate supervising boards of
fire underwriters and similar agencies.
7.7 Environmental Matters - To the best of Borrower's knowledge,
except as set forth in the Phase I Environmental Report delivered to lender, the
Property is as of the date hereof in compliance with all federal, state and
local laws, ordinances, regulations and statutes imposing environmental or
ecological protection restrictions on the Property. Borrower hereby agrees to
comply with all applicable environmental laws and requirements which may arise
during the term of this Loan or any renewal thereof.
7.8 Availability of Utilities - All utility services necessary for
the construction of the Improvements and the operation of the Property for the
intended purpose are available to the Property, including water supply, storm
and sanitary sewer facilities, gas, electric and telephone facilities.
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7.9 Building and Other Permits - Either all grading, building, curb
cut, sewer and water tap, and other permits required for the construction of the
Improvements have been obtained and copies of same have been delivered to
Lender, or, in the event that said permits have not been obtained, they will be
obtained on a timely basis and copies furnished prior to any disbursement under
the Loan.
7.10 Condition of Property - The Property is not now damaged or
injured as a result of any fire, explosion, accident, flood or other casualty.
7.11 Brokerage Commissions - Any brokerage commissions due in
connection with the transaction contemplated hereby have been paid in full and
any such commissions coming due in the future will be promptly paid by Borrower.
Borrower agrees to and shall indemnity Lender from any liability, claims or
losses arising by reason of any such brokerage commissions. This provision
shall survive the repayment of the Loan made in connection herewith and shall
continue in full force and effect so long as the possibility of such liability,
claims or losses exists.
ARTICLE 8
---------
COVENANTS OF BORROWER
---------------------
8.0 Borrower hereby covenants and agrees with Lender as follows:
8.1 Contracts Collaterally Assigned to Lender - With respect to the
contracts collaterally assigned to Lender pursuant to the Collateral Assignment
of Contracts (the "Assigned Contracts"), Borrower agrees (i) to permit no
default under the terms of the Assigned Contracts, (ii) to waive none of the
obligations of the other parties to such contracts, (iii) to do no action which
would relieve any other party from its obligations to construct the Improvements
according to the Plans and Specifications, (iv) to make no amendments to the
Assigned Contracts without the prior written consent of Lender, and (v) to
promptly furnish Lender with an agreement by each contractor under the
demolition contract, reconstruction contract and parking facility contract that,
in the event of default by Borrower under the terms of any of the Loan
Documents, the applicable contractor will, at the request of Lender, continue to
perform pursuant to the subject contract until completion of construction
contemplated by such contract, provided the contractor is reimbursed in
accordance with the existing construction contract for all such services
rendered. Notwithstanding the foregoing, any single change order for less than
Twenty-Five Thousand and 00/100 Dollars ($25,000.00) shall not require Lender's
written consent unless and until all change orders under such particular
construction contract exceed in the aggregate One Hundred Thousand and 00/100
Dollars ($100,000.00), after which all change orders with respect to such
construction contract shall require Lender's prior written consent.
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8.2 Collection of Insurance Proceeds - To cooperate with Lender in
obtaining for Lender the benefits of any insurance or other proceeds lawfully or
equitably payable to it in connection with the transactions contemplated hereby
and the collection of any indebtedness or obligation of Borrower to Lender
incurred hereunder (including the payment by Borrower of the expense of any
independent appraisal on behalf of Lender in case of a fire or other casualty
affecting the Property).
8.3 Application of Loan Proceeds - To use the proceeds of the Loan,
Working Capital Loan, and Structural Repair Revolving Loan solely for the
purposes specified in Paragraphs 1.1, 2.1, and 3.1 hereof, and such incidental
costs relative to such construction as may be approved from time to time in
writing in advance by Lender.
8.4 Expenses - To pay all reasonable costs of closing the Loan and
all expenses of Lender with respect thereto, including but not limited to, legal
fees of Lender's counsel, advances, recording expenses, surveys, intangible
taxes, other recording taxes, expenses of foreclosure (including reasonable
attorney's fees) and similar items, and to allow all closing papers, Loan
Documents and other legal matters to be subject to the approval of Lender's
counsel.
8.5 Commencement and Completion of Construction - To commence
construction of the Improvements within thirty (30) days from the date of this
Agreement to pursue diligently the construction of the Improvements or cause all
parties responsible for the construction of any portion of the Improvements
pursuant to the Assigned Contracts to complete construction of the Improvements,
and to supply such monies and to perform such duties as may be necessary to
complete the construction of the Improvements pursuant to the Plans and
Specifications and in full compliance with all terms and conditions of the Loan
Documents, with the Project to be completed within six (6) months from the date
of this Agreement, except tenant improvements in the Building which must be
finished on or before August 5, 1999. If the tenant improvements have not been
completed by the day thirty days prior to the first regularly scheduled
principal and interest payment under the Loan, then Borrower may make a draw
upon the Loan in the amount of the remaining tenant improvement allowance up to
the budgeted amount. If such remaining tenant improvement funds relate to the
Lease then Borrower shall pay such funds to Lender pursuant to the Lease. If
such tenant improvement funds relate to other space in the Building such funds
shall be deposited in an escrow account to be pledged to Lender to secure the
Loans.
8.6 Right of Lender to Inspect Property - Lender and its
representatives and agents shall have the right, but not a duty, to enter upon
the Property and to inspect the Improvements and all material to be used in the
construction thereof and the Borrower shall cause all contractors to cooperate
with Lender and its representatives and agents during such inspections;
provided, however, that this provision shall not be deemed to impose upon Lender
any obligation to undertake such inspections. Any such inspections and the
results therefrom shall be solely for the use and benefit of Lender.
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8.7 Correction of Defects - To correct promptly any structural defect
in the Improvements and to correct promptly any departure from the Plans and
Specifications not previously approved by Lender or allowed pursuant to 8.1
hereof, provided Borrower has been notified of any such defect or departure and
has not promptly undertaken correction thereof. The advance of any proceeds of
the Loan shall not constitute a waiver of Lender's right to require compliance
with this covenant.
8.8 Additional Documents - To furnish to Lender all instruments,
documents, initial surveys, certificates, Plans and Specifications, appraisals,
title and other insurance, reports and agreements and each and every other
document and instrument required to be furnished by the terms of this Agreement,
all at Borrower's expense.
8.9 Financial Statements - Borrower and the Guarantors shall furnish
Lender, upon request, but (so long as no uncured Event of Default exists) not
more often than annually, with signed financial statements, which statements
shall be in form and substance acceptable to Lender.
8.10 Restriction on Secondary Financing and Sale of Property - To keep
the Property and the personal property, upon which Lender has a first lien as
evidenced by the Mortgage executed simultaneously herewith, free and clear of
all other encumbrances, liens, mortgages, security interests and secondary
financing, except those approved in writing by Lender. Borrower shall not,
without the prior written consent of Lender, voluntarily or by operation of law,
sell, transfer or convey all or any part of its interest in the Property, or any
portion thereof, except as permitted in the Mortgage.
8.11 Compliance with Mechanic's Lien Law - To comply in every respect,
and insure compliance in every respect of the contractors under the Construction
Contracts, with all the terms and provisions of the Tennessee Mechanic's Lien
Law and court decisions construing and interpreting the same.
8.12 Non-Waiver - That any condition precedent to closing contained
herein or in any Loan Document which is not satisfied at the time required
hereunder shall not be deemed waived unless done so in writing by Lender, and if
the closing occurs, such unfulfilled conditions shall thereafter be and become
conditions precedent to Lender's obligation to advance any further Loan funds.
8.13 Necessary Capital Expenditures - That Borrower will make
necessary capital expenditures to adequately maintain the property, ordinary
wear and tear excepted.
8.14 Updated Environmental Assessments - That upon the request of the
Lender, such request to be made not more than once per year, Borrower, at
Borrower's expense, shall provide the Lender with a current updated
environmental assessment of the Property.
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ARTICLE 9
---------
METHOD AND CONDITIONS OF DISBURSEMENT OF LOAN PROCEEDS
------------------------------------------------------
9.1 Draw Request - At such time as Borrower shall desire to obtain,
subject to the other requirements hereof, a disbursement of any portion of the
proceeds of the Loan, Borrower shall complete, execute and deliver to Lender a
request for an advance in the form of the Draw Request to be supplied by Lender,
and simultaneously deliver a copy thereof to the Construction Consultant. The
Construction Consultant shall not be required to review non-construction items.
9.2 Disbursements -
a. No disbursement of the Loan will be made until after the
Borrower's Equity requirements are complied with.
b. Except for advances for the acquisition of the Property and
approved soft costs, disbursements under the Loan will be made on a percentage
of completion basis, with the percentage of completion to be determined by
Lender in its sole discretion.
c. Lender shall not be required to make any disbursement of the
Loan more than once each month nor at any time Borrower is in default with
respect to any of the terms and conditions hereof or the other Loan Documents
(for purposes of disbursement of the Loan, any default shall not require notice
and shall include elapse of time, or both, which would constitute a default).
d. Disbursement of the Loan shall be subject to the submission by
Borrower of the Draw Request accompanied by such additional documents as Lender
shall deem necessary, including evidence showing:
(i) the value of that portion of the Project completed to date;
(ii) that there are no outstanding claims for labor, materials, and
fixtures which have an invoice date more than thirty (30) days prior to the date
of the Draw Request, unless there is some dispute as to the validity of the
claims;
(iii) that no outstanding claims for labor, materials and fixtures
have been paid more than thirty (30) days past their respective invoice dates,
unless there has been some dispute as to the validity of the claims;
(iv) that there are no uninsured liens outstanding against the
Project, except for the Mortgage, unfiled mechanics' and materialmen's liens,
and other inchoate liens for property taxes not yet due;
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(v) that Borrower has complied with all of Borrower's obligations
under the Loan Documents;
(vi) that all construction completed prior to the date of the
request for advance under the Draw Request, has been completed in accordance
with the Plans and Specifications; and
(vii) that all funds previously disbursed by Lender have been applied
directly to the cost of construction of the Project or such other incidental
costs as Lender shall have approved.
(viii) that after disbursement of the requested Draw Request the total
funds disbursed under the Loan shall not exceed 97% of the costs expended by
Borrower with respect to the Property.
e. Under no circumstances shall funds be advanced for stored
materials unless Lender receives (i) satisfactory evidence that Borrower owns
such materials free and clear of any liens, (ii) evidence of insurance thereof
against theft, fire and vandalism; and (iii) evidence the materials are stored
in a separate and secured area.
9.3 Conditions Precedent to Each Disbursement - At no time and in no
event shall Lender be obligated to disburse funds:
a. in excess of the amount recommended by the Architect;
b. if any event of default, as delineated in Article VII
hereof, shall have occurred;
c. if in Lender's judgment the progress of construction is not
satisfactory to complete the construction by the deadline set forth in Paragraph
6.5 hereof;
d. if in the opinion of Lender the estimated remaining cost of
the construction in accordance with the Plans and Specifications materially
exceeds the remaining undisbursed committed portion of the Loan proceeds, and
Borrower has not posted sufficient additional funds with the Lender;
e. if the Property shall have been damaged by fire or other
casualty and Lender shall not have received insurance proceeds sufficient, in
the judgment of Lender, to effect the restoration of the Improvements in
accordance with Plans and Specifications and to permit the completion of the
Improvements on or before the completion date set out in Paragraph 6.5 hereof,
or has not received from Borrower sufficient additional funds or adequate
assurance thereof; or
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f. in excess of the line item budget amount budgeted for the items
proposed to be paid, except Lender agrees that Borrower may use savings under
one line item of the budget to fund overruns on other line items; provided,
however, Borrower shall not be able to use savings in the amount of the tenant
improvements required to be made by Borrower under the Lease for overruns on
other line items.
9.4 Retainage - Five percent (5%) of each loan disbursement
applicable to construction costs under the Construction Contracts, or such
greater amount as set forth in any such contract, shall be withheld by Lender.
Retainage amounts under the construction contract shall be disbursed only upon
compliance with the following requirements (in addition to the requirements for
all other disbursements):
a. Receipt by Lender of satisfactory evidence of the completion
of the Project in accordance with Plans and Specifications approval of such
completion by local governmental authorities and receipt of a certificate of
substantial completion issued by the Architect.
b. Receipt by Lender of a satisfactory "as-built" blueprint of
survey reflecting the location of the Improvements on the land in accordance
with the Plans and Specifications.
c. Receipt by Lender of the requisite affidavit of the
Contractor sufficient in the reasonable opinion of Lender's counsel to dissolve
any mechanics' and materialmen's liens (inchoate or otherwise) affecting title
to the Property.
9.5 Notice. Frequency and Place of Disbursements - At the option of
Lender:
a. the aforesaid Draw Request shall be submitted to Lender at
least five (5) business days prior to the date of the requested advance;
b. disbursements shall be made no more frequently than monthly; and
c. all disbursements shall be made at the office of Lender in
Brentwood, Tennessee, or at such other place as Borrower may designate.
9.6 Deposit of Funds Advanced - Each disbursement hereunder shall be
made by Lender's depositing of such disbursement to Account No. ______________
of Borrower at _____________ Bank, said disbursement amount to be withdrawn and
used solely for the payment of bills for labor, materials and fixtures used or
to be used in construction of the Project, or otherwise in accordance with
budgeted items as approved by the Lender.
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9.7 Advances Do Not Constitute a Waiver - No advance of proceeds of
the Loan shall constitute a waiver of any of the conditions of Lender's
obligation to make further advances; nor, in the event Borrower is unable to
satisfy any such condition, shall any such waiver have the effect of precluding
Lender from thereafter declaring such inability to be an event of default under
Article 8 hereof.
9.8 Joint Advances to Borrower and Contractors - Lender may, at
Lender's option, make any or all advances for the benefit of any Contractor or
third party payable jointly to such party and Borrower or, at Lender's option,
solely to such party, and the execution of this Agreement by the Borrower shall,
and hereby does, constitute an irrevocable direction and authorization to so
advance the funds. No further direction and authorization from Borrower shall
be necessary to warrant such joint and/or direct advances to such parties and
all such advances shall satisfy pro tanto the obligations of Lender hereunder
and shall be secured by the Mortgage and other security instruments as fully as
if made to Borrower, regardless of the disposition thereof by such parties.
ARTICLE 10
----------
DEFAULTS
--------
10.0 The following shall be deemed to be defaults hereunder:
10.1 Loan Default - Borrower's failure to pay the Loans or any other
obligation now or hereafter owed to Lender by Borrower when due according to the
terms of the Notes and as required herein; or
10.2 Breach of Covenant - Borrower breaches or fails to perform,
observe or meet any covenant or condition made in any of the Loan Documents;
10.3 Breach of Warranty - Any warranties made or agreed to be made by
Borrower under any of the Loan Documents shall prove to be false or misleading;
or
10.4 Filing of Liens Against the Property - Any lien for labor,
material, taxes or otherwise shall be filed against the Property and not removed
of record or bonded over in a manner wholly satisfactory to Lender within thirty
(30) days of being filed of record; or
10.5 Receiver for the Property - The appointment of a receiver for the
Property; or
10.6 Bankruptcy - Borrower commits any act of bankruptcy; or any
proceedings under bankruptcy laws or other laws of general application to
creditors is brought by or against Borrower and, in the case of an involuntary
proceeding, is not dismissed within ninety (90) days; or
20
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10.7 Cross Default - There occurs a default, or an Event of Default,
under the other Loan Documents, which is not cured within any applicable cure
period.
10.8 Event of Default - The occurrence of any default described in
Paragraphs 10.3, 10.4, 10.5, or 10.6 shall be an "Event of Default." The
occurrence of any default under Paragraph 10.1 shall be an Event of Default
following the passage of ten (10) days following written notice from Lender of
the occurrence of said default, provided such default is not cured during such
cure period. The occurrence of any other default described in this Article X
not specifically set forth in this paragraph shall be an Event of Default
following the passage of thirty (30) days following written notice from Lender
of the occurrence of said default, provided such default is not cured during
such cure period (provided that in the case of any such default that cannot with
diligence be cured within such thirty (30) day period, if Borrower shall proceed
promptly to cure the same and thereafter shall prosecute the curing of such
default with diligence and continuity, then the time within which such default
may be cured shall be extended for up to an additional sixty (60) days (for a
total of ninety (90) days).
ARTICLE 11
----------
REMEDIES OF LENDER
------------------
11.1 Remedies - Upon the occurrence of any one or more of the Events
of Default set out in Article X hereof, Lender shall at its option be entitled,
in addition to, and not in lieu of, the remedies provided for in the Loan
Documents or otherwise provided by law:
a. to declare all amounts outstanding immediately due and
payable and terminate any obligation to continue funding further disbursements;
provided, however, Lender shall not be entitled to accelerate payments due under
the Loan if Lender has failed to pay all regularly scheduled installments of
Base Rent and Additional Rent as required in the Lease. After Lender has
accelerated the payments due under the Loan, Lender shall not be required to
make any payments under the Lease as a condition to Lender's exercise of any
remedies under the Loan Documents.
b. to enter into possession of the Property, which the Borrower
hereby agrees to vacate immediately upon request;
c. to perform, or cause to be performed, any and all work and
labor necessary to complete the Project in accordance with Plans and
Specifications;
d. to employ security watchmen to protect the Property; and
e. at its option, to disburse that portion of the proceeds of
the Loan not previously disbursed (including any retainage) to the extent
necessary to complete construction of the Project in accordance with Plans and
Specifications, and if the completion
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requires a larger sum than the remaining undisbursed portion of the Loan, to
disburse such additional funds, all of which funds so disbursed by Lender shall
be deemed to have been disbursed to Borrower and shall be secured by the
Mortgage and other security instruments.
f. To pursue such other remedies as are available under the
Loan Documents, or are otherwise available to Lender at law or equity.
11.2 Remedies Cumulative - It is agreed by Borrower that the remedies
herein granted are cumulative to the other remedies provided for in the other
Loan Documents and provided by law.
ARTICLE 12
----------
GENERAL COVENANTS AND CONDITIONS
--------------------------------
12.1 Rights of Third Parties - All conditions of the obligations of
Lender hereunder, including the obligation to make advances, are imposed solely
and exclusively for the benefit of Borrower and its successors. No other person
shall have standing to require satisfaction of such conditions in accordance
with their terms, or be entitled to assume that Lender will make advances in the
absence of strict compliance with any or all the terms and conditions thereof
and no other person shall, under any circumstances, be deemed to be a
beneficiary of such conditions, any and all of which may be freely waived in
whole or in part by Lender at any time and from time to time if in its sole
discretion it deems it desirable to do so. In particular, Lender makes no
representations and assumes no obligations as to third parties concerning the
quality of the construction by Borrower of the Project or the absence therefrom
of defects. In this connection, Borrower agrees to and shall indemnify Lender
from any liability, claims or losses resulting from the disbursement of the loan
proceeds or from the condition of the Property whether related to the quality of
construction or otherwise, and whether arising during or after the term of the
Loans, excepting in all events any loss, cost, damage or expense arising as a
result of the Lender's gross negligence or willful wrongdoing. This provision
shall survive the repayment of the Loans and shall continue in full force and
effect so long as the possibility of such liability, claims or losses exists.
12.2 Sign - Borrower shall, upon request of Lender, at Borrower's
expense, erect one sign of a size and at a location acceptable to Lender and
Borrower on the Property during construction, giving notice of Lender's
commitment for financing.
12.3 Assignment - Borrower may not assign this Agreement or any of its
rights or obligations hereunder nor any part of the proceeds of the Loans
without the prior written consent of Lender, which consent may be unreasonably
withheld; any attempt at such assignment shall be void.
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12.4 Successors and Assigns Included in Parties - Whenever in this
Agreement one of the parties hereto is named or referred to, the heirs, legal
representatives, successors and assigns of such parties shall be included and
all covenants and agreements contained in this Agreement by or on behalf of the
Borrower or by or on behalf of Lender shall bind and inure to the benefit of the
respective heirs, legal representatives, successors and assigns, whether so
expressed or not.
12.5 Headings - The headings of the sections, paragraphs and
subdivisions of this Agreement are for the convenience of reference only, are
not to be considered a part hereof and shall not limit or otherwise affect any
of the terms hereof.
12.6 Non-Waiver - Failure of Lender to exercise any right hereunder
shall not be deemed a waiver of said right, future rights or any other right
hereunder, nor shall it be deemed an admission of liability by Lender.
12.7 Invalid Provisions to Affect No Others - If fulfillment of any
provision hereof or any transaction related hereto at the time performance of
such provisions shall be due, shall involve transcending the limit of validity
prescribed by law, then ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity; and if any clause or provisions herein
contained operates or would prospectively operate to invalidate this Agreement
in whole or in part, then such clause or provisions only shall be held for
naught as though not herein contained, and the remainder of this Agreement shall
remain operative and in full force and effect.
12.8 Number and Gender - Whenever the singular or plural number or
the masculine, feminine or neuter gender is used herein, it shall equally
include the other.
12.9 Amendments - Neither this Agreement nor any provision hereof
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.
12.10 Law Governing - This Agreement and the Loan Documents have been
negotiated, made, executed and delivered in Nashville, Tennessee, and the
parties agree that Tennessee law shall for all purposes govern this transaction
and the construction, interpretation and enforcement of the underlying
agreements.
12.11 Notices - Any notice permitted or required under this Agreement
shall be in writing, signed by the party giving such notice and shall be
delivered personally, or delivered by a nationally recognized overnight carrier,
or sent by registered or certified mail, to the other party at the address set
forth below each party's signature to this Agreement, or at such other address
as hereafter may be supplied in writing. The date of delivery or the date which
is three (3) days after the date of mailing, as the case may be, shall be the
date of such notice.
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IN WITNESS WHEREOF, Borrower and Lender have hereunto affixed their
signatures on the day and date first above written.
PMT SERVICES, INC. BATTLESHIP, LLC
BY: /s/ Clay Whitson BY: /s/ Mark McDonald
--------------------------- --------------------------------
TITLE: CFO TITLE: Chief Manager
------------------------ -----------------------------
"LENDER" "BORROWER"
Address for notice purposes: Address for notice purposes:
Two Maryland Farms 200 31st Avenue North
Suite 200 Suite 200
Brentwood, Tennessee 37027 Nashville, Tennessee 37203
Attn: Clay Whitson Attn: Mark McDonald
24
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Exhibit 10.3(b)
NOTE
$13,300,000.00 Nashville, Tennessee
April 2, 1997
FOR VALUE RECEIVED, Battleship, LLC, a Tennessee limited liability
company (the "Borrower") promises to pay to the order of PMT Services, Inc., a
Tennessee corporation (the "Lender") the sum of Thirteen Million Three Hundred
Thousand and No/100 Dollars ($13,300,000.00) with interest at the rate of five
percent (5%) per annum under the terms and conditions of this promissory note
(the "Note"). Interest shall be computed for the actual number of days elapsed
on the basis of a year consisting of 365 days. Interest on so much of the
outstanding principal balance as may be outstanding from time to time shall be
due and payable monthly on the fifth day of each consecutive month, the first
such payment being due and payable on May 5, 1997 and the fifth day of each
consecutive month thereafter through August 5, 1998. Thereafter, principal and
interest shall be due and payable monthly on the fifth day of each month
beginning September 5, 1998 in the amount required to amortize the outstanding
balance of this Note in equal monthly installments over twenty-five (25) years
(the "Monthly Payment Amount"). A final payment in the amount of all remaining
principal and interest shall be due and payable on August 5, 2007 (the "Maturity
Date") unless extended pursuant to the terms and conditions of the Loan
Agreement of even date between Borrower and Lender (the "Loan Agreement").
The defined terms in the Loan Agreement are used herein with the same
meaning. All of the terms, definitions, conditions and covenants of the Loan
Agreement are expressly made a part of this Note by reference in the same manner
and with the same effect as if set forth herein at length.
The following additional principal payments shall be due and payable
with respect to this Note:
a. Any refund to Borrower of the tenant improvement allowance paid by
Borrower to Lender pursuant to the terms of the Lease shall be applied to the
repayment of the outstanding principal balance of this Note. Such principal
payment shall be due and payable on the date such refund is paid to Borrower.
b. Any funds in excess of $100,000.00 remaining after August 5, 1999
in the escrow account established for tenant improvements pursuant to Paragraph
8.5 of the Loan Agreement shall, upon the demand of Lender, be applied to the
repayment of the outstanding principal balance of the Loan within five (5) days
of the date of such demand.
<PAGE>
c. Annual cash flow ("Annual Cash Flow") in excess of the sum of (i)
One Hundred Thousand and 00/100 Dollars ($100,000.00); (ii) the outstanding
principal balance of the Structural Repair Revolving Note and (iii) the amount
required to increase the balance of the Structural Reserve Fund to $250,000
("Excess Cash Flow") shall be applied to reduce the principal balance of this
Note. Annual Cash Flow shall mean all cash receipts ("Cash Receipts") of
Borrower less all cash expenses ("Cash Expenses") of Borrower during a 12-month
period. Cash Expenses shall not include any payments to members of Borrower,
including payments to any persons related to such members or to entities
controlled or owned by Borrower, except for payments pursuant to a management
contract approved by Lender or other disbursements approved by Lender. Annual
Cash Flow shall be measured for each consecutive 12-month period ("Cash Flow
Year") during the term of the Note. The first Cash Flow Year shall commence on
the first day of the first full month of the Lease to be entered into between
Borrower and Lender regarding space in the Building (the "Lease"), and shall end
on the last day of the first full 12 months of the Lease. Borrower shall
deliver to Lender an annual statement (the "Annual Cash Flow Report") within 45
days of the end of each Cash Flow Year in form and substance satisfactory to
Lender containing a summary setting forth Cash Receipts, Cash Expenditures and
Annual Cash Flow during such year. The first One Hundred Thousand and 00/100
Dollars ($100,000.00) of Annual Cash Flow may be disbursed by Borrower without
restriction 15 days after Borrower has delivered the Annual Cash Flow Report to
Lender ("Cash Flow Disbursement Date"), provided Lender has not delivered
written objection to the Annual Cash Flow Report to Borrower prior to the Cash
Flow Disbursement Date. If Lender delivers such objections to Borrower,
Borrower shall revise the Annual Cash Flow Report as reasonably requested by
Lender within 10 days of the receipt of such objection and such revised report
shall be deemed to be the Annual Cash Flow Report.
A principal payment in the amount of the Excess Cash Flow shall be due
and payable on the fifth day of the month following the month in which the
Annual Cash Flow Report is required to be delivered to Lender.
Following the Borrower's payment of any of the principal payments
required under paragraph a above the Lender shall recalculate the Borrower's
Monthly Payment Amount as of the second payment date following the prepayment of
any such principal amount (the "Reamortization Date"). The Borrower's revised
monthly payment amount (the "Revised Monthly Payment Amount") shall be the
amount required to amortize the remaining principal balance of this Note in
equal monthly installments over the Remaining Amortization Period. The
"Remaining Amortization Period" shall equal the number of months remaining
between the Reamortization Date and May 2023. The Lender will notify the
Borrower of the Revised Monthly Payment Amount within ten days of the
Reamortization Date.
Both principal and interest due on this Note are payable in Nashville,
Tennessee, at par in lawful money of the United States of America, in the office
of the Lender. Borrower shall pay Lender a late charge equal to 2% of any
payment which is past due for a period of 10 or more days.
<PAGE>
This Note is secured by (i) a Deed of Trust and Security Agreement of
even date herewith filed in the Register's Office of Davidson County, Tennessee
(the "Security Agreement"); (ii) a Loan Agreement of even date herewith between
Borrower and Lender (the "Loan Agreement"); (iii) an Assignment of Rents and
Leases of even date herewith between Borrower and Lender; (iv) Guaranty and
Suretyship Agreements; and (v) all other documents or instruments executed by
Borrower in connection with the Loan Agreement. The documents described in the
foregoing clauses (i)-(v) and all other documents evidencing, securing or in any
way relating to the indebtedness evidenced by this Note are herein referred to
collectively as the "Loan Documents".
The privilege is reserved to prepay the indebtedness evidenced by this
Note, in whole or in part, at any time or times without penalty. All prepayments
shall be applied to the latest maturing principal installments.
In the event there is an Event of Default under any of the Loan
Documents, then the entire unpaid principal sum evidenced by this Note, together
with all accrued interest, shall, at the option of any holder, without notice,
become due and payable forthwith, and shall thereafter bear interest until paid
at the highest rate of interest permitted to be charged under the laws in effect
from time to time. Failure of the holder to exercise this right of accelerating
the maturity of the debt, or indulgence granted from time to time, shall in no
event be considered as a waiver of said right of acceleration or stop the holder
from exercising said right.
Except as expressly set forth in the Loan Documents, all persons or
entities now or at any time liable, whether primarily or secondarily, for the
payment of the indebtedness hereby evidenced, for themselves, their heirs, legal
representatives and assigns, waive demand, presentment for payment, notice of
dishonor, protest, notice of protest, and diligence in collection and all other
notices or demands whatsoever with respect to this Note or the enforcement
hereof, and consent that the time of said payments or any part thereof may be
extended by the holder hereof and assent to any substitution, exchange, or
release of collateral permitted by the holder hereof, all without in any wise
modifying, altering, releasing, affecting, or limiting their respective
liability.
The term obligor, as used in this Note, shall mean all parties, and
each of them, directly or indirectly obligated for the indebtedness that this
Note evidences, whether as principal, maker, endorser, surety, guarantor or
otherwise.
The undersigned will pay, on demand, any attorney's fees and related
expenses that the holder incurs (i) in collecting or attempting to collect the
indebtedness evidenced by this Note (ii) in enforcing the Loan Documents
securing this Note (iii) in protecting the collateral encumbered by the Loan
Documents or (iv) in defending or asserting the holder's rights in that
collateral.
This obligation is made and intended as a Tennessee contract and is to
be so construed.
<PAGE>
IN WITNESS WHEREOF, this Note has been duly executed by the
undersigned the day and year first above written.
Battleship, LLC, a Tennessee
limited liability company
By: /s/ Mark McDonald
--------------------------------
Name: Mark McDonald
------------------------------
Title: Chief Manager
-----------------------------
<PAGE>
Exhibit 10.3(c)
THIS INSTRUMENT PREPARED BY:
Stephen C. Baker, Esquire MAXIMUM PRINCIPAL INDEBTEDNESS
Waller Lansden Dortch & Davis FOR TENNESSEE RECORDING TAX
511 Union Street, Suite 2100 PURPOSES IS $13,800,000.00.
Nashville, TN 37219
THIS DEED OF TRUST SECURES
OBLIGATORY FUTURE ADVANCES FOR
COMMERCIAL PURPOSES.
DEED OF TRUST AND SECURITY AGREEMENT
THIS DEED OF TRUST AND SECURITY AGREEMENT, securing obligatory future
advances and being for commercial purposes, made and entered into as of the 2nd
day of April, 1997, by and between Battleship, LLC, a Tennessee limited
liability company (the "Grantor"), in favor of Stephen C. Baker, Trustee, of
Nashville, Davidson County, Tennessee (the "Trustee"), for the use and benefit
of PMT Services, Inc., a Tennessee corporation, with an office located at Two
Maryland Farms, Suite 200, Brentwood, Tennessee 37027 (the "Beneficiary");
W I T N E S S E T H:
That for and in consideration of the Secured Indebtedness (as
hereinafter defined), and the sum of Ten Dollars ($10.00), cash in hand paid,
and other valuable considerations, the receipt and legal sufficiency whereof are
hereby acknowledged, and in order to secure the indebtedness and other
obligations of Grantor hereinafter set forth, Grantor does hereby grant,
bargain, sell, convey, assign, transfer, pledge, and set over unto Trustee, and
the successors and assigns of Trustee, all of its right, title, and interest in
respect of the following-described tracts of land located in Davidson County,
Tennessee, and all other interests of Grantor in such land, including without
limitation all estates, easements, rights and improvements relating to, arising
from, or now or hereafter located on such land, together with a security
interest in Grantor's fee ownership and leasehold rights in and to all personal
property, fixtures, equipment, furniture, furnishings, appliances and
appurtenances, including replacements and additions thereto as hereinafter
provided (hereinafter referred to collectively as the "Premises"):
(a) All right, title and interest of Grantor in, under, and to those
certain tracts, pieces, or parcels of land more particularly described in
Exhibit A attached hereto and incorporated herein by reference as if set forth
verbatim (hereinafter referred to as the "Land").
(b) All buildings, structures, and improvements of every nature
whatsoever now or hereafter situated on the Land, and all gas and electric
fixtures, radiators, heaters, engines and machinery, boilers, ranges, lifts,
elevators and motors, plumbing and heating fixtures, carpeting and other floor
coverings, washers, dryers, water heaters, mirrors, mantels,
<PAGE>
air conditioning apparatus, refrigerating plants, refrigerators, cooking
apparatus and appurtenances, window screens, awnings and storm sashes, which are
or shall be attached to said buildings, structures or improvements and all other
furnishings, furniture, fixtures, machinery, equipment, appliances, and other
items of personal property of every kind and nature whatsoever now or hereafter
owned by Grantor and located in, on or about, or used or intended to be used
with or in connection with the use, operation or enjoyment of the Premises,
including all extensions, additions, improvements, betterments, renewals and
replacements, substitutions, or proceeds from a permitted sale of any of the
foregoing, and all building materials and supplies of every kind now or
hereafter placed or located on the Land, all of which are hereby declared and
shall be deemed, to the extent allowable under applicable law, to be fixtures
and accessions to the Land and a part of the Premises as between the parties
hereto and all persons claiming by, through or under them, and which shall be
deemed to be a portion of the security for the indebtedness herein described
(hereinafter referred to as the "Improvements") and to be secured by this Deed
of Trust (hereinafter referred to as the "Deed of Trust"). Specifically
excluded from the foregoing is the equipment and personal property owned by any
tenant leasing the Premises or any portion thereof.
(c) All right, title and interest of Grantor in, under, and to all
easements, rights-of-way, strips and gores of land, vaults, streets, ways,
alleys, passages, sewer rights, waters, water courses, water rights and powers,
minerals, flowers, shrubs, crops, trees, timber, and other emblements now or
hereafter located on the Land or under or above the same or any part or parcel
thereof and all estates, rights, titles, interests, privileges, liberties,
tenements, hereditaments and appurtenances, reversions, and remainders
whatsoever, in any way belonging, relating, or appertaining to the Premises or
any part thereof, or which hereafter shall in any way belong, relate, or be
appurtenant thereto, whether now owned or hereafter acquired by Grantor.
(d) All leases, rents, issues, profits, and revenues of the Premises
from time to time accruing (including without limitation all payments under
leases or tenancies, proceeds of insurance, condemnation payments, tenant
security deposits, and escrow funds), and all of the estate, right, title,
interest, property, possession, claim, and demand whatsoever at law, as well as
in equity, of Grantor of, in, and to the same.
TO HAVE AND TO HOLD the Premises and all parts, rights, members, and
appurtenances thereof, to the use and benefit of Trustee and the successors,
successors-in-title, and assigns of Trustee, forever; and Grantor covenants that
Grantor is lawfully seized and possessed of fee simple ownership of the Land and
the Premises as aforesaid and has good right to convey the same, that the same
are unencumbered except for those matters expressly set forth in Exhibit B
attached hereto and by this reference made a part hereof (the "Permitted
Encumbrances"). Grantor does warrant and will forever defend the title to the
Premises against the claims of all persons whomsoever, subject only to the
Permitted Encumbrances. Capitalized terms not otherwise defined herein shall
have the meaning ascribed to such terms in the Loan Agreement (defined below).
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<PAGE>
But this conveyance is made IN TRUST for the following uses and
trusts, and for no other purposes, to wit:
(a) To secure the payment of indebtedness for borrowed money in the
aggregate principal amount of Thirteen Million Eight Hundred Thousand and No/1OO
Dollars ($13,800,000.00), which amount Beneficiary has advanced, or has
obligated itself to advance, pursuant to the terms of a certain Loan Agreement
dated of even date herewith (the "Loan Agreement"), such indebtedness being
evidenced by three (3) notes of even date herewith, in the respective amounts of
$13,300,000.00, $250,000.00 and $250,000.00 made by Grantor, together with
interest thereon, and any extensions, modifications and/or renewals thereof and
any notes given in payment of any such principal and/or interest (all of which
are herein sometimes collectively referred to as the "Notes"), such Notes being
payable in monthly installments, and being fully due and payable, if not sooner
paid, on August 5, 2007.
(b) To secure (i) all sums expended by Beneficiary for Grantor's
account or benefit pursuant to the terms of this Deed of Trust, the Loan
Agreement, or any other document or instrument evidencing or securing the
indebtedness evidenced by the Notes (the "Loan Documents"), together with
interest at the highest rate permitted by applicable law, and (ii) the faithful
performance of all terms and conditions contained herein.
(c) To secure the payment of all court costs, expenses, and costs
incident to the collection of any indebtedness secured hereby and the
enforcement or protection of the lien of this conveyance, including reasonable
attorneys' fees.
(d) To secure the performance by Grantor of all obligations under the
Loan Documents.
(e) To secure any extensions or renewals of the Notes, together with
all amounts in excess of the principal debt that may be advanced by Beneficiary
from time to time to protect the Premises or the security interest created by
this Deed of Trust, as provided herein, and all such amounts shall have the same
priority over any intervening encumbrances as that priority afforded the
original principal debt. Nothing in this Deed of Trust shall be construed to
obligate Beneficiary to make any renewals or additional loans.
(All of the indebtedness and obligations set forth in (a) through (e)
above are sometimes hereinafter referred to as the "Secured Indebtedness".)
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<PAGE>
GRANTOR HEREBY FURTHER COVENANTS AND AGREES WITH TRUSTEE AND
BENEFICIARY AS FOLLOWS:
ARTICLE 1
Section 1.1. Payment of Indebtedness. Grantor shall pay the Notes
according to the tenor thereof and the remainder of the Secured Indebtedness
promptly as the same shall become due.
Section 1.2. Taxes, Liens, and Other Charges.
(a) Grantor shall pay, or cause to be paid, when due and prior to the
delinquency date thereof, all levies, license fees, permit fees, and other
charges (in each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen) of every character whatsoever (including all penalties
and interest thereon) now or hereafter levied, assessed, confirmed or imposed
on, or in respect of, or that may be a lien upon the Premises, or any part
thereof, or any estate, right, or interest therein, or upon the rents, issues,
income, or profits thereof, and shall submit to Beneficiary such evidence of the
due and punctual payment of all such taxes, assessments, and other fees and
charges as Beneficiary may require. Grantor shall furnish Beneficiary with a
copy of the paid tax receipt evidencing payment of all taxes assessed against
the Premises, such receipt to be forwarded to the Beneficiary on or before the
date when such taxes become delinquent. Grantor shall have the right to contest
such taxes or assessments in good faith, provided Grantor shall, at the request
of Beneficiary, provide Beneficiary with evidence reasonably satisfactory to
Beneficiary that Grantor has set aside sufficient funds to pay the tax
obligation herein contested.
(b) Grantor shall pay, or cause to be paid, when due and prior to the
delinquency date thereof, all taxes, assessments, charges, expenses, costs, and
fees that now or hereafter may be levied upon, or assessed or charged against,
or incurred in connection with, the Notes, the Secured Indebtedness, this Deed
of Trust, or any of the other Loan Documents.
(c) Grantor shall pay, or cause to be paid, on or before the due date
thereof, (i) all premiums on policies of insurance covering, affecting, or
relating to the Premises, as required pursuant to Section 1.3 below; and (ii)
all ground rentals, other lease rentals, and other sums, if any, owing by
Grantor and becoming due under any lease or rental contract affecting the
Premises. Grantor shall submit to Beneficiary such evidence of the due and
punctual payment of all such premiums, rentals, and other sums as Beneficiary
may require.
(d) In the event of the passage of any state, federal, municipal or
other governmental law, order, rule or regulations, subsequent to the date
hereof, in any manner changing or modifying the laws now in force governing the
taxation of deeds of trust or security agreements or debts secured thereby or
the manner of collecting such taxes as adversely to affect Beneficiary, Grantor
will pay any such tax on or before the delinquency date thereof. If Grantor
4
<PAGE>
fails to make such prompt payment or if, in the opinion of Beneficiary
reasonably exercised, any such state, federal, municipal, or other governmental
law, order, rule, or regulation prohibits Grantor from making such payment or
would penalize Grantor if Grantor makes such payment, or if, in the opinion of
Beneficiary, the making of such payment might result in the imposition of
interest beyond the maximum amount permitted by applicable law, then the entire
balance of the Secured Indebtedness and all interest accrued thereon, at the
option of Beneficiary, shall become immediately due and payable, and shall be
repaid by Grantor with interest thereon (which shall accrue at the Note Rate
without imposition of the Default Rate set forth in the Notes), within one
hundred twenty (120) days following demand for payment.
(e) Grantor shall not suffer or permit any mechanics', materialmen's,
laborers', statutory, or other liens to be created against the Premises, which
are not removed by bond or otherwise, within thirty (30) days of the date on
which such lien is filed in the public records.
Section 1.3. Insurance.
(a) Grantor shall procure for, deliver to, and maintain for the
benefit of Beneficiary during the term of this Deed of Trust, original (or
certified copies of) paid-up insurance policies issued by insurance companies
approved by Beneficiary (having an A rating or better), in such amounts, in form
and substance, and with such expiration dates as are acceptable to Beneficiary
and containing non-contributory standard mortgagee clauses, their equivalent, or
a satisfactory mortgagee loss payable endorsement in favor of Beneficiary; and
all such policies shall provide for thirty (30) days written notice to
Beneficiary prior to cancellation. The following types of insurance covering
the Premises and the interest and liabilities incident to the ownership,
possession and operation thereof shall be provided:
(i) fire and extended coverage insurance against loss or damage by
fire, lightning, windstorm, hail, explosion, riot, or riot attending a strike if
reasonably available, civil commotion, aircraft, vehicles, smoke, vandalism and
malicious mischief, and such other hazards as under good insurance practices
from time to time are insured against for properties of similar character and
location, with a full replacement cost endorsement, and a deductible acceptable
to Beneficiary;
(ii) comprehensive general liability insurance naming Beneficiary as
an additional insured, in amounts satisfactory to Beneficiary; and,
(iii) such other insurance on the Premises or any replacements or
substitutions therefor and in such amounts as may from time to time be
reasonably required by Beneficiary against other insurable casualties that at
the time are commonly insured against in the case of premises similarly situated
(including, without limitation, flood insurance as provided for in the Loan
Agreement), due regard being given to the height and type of the improvements,
their construction, location, use and occupancy, or any replacements or
substitutions therefor.
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<PAGE>
(b) As between Grantor and Beneficiary, Beneficiary is hereby
authorized and empowered to adjust or compromise any loss under any insurance
policies maintained pursuant to this paragraph 1.3, and to collect and receive
the proceeds from any such policy or policies. Each insurance company is hereby
authorized and directed to make payment for all such losses (excluding general
liability claims) directly to Beneficiary, instead of to Grantor and Beneficiary
jointly. In the event any insurance company fails to disburse directly and
solely to Beneficiary but disburses instead either solely to Grantor or to
Grantor and Beneficiary jointly, Grantor agrees immediately to endorse and
transfer such proceeds to Beneficiary. Upon the failure of Grantor to endorse
and transfer such proceeds as aforesaid, Beneficiary may execute such
endorsements or transfers for and in the name of Grantor and Grantor hereby
irrevocably appoints Beneficiary as Grantor's agent and attorney-in-fact so to
do, which appointment is coupled with an interest. After deducting from said
insurance proceeds all of its expenses incurred in collection and administration
of such sums, including attorney's fees, Beneficiary may apply the net proceeds
or any part thereof, at its option, (i) to the payment of the Secured
Indebtedness, whether or not due and in whatever order Beneficiary elects, (ii)
to the repair and/or restoration of the premises, or (iii) for any other
purposes or objects for which Beneficiary is entitled to advance funds under
this Deed of Trust, all without affecting the lien and security interest created
by this Deed of Trust, and any balance of such moneys then remaining shall be
paid to Grantor or the person or entity lawfully entitled thereto. Beneficiary
shall not be held responsible for any failure to collect any insurance proceeds
due under the terms of any policy regardless of the cause of such failure.
Notwithstanding the foregoing, Beneficiary agrees that so long as (i)
Grantor is not in default hereunder at the time of the insured loss and (ii) no
default exists or occurs under the Lease between Grantor and Beneficiary with
respect to the Premises which will generate sufficient proceeds to pay the
Secured Indebtedness, as determined by Beneficiary, then the Beneficiary will
permit the insurance proceeds to be utilized toward the restoration of the
Premises. Prior to such utilization of the insurance proceeds, Beneficiary must
be provided with (A) a full and complete set of plans and specifications for the
restoration of the Premises, and be provided with (B) a current appraisal
indicating that the value of the Premises following the restoration as
contemplated by such plans and specifications will be of a value at least equal
to the greater of (i) the Premises prior to the loss or (ii) the then
outstanding principal balance of the indebtedness secured hereby, (C) a budget
setting forth in detail the cost of restoring the Premises and (D) all other
items that may be requested by Beneficiary in form and substance satisfactory to
Beneficiary. The plans and specifications and the appraisal must be in a form
and content fully satisfactory to Beneficiary. Beneficiary shall disburse such
insurance proceeds for the purpose of restoration of the Premises on a monthly
basis upon receipt of satisfactory draw requests and inspection reports of an
architect approved by Beneficiary certifying as to the percentage of completion
of the restoration project. Beneficiary shall retain a ten percent (10%)
retainage of all insurance proceeds disbursed hereunder pending the issuance of
a final certificate of substantial completion issued by the inspecting architect
certifying the completion of the restoration of the Premises in accordance with
the approved plans and specifications. The insurance proceeds must be in amount
which is adequate, as determined by Beneficiary, to repair and restore the
Premises, otherwise, the Grantor must deposit with the Beneficiary any shortfall
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<PAGE>
to cover the cost of restoring of the Premises. In the event of a default
hereunder at any time following an insurance loss, Beneficiary may apply all
insurance proceeds then in Beneficiary's possession as a reduction against the
indebtedness secured hereby.
(c) At least fifteen (15) days prior to the expiration date of each
policy maintained pursuant to this paragraph 1.3, a certified copy of a policy
evidencing the renewal or replacement thereof satisfactory to Beneficiary shall
be delivered to Beneficiary. Grantor shall deliver to Beneficiary receipts
evidencing the payment for all such insurance policies and renewals or
replacements. The delivery of any insurance policies hereunder shall constitute
an assignment of all unearned premiums as further security hereunder. In the
event of the foreclosure of this Deed of Trust or any other transfer of title to
the Premises in extinguishment or partial extinguishment of the Secured
Indebtedness, all right, title and interest of Grantor in and to all insurance
policies (other than blanket policies) then in force other than blanket policies
shall pass to the purchaser or Beneficiary, and Beneficiary is hereby
irrevocably appointed by Grantor as attorney-in-fact for Grantor to assign any
such policy to said purchaser or to Beneficiary without accounting to Grantor
for any unearned premiums thereon.
Section 1.4. Monthly Deposits. To secure the payment of the taxes
and assessments referred to in paragraph 1.2 and the premiums on the insurance
referred to in paragraph 1.3, upon the request of the Beneficiary (to be made
only if the Grantor is delinquent in the payment of taxes or insurance or is
otherwise in default hereunder), Grantor shall deposit with Beneficiary, on a
monthly basis, on the due date of each installment due under the Notes, such
amounts as, in the estimation of Beneficiary, shall be necessary to pay such
charges as they become due; said deposits to be held by Beneficiary in a non-
interest bearing account with Beneficiary. The funds in said account shall be
used by Beneficiary to pay current taxes and assessments and insurance premiums
on the Premises as the same accrue and are payable. Payment from said sums for
said purposes shall be made by Beneficiary at its discretion and may be made
even though such payments will benefit subsequent owners of the Premises. Said
deposits shall not be, nor be deemed to be, trust funds, but may be, to the
extent permitted by applicable law, commingled with the general funds of
Beneficiary. If said deposits are insufficient to pay the taxes and assessments
and insurance premiums in full as the same become payable, Grantor will deposit
with Beneficiary such additional sum or sums as may be required in order for
Beneficiary to pay such taxes and assessments and insurance premiums in full.
Upon any Event of Default in the provisions of this Deed of Trust or the Notes,
or any instrument evidencing, securing, or in any way related to the Secured
Indebtedness, Beneficiary may, at its option, apply any money in the fund
resulting from said deposits to the payment of the Secured Indebtedness in such
manner as Beneficiary may elect.
Section 1.5. Condemnation. If all or any portion of the Premises
shall be permanently damaged or taken through condemnation (which term when used
in this Deed of Trust shall include any damage or taking by any governmental or
quasi-governmental authority and any transfer by private sale in lieu thereof),
which materially impacts the use of the Premises as contemplated by the Grantor
at the time this Deed of Trust is executed, then the entire Secured Indebtedness
shall, at the option of Beneficiary immediately become due and
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<PAGE>
payable. Grantor, immediately upon obtaining knowledge of the institution, or
the proposed, contemplated, or threatened institution, of any action or
proceeding for the taking through condemnation of the Premises or any part
thereof (whether temporary or permanent) will notify Beneficiary, and, as
between Grantor and Beneficiary, Grantor and Beneficiary are hereby authorized,
to jointly commence, appear in, and prosecute, through counsel selected by
Beneficiary, in its own or in Grantor's name, any action or proceeding relating
to any condemnation, and to settle or compromise any claim in connection
therewith. All such compensation, awards, damages, claims, rights of action and
proceeds and the right thereto are hereby assigned by Grantor to Beneficiary,
and Beneficiary is authorized, at its option, to collect and receive all such
compensation, awards, or damages and to give proper receipts and acquittances
therefor without any obligation to question the amount of any such compensation,
award, or damages. After deducting from said condemnation proceeds all of its
expenses incurred in the collection and administration of such sums, including
attorneys' fees, Beneficiary may apply the net proceeds or any part thereof, at
its option, (a) to the payment of the Secured Indebtedness whether or not due
and in whatever order Beneficiary elects, (b) to the repair and/or restoration
of the Premises, or (c) for any other purposes or objects for which Beneficiary
is entitled to advance funds under this Deed of Trust, all without affecting the
security interest created by this Deed of Trust, and without extending or
postponing the due date of any installments of the Secured Indebtedness, or
changing the amount of any such installments, and any balance of such moneys
then remaining shall be paid to Grantor or any other person or entity lawfully
entitled thereto. Notwithstanding the foregoing, Beneficiary agrees that, so
long as Grantor is not in default hereunder, to the extent Beneficiary
determines, in Beneficiary's reasonable discretion, that the Premises can be
restored, Beneficiary will allow the condemnation proceeds to be utilized to
restore the Premises, provided Grantor shall comply with the provision of
Section 1.3(b) hereof relating to the conditions which Grantor must meet to
utilize insurance proceeds for repair and restoration. Grantor agrees to execute
such further assignments of any compensation, awards, damages, claims, rights of
action, and proceeds as Beneficiary may require. If, prior to the receipt by
Beneficiary of such award or proceeds, the Premises shall have been sold on
foreclosure of this Deed of Trust, or under the power herein granted,
Beneficiary shall have the right to receive such award or proceeds to the extent
of any unpaid Secured Indebtedness following such sale, with legal interest
thereon, whether or not a deficiency judgment in respect of the Secured
Indebtedness shall have been sought or recovered, and to the extent of
reasonable counsel fees, costs, and disbursements incurred by Beneficiary in
connection with the collection of such award or proceeds. Nothing hereinabove
shall prevent Grantor from seeking to recover damages to its beneficial
interests in the Premises from the condemning authority, provided that no such
recovery shall in any way diminish the award otherwise payable to Beneficiary,
and provided, further, that all proceeds of any such recovery by Grantor shall
be payable to Beneficiary for application against the Secured Indebtedness.
Section 1.6. Care of Premises.
(a) Grantor will keep the buildings, parking areas, roads and
walkways, landscaping, and all other improvements of any kind now or hereafter
erected on the Land or any part thereof in good condition and repair, ordinary
wear and tear excepted, will not commit
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or suffer any waste, and will not do or suffer to be done anything that would or
could increase the risk of fire or other hazard to the Premises or any other
part thereof or that would or could result in the cancellation of any insurance
policy carried with respect to the Premises.
(b) Grantor will not remove, demolish, or alter the structural
character of any improvement located on the Land without the written consent of
Beneficiary other than as provided in the Plans and Specifications.
(c) If the Premises or any part thereof is damaged by fire or any
other cause to an extent exceeding $25,000.00 in any one instance, Grantor will
give immediate written notice thereof to Beneficiary.
(d) Beneficiary or its representative is hereby authorized to enter
upon and inspect the Premises at any time during normal business hours.
(e) Grantor will promptly comply with all present and future laws,
ordinances, rules, and regulations of any governmental authority affecting the
Premises or any part thereof.
Section 1.7. Leases, Contracts, Etc.
(a) As additional collateral and further security for the Secured
Indebtedness, Grantor has assigned to Beneficiary its interest whether now
existing or hereafter arising in any and all space leases and subleases, tenant
contracts, rental agreements, franchise agreements, management contracts,
construction contracts, and other contracts, licenses, and permits now or
hereafter affecting the Premises, or any part thereof, as evidenced by an
Assignment of Rents and Leases of even date herewith, the terms of which are
incorporated herein by reference.
Section 1.8. Security Agreement. With respect to the apparatus,
fittings, fixtures, and articles of personal property referred to or described
in this Deed of Trust, or in any way connected with the use and enjoyment of the
Premises, and all other moneys and instruments held by or on account of the
Grantor, including, without limitation, any funds of Grantor held in escrow to
construct the Parking Facility or in the Structural Repair Reserve Fund, and all
proceeds arising therefrom, this Deed of Trust is hereby made and declared to be
a security agreement pursuant to which Grantor grants to Beneficiary and to
Trustee for the benefit of Beneficiary a security interest in each and every
item of personal property now or hereafter included herein as part of the
Premises, in compliance with the provisions of the Uniform Commercial Code. A
financing statement or statements describing all of said personal property
aforementioned shall be executed by Grantor and appropriately filed. The
remedies for any violation of the covenants, terms, and conditions of the
security agreement contained in this Deed of Trust shall be (i) as prescribed
herein, (ii) as prescribed by general law, or (iii) as prescribed by the
specific statutory provisions now or hereafter enacted and specified in said
Uniform Commercial Code, all at Beneficiary's sole election. Grantor and
Beneficiary agree that the filing of such financing statement[s] in the records
normally having to do with personal property shall not in any way affect the
agreement of Grantor and Beneficiary that everything
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used in connection with the production of income from the Premises or adapted
for use therein or which is described or reflected in this Deed of Trust is, and
at all times and for all purposes and in all proceedings, both legal or
equitable, shall be, regarded as part of the real estate conveyed hereby
regardless of whether (a) any such item is physically attached to the
improvements, (b) serial numbers are used for the better identification of
certain items capable of being thus identified in an Exhibit to this Deed of
Trust, or (c) any such item is referred to or reflected in any such financing
statement[s] so filed at any time. Similarly, the mention in any such financing
statement[s] of the rights in and to (aa) the proceeds of any fire and/or hazard
insurance policy or (bb) any award in eminent domain proceedings for a taking or
for loss of value, or (cc) Grantor's interest as lessor in any present or future
lease or rights to income growing out of the use and/or occupancy of the
Premises, whether pursuant to lease or otherwise, shall not in any way alter any
of the rights of Beneficiary as determined by this instrument or affect the
priority of Beneficiary's security interest granted hereby or by any other
recorded documents, it being understood and agreed that such mention in such
financing statement[s] is solely for the protection of Beneficiary in the event
any court shall at any time hold with respect to the foregoing items (aa), (bb),
or (cc), that notice of Beneficiary's priority of interest, to be effective
against a particular class of persons, must be filed in the Uniform Commercial
Code records.
Section 1.9. Further Assurances: After-Acquired Property. At any time,
and from time to time, upon request by Beneficiary, Grantor will make, execute,
and deliver or cause to be made, executed, and delivered, to Beneficiary and,
where appropriate, cause to be recorded and/or filed and from time to time
thereafter to be rerecorded and/or refiled at such time and in such offices and
places as shall be deemed reasonably necessary or desirable by Beneficiary, any
and all such other and further deeds of trust, security agreements, financing
statements, continuation statements, instruments of further assurance,
certificates, and other documents as, in the opinion of Beneficiary, may be
reasonably necessary or desirable in order to effectuate, complete, or perfect,
or to continue and preserve (a) the obligation of Grantor under the Notes and
under this Deed of Trust, and (b) the security interest created by this Deed of
Trust as a first and prior security interest upon and security title in and to
all of the Premises, whether now owned or hereafter acquired by Grantor. Upon
any failure by Grantor so to do, Beneficiary may make, execute, record, file,
rerecord, and/or refile any and all such deeds of trust, security agreements,
financing statements, continuation statements, instruments, certificates, and
documents for and in the name of Grantor, and Grantor hereby irrevocably
appoints Beneficiary the agent and attorney-in-fact of Grantor coupled with an
interest so to do. The security title of this Deed of Trust will be
automatically attached, without further act, to all after-acquired property
attached to and/or used in the operation of the Premises or any part thereof.
Grantor further agrees upon the request of Beneficiary to execute and deliver
such other deeds of trust and instruments of further assurance as may be
reasonably necessary to effectuate and continue the terms and provisions hereof.
Section 1.10. Expenses. Grantor will pay or reimburse Beneficiary,
upon demand therefor, for all attorneys' fees, and other costs and expenses
incurred by Beneficiary in any suit, action, legal proceeding or dispute of any
kind in which Beneficiary is made a party
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or appears as party plaintiff or defendant, affecting the Secured Indebtedness,
this Deed of Trust or the interest created herein, or the Premises, including,
but not limited to, the exercise of the power of sale contained in this Deed of
Trust, any condemnation action involving the Premises, or any action to protect
the security hereof, and any such amounts paid by Beneficiary shall be added to
the Secured Indebtedness and shall be secured by this Deed of Trust.
Section 1.11. Estoppel Affidavits. Grantor and Beneficiary agree
that, upon ten (10) days, prior written notice from the other party, said party
shall furnish the other party a written statement, duly acknowledged, setting
forth the unpaid principal of, and interest on, the Secured Indebtedness,
stating whether or not any offsets or defenses exist against the Secured
Indebtedness, or any portion thereof, and, if such offsets or defenses exist,
stating in detail the specific facts relating to each such offset or defense.
Section 1.12. Subrogation. To the full extent of the Secured
Indebtedness, Beneficiary is hereby subrogated to the liens, claims, and
demands, and to the rights of the owners and holders of each and every lien,
claim, demand, and other encumbrance on the Premises that is paid or satisfied,
in whole or in part, out of the proceeds of the Secured Indebtedness, and the
respective liens, claims, demands, and other encumbrances shall be, and each of
them is hereby, preserved and shall pass to and be held by Beneficiary as
additional collateral and further security for the Secured Indebtedness, to the
same extent they would have been preserved and would have been passed to and
held by Beneficiary had they been duly and legally assigned, transferred, set
over, and delivered unto Beneficiary by assignment, notwithstanding the fact
that the same may be satisfied and cancelled of record.
Section 1.13. Books, Records, Accounts, and Annual Reports. Grantor
shall keep and maintain or cause to be kept and maintained, at its cost and
expense, and in accordance with generally accepted accounting principles
consistently applied, proper and accurate books, and accounts reflecting all
items of income and expense in connection with the operation of the Premises and
in connection with any services, equipment, or furnishings provided in
connection with the operation of the Premises. Beneficiary, by Beneficiary's
agents, accountants, and attorneys, shall have the right from time to time to
examine such books, records, and accounts at the offices where such books,
records, and accounts are maintained, to make such copies or extracts thereof as
Beneficiary shall desire, and to discuss Grantor's affairs, finances, and
accounts with any officer of Grantor, at such reasonable times as may be
requested by Beneficiary. Grantor shall cause financial statements of the
Grantor, to be provided to Beneficiary in accordance with the provisions of
Paragraph 7.9 of the Loan Agreement.
Section 1.14. Limit of Validity. If from any circumstances
whatsoever, fulfillment of any provision of this Deed of Trust or of the Notes,
at the time performance of such provision shall be due, shall involve
transcending the limit of validity presently prescribed by any applicable usury
statute or any other applicable law, with regard to obligations of like
character and amount, then, ipso facto, the obligation to be filled shall be
reduced to the limit of such validity, so that in no event shall any exaction be
possible under this Deed of Trust or
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under the Notes that is in excess of the current limit of such validity, but
such obligation shall be fulfilled to the limit of such validity. The
provisions of this paragraph 1.14 shall control every other provision of this
Deed of Trust and of the Notes.
Section 1.15. Fixture Filing. This Deed of Trust constitutes a
financing statement filed as a fixture filing under the Uniform Commercial Code
in the official records of the county in which the Premises are located with
respect to any and all fixtures included within the term "Premises".
Section 1.16. Use and Management of Premises. Grantor shall at all
times use its best efforts to cause the Premises to be operated as an office
building or retail space. Grantor shall not be permitted to alter or change the
use of the Premises without the prior written consent of Beneficiary.
Section 1.17. Conveyance of Premises. Grantor shall not sell,
encumber, convey in trust, pledge, convey, lease, transfer, or assign or
otherwise transfer, voluntarily or involuntarily, any or all of its interest in
the Premises or of any interest in Grantor, whether legal or equitable, without
the prior written consent of Beneficiary, and any attempt to do so in violation
of this provision shall be null and void.
Section 1.18. Acquisition of Collateral. Grantor shall not acquire
any portion of the personal property covered by this Deed of Trust subject to
any security interest, conditional sales contract, title retention arrangement,
or other charge or lien taking precedence over the security, title, and lien of
this Deed of Trust.
Section 1.19. Loan Agreement. Simultaneously with the execution and
delivery of the Notes and this Deed of Trust, Grantor and Beneficiary have
entered into the Loan Agreement, providing, among other things, for the
advancement and acceptance of funds subject to certain conditions set forth
therein, up to the full amount of the indebtedness secured hereby. The terms
and conditions of the Loan Agreement are hereby incorporated into this Deed of
Trust, and made a part hereof as fully as those set forth herein. The Loan
Agreement specifically provides, and Grantor hereby recognizes and agrees, that,
upon the happening of certain events set forth in the Loan Agreement,
Beneficiary shall be authorized to declare the indebtedness secured hereby
immediately due and payable. In addition, all other terms and conditions of the
Loan Agreement shall be deemed to be terms and conditions of this Deed of Trust,
and an Event of Default under any provisions of the Loan Agreement, or any other
documents referred to therein, shall constitute and be an event of default under
this Deed of Trust, and shall entitle the Beneficiary to exercise any and all
remedies set forth herein.
ARTICLE 2
Section 2.1. Defaults. The term "default" shall mean the happening of
any one or more of the following events:
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(a) Failure by Grantor to pay any portion of the Secured Indebtedness;
or
(b) Failure by Grantor duly to observe or perform any other term,
covenant, condition, or agreement of this Deed of Trust; or
(c) The breach of any warranty made by Grantor herein; or
(d) The occurrence of an Event of Default under any agreement now or
hereafter evidencing, securing, or otherwise relating to the Notes or the
Secured Indebtedness, including, without limitation, the Loan Agreement, which
is not cured within any applicable cure period; or
(e) If the Grantor shall make a general assignment for the benefit of
creditors, or shall file a voluntary petition in bankruptcy, or shall be
adjudicated a bankrupt or insolvent, or shall file any petition or answer
seeking, consenting to, or acquiescing in reorganization, arrangement,
adjustment, composition, liquidation, dissolution or similar relief, under any
present or future statute, law, or regulation, or shall file an answer admitting
or failing to deny the material allegations of a petition against it for any
such relief or shall admit in writing its inability to pay its debts as they
mature, or if any proceedings against Grantor seeking such relief shall not have
been dismissed or stayed within ninety (90) days after the commencement thereof;
or
(f) If Grantor directly or indirectly transfers, sells, conveys,
encumbers, or mortgages all or any portion of the Premises or any interest
therein without the prior written consent of Beneficiary as required in Section
1.17 above. Such non-permitted transfers shall include, without limitation, any
and all transfers, whether by operation of law or otherwise, including but not
limited to transfers of beneficial interest in trust, execution by Grantor of
any contract to sell the Premises (except as permitted by Section 1.17), or
execution of any lease or other document containing as a part of it, or as a
part of the transaction, any option to purchase the Premises or any part
thereof, or any interest therein; or
(g) Any representation or statement made by Grantor herein or in
connection herewith proving to have been false when made or furnished.
Section 2.2. Event of Default. The occurrence of any default
described in Sections 2.1(d), 2.1(e), 2.1(f), or 2.1(g) shall be an "Event of
Default". The occurrence of any default described in Section 2.1(a) shall be an
Event of Default following the passage of ten (10) days following written notice
from lender of the occurrence of said default, provided such default is not
cured during such cure period. The occurrence of any default described in
Sections 2.1(b) or 2.1(c) shall be an Event of Default following the passage of
thirty (30) days following written notice from Lender of the occurrence of said
default, provided such default is not cured during such cure period (provided
that in the case of any default described in Sections 2.1(b) or 2.1(c) that
cannot with diligence be cured within such thirty (30) day period, if Grantor
shall proceed promptly to cure the same and thereafter shall prosecute the
curing of
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such default with diligence and continuity, then the time within which such
default may be cured shall be extended for up to an additional sixty (60) days
(for a total of ninety (90) days).
Section 2.3. Acceleration of Maturity. If an Event of Default shall
have occurred, then the entire Secured Indebtedness shall, at the option of
Beneficiary, immediately become due and payable without notice or demand, time
being of the essence of this Deed of Trust, and no omission on the part of
Beneficiary to exercise such option when entitled to do so shall be construed as
a waiver of such right.
Section 2.4. Right to Enter and Take Possession.
(a) If an Event of Default shall have occurred but the Premises have
as yet not been foreclosed, Grantor, upon demand of Beneficiary, forthwith shall
surrender to Beneficiary the actual possession of the premises and, to the
extent permitted by law, Beneficiary itself, or by such officers or agents as it
may appoint, may enter and take possession of all the Premises without the
appointment of a receiver or an application therefor, and may exclude Grantor
and its agents and employees wholly therefrom, and have joint access with
Grantor to the books, papers, and accounts of Grantor;
(b) If Grantor shall for any reason fail to surrender or deliver the
Premises or any part thereof after such demand by Beneficiary, Beneficiary may
obtain a judgment or decree conferring upon Beneficiary the right to immediate
possession or requiring Grantor to deliver immediate possession of the Premises
to Beneficiary, and Grantor hereby specifically consents to the entry of such
judgment or decree. Grantor will pay to Beneficiary, upon demand, all expenses
of obtaining such judgment or decree, including reasonable compensation to
Beneficiary and its attorneys and agents, and all such expenses and
compensation, until paid, shall become part of the Secured Indebtedness and
shall be secured by this Deed of Trust;
(c) Upon every such entering upon or taking of possession, Beneficiary
may hold, store, use, operate, manage, and control the Premises and conduct the
business thereof and from time to time (i) make all necessary and proper
maintenance, repairs, renewals, replacements, additions, betterments, and
improvements thereto and thereon and purchase or otherwise acquire additional
fixtures, personalty, and other property; (ii) insure or keep the Premises
insured; (iii) manage and operate the Premises and exercise all of the rights
and powers of Grantor to the same extent as Grantor could in its own name or
otherwise act with respect to the same; and (iv) enter into any and all
agreements with respect to the exercise by others of any of the powers herein
granted to Beneficiary, all as Beneficiary from time to time may determine to be
in its best interest. Beneficiary may collect and receive all the rents,
issues, profits, and revenues from the Premises, including those past due as
well as those accruing thereafter, and, after deducting (aa) all reasonable
expenses of taking, holding, managing, and operating the Premises (including
compensation for the services of all persons employed for such purposes); (bb)
the reasonable cost of all such maintenance, repairs, renewals, replacements,
additions, betterments, improvements, purchases, and acquisitions; (cc) the
reasonable cost of such insurance; (dd) such taxes, assessments, and other
similar charges as Beneficiary at its
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option may pay; (ee) other proper charges upon the Premises or any part thereof;
and (ff) the reasonable compensation, expenses, and disbursements of the
attorneys and agents of Beneficiary, Beneficiary shall apply the remainder of
the moneys and proceeds so received by Beneficiary, first, to the payment of
accrued interest; second, to the payment of deposits required in paragraph 1.4
and to other sums required to be paid hereunder; and third, to the payment of
installments of principal. Anything in this paragraph 2.4 to the contrary
notwithstanding, Beneficiary shall not be obligated to discharge or perform the
duties of a landlord to any tenant or incur any liability as a result of any
exercise by Beneficiary of its rights under this Deed of Trust, other than for
acts of gross negligence or wilful wrongdoing, and Beneficiary shall be liable
to account only for the rents, incomes, issues, and profits actually received by
Beneficiary.
Section 2.5. Performance by Beneficiary. If an Event of Default
shall occur in the payment, performance, or observance of any term, covenant, or
condition of this Deed of Trust, Beneficiary, at its option, may pay, perform,
or observe the same, and all payments made or costs or expenses incurred by
Beneficiary in connection therewith shall be secured hereby and, immediately
shall be repaid by Grantor to Beneficiary without demand, with interest thereon
at the highest rate permitted by law. Beneficiary shall be the sole judge of
the necessity for any such actions and of the amounts to be paid. Beneficiary is
hereby empowered to enter and to authorize others to enter upon the Premises or
any part thereof for the purpose of performing or observing any such defaulted
term, covenant or condition without thereby becoming liable to Grantor or any
person in possession holding under Grantor.
Section 2.6. Receiver. If an Event of Default shall have occurred,
Beneficiary, upon application to a court of competent jurisdiction, shall be
entitled as a matter of strict right, without notice and without regard to the
occupancy or value of any security for the Secured Indebtedness or the solvency
of any party bound for its payment, to the appointment of a receiver to take
possession of and to operate the Premises and to collect and apply the rents,
issues, profits, and revenues thereof. The receiver shall have all of the rights
and powers permitted under the laws of the State of Tennessee. Grantor will pay
unto Beneficiary upon demand all expenses, including receiver's fees, attorneys'
fees, costs, and agent's compensation, incurred pursuant to the provisions of
this paragraph 2.6, and any such amounts paid by Beneficiary shall be added to
the Secured Indebtedness and shall be secured by this Deed of Trust.
Section 2.7. Enforcement.
(a) If the Notes and all other debts secured by this Deed of Trust are
paid with interest when due, and if the agreements contained in this Deed of
Trust are faithfully performed, then this Deed of Trust shall be void, and the
Premises shall be released at the cost of Grantor. Upon the occurrence of an
Event of Default, and at any time thereafter, in addition to the other remedies
provided for herein, the Trustee, or the agent or successor of Trustee, at the
request of the Beneficiary, shall proceed to sell the Premises, or any part of
the Premises, at public venue, to the highest bidder, at the front door of the
Davidson County Courthouse in
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Nashville, Tennessee, for cash, in bar of all statutory and equitable rights of
redemption, homestead, dower, and any and all other rights and exceptions of
every kind, all of which are hereby waived by the Grantor, in order to pay the
Secured Indebtedness, and all expenses of sale and of all proceedings in
connection therewith, including reasonable attorney's fees, provided the Trustee
shall first give the required legal notice of the time, terms and place of sale,
and a description of the Premises to be sold. Grantor shall bear all expenses of
any foreclosure proceeding which is terminated before sale at Grantor's request.
Following any such public sale, Trustee may execute and deliver to the purchaser
a deed of conveyance of the Premises or any part of the Premises in fee simple,
and any statement or recital of fact in such deed in relation to the nonpayment
of money secured hereby, notice by advertisement, sale, or receipt of money,
shall be prima facie evidence of the truth of such statement or recital. In the
event of any sale under this Deed of Trust by virtue of the exercise of the
powers herein granted, or pursuant to any order in any judicial proceeding or
otherwise, the Premises may be sold in its entirety or in separate parcels, and
in such manner or as Beneficiary, in its sole discretion, may elect, and if
Beneficiary so elects, Trustee may sell the personal property covered by this
Deed of Trust at one or more separate sales in any manner permitted by the
Uniform Commercial Code, as enacted in the State of Tennessee, and one or more
exercises of the powers herein granted shall not extinguish or exhaust such
powers, until the entire Premises are sold or the Secured Indebtedness is paid
in full. If the Secured Indebtedness is now or hereafter further secured by any
chattel mortgages, pledges, contracts of guaranty, assignments of lease, or
other security instruments, Beneficiary may, at its option, exhaust the remedies
granted under any of said security instruments, either concurrently or
independently, and in such order as Beneficiary may determine.
Any sale held under the provisions of this Deed of Trust may be
adjourned by the Trustee, or his agent or successors, and reset at a later date
without additional publication, provided that an announcement to such effect is
made at the scheduled place of sale at the time and on the date the sale was
originally set.
(b) Following an Event of Default, Beneficiary may, in addition to and
not in abrogation of the rights covered under subparagraph (a) of this paragraph
2.7, either with or without entry or taking possession as herein provided or
otherwise, proceed by suit or suits in law or in equity, or by any other
appropriate proceeding or remedy (i) to enforce payment of the Notes or the
performance of any term, covenant, condition, or agreement of this Deed of Trust
or any other right, and (ii) to pursue any other remedy available to
Beneficiary, all as Beneficiary, in its sole discretion, shall elect.
Beneficiary shall be entitled to recover judgment as aforesaid either before or
after or during the pendency of any proceedings for the enforcement of the
provisions of this Deed of Trust, and the right of Beneficiary to recover any
such judgment shall not be affected by any entry or sale hereunder, or by the
exercise of any other right, power or remedy for the enforcement of the
provisions of this Deed of Trust, or the foreclosure of the lien hereof; and in
the event of a sale of the Premises, and of the application of the proceeds of
sale as in this Deed of Trust provided, to the payment of the Secured
Indebtedness, Beneficiary shall be entitled to enforce payment of and to receive
all amounts then remaining due and unpaid upon the Notes, and to enforce payment
of all other charges,
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payments and costs due under this Deed of Trust, and shall be entitled to
recover judgments for any portion of the debt remaining unpaid, with interest at
the Default Rate.
Section 2.8. Purchase by Beneficiary. Upon any foreclosure sale or
sale of all or any portion of the Premises under the power herein granted,
Beneficiary may bid for and purchase the Premises and shall be entitled to apply
all or any part of the Secured Indebtedness as a credit to the purchase price.
Section 2.9. Application of Proceeds of Sale. In the event of a
foreclosure or a sale of all or any portion of the Premises, the proceeds of
said sale shall be applied, first, to the expenses of such sale and of all
proceedings in connection therewith, including reasonable fees of the attorney
and trustee (and attorney and trustee fees and expenses shall become absolutely
due and payable whenever foreclosure is commenced); then to insurance premiums,
liens, assessments, taxes, and charges including utility charges advanced by
Beneficiary, and interest thereon; then to payment of the Secured Indebtedness
and accrued interest thereon; and finally the remainder, if any, shall be paid
to Grantor, or to the person or entity lawfully entitled thereto.
Section 2.10. Tenant Holding Over. In the event of any such
foreclosure sale or sale under the power herein granted, Grantor (if Grantor
shall remain in possession) shall be deemed a tenant holding over and shall
forthwith deliver possession to the purchaser or purchasers at such sale or be
summarily dispossessed according to provisions of law applicable to tenants
holding over.
Section 2.11. Waiver of Appraisement, Valuation, Etc. Grantor agrees,
to the full extent permitted by law, that in case of an Event of Default
hereunder, neither Grantor nor anyone claiming through or under Grantor will set
up, claim, or seek to take advantage of any appraisement, valuation, stay,
extension, homestead, exemption, or redemption laws now or hereafter in force,
in order to prevent or hinder the enforcement or foreclosure of this Deed of
Trust, or the absolute sale of the Premises, or the delivery of possession
thereof immediately after such sale to the purchaser at such sale, and Grantor,
for itself and all who may at any time claim through or under Grantor, hereby
waives to the full extent that it may lawfully so do the benefit of all such
laws and any and all right to have the assets subject to the security interest
of this Deed of Trust marshaled upon any foreclosure or sale under the power
herein granted.
Section 2.12. Waiver of Homestead. Grantor hereby waives and
renounces all homestead and exemption rights provided for by the Constitution
and the laws of the United States and of any state, in and to the Premises as
against the collection of the Secured Indebtedness, or any part thereof.
Section 2.13. Waiver of Rights of Redemption. In case of a sale by
the Trustee enforcing the provisions hereof, Grantor waives and surrenders all
right and equity of redemption, statutory right of redemption, or repurchase of
said land and premises and all other exemptions. From the time of the
conveyance of said land under such sale by the delivery of
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a deed to a purchaser, Grantor and all persons holding under it, shall be and
become the tenant or tenants at will of the purchaser, holding from month to
month, with rent payable to such purchaser monthly in advance, commencing with
the day of delivery of said deed.
Section 2.14. Leases. Beneficiary, at its option, is authorized to
foreclose this Deed of Trust subject to the rights of any tenants of the
Premises, and the failure to make any such tenants parties to any such
foreclosure proceedings and to foreclose their rights will not be, nor be
asserted to be by Grantor, a defense to any proceeding instituted by Beneficiary
to collect the sums secured hereby.
Section 2.15. Discontinuance of Proceedings. In case Beneficiary
shall have proceeded to enforce any right, power, or remedy under this Deed of
Trust by foreclosure, entry, or otherwise, and such proceedings shall have been
determined adversely to Beneficiary, then in every such case, the costs and
expenses incurred by Beneficiary in such matter shall not be included in the
Secured Indebtedness, and the Grantor, Trustee, and Beneficiary shall be
restored to their former positions and rights hereunder, and all rights, powers,
and remedies of Beneficiary shall continue as if no such proceeding had
occurred.
Section 2.16. Remedies Cumulative. No right, power, or remedy
conferred upon or reserved to Beneficiary by this Deed of Trust is intended to
be exclusive of any other right, power, or remedy, but each and every such
right, power, and remedy shall be cumulative and concurrent and shall be in
addition to any other right, power, and remedy given hereunder or now or
hereafter existing at law, in equity, or by statute.
Section 2.17. Waiver.
(a) Grantor agrees that no delay or omission by Beneficiary or by any
holder of the Notes to exercise any right, power or remedy accruing upon any
default shall exhaust or impair any such right, power or remedy or shall be
construed to be a waiver of any such default, or acquiescence therein, and every
right, power and remedy given by this Deed of Trust to Beneficiary may be
exercised from time to time and as often as may be deemed expedient by
Beneficiary. No consent or waiver, expressed or implied, by Beneficiary to or
of any breach or default by Grantor in the performance of the obligations of
Grantor hereunder shall be deemed or construed to be a consent or waiver to or
of any other breach or default in the performance of the same or any other
obligations of Grantor hereunder. Failure on the part of Beneficiary to
complain of any act or failure to act or failure to declare an Event of Default,
irrespective of how long such failure continues, shall not constitute a waiver
by Beneficiary of its rights hereunder or impair any rights, powers or remedies
of Beneficiary hereunder. The lien of this Deed of Trust shall remain in full
force and effect during any postponement or extension of the time of payment of
the Secured Indebtedness or any part thereof. The parties hereto shall have the
right by mutual agreement, at any time and from time to time, to renew or extend
the indebtedness secured hereby or any part thereof, or any addition which may
be made thereto, that they may by agreement increase or decrease the rate of
interest, and that they may modify or change any other obligation between the
parties hereto evidenced by this instrument or by the
18
<PAGE>
Notes, and all of such changes, modifications, and extensions shall be binding
upon any junior encumbrancer, voluntary or involuntary; and such changes,
modifications and extensions may be granted without affecting or releasing the
obligation of any subsequent purchaser who may purchase the property herein
described by assuming this indebtedness with Beneficiary's consent; and that any
or all of these changes, modifications, and extensions may be made without
notice to or the consent of any junior encumbrancer or subsequent purchaser.
(b) No act or omission by Beneficiary shall release, discharge,
modify, change or otherwise affect the original liability under the Notes, this
Deed of Trust or any other obligation of Grantor or any subsequent purchaser of
the Premises or any part thereof, or any maker, cosigner, endorser, surety, or
guarantor, preclude Beneficiary from exercising any right, power, or privilege
herein granted or intended to be granted in the Event of Default then made or of
any subsequent Event of Default, or alter the lien of this Deed of Trust except
as expressly provided in an instrument or instruments executed by Beneficiary.
Without limiting the generality of the foregoing, Beneficiary may (i) grant
forbearance or an extension of time for the payment of all or any portion of the
Secured Indebtedness, (ii) take other or additional security for the payment of
any of the Secured Indebtedness, (iii) waive or fail to exercise any right
granted herein or in the Notes, (iv) release any part of the Premises from the
security interest or lien of this Deed of Trust or otherwise change any of the
terms, covenants, conditions, or agreements of the Notes or this Deed of Trust,
(v) consent to the filing of any map, plat, or replat affecting the Premises,
(vi) consent to the granting of any easement or other right affecting the
Premises, (vii) make or consent to any agreement subordinating the security
title or lien hereof, or (viii) take or omit to take any action whatsoever with
respect to the Notes, this Deed of Trust, the Premises, or any document or
instrument evidencing, securing or in any way related to the Secured
Indebtedness, all without releasing, discharging, modifying, changing, or
affecting any liability of Grantor or precluding Beneficiary from exercising any
such right, power, or privilege or affecting the lien of this Deed of Trust. In
the event of the sale or transfer by operation of law or otherwise of all or any
part of the Premises, Beneficiary, without notice, is hereby authorized and
empowered to deal with any such vendee or transferee with reference to any of
the terms, covenants, conditions, or agreements hereof, as fully and to the same
extent as it might deal with the original parties hereto and without in any way
releasing or discharging any liabilities, obligations, or undertakings.
Section 2.18. Suits to Protect the Premises. Beneficiary shall have
power to institute and maintain such suits and proceedings as it may deem
expedient (a) to prevent any impairment of the Premises by any acts that may be
unlawful or constitute a default under this Deed of Trust, (b) to preserve or
protect its interest in the Premises and in the rents, issues, profits, and
revenues arising therefrom, and (c) to restrain the enforcement of or compliance
with any legislation or other governmental enactment, rule, or order that may be
unconstitutional or otherwise invalid, if the enforcement of or compliance with
such enactment, rule, or order would impair the security hereunder or be
prejudicial to the interest of Beneficiary.
Section 2.19. Proofs of Claim. In the case of any receivership,
insolvency, bankruptcy, reorganization, arrangement, adjustment, composition, or
other proceeding affecting
19
<PAGE>
Grantor, its creditors, or its property, Beneficiary, to the extent permitted by
law, shall be entitled to file such proofs of claim and other documents as may
be necessary or advisable in order to have the claim of Beneficiary allowed in
such proceedings for the entire amount due and payable by Grantor under this
Deed of Trust at the date of the institution of such proceedings and for any
additional amount that may become due and payable by Grantor hereunder after
such date.
ARTICLE 3
Section 3.1. Successors and Assigns. This Deed of Trust shall inure to
the benefit of and be binding upon Grantor, Trustee, and Beneficiary and their
respective heirs, executors, legal representatives, successors, successors-in-
title, and assigns. Grantor shall have personal liability for the full
performance of all covenants to be performed by it. Whenever a reference is made
in this Deed of Trust to "Grantor", "Trustee", or "Beneficiary", such reference
shall be deemed to include a reference to the heirs, executors, legal
representatives, successor, successors-in-title, and assigns of Grantor,
Trustee, or Beneficiary, as the case may be.
Section 3.2. Terminology. All personal pronouns used in this Deed of
Trust, whether used in the masculine, feminine, or neuter gender, shall include
all other genders; the singular shall include the plural, and vice versa. Titles
and Articles are for convenience only and neither limit nor amplify the
provisions of this Deed of Trust, and all references herein are to Articles,
paragraphs, or subparagraphs of this Deed of Trust unless specific reference is
made to Articles, paragraphs, or subparagraphs of another document or
instrument.
Section 3.3. Severability. If any provisions of this Deed of Trust
or the application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Deed of Trust and the
application of such provisions to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.
Section 3.4. Conflict of Terms. In the event of any conflict in terms
between this Deed of Trust and any other instrument given to evidence or secure
the Secured Indebtedness, the provisions of this Deed of Trust shall govern.
Section 3.5. Applicable Law. This Deed of Trust shall be
interpreted, construed, and enforced according to the laws of the State of
Tennessee.
Section 3.6. Notices. Any and all notices, elections, or demands
permitted or required under this Deed of Trust shall be in writing, signed by
the party giving such notice election, or demand, and shall be delivered
personally, or sent by registered or certified mail, or nationally recognized
overnight courier to the other party at the address set forth below, or at such
other address as hereafter may be supplied in writing. The date of personal
delivery or the date which is three (3) days after the date of mailing or
deposit for delivery, as the case may
20
<PAGE>
be, shall be the date of such notice, election, or demand. For the purposes of
this Deed of Trust:
The address of Grantor is: Battleship, LLC
200 31st Avenue North
Suite 200
Nashville, Tennessee 37203
Attn: Mark McDonald
The address of Beneficiary is: PMT Services, Inc.
Two Maryland Farms, Suite 200
Brentwood, TN 37027
Attention: Clay Whitson
Section 3.7. Assignment. This Deed of Trust is assignable by
Beneficiary, and any assignment hereof by Beneficiary shall operate to vest in
the assignee all rights and powers herein conferred upon and granted to
Beneficiary.
Section 3.8. Time of the Essence. Time is of the essence with
respect to each and every covenant, agreement, and obligation of Grantor under
this Deed of Trust, the Notes, and any and all other instruments now or
hereafter evidencing, securing, or otherwise relating to the Secured
Indebtedness.
Section 3.9. Waiver of Inventory. The necessity of Trustee or any
successor in trust making oath, filing inventory, or giving bond as security for
the execution of this trust, as required by the laws of Tennessee, is hereby
expressly waived.
Section 3.10. Substitution of Trustee. Beneficiary may at any time,
with or without cause and without notice to Trustee or to Grantor, remove the
Trustee herein named and appoint a successor by an instrument in writing
recorded in the same County and State in which this instrument is recorded. The
successor Trustee so appointed shall succeed to all the rights, title, and
powers and be subject to the same obligations, duties, waivers, and immunities
conferred upon the Trustee herein named, and no resignation, evidence of
inability, failure to function, or evidence of absence of the Trustee herein
named shall be required, and such powers of substitution shall continue so long
as any part of the indebtedness secured hereby remains unpaid.
Section 3.11. Environmental Matters. Grantor has executed and
delivered to Beneficiary an Agreement and Indemnification Regarding Hazardous
Substances (the "Indemnification Agreement"), pursuant to which Grantor has made
certain representations, warranties, and indemnifications with regard to
violations of Applicable Environmental Laws, as defined in the Indemnification
Agreement. The terms of the Indemnification Agreement are incorporated herein by
reference, and shall survive the payment of the Secured Indebtedness and/or the
release of this Deed of Trust.
21
<PAGE>
Grantor shall immediately advise Beneficiary in writing of (i) any and
all enforcement, cleanup, remedial, removal, or other governmental regulatory
actions instituted, completed, or threatened, pursuant to any applicable
federal, state, or local laws, ordinances or regulations relating to any
hazardous substances affecting the Premises or Grantor's business operations
thereon which are actually known by Grantor; and (ii) all claims made or
threatened by any third party against Grantor relating to damages, contribution,
costs, recovery, compensation, loss or injury resulting from any hazardous
substances which are actually known by Grantor. Grantor shall immediately
notify Beneficiary of any remedial action taken by Grantor with respect to the
Premises or Grantor's business operations thereon relating to the presence of
hazardous substances.
IN WITNESS WHEREOF, this Deed of Trust has been executed by
Grantor on the day and year first above written.
GRANTOR:
BATTLESHIP, LLC,
a Tennessee limited liability company
By: /s/ MARK MCDONALD
Name: Mark McDonald
Title: Chief Manager
STATE OF TENNESSEE)
COUNTY OF DAVIDSON)
Before me, the undersigned, a Notary Public in and for the County and
State aforesaid, personally appeared Mark McDonald, with whom I am
personally acquainted (or proved to me on the basis of satisfactory evidence),
and who upon oath acknowledged himself to be Chief Manager of Battleship,
LLC, the within named bargainor, a Tennessee limited liability company, and that
he as such Chief Manager being authorized so to do, executed the foregoing
instrument for the purposes therein contained, by signing the name of the
limited liability company by himself as Chief Manager.
Witness my hand and seal, at office in Nashville, Tennessee, this the
2nd day of April, 1997.
/s/ Jeanette L. Ramer
_________________________________
NOTARY PUBLIC
My Commission Expires: 09/18/99
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF PMT SERVICES, INC. FOR THE QUARTER
ENDED APRIL 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> APR-30-1997
<CASH> 4,867,807
<SECURITIES> 68,040,264
<RECEIVABLES> 13,589,579
<ALLOWANCES> 0
<INVENTORY> 1,283,668
<CURRENT-ASSETS> 91,244,320
<PP&E> 8,055,805
<DEPRECIATION> 3,158,777
<TOTAL-ASSETS> 199,564,031
<CURRENT-LIABILITIES> 6,781,497
<BONDS> 0
0
0
<COMMON> 380,817
<OTHER-SE> 191,831,717
<TOTAL-LIABILITY-AND-EQUITY> 199,564,031
<SALES> 186,132,223
<TOTAL-REVENUES> 186,132,223
<CGS> 139,133,265
<TOTAL-COSTS> 139,133,265
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 964,814
<INTEREST-EXPENSE> 34,139
<INCOME-PRETAX> 16,431,793
<INCOME-TAX> 6,144,930
<INCOME-CONTINUING> 10,286,863
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,286,863
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0
</TABLE>
