Exhibit 10.1
================================================================================
MASTER PARTICIPATION AGREEMENT
Dated as of January 30, 1998
among
ASSET XVIII HOLDINGS COMPANY, L.L.C., as Lessor
ATRIA COMMUNITIES, INC., as Lessee
and
BANK ONE, KENTUCKY, N.A., as Lender
______________________________________
Lease Financing
for Atria Communities, Inc.
Assisted Living Centers
TABLE OF CONTENTS
Page
----
SECTION 1 DEFINITIONS; INTERPRETATION..................................... 1
SECTION 2 ACQUISITION, CONSTRUCTION AND LEASE; LOANS;
NATURE OF TRANSACTION........................................... 1
SECTION 2.1 Agreement to Acquire, Construct, Fund and Lease........... 1
SECTION 2.2 Funding of Development Costs; Loans and Contribution...... 2
SECTION 2.3 Nature of Transaction..................................... 4
SECTION 2.4 Amounts Due Hereunder and Under Lease and Loan
Agreement......................................................... 4
SECTION 2.5 Controlling Agreements.................................... 5
SECTION 2.6 Permitted Applications of Loan Advances and
Contribution Advances............................................. 5
SECTION 2.7 Covenants Concerning Construction......................... 6
SECTION 3 CONDITIONS PRECEDENT; DOCUMENTS................................. 8
SECTION 3.1 Conditions to the Obligations of the Lessor and the
Lender on the Closing Date........................................ 8
SECTION 3.2 Conditions to the Obligations of the Lessor and the
Lender on each Parcel Closing Date................................ 11
SECTION 3.3 Conditions to Subsequent Fundings......................... 15
SECTION 3.4 Completion Date Conditions................................ 19
SECTION 3.5 Conditions to the Obligations of the Lessee............... 21
SECTION 3.6 Appraisal................................................. 21
SECTION 4 REPRESENTATIONS AND COVENANTS................................... 21
SECTION 4.1 Representations of the Lessee............................. 21
SECTION 4.2 Representations and Covenants of the Lessor............... 24
SECTION 4.3 Covenant of Lender........................................ 25
SECTION 4.4 Tax Treatment............................................. 25
SECTION 5 COVENANTS OF THE LESSEE......................................... 26
SECTION 5.1 Qualification as to Corporate Status...................... 26
SECTION 5.2 Further Assurances........................................ 26
SECTION 5.3 Reporting................................................. 27
SECTION 5.4 Affirmative Covenants of Lessee........................... 28
SECTION 5.5 Financial Covenants of Lessee............................. 29
SECTION 6 TRANSFERS BY LESSOR AND LENDER.................................. 29
SECTION 6.1 Lessor Transfers.......................................... 29
SECTION 6.2 Lender Transfers.......................................... 30
-i-
Page
----
SECTION 7 INDEMNIFICATION................................................. 30
SECTION 7.1 General Indemnification................................... 30
SECTION 7.2 Environmental Indemnity................................... 32
SECTION 7.3 Proceedings in Respect of Claims.......................... 33
SECTION 7.4 General Tax Indemnity..................................... 35
SECTION 7.5 Increased Costs, Etc...................................... 40
SECTION 7.6 End of Term Indemnity..................................... 41
SECTION 7.7 Exculpation............................................... 42
SECTION 7.8 Role of Lender............................................ 43
SECTION 7.9 Lender's Benefits......................................... 43
SECTION 7.10 Lessor's Benefits......................................... 43
SECTION 8 MISCELLANEOUS................................................... 44
SECTION 8.1 Survival of Agreements.................................... 44
SECTION 8.2 Notices................................................... 44
SECTION 8.3 Counterparts.............................................. 45
SECTION 8.4 Amendments................................................ 45
SECTION 8.5 Headings, Etc............................................. 45
SECTION 8.6 Parties in Interest....................................... 45
SECTION 8.7 Governing Law............................................. 46
SECTION 8.8 No Recourse............................................... 46
SECTION 8.9 Expenses.................................................. 46
SECTION 8.10 Severability............................................. 46
SECTION 8.11 Submission to Jurisdiction; Waivers...................... 46
SECTION 8.12 Limitation on Interest................................... 47
SECTION 8.14 Waiver of Consumer Rights................................ 48
APPENDIX I Definitions and Interpretation
APPENDIX II Form of Funding Requisition
APPENDIX III Financial Covenants
EXHIBIT A Form of Lease
EXHIBIT B Form of Loan Agreement
EXHIBIT C Form of Assignment of Lease and Rents
EXHIBIT D Form of Opinion of Counsel to the Lessee (Closing Date)
EXHIBIT E Form of Opinion of Counsel to the Lessor (Closing Date)
EXHIBIT F Form of Mortgage
EXHIBIT G Form of Non-Disturbance and Attornment Agreement
EXHIBIT H Form of Security Agreement and Assignment
EXHIBIT I Form of Opinion of Counsel to the Lessee (Parcel Closing Date)
EXHIBIT J Form of Opinion of Counsel to the Lessor (Parcel Closing Date)
-ii-
EXHIBIT K Form of Architect's Certificate
EXHIBIT L-1 Form of Investment Property Security Agreement
EXHIBIT L-2 Form of Account Control Agreement
EXHIBIT M Form of Limited Guaranty Agreement
-iii-
MASTER PARTICIPATION AGREEMENT
THIS MASTER PARTICIPATION AGREEMENT (this "Participation Agreement"), dated
as of January 30, 1998, is among ASSET XVIII HOLDINGS COMPANY, L.L.C., a
Massachusetts limited liability company, as Lessor, ATRIA COMMUNITIES, INC., a
Delaware corporation, as Lessee, and BANK ONE, KENTUCKY, N.A., a national
banking association, as Lender.
W I T N E S S E T H:
WHEREAS, in accordance with the terms and provisions of this Participation
Agreement, the Lease, the Loan Agreement, the Notes and the other Operative
Documents, (i) the Lessor intends to acquire certain Properties and has agreed
to lease the Properties to the Lessee, (ii) the Lessor and the Lessee wish to
obtain, and the Lender has agreed to provide, funding pursuant to loans in the
aggregate amount of up to $431,992,500 for the acquisition of the Properties ,
and (iii) Lessor has agreed to make Contribution Advances from its own equity
resources in an aggregate sum not to exceed $1,507,500 to pay a portion of the
cost of acquisition of the Properties and the development and construction of
Improvements thereon;
NOW, THEREFORE, in consideration of the mutual agreements contained in this
Participation Agreement and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1
DEFINITIONS; INTERPRETATION
Unless the context shall otherwise require, capitalized terms used and not
defined herein shall have the meanings assigned thereto in Appendix I hereto for
all purposes hereof and the rules of interpretation set forth in Appendix I
hereto shall apply to this Participation Agreement.
SECTION 2
ACQUISITION, CONSTRUCTION AND LEASE; LOANS;
NATURE OF TRANSACTION
SECTION 2.1 Agreement to Acquire, Construct, Fund and Lease.
(a) Property. Subject to the terms and conditions of this
Participation Agreement, on each Parcel Closing Date, (i) the Lessor shall
acquire an interest in the related Parcel of Land and all Improvements thereon,
(ii) the Lessor shall lease such Property to the Lessee pursuant to the Lease
and the related Parcel Lease Supplement and (iii) the Lessee shall lease such
Property from the Lessor pursuant to the Lease and the related Parcel Lease
Supplement.
(b) Additional Improvements. Subject to the terms and conditions of
this Participation Agreement and the other Operative Documents, (i) the Lessee
has agreed, pursuant to the terms of the Lease, to construct and install
Improvements on the Land for the Lessor, (ii) the Lessor has agreed to obtain
funding for all or a portion of the Development Costs of the Leased Property,
(iii) the Lessor has agreed to lease the Improvements as part of the Leased
Property to the Lessee pursuant to the Lease and (iv) the Lessee has agreed to
lease the Improvements from the Lessor pursuant to the Lease.
SECTION 2.2 Funding of Development Costs; Loans and Contribution.
(a) Subject to the terms and conditions of this Participation
Agreement and the Loan Agreement, the Lender has agreed to make two loans to the
Lessor up to the amount of its Loan Commitment in order finance a portion of the
Development Costs of the Leased Property. One loan shall be in an aggregate
principal amount of up to $28,475,000 ("Loan A") and the second loan shall be in
an aggregate principal amount of up to $3,517,500 ("Loan B"). Loan A and Loan B
are hereinafter referred to together as the "Loans."
Subject to the terms and conditions of this Participation Agreement, the
Lessor has agreed to make available to the Lessee Contribution Advances up to
the amount of its Equity Commitment for the payment of Development Costs from
and after the Closing Date through the Commitment Deadline. As provided in
subsection (b) below, the Lender shall from time to time, upon the receipt of a
Funding Requisition from the Lessee, make Loan Advances as requested in such
Funding Requisition, and the Lessor shall from time to time, make Contribution
Advances as requested in such Funding Requisition. Lessor hereby directs the
Lender to make disbursements of each Loan Advance and each Contribution Advance
directly to the Lessee or as otherwise directed in the applicable Funding
Requisition. Lessor will only direct the Lender otherwise if an Event of
Default has occurred and is continuing.
Each Loan Advance shall be allocated between Loan A and Loan B in the same
proportion which the Loan A Commitment or the Loan B Commitment, as the case may
be, bears to the Loan Commitment. Loan A shall (i) be a term loan, (ii) bear
interest as to Loan A Advance from the date such Loan Advance is made in
accordance with Section 2.4 of the Loan Agreement, payable on each Loan Payment
Date, (iii) bear interest as to overdue amounts at the Overdue Rate, (iv) be
repayable as to principal as provided in the Loan Agreement with a final
scheduled Loan Payment Date on the Scheduled Termination Date, (v) be evidenced
by a promissory note ("Note A"), and (vi) have the other terms and conditions as
provided in the Loan Agreement and Note A. Loan B shall (i) be a term loan,
(ii) bear interest as to each Loan B Advance from the date such Loan Advance is
made in accordance with Section 2.4 of the Loan Agreement, payable on each Loan
Payment Date, (iii) bear interest as to overdue amounts at the Overdue Rate,
(iv) be repayable as to principal as provided in the Loan Agreement with a final
scheduled Loan Payment Date on the Scheduled Termination Date, (v) be evidenced
by a promissory note ("Note B"), and (vi) have the other terms and conditions as
provided in the Loan Agreement and Note B. The Contribution shall (i) be in an
amount not to exceed the Equity Commitment, (ii) be repayable in full (subject
to the provisions of Section 15.6 of the
-2-
Lease) on the Scheduled Termination Date, (iii) bear a pre-tax cumulative return
equal to the Contribution Return, and (iv) be subject to such other terms and
conditions as the Lessor and the Lessee shall agree. Under the Lease, the Lessee
agrees to pay the Facility Rent for each Parcel to the Lender as agent and
assignee of the Lessor in respect of the Contribution Return on each Rent
Payment Date after the related Parcel Closing Date.
(b) On the Closing Date, upon the Lessee's satisfaction of the
conditions set forth in Section 3.1 hereof, Lender agrees to make a Loan A
Advance and a Loan B Advance, as the case may be, in the respective amounts
equal to 95.5%, and 4.5% of the amount described in Section 3.1 (g) hereof. On
the Closing Date, the Lessee, acting for itself and on behalf of the Lessor,
shall submit to the Lessor and the Lender one or more Funding Requisitions in
support of a Funding for the Initial Contribution Advance and the Initial Loan
Advance. Each of such Funding Requisitions shall request a Loan Advance and a
Contribution Advance (together a "Funding") for the acquisition cost of one or
more of the Closing Date Properties. The Fundings for the Closing Date
Properties shall occur simultaneously with the Parcel Closing Dates for the
Closing Date Properties, all of which shall occur on the Closing Date.
Beginning with a date at least three Business Days prior to the Parcel Closing
Date for each Property (other than a Closing Date Property), and on any date
thereafter to and including the third Business Day next preceding the Commitment
Deadline, the Lessee, acting for itself and on behalf of the Lessor, shall have
the right to submit to the Lessor and the Lender a Funding Requisition
requesting a Funding for Development Costs related to such Property; provided,
however, that neither the Lender nor the Lessor shall be obligated to honor any
Funding Requisition with respect to any Property as to which the Parcel Closing
Date did not occur prior to January 30, 1999. Each Funding Requisition shall be
addressed jointly to the Lessor and the Lender and be substantially in the form
attached hereto as Appendix II. Each Funding Requisition shall (i) request that
the Lender make a Loan Advance and that the Lessor make a Contribution Advance,
as the case may be, for Development Costs with respect to a Property incurred
and not previously reimbursed or paid, (ii) specify the Property to which it
relates (provided that no Funding shall be made in respect of a Property before
its related Parcel Closing Date), (iii) specify the date not less than three
Business Days later than the delivery of the Funding Requisition on which the
Funding is to be made (the "Funding Date") (provided that if a Funding
Requisition requests a Loan Advance for a Base Rate Loan and the stated Funding
Date therein is not a Loan Payment Date, the Funding Date for the related
Contribution Advance shall be deferred until the next Loan Payment Date), (iv)
specify the respective amounts of the Loan A Advance, Loan B Advance and
Contribution Advance to be made with respect to such Funding, (v) be
irrevocable, and (vi) request a Funding of at least $100,000 or such lesser
amount as shall be equal to the difference between the Total Commitments and the
sum of the outstanding principal balance of the Notes and the Contribution (the
"Remaining Commitments"). Each Funding Requisition shall constitute a
representation and warranty by the Lessee to the Lender and the Lessor that all
the conditions precedent to such Funding have been satisfied, including but not
limited to those contained in Section 3.3 hereof. Notwithstanding anything to
the contrary contained herein, the Funding Date with respect to any Funding
Requisition shall be a Loan Payment Date except that a Funding Requisition which
requests a Loan Advance for a Base Rate Loan may request a Funding Date with
respect to such Loan
-3-
Advance on any Business Day. The Lender and the Lessor hereby severally (but not
jointly) promise and agree that, to the extent of the Remaining Commitments, (i)
upon the receipt by the Lender of a properly completed Funding Requisition and
so long as all conditions precedent to the Lender's obligation to make Loan
Advances shall have been satisfied or waived by the Lender, the Lender shall, on
the Funding Date, make a Loan Advance in an amount equal to the product of the
Funding requested therein multiplied by the Lender Ratio, each in immediately
available funds (for the account of the Lessor) to the Lessee or to such other
Person or Persons as may be specified in such written Funding Requisition, and
(ii) upon the receipt by the Lessor of a properly completed Funding Requisition
and so long as all conditions precedent to the Lessor's obligation to make
Contribution Advances shall have been satisfied or waived by the Lessor, the
Lessor shall, on the Funding Date, make a Contribution Advance in an amount
equal to the product of the Funding requested therein, multiplied by the Equity
Ratio, plus any deferred and unfunded Contribution Advances related to a Funding
which included a Loan Advance for a Base Rate Loan borrowed since the
immediately preceding Loan Payment Date, all in immediately available funds to
Lessee or to such other Person or Persons as may be specified in the applicable
Funding Requisition.
(c) Notwithstanding the foregoing, neither the Lender nor the Lessor
shall be obligated to make an Advance with respect to any Property if the sum of
all Advances made, or deemed to have been made, with respect to such Property
exceeds the appraised value of such Property stated in the appraisal therefor
delivered pursuant to Section 3.2 hereof; provided, however, that,
notwithstanding any other provision hereof, the Lessee shall have up to sixty
(60) days after the Closing Date to deliver to the Lender the required
appraisals for the Closing Date Properties and that, on the Rent Payment Date
immediately following the delivery of said appraisals, the Lessee shall pay to
the Lender, as a prepayment of the Loans, the amount, if any, by which the
aggregate principal amount of the Loans related to the Closing Date Parcels
exceeds 142% of the aggregate Fair Market Sales Value of the Closing Date
Properties as determined in the appraisals but not in any event more than the
Recourse Deficiency Amount for the Leased Property. Furthermore, in no event
shall the aggregate of all Loan Advances in respect of the Loan at any time
outstanding exceed the Loan Commitment, nor shall the Contribution at any time
outstanding exceed the Equity Commitment.
SECTION 2.3 Nature of Transaction. Notwithstanding the provisions of
Section 4.4 and Section 7.4 hereof, each party hereto acknowledges and agrees
that none of the Lessee, the Lender, the Lessor, the Financial Advisor nor any
other Person has made any representations or warranties to such party concerning
the tax, financial, accounting or legal characteristics or treatment of the
Operative Documents and that each party has obtained and relied solely upon the
advice of its own tax, accounting and legal advisors concerning the Operative
Documents and the accounting, tax, financial and legal consequences of the
transactions contemplated therein.
SECTION 2.4 Amounts Due Hereunder and Under Lease and Loan Agreement.
Anything else herein, in the Loan Agreement or elsewhere to the contrary
notwithstanding, it is the intention of the Lessee, the Lessor and the Lender
that, (i) from and after the Parcel
-4-
Closing Date for each Property, the Lessee shall be obligated, pursuant to the
terms of the Lease, to pay Basic Rent in respect of such Property on each Rent
Payment Date in respect of principal, if any, and interest due on the principal
amount of the Loans related to such Property and the Contribution Return on the
amount of the Contribution Advances related to such Property, (ii) if the Lessee
becomes obligated to purchase the Leased Property under the Lease, the sum of
(A) the principal amount of the Notes, all interest thereon and Breakage Costs,
if any, with respect thereto and all other obligations of the Lessee owing to
the Lender under the Operative Documents plus (B) the outstanding Contribution,
all accrued and unpaid Contribution Return prorated to the date of payment,
Lessor's Breakage Costs, if any, and all other obligations of the Lessee owing
to the Lessor under the Operative Documents, shall be paid in full by the
Lessee, (iii) if the Lessee elects to exercise the Purchase Option with respect
to the Leased Property, Lessee shall be obligated to pay the Lease Balance for
the Leased Property in full in accordance with Sections 15.1, 15.3 15.4 and 15.5
of the Lease, (iv) upon an Event of Default resulting in an acceleration of the
Lessee's obligation to purchase the Leased Property under the Lease, the amounts
then due and payable by the Lessee under the Lease shall include the sum of (A)
all amounts necessary to pay in full the Loans, accrued interest and Breakage
Costs, if any, and all other obligations of the Lessee owing to the Lender under
the Operative Documents plus (B) the outstanding Contribution, all accrued and
unpaid Contribution Return prorated to the date of payment, Lessor's Breakage
Costs, if any, and all other obligations of the Lessee owing to the Lessor under
the Operative Documents, provided that (v) in the event Lessee effectively
exercises the Remarketing Option pursuant to the provisions of Section 15.6 of
the Lease and duly and timely fulfills the provisions of clauses (i) through
(xiii) of Section 15.6 of the Lease, Lessee's obligations shall be limited as
provided in Section 15.6 of the Lease. The foregoing notwithstanding, the
parties hereto acknowledge and agree that the obligations of the Lessor
(including its members, incorporators, stockholders, directors, officers,
employees and agents) hereunder, under the Loan Agreement, the Lease and the
other Operative Documents are non-recourse as provided in Section 4.2 of the
Loan Agreement and Section 18.12 of the Lease.
SECTION 2.5 Controlling Agreements. In the event of any conflict between
this Participation Agreement and any other Operative Document, this
Participation Agreement shall control. In the event of any conflict between the
Lease and any other Operative Document to which the Lessee is not a party, the
Lease shall control.
SECTION 2.6 Permitted Applications of Loan Advances and Contribution
Advances. The parties hereto agree that the Lessee may apply the proceeds of
Loan Advances and Contribution Advances for the payment (or the reimbursement by
the Lessee of itself for the payment) of any or all of the following items (any
combination or all of the items together, the "Development Costs"): (i) the
purchase price of any Parcel or Property and all related costs of development
and acquisition of such Parcel or Property, (ii) costs of Construction of
Improvements for any Property (as approved by the Lender), including costs
related to letters of credit, surety bonds, security deposits or other security
in connection with the Construction, each Construction Contract, any municipal
sewer or utility contract, any permit or consent for any Governmental Authority
or other Person, or any other obligation or requirement relating to
-5-
the Construction, and (iii) "soft costs" related to the foregoing, including
architect's fees, engineering fees, permit and license fees and charges,
testing, survey costs, title charges and attorneys' fees and other related costs
and expenses properly attributable to any of the foregoing Development Costs.
The Lessee covenants not to use any Loan Advances or Contribution Advances to
pay, or reimburse itself for paying, for trade fixtures, personal property or
equipment which does not constitute part of the Improvements or to use the
proceeds of Loan Advances or Contribution Advances for working capital.
SECTION 2.7 Covenants Concerning Construction.
(a) Changes in Construction Documents. No change will be made in any Plans
and Specifications, the terms and conditions of any Construction Contract, or
the identity of any General Contractor without the prior written consent of the
Lender; provided, however, that so long as no Default or Event of Default shall
have occurred and is then continuing, no such consent relating to Improvements
to a Property, the Development Costs of which are reasonably estimated by the
Lessee to cost in the aggregate less than $100,000, shall be required. The
Lender's approval of the Plans and Specifications shall be for lending purposes
only and shall not constitute an assumption of liability by the Lender with
respect to the Lessee, any General Contractor, or any other present or future
tenant, occupant or purchaser of the Leased Property.
(b) Conduct of the Construction. If Improvements are to be constructed on
any Parcel, such Construction shall commence within thirty (30) days after the
Parcel Closing Date therefor. All Improvements shall be completed prior to the
Completion Deadline for such Property. In the event of a Construction Force
Majeure Event, the Completion Deadline therefor shall be extended by a period of
time equal to the Construction Force Majeure Event, but in no event to a date
later than January 29, 2000. All Improvements will be constructed substantially
in accordance with the related Plans and Specifications and in compliance with
all Applicable Laws. All Improvements to a Parcel will be located entirely upon
the related Parcel. Title to each Property will, during the Construction and on
the related Parcel Completion Date, be free from all liens, claims, and
encumbrances, except for those created by or arising under the Operative
Documents, taxes and assessments which are a lien but not yet due and payable,
liens that are bonded off in accordance with Applicable Law within thirty (30)
days of the filing of such lien, and in any event prior to the commencement of
an action to foreclose on such lien, and any other liens or exceptions which are
approved in writing by the Lender.
(c) Inspections of Construction Records. During normal business hours and
at any time an Event of Default has occurred as is continuing, the Lessee will
make available for inspection by a duly authorized representative of the Lender
any of the Lessee's and each General Contractor's books and records insofar as
they relate to the Leased Property at such times as requested by the Lender when
requested to do so and will furnish to the Lender any information regarding its
business affairs and its financial condition.
(d) Reimbursements. The Lessee will reimburse the Lender promptly for all
construction loan costs paid by the Lender in accordance with the Operative
Documents,
-6-
including but not limited to the costs of title insurance policies, title
examinations, recording fees, surveys, fees of counsel for services rendered and
out-of-pocket expenses for which the Lender is entitled to be reimbursed
pursuant to the Operative Documents, all of which the Lender is authorized to
deduct from the proceeds of disbursements hereunder.
(e) Fixtures and Equipment. No personal property of any kind intended to
be part of the Improvements or paid for with the proceeds of Advances will be
purchased or acquired by the Lessee under any conditional sales contract or
security agreement or any lease agreement, and all such personal property will
be fully paid for before payment therefor becomes past due or in any event
within 30 days after delivery thereof; provided, however, that the foregoing
shall not apply to amounts withheld and unpaid on account of bona fide disputes
with the suppliers thereof.
(f) Inspections of the Construction. The Lessee shall allow the Lender and
its agents, at all times during normal business hours and at any time that an
Event of Default has occurred and is continuing, (i) the right of entry and free
access to the site of the Improvements and the right to inspect all work done,
labor performed and materials furnished in and about the Improvements; and (ii)
to require to be replaced or otherwise corrected any material or work that does
not comply with the Plans and Specifications therefor.
(g) Insurance Prior to the Parcel Completion Date. The Lessee shall submit
to the Lender for its review and approval evidence of builder's risk insurance
coverage or permanent insurance coverage appropriate and satisfactory to the
Lender, on the Leased Property. All insurance policies shall name the Lessee
and the Lender as an additional insured and shall be issued by carriers with a
Best's Insurance Reports policy holder's rating of A+ and a financial size
category acceptable to the Lender and shall include a standard mortgagee clause
(without contribution) in favor of and acceptable to the Lender. The policies
shall provide for the following coverages and any other coverages that the
Lender may from time to time reasonably require:
(1) Builder's "all risk" hazard coverage in the amount of the replacement
cost of the Improvements and all other improvements and personality on
the Leased Property. If the policy is written on a coinsurance basis,
the policy must contain an agreed amount endorsement as evidence that
the coverage is in an amount sufficient to insure the full amount of
the Loan. Such insurance shall be 100% non-reporting policies;
(2) Public liability insurance in such amounts (at least $5,000,000 for
personal injury, death or property damage arising out of any one
accident) and with a deductible satisfactory to the Lender any portion
of which may be provided by umbrella coverage;
(3) Flood hazard coverage, if appropriate, in an amount acceptable to the
Lender and with a deductible acceptable to the Lender; and
-7-
(4) Worker's compensation insurance (including employer's liability
insurance, if available and requested by the Lender) for all
employees, if any, of the Lessee and for all employees, if any, of the
Lessee's managing agent(s) and contractor(s) engaged on or with
respect to the Leased Property or the Construction in such amounts as
are satisfactory to the Lender, or, if such limits are established by
law, in such amounts. The Lessee may satisfy the requirements of this
clause (4) with respect to employees of the Lessee's agents and
contractors through separate policies provided by each agent or
contractor.
The initial policies for each Property shall be prepaid and the Lessee shall
deliver to the Lender and the Lessee prior to the Parcel Closing Date therefor
copies of all such policies, together with original certificates therefor.
Copies of all renewal policies and original certificates therefor shall be
deposited with the Lender as evidence of such insurance. All policies shall
contain provisions for thirty days' written notice to the Lender prior to
expiration or cancellation. The Lessee expressly agrees to permit the Lender to
maintain insurance in force by payment of premiums from undisbursed Loan
proceeds. The Lender hereby agrees that the insurance coverages required to be
obtained and maintained by the Lessee hereunder may be obtained and maintained
in the form of blanket insurance policies, covering both the Leased Property and
other properties and projects owned by the Lessee. Written evidence
satisfactory to the Lender of the existence and coverage of such blanket
policies shall be delivered to the Lender prior to each Parcel Closing Date.
(h) Notice of Default. The Lessee shall notify the Lender in writing
within three (3) days of the occurrence thereof of any Default or Event of
Default.
(i) Construction Bank Account. The Lessee may, at its option, maintain
with the Lender a commercial operating account. All Loan Advances made by the
Lender and all Contribution Advances issued by the Lender on behalf of the
Lessor may be made by depositing the amount thereof directly into such operating
account.
SECTION 3
CONDITIONS PRECEDENT; DOCUMENTS
SECTION 3.1 Conditions to the Obligations of the Lessor and the Lender on
the Closing Date. The obligations of the Lessor and the Lender to carry out
their respective obligations under Section 2 of this Participation Agreement to
be performed on the Closing Date shall be subject to the fulfillment to the
satisfaction of, or waiver by, each such party (acting directly or through its
counsel) on or prior to the Closing Date of the following conditions precedent:
(a) Documents. The following documents shall have been executed and
delivered by the respective parties thereto:
-8-
(i) Participation Agreement. Counterparts of this Participation
Agreement, duly executed by the parties hereto, shall have been
delivered to each of the parties hereto.
(ii) Lease. Counterparts of the Lease (substantially in the form
of Exhibit A), duly executed by the Lessee and the Lessor, shall have
been delivered to the Lender.
(iii) Loan Agreement. Counterparts of the Loan Agreement
(substantially in the form of Exhibit B), duly executed by the Lessor
and the Lender, shall have been delivered to each of the Lessor and
the Lender.
(iv) Notes. The Notes (substantially in the forms attached as
exhibits to the Loan Agreement) payable to the order of the Lender,
duly executed by the Lessor, shall have been delivered to the Lender.
(v) Assignment of Lease and Rents. Counterparts of the
Assignment of Lease and Rents (substantially in the form of Exhibit
C), duly executed by the Lessor, consented to by the Lessee, shall
have been delivered to the Lender;
(vi) Securities Account. Counterparts of the Investment Property
Security Agreement (substantially in the form of Exhibit L-1) duly
executed by the Lessee and Lender and the Account Control Agreement
(substantially in the form of Exhibit L-2) shall have been delivered
to the Lender;
(vii) Guaranty. The Limited Guaranty (substantially in the form
of Exhibit M), duly executed by the Lessee, shall have been delivered
to the Lender.
(viii) Lessee's Resolutions and Incumbency Certificate, Etc.
Each of the Lender and the Lessor shall have received a certificate of
the Secretary or an Assistant Secretary of the Lessee attaching and
certifying as to (1) the resolution of the Lessee's Board of Directors
(or an appropriate committee of such Board) duly authorizing the
execution, delivery and performance by the Lessee of each Operative
Document to which the Lessee is or will be a party, (2) the incumbency
and signatures of Persons authorized to execute and deliver Operative
Documents on the Lessee's behalf, (3) the Lessee's certificate of
incorporation, certified as of a recent date by the Secretary of State
of the state of the Lessee's incorporation and (4) the Lessee's by-
laws.
(ix) Opinion of Lessee's Counsel. The opinion of ▇▇▇▇▇▇▇▇▇▇,
Doll & ▇▇▇▇▇▇▇▇, PLLC, Lessee's counsel, dated the Closing Date, and
being substantially in the form set forth in Exhibit D and containing
such other matters as the parties to whom such opinion is addressed
shall reasonably request, shall have been delivered and addressed to
each of the Lessor and the Lender.
-9-
(x) Lessor's Resolution and Incumbency Certificate. The Lender
shall have received a certificate of the managing member of the Lessor
attaching and certifying as to (A) the managing member's resolution
authorizing the execution, delivery and performance by it of each
Operative Document to which the Lessor is or will be a party and (B)
the incumbency and signatures of Person(s) authorized to execute and
deliver such documents on the Lessor's behalf.
(xi) Opinion of Lessor's Counsel. The Opinion of Ropes and ▇▇▇▇,
Boston, Massachusetts dated the Closing Date, substantially is the
form of Exhibit E shall have been delivered and addressed to each of
the Lessee and the Lender.
(b) Litigation. No action or proceeding shall have been instituted
or, to the Lessee's knowledge, threatened nor shall any governmental action,
suit, proceeding or investigation be instituted or, to the Lessee's knowledge,
threatened before any Governmental Authority, nor shall any order, judgment or
decree have been issued or proposed to be issued by any Governmental Authority,
to set aside, restrain, enjoin or prevent the performance of this Participation
Agreement or any of the other Operative Documents or any transaction
contemplated hereby or thereby or which would materially adversely affect the
Leased Property or any transaction contemplated by the Operative Documents or
which would result in a Material Adverse Effect.
(c) Legality. In the opinion of the Lender, the Lessor or their
respective counsel, the transactions contemplated by the Operative Documents
shall not violate any Applicable Law, and no change shall have occurred or been
proposed in Applicable Law that would make it illegal for the Lender or the
Lessor to participate in any of the transactions contemplated by the Operative
Documents.
(d) No Events. (i) No Default, Event of Default, Event of Loss or
Event of Taking shall have occurred and be continuing and (ii) no action shall
be pending or, to the Lessee's knowledge, threatened by a Governmental Authority
to initiate a Condemnation or an Event of Taking.
(e) Representations. Each representation and warranty of the parties
hereto or to any other Operative Document contained herein or in any other
Operative Document shall be true and correct in all material respects as though
made on and as of the Closing Date.
(f) No Material Adverse Effect. There shall not have occurred any
event having a Material Adverse Effect since December 31, 1997.
(g) Fees and Transaction Expenses. The Lessee shall have paid, or
caused to be paid the reasonable fees and expenses of the Lessor, the Lender and
their respective counsel.
-10-
SECTION 3.2 Conditions to the Obligations of the Lessor and the Lender on
each Parcel Closing Date. The obligations of the Lessor and the Lender to
carry out their respective obligations under Section 2 of this Participation
Agreement to be performed on each Parcel Closing Date shall be subject to the
fulfillment to the satisfaction of, or waiver by, each such party (acting
directly or through its counsel) on or prior to such Parcel Closing Date of the
following conditions precedent (together, the "Parcel Conditions"):
(a) Documents. The following documents shall have been executed and
delivered by the respective parties thereto:
(i) Deed. The Deed concerning the Parcel to the Lessor from the
Person conveying such interest (fee simple or leasehold, as the case
may be) shall have been delivered to the Lessor in recordable form;
(ii) Lease. A Parcel Lease Supplement (substantially in the form
of Appendix II to the Lease), together with a Memorandum of Lease
(substantially in the form of Appendix III to the Lease, each duly
executed by the Lessee and the Lessor, provided that the Memorandum of
Lease shall be executed in recordable form, shall have been delivered
to the Lender;
(iii) Mortgage. Counterparts of the Mortgage (substantially in
the form of Exhibit F), duly executed by the Lessee and in recordable
form, shall have been delivered to each of the Lessor and the Lender;
(iv) Notice of Assignment of Lease and Rents. Counterparts of a
Notice of the Assignment of Lease and Rents (substantially in the form
of Exhibit A to the Assignment of Lease and Rents), duly executed by
the Lessor, consented to by the Lessee and in recordable form, shall
have been delivered to the Lender;
(v) Non-Disturbance and Attornment Agreement. Counterparts of
the Non-Disturbance and Attornment Agreement (substantially in the
form of Exhibit G) duly executed by the Lessee, Lessor and Lender and
in recordable form shall have been delivered to the Lender, the Lessor
and the Lessee;
(vi) Title and Title Insurance. The Lessor and the Lender shall
receive from the Title Insurance Company, a ALTA form of Owner's
Policy in the amount of the Parcel Estimated Development Costs (an
"Owner's Title Policy") and an ALTA form of Loan Policy of title
insurance in the amount of 97% of the Parcel Estimated Development
Costs (a "Lender's Title Policy"), each issued by the Title Insurance
Company, in each case, each acceptable in form and substance to Lessee
and the Lender (each Owner's Title Policy and the Lender's Title
Policy, collectively the "Title Policies"). The Title Policies (A)
shall be dated as
-11-
of the Parcel Closing Date, (B) to the extent permitted under
Applicable Law, shall include coverage over the general exceptions to
such Title Policy and shall contain such affirmative endorsements as
to easements and rights-of-way, encroachments, the nonviolation of
covenants and restrictions, survey matters and other matters as the
Lender and the Lessor shall reasonably request and (C) shall not
contain a "pending disbursements" exception except as to mechanics'
lien claims and except as to limiting coverage to the amount of Loan
Advances actually disbursed from time to time.
(vii) Security Agreement and Assignment. The Security Agreement
and Assignment (substantially in the form of Exhibit H), duly executed
by the Lessee, with an acknowledgement and consent thereto
satisfactory to the Lessor and the Lender duly executed by the General
Contractor therefor and complete copy of the Construction Contract,
certified by the Lessee, shall have been delivered to the Lender.
(viii) Survey. The Lessee shall have delivered, or shall have
caused to be delivered, to the Lessor and the Lender, at the Lessee's
expense, an accurate survey of the Parcel (and any Improvements
thereon) certified to the Lessor and the Lender in a form satisfactory
to the Lessor and the Lender and showing no state of facts
unsatisfactory to the Lessor or the Lender and prepared within sixty
(60) days of the Parcel Closing Date by a licensed surveyor selected
by Lessee and reasonably satisfactory to Lender. Such survey shall (A)
be acceptable to the Title Insurance Company, (B) show no
encroachments on the Parcel by structures owned by others, and no
encroachments from any part of the Parcel onto any land owned by
others, except for such encroachments which, in the judgment of the
Lender and its counsel, do not impair in any material respect the
value of the Leased Property or the suitability of the Leased Property
for its intended use, and (C) disclose no state of facts objectionable
to the Lessor, the Lender or the Title Insurance Company.
(ix) Evidence of Insurance. The Lessor and the Lender have
received from the Lessee certificates of insurance evidencing
compliance with the provisions of both Section 2.7 hereof and Article
IX of the Lease (including the naming of the Lessor and/or the Lender
as additional insured or loss payees with respect to such insurance),
in form and substance reasonably satisfactory to the Lessor and the
Lender.
(x) Lessee's Resolutions and Incumbency Certificate, Etc. Each
of the Lender and the Lessor shall have received (A) a certificate of
the Secretary or an Assistant Secretary of the Lessee attaching and
certifying as to (1) the resolution of the Lessee's Board of Directors
(or an appropriate committee of such Board) duly authorizing the
execution, delivery and performance by the Lessee of each Operative
Document to which the Lessee is or will be a party, (2) the incumbency
-12-
and signatures of Persons authorized to execute and deliver Operative
Documents on the Lessee's behalf, (3) the Lessee's certificate of
incorporation, certified as of a recent date by the Secretary of State
of the state of the Lessee's incorporation and (4) the Lessee's by-
laws and (B) a good standing certificate for the Lessee from the
appropriate officer of the state in which the Parcel is located.
(xi) Recording Fees; Transfer Taxes. To the extent not covered
by the Lender's Title Policy, the Lender shall have received
satisfactory evidence of the payment by the Lessee of all recording
and filing fees and taxes with respect to any recordings or filings
made of the Memorandum of Lease, the Mortgage, the Notice of
Assignment of Lease and Rents and the Subordination and Nondisturbance
Agreement for such Parcel.
(xii) Opinions of Lessee's Counsel. (a) The opinion of
▇▇▇▇▇▇▇▇▇▇, Doll & ▇▇▇▇▇▇▇▇, PLLC, Lessee's counsel, dated the Parcel
Closing Date, and being substantially in the form set forth in Exhibit
I and containing such other matters as the parties to whom such
opinion is addressed shall reasonably request, shall have been
delivered and addressed to each of the Lessor and the Lender; and (b)
in the event the Parcel shall be located in a State other than
Kentucky, an opinion of counsel authorized to practice law in such
state, satisfactory to the Lender, dated the Parcel Closing Date,
containing such matters as the parties to whom such opinion is
addressed shall reasonably request, shall have been delivered and
addressed to each of the Lessor and Lender.
(xiii) Lessor's Resolution and Incumbency Certificate. The
Lender shall have received a certificate of the managing member of the
Lessor attaching and certifying as to (A) the managing member's
resolution authorizing the execution, delivery and performance by it
of each Operative Document to which the Lessor is or will be a party
and (B) the incumbency and signatures of Person(s) authorized to
execute and deliver such documents on the Lessor's behalf.
(xiv) Opinion of Lessor's Counsel. The Opinion of Ropes and
▇▇▇▇, Boston, Massachusetts dated the Parcel Closing Date,
substantially is the form of Exhibit J shall have been delivered and
addressed to each of the Lessee and the Lender.
(xv) Soil Analysis and Environmental Report. The Lender and the
Lessor shall have received and approved (i) a soil analysis report
relating to the Parcel in form and content satisfactory to the Lender
and (ii) an environmental report which shall certify results related
to toxic and other hazardous substances on the Parcel.
(xvi) Plans and Specifications. Copies of the Plans and
Specifications, either "as built" in the event the Improvement for
such Property have been
-13-
previously completed, or in final form for use in the Construction of
such Improvements, as the case may be, in either such case in form
satisfactory to the Lender.
(xvii) Architect Certificate. Certification from an Architect
approved by the Lender, substantially is the form of Exhibit K shall
have been delivered to each of the Lessor and the Lender.
(xviii) Utilities. Evidence that all utility services necessary
for construction, if applicable, and use of the Improvements
(including without limitation, electric, gas, telephone, water and
sewer service) are available to the Parcel, and the Lessee has the
right to connect to and use all utility services without restriction;
and that all necessary easements to provide such utility services to
the Improvements thereon have been obtained.
(xix) Zoning. Evidence of compliance with applicable zoning
ordinances or similar land use restrictions with respect to the
Parcel.
(xx) Governmental Authorizations. All authorizations, if any,
required by an governmental authority for the operation of the Parcel
and the Improvements for the purposes contemplated by the Plans and
Specifications therefor, which are presently procurable.
(xxi) Appraisal. An appraisal report for the Parcel and the
Improvements (as constructed or to be constructed thereon), which
appraisal report shall be prepared by an independent appraising firm,
and be in form and substance, acceptable to the Lender in its sole and
absolute discretion, whether in relation to all applicable regulatory
requirements imposed by The Financial Institutions Reform, Recovery
and Enforcement Act of 1989 and the regulations thereunder, or
otherwise, shall have been delivered to the Lender. Such appraisal
shall state the Fair Market Sales Value of the Property upon
completion of any Construction, which amount shall be at least equal
to 70% of the Estimated Parcel Development Costs. The cost of such
appraisal shall be borne solely by the Lessee.
(xxii) Estimated Parcel Development Costs; Approved Budget. The
Lessee shall deliver an Officer's Certificate certifying Lessee's best
estimate of the Estimated Parcel Development Costs for such Property,
presented in reasonable detail, in form and substance acceptable to
the Lender, and in the case of any Construction of Improvements
contemplated for the Property, setting forth the Approved Budget for
such Construction.
-14-
(xxiii) Fees of the Financial Advisor. On or prior to the first
Parcel Closing Date, the Lessee shall have paid all fees of the
Financial Advisor in connection with the transactions contemplated
hereunder.
(xxiv) Reaffirmation of Guaranty. A reaffirmation of the
Guaranty duly executed by the Lessee.
(b) Litigation. No action or proceeding shall have been instituted
or, to the Lessee's knowledge, threatened nor shall any governmental action,
suit, proceeding or investigation be instituted or, to the Lessee's knowledge,
threatened before any Governmental Authority, nor shall any order, judgment or
decree have been issued or proposed to be issued by any Governmental Authority,
to set aside, restrain, enjoin or prevent the performance of this Participation
Agreement or any of the other Operative Documents or any transaction
contemplated hereby or thereby or which would materially adversely affect the
Leased Property or any transaction contemplated by the Operative Documents or
which would result in a Material Adverse Effect.
(c) Legality. In the opinion of the Lender, the Lessor or their
respective counsel, the transactions contemplated by the Operative Documents
shall not violate any Applicable Law, and no change shall have occurred or been
proposed in Applicable Law that would make it illegal for the Lender or the
Lessor to participate in any of the transactions contemplated by the Operative
Documents.
(d) No Events. (i) No Default, Event of Default, Event of Loss or
Event of Taking shall have occurred and be continuing and (ii) no action shall
be pending or, to the Lessee's knowledge, threatened by a Governmental Authority
to initiate a Condemnation or an Event of Taking.
(e) Representations. Each representation and warranty of the parties
hereto or to any other Operative Document contained herein or in any other
Operative Document shall be true and correct in all material respects as though
made on and as of the Parcel Closing Date.
(f) No Material Adverse Effect. There shall not have occurred any
event having a Material Adverse Effect since the most recent to occur of (i) the
Closing Date or (ii) a Parcel Closing Date.
(g) Location of Parcel. If the Parcel is located other than in Tyler,
Texas or ▇▇▇▇▇▇▇▇, Texas, then the Lessee shall have obtained the Lender's prior
written consent as to the location of the Parcel (it being understood that the
Lender may grant or withhold such consent in its sole and absolute discretion).
SECTION 3.3 Conditions to Subsequent Fundings. Notwithstanding anything
to the contrary contained herein, or in any other Operative Document, neither
the Lender nor the Lessor shall have any obligation to make any Loan Advance or
Contribution Advance, as the
-15-
case may be, pursuant to a Funding Requisition for Development Costs following
the Loan Advance for the acquisition of a Parcel on the Parcel Closing Date,
unless each of the following conditions shall have been satisfied or waived by
the Lender with respect to such Funding:
(a) Deliveries. On or prior to each Funding subsequent to the
Initial Loan Advance, the Lessee shall deliver, or cause to be delivered, the
following:
(i) Plans and Specifications. Detailed architectural,
structural, mechanical, and electrical Plans and Specifications for
all Improvements to be constructed, to the extent not already
delivered, to the Lender, provided, however, that no Advance shall be
required to be made for any portion of Construction of the
Improvements until the Plans and Specifications for such portion of
the Improvements shall have been delivered to and approved by the
Lender;
(ii) Title Policy Endorsement. If applicable, a endorsement to
the Title Policies for each Parcel (A) indicating that since the last
Funding Date as to which a Funding was made in respect of such Parcel
there has been no change in the state of title and no survey
exceptions not theretofore approved by the Lessor and the Lender and
(B) increasing the coverage of the Title Policies by an amount equal
to the Funding with respect to such Parcel then being made so that the
total amount insured equals, in the case of the Lender's Title Policy,
the total amount of Loan Advances disbursed by the Lender with respect
to such Parcel, and in the case of Lessor's Title Policy, a like
amount plus in addition, the amount of the Contribution with respect
to such Parcel, and, in each case, changing the effective date of the
Title Policies to the Funding Date. At the Lender's discretion, any
Funding may be made through the Title Insurance Company. Prior to each
Funding Date, the Lessee shall furnish the Title Insurance Company
with lien waivers as required by the Title Insurance Company through
the time of the Funding. No title indemnities for purposes of insuring
around any objection to or condition of title shall be issued or
provided by the Lessee or the Lessor to the Title Insurance Company
without the prior written consent of the Lender;
(iii) Engineer's Certificate. If applicable, a certification
from the Architect or from an engineer approved by the Lender that the
Improvements have been or are being erected within the property
boundaries of the Land and in accordance with all applicable set back
requirements and the approved site plan; and
(iv) Improvements Permit. All building permits or other
authorizations required by any Governmental Authority for the
Construction to the extent not previously obtained;
-16-
(b) No Events. (i) No Default, Event of Default, Event of Loss or
Event of Taking shall have occurred and be continuing and (ii) no action shall
be pending or threatened by a Governmental Authority to initiate a Condemnation
or an Event of Taking;
(c) Requisition. Together with the Funding Requisition, the Lessee
shall submit to the Lender a requisition using AIA Form G702 and 703 accompanied
by a cost breakdown, the accuracy of which shall be certified by the Lessee, the
Architect and the General Contractor, and such other information and
documentation required hereunder. The Approved Budget shall serve as the
disbursement control for each line item. Neither the Lender nor the Lessor
shall be required to make a Funding for any line item in excess of the amount
shown in the Approved Budget for such line item; provided, however, that the
Lender shall not unreasonably withhold its consent to a reallocation of amounts
within line items in the Approved Budget (other than the line item for interest
reserve) as long as the total cost of the Construction does not increase;
(d) Timing. Funding Requisitions after the Initial Loan Advance shall
not be made more often than once a month and the total amount of all Fundings in
respect of Construction shall not at any time exceed an amount equal to the sum
of the hard costs of the work completed to date as certified by the Architect on
the aforesaid AIA draw request forms and the soft costs incurred. The Lender
reserves the right to review and approve invoices for all hard and soft costs.
Prior to each Advance, the Lender or its agents may inspect the Leased Property
to verify that the related Funding Requisition accurately reflects the amount of
the Construction with respect thereto;
(e) Loan Out of Balance. If, in the sole judgment of the Lender, and
determined at any time while the Loans are outstanding, the cost of the
Construction increases, the Lessee shall be required to invest the increased
amount in the Construction or deposit such increased amount with the Lender in
an account pledged to the Lessor as security for the Lease and other Operative
Documents in a manner reasonably satisfactory to the Lender or to provide the
Lender such other assurances as to the availability of the funds as subject to
the Lender's approval prior to any Loan Advance;
(f) Completion Deadline. If at any time the Lender shall, in its sole
judgment, estimate and give notice to the Lessee that substantial completion of
any Construction will not occur on or before the Completion Deadline, then
neither the Lender nor the Lessor shall have any obligation to make further
Advances until such time as the Lessee shall have delivered to the Lender
evidence satisfactory to Lender that substantial completion of all Improvements
will occur on or before the Completion Deadline;
(g) Approval of Contracts. Neither the Lender nor the Lessor shall
have any obligation to make any Advances for any Development Costs due from the
Lessee under a contract or subcontract for the Construction if such contract or
subcontract is required to be, but has not been, approved by the Lender and such
approval by the Lender has not been unreasonably withheld or delayed. Although
the Lessee shall not be required to provide to the
-17-
Lender the subcontracts for the Construction as a condition precedent to making
the Initial Funding, the Lender reserves the right, upon written notice to the
Lessee, to require the Lessee to provide such subcontracts for subsequent
Advances;
(h) Compliance with Plans and Specifications. If the Lender or the
Lessor should at any time determine that any part of the work performed on, or
materials incorporated into, any Improvements does not comply in any material
respect with the related Plans and Specifications, whether or not the
Development Cost of any such work or materials shall have been included in a
Funding Requisition theretofore made, then neither the Lender nor the Lessor
shall have any obligation to make any further Advances until such work is
corrected, or material is changed, to comply with such Plans and Specifications
and the Lender and the Lessor have received satisfactory evidence to them of
such change and compliance, and Lender and the Lessor shall respectively have
the right to offset against the amount of any subsequent Advance the cost of the
nonconforming work or materials included in prior Fundings. Notwithstanding the
foregoing, the Lender and the Lessor shall continue to make Advances for other
work and materials if, prior to the determination by the Lender or the Lessor of
such nonconformance, the Lessee and/or the Architect therefor have previously
made a similar determination, and the Lessee has delivered to the Lender and the
Lessor evidence reasonably satisfactory to the Lender and the Lessor that the
General Contractor therefor has agreed to correct such work or to change such
materials without requesting an Advance for the cost thereof, and the General
Contractor diligently pursues such work and changes to completion within 90 days
after the determination of the need for corrective action;
(i) Defects in Construction. If the Lender or the Lessor should at
any time reasonably determine that any part of the work performed on any
Improvements has not been performed in a good and workmanlike manner, whether or
not the Development Cost of any such work shall have been included in a Funding
Requisition theretofore made, neither the Lender nor the Lessor shall have any
obligation to make any further Advances until such work is corrected so as to
have been performed in a good and workmanlike manner and the Lender and the
Lessor have received satisfactory evidence of such correction, and Lender and
the Lessor shall have the right to offset against the amount of any subsequent
Advances by the cost of the nonconforming work or materials included in prior
Fundings. Notwithstanding the foregoing, the Lender and the Lessor shall
continue to make Advances for other work and materials if, prior to the
determination by the Lender or the Lessor of such nonconformance, the Lessee
and/or the Architect therefor have previously made a similar determination, and
the Lessee has delivered to the Lender and the Lessor evidence reasonably
satisfactory to the Lender and the Lessor that the General Contractor therefor
has agreed to correct such work or to change such materials without requesting
an Advance for the cost thereof, and the General Contractor diligently pursues
such work and changes to completion within 90 days after the determination of
the need for corrective action; and
(j) Compliance with Codes. If the Lender or the Lessor should at any
time determine that any part of the work performed on, or materials incorporated
into, any Improvements does not comply with all applicable building codes or
other Applicable Law,
-18-
whether or not the Development Cost of any such work or materials shall have
been included in a Funding Requisition theretofore made, then neither the Lender
nor the Lessor shall have any obligation to make any further Advances until such
work is corrected, or material is changed, to cause the same to comply with all
applicable building codes or other Applicable Law and the Lender and the Lessor
have received satisfactory evidence of such correction or change and of such
compliance, and the Lender and the Lessor shall have the right to offset against
the amount of any subsequent Advances for other work and materials by the cost
of the nonconforming work as materials included in prior Fundings.
Notwithstanding the foregoing, the Lender and the Lessor shall continue to make
Advances for other work and materials if, prior to the determination by the
Lender or the Lessor of such nonconformance, the Lessee and/or the Architect
have previously made a similar determination, and the Lessee has delivered to
the Lender and the Lessor evidence reasonably satisfactory to the Lender and the
Lessor that the General Contractor therefor has agreed to correct such work or
to change such materials without requesting an Advance for the cost thereof, and
the General Contractor diligently pursues such work and changes to completion
within 90 days after the determination of the need for corrective action.
(k) Securities Account. To the extent that the Margin Value of the
securities held in the Securities Account (together with any other funds held
therein, hereinafter called the "Account Balance") shall be less than the Lease
Balance on the date five (5) Business Days immediately prior to the first
Advance made after delivery of the appraisal pursuant to Section 3.2(a)(xxi)
hereof, the Lessee shall have delivered to the Securities Intermediary funds in
amount not less than the amount by which the Lease Balance exceeds the Margin
Value of the securities held in the Securities Account on such fifth Business
Day prior to the aforesaid Advance, which funds shall be held in the Securities
Account and invested, all pursuant to the Investment Property Security
Agreement.
SECTION 3.4 Completion Date Conditions. If Improvements have been
constructed on a Parcel pursuant hereto, the occurrence of the Parcel Completion
Date therefor shall be subject to the fulfillment or satisfaction of, or waiver
by, each party hereto (acting directly or through its counsel) of the following
conditions precedent (the "Completion Date Conditions"):
(a) Title Policy Endorsements. The Lessee shall have furnished to the
Lender the following endorsements to its related Title Policy (to the extent
available under the Texas Insurance Code and the Basic Manual for Rates, Rules
and Forms for Title Insurance in Texas, with respect to Properties located in
the State of Texas) (each of which shall be subject to no exceptions other than
those set forth in Schedule B to its Title Policy): (i) a date-down endorsement
(redating and confirming the coverage provided under the related Title Policy
and each endorsement thereto) and (ii) a comprehensive endorsement, in each
case, effective as of a date not earlier than the date of completion of the
Construction.
(b) Construction Complete. The Construction on the Parcel shall have
been completed substantially in accordance with the Plans and Specifications
therefor and all Applicable Laws, and the Improvements therein are ready for
occupancy and operation in the
-19-
ordinary course of Lessee's business. All fixtures, equipment, materials and
other property contemplated under the Plans and Specifications thereof to be
incorporated or installed in the Property shall have been incorporated or
installed free and clear of all liens except for Permitted Liens.
(c) Lessee Certification. The Lessee shall have furnished the Lessor
and the Lender with both (i) a certification of the Lessee that:
(A) all amounts owing to third parties for the Construction
therefor have been paid in full (other than contingent obligations for
which the Lessee has made adequate reserves or claims being defended
in good faith), and to Lessee's knowledge no litigation or proceedings
are pending, or to the best of the Lessee's knowledge are threatened,
against the Property or the Lessee which would materially adversely
affect (1) the enforceability or priority of this Participation
Agreement or the other Operative Documents and (2) the ability of the
Lessee to fully perform its obligations pursuant to and as
contemplated by the terms and provisions of this Participation
Agreement and the other Operative Documents;
(B) all consents, licenses and permits and other governmental
authorizations or approvals required for the Construction and
operation of the Property have been obtained;
(C) the Property has available all services of public facilities
and other utilities necessary for use and operation of the Property
for its intended purposes including, without limitation, adequate
water, gas and electrical supply, storm and sanitary sewerage
facilities, telephone and other required public utilities and means of
access between the Improvements and public highways for pedestrians
and motor vehicles;
(D) all agreements, easements and other rights, public or
private, which are necessary to permit the lawful use and operation of
the Property as the Lessee intends to use the Property under the Lease
and which are necessary to permit the lawful intended use and
operation of all then intended utilities, driveways, roads and other
means of egress and ingress to and from the same have been obtained
and are in full force and effect and the Lessee has no knowledge of
any pending modification or cancellation of any of the same, and the
use of the Property does not depend on any variance, special exception
or other municipal approval, permit or consent that has not been
obtained for its continuing legal use;
(E) the Construction has been completed substantially in
accordance with the Plans and Specifications and all Applicable Laws
and the Property is ready for occupancy and operation; and
-20-
(F) the Property is in compliance with all applicable zoning laws
and regulations; and
(ii) copies of (A) all final lien waivers regarding the Construction
thereof, together with sworn statements from contractors, subcontractors and
material suppliers and (B) true and complete copies of an "as built" or "record"
set of the Plans and Specifications therefor, and a plat of survey of the
Property "as built" showing all paving, driveways, fences and exterior
improvements and copies of all licenses and permits required by any Governmental
Authority having jurisdiction over the use and occupancy of the Property and for
the operation thereof, including copies of a certificate or certificates of
occupancy for the Property or other legally equivalent permission to occupy the
Property from the Governmental Authority having jurisdiction.
(d) Cutoff Date. The Parcel Completion Date shall occur on or prior to the
Completion Deadline.
SECTION 3.5 Conditions to the Obligations of the Lessee. The obligations
of the Lessee hereunder are subject to the fulfillment on the Closing Date to
the satisfaction of, or waiver by the Lessee of, conditions set forth in this
Sections 3 that require fulfillment by the Lessor and the Lender shall have been
satisfied.
SECTION 3.6 Appraisal. If Improvements have been constructed on a
Parcel after the related Parcel Closing Date, the Lessee agrees to supply the
Lender at its request made, within sixty (60) days of the Parcel Completion Date
therefor, with an appraisal report for such Property, which appraisal report
shall be prepared by an independent appraising firm, and be in form and
substance, reasonably acceptable to the Lender. In the event that the appraised
Fair Market Sales Value of such Property is less than the amount of the Loan
Advances and the Contribution Advances previously made (or deemed made) in
respect thereof, Lessee agrees to promptly pay to the Lender an amount equal to
the sum of amount by which such Loan Advances exceed the aforesaid appraised
value, which amount shall be applied in accordance with Section 3 of the Loan
Agreement. Any such payment of a portion of the Loan under the circumstances
described in this Section 3.5 shall be without any premium or penalty to Lessee,
but Lessee shall pay Supplemental Rent in an amount of the Breakage Costs, if
any.
SECTION 4
REPRESENTATIONS AND COVENANTS
SECTION 4.1 Representations of the Lessee. Effective as of the date of
execution hereof, as of the Closing Date, and as of each Parcel Closing Date,
the Lessee represents and warrants to each of the other parties hereto as
follows:
(a) Organization; Corporate Powers. The Lessee (i) is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, (ii) is duly qualified as a foreign corporation and in good
standing under the laws of each other
-21-
jurisdiction where such qualification is required and where the failure to be
duly qualified and in good standing would have a Material Adverse Effect and
(iii) has all requisite corporate power and authority to own, operate and
encumber its property and assets and to conduct its business as presently
conducted and as proposed to be conducted in connection with and following the
consummation of the transactions contemplated by the Operative Documents.
(b) Authority. The Lessee has the requisite corporate power and
authority to execute, deliver and perform the Operative Documents executed or to
be executed by it. The execution, delivery and performance (or recording or
filing, as the case may be) of the Operative Documents, and the consummation of
the transactions contemplated on the part of the Lessee thereby, have been duly
approved by the Board of Directors of the Lessee and no other corporate
proceedings on the part of the Lessee are necessary to consummate the
transactions so contemplated.
(c) Due Execution and Delivery of Operative Documents. The Operative
Documents executed by the Lessee have been duly executed and delivered (or
recorded or filed, as the case may be) by the Lessee, and, in each case,
constitute its legal, valid and binding obligation, enforceable against it in
accordance with each such Operative Document of its respective terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or other laws relating to or limiting creditors' rights generally or by
equitable principles generally.
(d) No Conflict. The execution, delivery and performance of each
Operative Document to which it is a party by the Lessee and each of the
transactions contemplated thereby do not and will not (i) violate any Applicable
Law or Contractual Obligation of the Lessee the consequences of which violation,
singly or in the aggregate, would have a Material Adverse Effect, (ii) result in
or require the creation or imposition of any Lien whatsoever on the Leased
Property (other than Permitted Liens) or (iii) require any approval of
stockholders which has not been obtained.
(e) Governmental Consents. Except as have been made, obtained or
given, no filing or registration with, consent or approval of, notice to, with
or by any Governmental Authority is required to authorize, or is required in
connection with, the execution, delivery and performance by the Lessee of the
Operative Documents, the use of the proceeds of the Loans made to effect the
acquisition of the interests in the Land and the Construction of the
Improvements, or the legality, validity, binding effect or enforceability of any
Operative Document.
(f) Governmental Regulation. The Lessee is not an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
-22-
(g) Requirements of Law. The Lessee is in compliance with all
Requirements of Law applicable to Lessee and its business, in each case where
the failure to so comply would have a Material Adverse Effect, either
individually or together with other such cases.
(h) Rights in Respect of the Leased Property. The Lessee is not a
party to any contract or agreement to sell any interest in the Leased Property
or any part thereof other than pursuant to the Participation Agreement and the
Lease.
(i) Hazardous Materials.
(i) Except in full compliance with all Applicable Law, there are
no Hazardous Materials present at, upon, under or within the Leased Property or
released or transported to or from the Leased Property.
(ii) No Governmental Actions have been taken, or are in process
or have been threatened, which could reasonably be expected to subject the
Leased Property, the Lender or the Lessor to any Claims or Liens under any
Environmental Law which would have a materially adverse effect on the Lessor,
the Lender or the Leased Property.
(iii) The Lessee has all Environmental Permits necessary to
operate the Leased Property in accordance with Environmental Laws and is
complying with and has at all times complied with all such Environmental
Permits.
(iv) With respect to the Leased Property, no notice,
notification, demand, request for information, citations, summons, complaint or
order has been issued or filed to or with respect to the Lessee, and no penalty
has been assessed on the Lessee and no investigation or review is pending or
threatened by any Governmental Authority or other Person with respect to any
alleged violation or liability of the Lessee under any Environmental Law. No
material notice, notification, demand, request for information, citation,
summons, complaint or order has been issued or filed to or with respect to any
other Person, no material penalty has been assessed on any other Person and no
investigation or review is pending or threatened by any Governmental Authority
or other Person relating to the Leased Property with respect to any alleged
material violation or liability under any Environmental Law by any other Person.
(v) The Leased Property and each portion thereof are presently in
compliance with all Environmental Laws, and there are no present or past facts,
circumstances, activities, events, conditions or occurrences regarding the
Leased Property (including, without limitation, the release or presence of
Hazardous Materials) that could reasonably be anticipated to (A) form the basis
of a Claim against the Leased Property, the Lender, the Lender or the Lessee,
(B) cause the Leased Property to be subject to any restrictions on ownership,
occupancy, use or transferability under any Environmental Law, (C) require the
filing or recording of any notice or restriction relating to the presence of
Hazardous Materials in the real estate records in the county or other
appropriate municipality in which the Leased Property is located or (D)
-23-
prevent or interfere with the continued operation and maintenance of the Leased
Property as contemplated by the Operative Documents.
(j) Leased Property. The present condition and use of the Leased
Property conforms with all conditions or requirements of all existing permits
and approvals issued with respect to the Leased Property, and the present use of
the Leased Property and the Lessee's future intended use of the Leased Property
under the Lease does not violate any Applicable Law. No notices, complaints or
orders of violation or non-compliance have been issued or threatened or
contemplated by any Governmental Authority with respect to the Leased Property
or any present or intended future use thereof. All agreements, easements and
other rights, public or private, which are necessary to permit the lawful use
and operation of the Leased Property as the Lessee intends to use the Leased
Property under the Lease and which are necessary to permit the lawful intended
use and operation of all presently intended utilities, driveways, roads and
other means of egress and ingress to and from the same have been, or in the
reasonable judgment of the Lessee will be, obtained and are in full force and
effect and the Lessee has no actual knowledge of any pending modification or
cancellation of any of the same.
(k) Qualification of Lessee Representations. The representations of
the Lessee set forth in this Section are qualified by the conditions that (i)
all representations are made and given to the best of the Lessee's knowledge
after due inquiry, (ii) where a representation involves compliance by the Lessee
with an Applicable Law or an Environmental Law such representation is deemed to
be compliance by the Lessee in all material respects with any such law and (iii)
where a representation involves conduct on the part of the Lessee that does not
violate an Applicable Law or an Environmental Law such representation is deemed
to exclude Lessee's non-material violations of any such law.
SECTION 4.2 Representations and Covenants of the Lessor. Effective as of
the date of execution hereof, as of the Closing Date, and as of each Parcel
Closing Date, the Lessor represents and warrants to the Lender and the Lessee as
follows:
(a) Due Organization; Limited Purpose. The Lessor is a limited
liability company duly organized and validly existing in good standing under the
laws of the State of Massachusetts; is duly qualified as a foreign limited
liability company and in good standing under the laws of the State of Texas and
each other state in which a Parcel of the Land is located; and has full power,
authority and legal right as a limited liability company to execute, deliver and
perform its obligations under this Participation Agreement and each other
Operative Document to which it is or will be a party. The Lessor further
represents, covenants and warrants that (i) it has been formed and exists for
the sole purpose of, and will not engage in any business or other activity
except as necessary in connection with, acquiring and owning the Leased Property
and taking the actions contemplated on the Lessor's part under the Operative
Documents and (ii) except for obligations and indebtedness of the Lessor
represented by and set forth in the Operative Documents and except for
obligations or indebtedness of the Lessor arising directly or indirectly from
the Lessee's failure to discharge the Lessee's obligations under
-24-
the Operative Documents, the Lessor will not create, incur, suffer to be created
or incurred, or guarantee any obligation or indebtedness.
(b) Due Authorization; Enforceability, Etc. This Participation
Agreement and each other Operative Document to which the Lessor is or will be a
party have been or will be duly authorized, executed and delivered by or on
behalf of the Lessor and are, or upon execution and delivery will be, legal,
valid and binding obligations of the Lessor enforceable against it in accordance
with their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws affecting creditors' rights
generally and by general equitable principles.
(c) No Conflict. The execution and delivery by the Lessor of this
Participation Agreement and each other Operative Document to which the Lessor is
or will be a party are not or will not, and the performance by the Lessor of its
obligations under each and will not, violate its certificate of formation or
Operating Agreement, do not and will not contravene any Applicable Law and do
not and will not contravene any provision of, or constitute a default under, any
Contractual Obligation of the Lessor, and the Lessor possesses all requisite
regulatory authority to undertake and perform its obligations under the
Operative Documents.
(d) Litigation. There are no pending or threatened actions or
proceedings against the Lessor before any court, arbitrator or administrative
agency that would have a material adverse effect upon the ability of the Lessor
to perform its obligations under this Participation Agreement or any other
Operative Documents to which it is or will be a party.
(e) Lessor Liens. No Lessor Liens or other Liens created by acts or
omissions of the Lessor (other than Liens created by the Operative Documents)
exist on the Parcel Closing Date on the related Parcel, or any portion thereof,
and the execution, delivery and performance by the Lessor of this Participation
Agreement or any other Operative Document to which it is or will be a party will
not subject the Leased Property, or any portion thereof, to any Lessor Liens or
other Liens created by the Lessor (other than by the Operative Documents).
Except for Liens against the Leased Property created by the Operative Documents,
Permitted Liens (other than Lessor Liens), Liens (including Lessor Liens)
arising directly or indirectly from the Lessee's failure to discharge the
Lessee's obligations under the Operative Documents, the Lessor further
represents and warrants that it will not create, suffer to be created or permit
any Liens on the Leased Property.
(f) Employee Benefit Plans. The Lessor is not and will not be making
its Contribution Advances hereunder, and is not performing its obligations under
the Operative Documents, with the assets of an "employee benefit plan" (as
defined in Section 3(3) of ERISA) which is subject to Title I of ERISA, or
"plan" (as defined in Section 4975(e)(1) of the Code).
-25-
SECTION 4.3 Covenant of Lender. Upon payment by Lessee of the purchase
price for the Leased Property pursuant to Article XV of the Lease, Lender will
release the lien of the Operative Documents against the Leased Property.
SECTION 4.4 Tax Treatment. (a) The parties hereto agree that it is the
Lessee's intention that for Federal, state and local income Tax purposes (i) the
Lease be treated as the repayment and security provisions of a loan to the
Lessee, all rights to the principal and interest of which have been assigned by
the Lessor to the Lender, (ii) the Lessee be treated as the legal and beneficial
owner entitled to any and all benefits of ownership of the Property or any part
thereof and (iii) all payments of Basic Rent during the Lease Term be treated as
payments of interest and principal, as the case may be, to the Lender.
(b) The Lessee agrees that neither it nor any member of any affiliated
group of which it is or may become a member (whether or not consolidated or
combined returns are filed for such affiliated group for Federal, state or local
income Tax purposes) will at any time take any action, directly or indirectly,
or file any return or other document inconsistent with the intended income Tax
treatment set forth in Section 4.4 (a) hereof, and the Lessee agrees that the
Lessee and any such Affiliates will file such returns, maintain such records,
take such actions and execute such documents as may be appropriate to facilitate
the realization of such intended income Tax treatment.
(c) The Lessor and the Lender each agree that, except to the extent
required by law, neither it nor any member of any affiliated group of which it
is or may become a member (whether or not consolidated or combined returns are
filed for such affiliated group for Federal, state or local income Tax purposes)
will at any time take any action, directly or indirectly, or file any return or
other document claiming, or asserting that it is entitled to the income Tax
benefits, deductions and/or credits which, pursuant to the intended income Tax
treatment set forth in Section 4.4 (a) hereof, would otherwise be claimed or
claimable by the Lessee, and that it and any such Affiliates will at the expense
of the Lessee file such returns, maintain such records, take such actions, and
execute such documents (as reasonably requested by the Lessee from time to time)
as may be appropriate to facilitate the realization of, and as shall be
consistent with, such intended income Tax treatment, other than engaging in any
contest of such treatment with any taxing authority, and if any such filing,
maintenance, action or execution requested by the Lessee would result in any
additional income Tax liability or expense payable by it or any Affiliate, or
could reasonably be expected to result in liability or expense payable by it or
any Affiliate, then the Lessee will provide an indemnity against such income Tax
liability or other liability satisfactory to the Lessor or the Lender, as the
case may be, in the Lessor's or the Lender's sole opinion, as the case may be.
SECTION 5
COVENANTS OF THE LESSEE
SECTION 5.1 Qualification as to Corporate Status. The Lessee shall
remain a validly existing corporation organized under the laws of the State of
Delaware or any other state of the
-▇▇-
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ and shall remain qualified to do business in all such
states where the failure to do so would have a Material Adverse Effect.
SECTION 5.2 Further Assurances. Upon the written request of the Lessor
or the Lender, the Lessee, at its own cost and expense, will cause all financing
statements (including precautionary financing statements), fixture filings and
other similar documents to be recorded or filed at such places and times in such
manner as may be necessary to preserve, protect and perfect the interest of the
Lessor and the Lender in the Leased Property as contemplated by the Operative
Documents.
SECTION 5.3 Reporting.
(a) Financial Statements. The Lessee shall deliver or cause to be
delivered to the Lender:
(i) As soon as practicable, and in any event within forty-five (45)
days after the close of each of the first three quarterly accounting
periods in each Fiscal Year, the consolidated condensed balance sheet of
the Lessee and its Subsidiaries as at the end of such quarterly period and
the related consolidated condensed statements of operations for such
quarterly period and for the elapsed portion of the current Fiscal Year
ended with the last day of such quarterly period, and setting forth
comparative consolidated figures for the related period in the prior Fiscal
Year, which financial statements shall be certified by a duly authorized
officer of the Lessee that they fairly present the consolidated financial
condition of the Lessee and its Subsidiaries as at the dates indicated,
subject to changes resulting from audit and normal year-end adjustments;
(ii) As soon as practicable, and in any event within one hundred
twenty (120) days after the end of each Fiscal Year, consolidated balance
sheets of the Lessee and its Subsidiaries as at the end of such Fiscal Year
and the related consolidated statements of earnings, stockholders' equity
and changes in cash-flows of the Lessee and its Subsidiaries for such
Fiscal Year, setting forth in comparative form the consolidated figures for
the Lessee and its Subsidiaries for the previous Fiscal Year, all in
reasonable detail and accompanied by a report thereon of independent public
accountants of recognized national standing selected by the Lessee which
report shall be unqualified as to the scope of audit and as to the status
of the Lessee and its Subsidiaries as a going concern and shall state that
such consolidated financial statements present fairly the financial
position of the Lessee and its Subsidiaries as at the dates indicated and
the results of their operations and changes in their financial position for
the periods indicated in conformity with GAAP applied on a basis consistent
with prior years (or, in the event of a change in accounting principles,
such accountants' concurrence with such change) and that the examination by
such accountants in connection with such consolidated financial statements
has been made in accordance with generally accepted auditing standards;
-27-
(iii) Together with each delivery of any financial statements
pursuant to clauses (i) and (ii) of this subsection, an officer's
certificate of the Lessee, executed by a duly authorized officer of the
Lessee, stating (A) that the signer has instituted procedures for the
review of the terms of this Participation Agreement and the principal
Operative Documents and the review in reasonable detail of the transactions
and conditions of the Lessee and its Subsidiaries taken as a whole during
the accounting period covered by such financial statements, and that such
review has not disclosed the existence during or at the end of such
accounting period, (B) that the signer does not have knowledge of the
existence as at the date of such officer's certificate, of any condition or
event which constitutes an Event of Default, or, if any such condition or
event existed or exists, specifying the nature and period of existence
thereof and what action the Lessee has taken, is taking and proposes to
take with respect thereto, (C) that, to the best of such officer's
knowledge, the financial statements delivered pursuant to clause (i) of
this subsection present fairly the financial position of the Lessee and its
Subsidiaries as at the dates indicated and the results of their operations
and changes in their financial position for the periods indicated in
conformity with GAAP consistently applied, and (D) that the Lessee is in
compliance with each of the covenants contained in Section 5.4 hereof, and
setting out in reasonable detail the data and calculations upon which the
Officer bases such statement;
(iv) Promptly, and in any event within five (5) Business Days after
the Lessee obtains knowledge thereof, notice of (A) the occurrence of any
event which constitutes an Event of Default which notice shall specify the
nature thereof, the period of existence thereof and what action the Lessee
propose to take with respect thereto and (B) any litigation or governmental
proceedings pending against the Lessee which the Lessee determines it will
disclose in the Lessee's reports filed on Forms 10-K or 10-Q with the SEC
(notice being due within five Business Days of such determination); and
(v) With reasonable promptness, such information with respect to the
financial condition of the Lessee or the Leased Property as from time to
time may be reasonably requested by the Lender; provided, however, that the
Lender shall keep such information confidential, except in connection with
enforcement or exercise of the Lender's rights under this Participation
Agreement or otherwise available at law or in equity and provided, further,
that the Lender may disclose such information to the extent necessary to
respond to inquiries of bank regulatory authorities or to comply with legal
process or any other legal disclosure obligations, or to the extent such
information has been made publicly available by parties other than the
Lender.
(b) Other Reports. Promptly after the same are available to it, the
Lessee shall deliver to the Lessor copies of all regular and periodic reports
and other reports and filings (if any) made by the Lessee with the SEC, and
promptly upon transmission thereof, copies of all proxy statements, financial
statements, notices and reports as the Company shall send to its shareholders.
-28-
SECTION 5.4 Affirmative Covenants of Lessee.
(a) Compliance with Law. The Lessee will, and will cause each of its
Subsidiaries to, comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, including, without limitation,
Environmental Laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of their respective properties or to the conduct of
their respective businesses, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(b) Payment of Taxes and Claims. The Lessee will, and will cause each of
its Subsidiaries to, file all tax returns required to be filed in any
jurisdiction and to pay and discharge all taxes shown to be due and payable on
such returns and all other taxes, assessments, governmental charges, or levies
imposed on them or any of their properties, assets, income or franchises, to the
extent such taxes and assessments have become due and payable and before they
have become delinquent and all claims for which sums have become due and payable
that have or might become a Lien on properties or assets of the Lessee or any
Subsidiary, provided that neither the Lessee nor any Subsidiary need pay any
such tax or assessment or claims if (i) the amount, applicability or validity
thereof is contested by the Lessee or such Subsidiary on a timely basis in good
faith and in appropriate proceedings, and the Lessee or a Subsidiary has
established adequate reserves therefor in accordance with GAAP on the books of
the Lessee or such Subsidiary or (ii) the nonpayment of all such taxes and
assessments in the aggregate could not reasonably be expected to have a Material
Adverse Effect.
(c) Corporate Existence. The Lessee will at all times preserve and keep in
full force and effect its corporate existence. The Lessee will at all times
preserve and keep in full force and effect the corporate existence of each of
its Subsidiaries (unless merged into the Lessee or a Subsidiary) and all rights
and franchises of the Lessee and its Subsidiaries unless, in the good faith
judgment of the Lessee, the termination of or failure to preserve and keep in
full force and effect such corporate existence, right or franchise could not,
individually or in the aggregate, have a Material Adverse Effect.
(d) Maintenance of Properties. The Lessee will and will cause each of its
Subsidiaries to maintain and keep, or cause to be maintained and kept, their
respective properties in good repair, working order and condition (other than
ordinary wear and tear), so that the business carried on in connection therewith
may be properly conducted at all times, provided that this Section 5.4(d) shall
not prevent the Lessee or any Subsidiary from discontinuing the operation and
the maintenance of any of its properties if such discontinuance is desirable in
the conduct of its business and the Lessee has concluded that such
discontinuance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
-29-
SECTION 5.5 Financial Covenants of Lessee. The Lessee shall at all times
comply with the financial covenants set forth in Appendix III hereof.
SECTION 6
TRANSFERS BY LESSOR AND LENDER
SECTION 6.1 Lessor Transfers. The Lessor shall not assign, convey,
encumber or otherwise transfer all or any portion of its right, title or
interest in, to or under the Leased Property or the Lease (except pursuant to
the Mortgages, the Assignment of Lease and Rents or pursuant to Article VI of
the Lease) or any of the Operative Documents without obtaining the prior written
consent of the Lender and the Lessee.
SECTION 6.2 Lender Transfers. The Lender shall not assign, convey or
otherwise transfer all or any portion of its right, title or interest in, to or
under any of the Operative Documents without the prior written consent of the
Lessee and the Lessor (such consent not to be unreasonably withheld); provided,
however, that without the prior written consent of or notice to the Lessor or
the Lessee, the Lender may sell participating interests in the Loans to such
banks and other financial institutions as the Lender shall, in its sole
discretion, determine.
SECTION 7
INDEMNIFICATION
SECTION 7.1 General Indemnification. The Lessee agrees, whether or not
any of the transactions contemplated hereby shall be consummated, to assume
liability for, and to indemnify, protect, defend, save and keep harmless each
Indemnitee, on an After-Tax Basis, from and against, any and all Claims by any
third-party that may be imposed on, incurred by or asserted against such
Indemnitee, whether or not such Indemnitee shall also be indemnified as to any
such Claim by any other Person (except to the extent such claim is covered by
the insurance required by the Lease) and in any way relating to or arising out
of:
(i) any of the Operative Documents or any of the transactions
contemplated thereby, and any amendment, modification or waiver in respect
thereof;
(ii) the Land or any part thereof or interest therein;
(iii) the purchase, design, construction, preparation, installation,
inspection, delivery, non-delivery, acceptance, rejection, ownership,
management, possession, operation, rental, lease, sublease, repossession,
maintenance, repair, alteration, modification, addition or substitution,
storage, transfer or title, redelivery, use, financing, refinancing,
disposition, operation, condition, sale (including, without limitation, any
sale pursuant to the Lease), return or other disposition of all or any part
or any interest in the Leased Property or the imposition of any Lien (or
incurring of any liability to refund or pay over any amount as a result of
any Lien) thereon, including without limitation (A) Claims or penalties
arising from any violation of law or in tort
-30-
(strict liability or otherwise), (B) latent or other defects, whether or
not discoverable, (C) any Claim based upon a violation or alleged violation
of the terms of any restriction, easement, condition or covenant or other
matter affecting title to the Leased Property, (D) the making of any
Alterations in violation of any standards imposed by any insurance policies
required to be maintained by the Lessee pursuant to the Lease which are in
effect at any time with respect to the Leased Property or any part thereof,
(E) any Claim for patent, trademark or copyright infringement and (F)
Claims arising from any public improvements with respect to the Leased
Property resulting in any change or special assessments being levied
against the Leased Property or any Claim for utility "tap-in" fees;
(iv) the breach or alleged breach by the Lessee of any representation
or warranty made by it or deemed made by it in any Operative Document or
any certificate required to be delivered under any Operative Document;
(v) the retaining or employment of any broker, finder or financial
advisor by the Lessee to act on its behalf in connection with this
Participation Agreement, or the authorization of any broker or financial
adviser retained or employed by any other Person who or which acts on
Lessee's behalf, or the incurring of any fees or commissions to which the
Lessor or the Lender might be subjected by virtue of their entering into
the transactions contemplated by this Participation Agreement;
(vi) the existence of any Lien on or with respect to the Leased
Property, the Construction, any Basic Rent or Supplemental Rent, including
any Liens which arise out of the possession, use, occupancy, construction,
repair or rebuilding of or title to or interest of any Person in the Leased
Property or by reason of labor or materials furnished or claimed to have
been furnished to the Lessee or any of its contractors or agents or by
reason of the financing of any personalty or equipment purchased or leased
by the Lessee or Alterations constructed by the Lessee, except in all cases
the Liens listed as items (i) and (ii) in the definition of Permitted
Liens;
(vii) any breach of any requirement, condition, restriction or
limitation in any Deed; or
(viii) to the extent not insured by the Title Policies, (A) any
failure of title (except with respect to Permitted Liens) to any part of
the Leased Property or failure (including the failure to create), lack of
perfection, recordation, or loss of priority of the lien of any Mortgage or
the security interests in personal property created thereby, or (B) the
unenforceability, as a matter of law or equity, in whole or in part, of the
Assignment of Lease and Rents of any Mortgage or, with respect to the
obligations of the Lessee, any other Operative Document to which it is a
party, except to the extent that the enforceability of such documents shall
be affected by (i) bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or similar laws affecting the enforcement of
creditors' rights generally, (ii) equitable principles limiting the
availability
-31-
of equitable remedies, or (iii) limits on enforceability of any provision
calling for the payment of attorneys' fees;
provided, however, that the Lessee shall not be required to indemnify any
Indemnitee under this Section for (x) any Claim to the extent that such Claim
results from the willful misconduct or gross negligence of such Indemnitee
(provided that the exception set forth in this clause (x) shall not apply to
Lessor Indemnitees, which the Lessee shall, in any event, be obligated to
indemnify, except as provided in Section 18.12 of the Lease), (y) any Claim
resulting from Lessor Liens which the Lessor is responsible for discharging
under the Operative Documents or (z) any Claim which occurs or arises out of a
time when the Lessee was not an owner, lessee or otherwise using or in
possession of the Leased Property or any part thereof. It is expressly
understood and agreed that the indemnity provided for herein shall survive the
expiration or termination of and shall be separate and independent from any
remedy under the Lease or any other Operative Document.
SECTION 7.2 Environmental Indemnity. Without limitation of Section 7.1,
the Lessee agrees to indemnify, hold harmless and defend each Indemnitee from
and against any and all Claims (including without limitation third party Claims
for personal injury or real or personal property damage), losses (including but
not limited to any loss of value of the Leased Property), damages, liabilities,
fines, penalties, charges, administrative and judicial proceedings (including
informal proceedings) and orders, judgments, remedial action, requirements,
enforcement actions of any kind, and all reasonable and documented costs and
expenses incurred in connection therewith (including but not limited to
reasonable and documented attorneys' and/or paralegals' fees and expenses),
including, but not limited to, all costs incurred in connection with any
investigation or monitoring of site conditions or any clean-up, remedial,
removal or restoration work by any Governmental Authority, arising directly or
indirectly, in whole or in part, out of:
(i) the presence on or under the Land of any Hazardous Materials, or
any releases or discharges of any Hazardous Materials on, under, from or
onto the Land;
(ii) any activity, including, without limitation, construction,
carried on or undertaken on or off the Land, and whether by the Lessee, or
any predecessor in title or any employees, agents, contractors or
subcontractors of the Lessee, or any predecessor in title, or any other
Persons (including such Indemnitee), in connection with the handling,
treatment, removal, storage, decontamination, clean-up, transport or
disposal of any Hazardous Materials that at any time are located or present
on or under or that at any time migrate, flow, percolate, diffuse or in any
way move onto or under the Land;
(iii) loss of or damage to any property or the environment
(including, without limitation, clean-up costs, response costs, remediation
and removal costs, cost of corrective action, costs of financial assurance,
fines and penalties and natural resource damages), or death or injury to
any Person, and all expenses associated with the protection of wildlife,
aquatic species, vegetation, flora and fauna, and any mitigative action
required by or under Environmental Laws;
-32-
(iv) any claim concerning lack of compliance with Environmental Laws,
or any act or omission causing an environmental condition that requires
remediation or would allow any Governmental Authority to record a lien or
encumbrance on the land records; or
(v) any residual contamination on or under the Land, or affecting any
natural resources, and any contamination of any property or natural
resources arising in connection with the generation, use, handling,
storage, transport or disposal of any such Hazardous Materials, and
irrespective of whether any of such activities were or will be undertaken
in accordance with applicable laws, regulations, codes and ordinances;
in any case arising or occurring (y) prior to or during the Lease Term or (z) at
any time during which the Lessee or any Affiliate thereof owns any interest in
or otherwise occupies or possesses the Leased Property or any portion thereof;
provided, however, that the Lessee shall not be required to indemnify any
Indemnitee under this Section for any Claim to the extent that such Claim
results from the willful misconduct or gross negligence of such Indemnitee
(except that the exception set forth in the immediately preceding proviso shall
not apply to Lessor Indemnitees, which the Lessee shall, in any event, be
obligated to indemnify, except as provided in Section 18.12 of the Lease). It
is expressly understood and agreed that the indemnity provided for herein shall
survive the expiration or termination of and shall be separate and independent
from any remedy under the Lease or any other Operative Document.
SECTION 7.3 Proceedings in Respect of Claims. The obligations and
liabilities of the Lessee with respect to any Claims for which, if valid, Lessee
is obligated to provide indemnification pursuant to the provisions of Section
7.1 and Section 7.2 ("Indemnified Claims"), shall be subject to the following
terms and conditions:
(a) Whenever an Indemnitee shall have received notice that an
Indemnified Claim has been asserted or threatened against such Indemnitee, the
Indemnitee shall promptly notify the Lessee of such Claim, together with
supporting facts and data within the possession or knowledge of the Indemnitee
related thereto, provided that the failure to deliver such notice shall not
relieve the Lessee of its indemnification obligations hereunder except to the
extent that such failure prejudices the Lessee. With respect to any amount that
the Lessee is requested by an Indemnitee to pay by reason of Section 7.1 or 7.2,
such Indemnitee shall, if so requested by the Lessee and prior to any payment,
submit such additional information to the Lessee as the Lessee may reasonably
request and which is in the possession of such Indemnitee to substantiate
properly the requested payment.
(b) Lessee shall defend, at its expense, such Indemnified Claim with
counsel of its choice reasonably satisfactory to the Indemnitee, provided,
however, that if an Event of Default has occurred and is continuing, the
Indemnitee shall have the right, upon notice to and at the expense of Lessee, to
undertake the defense of such Claim during the continuance of such Event of
Default. The Indemnitee shall promptly notify the Lessee of any compromise or
settlement proposal with respect to any such Claim and shall not unreasonably
refuse to accept
-33-
any such proposal if the same is acceptable to the Lessee. The Indemnitee may
participate in a reasonable manner at its own expense and with its own counsel
in any proceeding conducted by the Lessee in accordance with the foregoing. The
Lessee shall not enter into any settlement or other compromise with respect to
any Claim which is entitled to be indemnified under Section 7.1 or 7.2 without
the prior written consent of the Lender acting individually and on behalf of the
affected Indemnitee (and Lessor hereby irrevocably so authorizes Lender to grant
such consent on behalf of Lessor and the Lessor Indemnitees), which consent
shall not be unreasonably withheld. The Lessee and each Indemnitee are and shall
be bound to cooperate with each other in good faith in connection with the
defense of any such action, suit or proceeding in providing any information and
bear witness or give testimony which may be requested by counsel for any of such
parties.
(c) Unless an Event of Default shall have occurred and be continuing,
no Indemnitee shall enter into any settlement or other compromise with respect
to any Claim which is entitled to be indemnified under Section 7.1 or 7.2
without the prior written consent of the Lessee, which consent shall not be
unreasonably withheld (it being agreed that it will not be unreasonable for the
Lessee to withhold consent if such compromise or settlement adversely affects a
material right or property interest of the Lessee, including, without
limitation, Lessee's use, title or possession of the Leased Property), unless
such Indemnitee waives its right to be indemnified under Section 7.1 or 7.2 with
respect to such Claim, provided that no Indemnitee shall enter into any
settlement which would adversely affect Lessee's use, title to or possession of
the Leased Property without Lessee's prior written consent.
(d) Upon payment in full of any Claim by the Lessee pursuant to
Section 7.1 or 7.2 to or on behalf of an Indemnitee, the Lessee, without any
further action, shall be subrogated to any and all claims that such Indemnitee
may have relating thereto (other than claims in respect of insurance policies
maintained by such Indemnitee at its own expense) including claims (subject to
the provisions of this Section 7 and Section 18.12 of the Lease) against another
Indemnitee and such Indemnitee shall execute such instruments of assignment and
conveyance, evidence of claims and payment and such other documents, instruments
and agreements as may be necessary to preserve any such Claims and otherwise
cooperate with the Lessee and give such further assurances as are necessary or
advisable to enable the Lessee vigorously to pursue such Claims.
(e) Any amount payable to an Indemnitee pursuant to Section 7.1 or 7.2
shall be paid to such Indemnitee promptly upon receipt of a written demand
therefor from such Indemnitee, accompanied by a written statement describing in
reasonable detail the basis for such indemnity and the computation of the amount
so payable, and if requested by the Lessee, such determination shall be verified
by a nationally recognized independent accounting firm mutually acceptable to
the Lessee and the Indemnitee at the expense of the Lessee.
(f) If Lessee fails to assume the defense of an Indemnified Claim
within a reasonable time (and in any event not more than 30 days) after receipt
of notice thereof from the Indemnitee, the Indemnitee will (upon delivering
notice to such effect to the Lessee) have
-34-
the right to undertake, at the Lessee's cost and expense, the defense,
compromise or settlement of such Claim on behalf of and for the account and risk
of the Lessee, subject to the right of the Lessee (provided no Event of Default
shall have occurred and remained outstanding) to assume the defense of such
Claim at any time prior to the settlement, compromise or final determination
thereof, and provided however, that the Indemnitee shall not enter into any such
compromise or settlement without the written consent of the Lessee, which shall
not be unreasonably withheld, as aforesaid, and provided further that no
Indemnitee shall enter into any such settlement which would adversely affect
Lessee's use, title to or possession of the Leased Property without Lessee's
prior written consent. In the event the Indemnitee assumes the defense of any
such Claim, the Indemnitee will cooperate with the Lessee in keeping the Lessee
reasonably informed of the progress of any such defense, compromise or
settlement.
(g) Nothing contained in this Section 7.3 shall be deemed to expand
the obligation of the Lessee to defend or be responsible for indemnification of
the Indemnitees with respect to any Claim beyond the specific indemnification
obligations set forth in Sections 7.1, 7.2, 7.4, or elsewhere in the Operative
Documents.
SECTION 7.4 General Tax Indemnity.
(a) Except as otherwise provided in this Section, the Lessee shall pay
on an After-Tax Basis, and on written demand shall indemnify and hold each Tax
Indemnitee harmless from and against, any and all fees (including, without
limitation, documentation, recording, license and registration fees), taxes
(including, without limitation, income, gross receipts, sales, rental, use,
turnover, value-added, property, excise and stamp taxes and all recapture and
other payments in connection with any agreement relating to tax abatements
granted in connection with the Leased Property), levies, imposts, duties,
charges, assessments or withholdings of any nature whatsoever, together with any
penalties, fines or interest thereon or additions thereto (any of the foregoing
being referred to herein as "Taxes" and individually as a "Tax" (for the
purposes of this Section, the definition of "Taxes" excludes amounts imposed on,
incurred by, or asserted against each Tax Indemnitee as the result of any
prohibited transaction, within the meaning of Section 406 or 407 of ERISA or
Section 4975(c) of the Code, arising out of the transactions contemplated hereby
or by any other Operative Document as well as any penalties, fees or interest
on, or additions to taxes, caused solely by the failure of any of the Tax
Indemnitees to provide notice to Lessee of Lessee's indemnity obligations
hereunder)) imposed on or with respect to any Tax Indemnitee, the Lessee, the
Leased Property or any portion thereof or the Land, or any sublessee or user
thereof, by the United States or by any state or local government or other
taxing authority in the United States in connection with or in any way relating
to (i) the acquisition, financing, mortgaging, construction, preparation,
installation, inspection, delivery, non-delivery, acceptance, rejection,
purchase, ownership, possession, rental, lease, sublease, maintenance, repair,
storage, transfer of title, redelivery, use, operation, condition, sale, return
or other application or disposition of all or any part of the Leased Property or
the imposition of any Lien, other than a Lessor Lien (or incurrence of any
liability to refund or pay over any amount as a result of any Lien, other than a
Lessor Lien) thereon, (ii) Basic Rent or Supplemental Rent or the receipts or
earnings arising from or received with respect to the Leased
-35-
Property or any part thereof, or any interest therein or any applications or
dispositions thereof, (iii) the Leased Property, the Land or any part thereof or
any interest therein, (iv) all or any of the Operative Documents, any other
documents contemplated thereby and any amendments and supplements thereto and
(v) otherwise with respect to or in connection with the transactions
contemplated by the Operative Documents.
(b) Section 7.4(a) shall not apply to:
(i) Taxes on, based on, or measured by or with respect to, net
income of the Lessor and the Lender (including, without limitation, minimum
Taxes, capital gains Taxes, Taxes on or measured by items of tax preference
or alternative minimum Taxes) other than (A) any such Taxes that are, or
are in the nature of, sales, use, license, rental, ad valorem or property
Taxes, (B) withholding Taxes imposed by the United States or any state or
local taxing authority (1) on payments with respect to the Notes, to the
extent imposed by reason of a change in Applicable Law occurring after the
Closing Date or (2) on Rent, to the extent the net payment of Rent after
deduction of such withholding Taxes would be less than amounts currently
payable with respect to the Notes and (C) any increase in any franchise
taxes based on or otherwise measured by net income, estate, inheritance,
transfer, income tax or gross income or gross receipts tax in lieu of net
income over the term of the Lease, net of any decrease in such taxes
realized by such Tax Indemnitee, to the extent that such tax increase or
decrease would not have occurred if on the Closing Date the Lessor had
advanced funds to the Lessee in the form of a loan secured by the Leased
Property in an amount equal to the Loans, with debt service for such loan
equal to the portion of the Basic Rent attributable to the Loans payable on
each Rent Payment Date and a principal balance at the maturity of such loan
in an amount equal to the Loans at the end of the Lease Term;
(ii) Taxes on, based on, or in the nature of or measured by Taxes
on doing business, business privilege, capital, capital stock, net worth,
or mercantile license or similar taxes other than (A) any increase in such
Taxes imposed on such Tax Indemnitee by any state, net of any decrease in
such taxes realized by such Tax Indemnitee, to the extent that such tax
increase or decrease would not have occurred if on the Closing Date the
Lessor had advanced funds to the Lessee in the form of a loan secured by
the Leased Property in an amount equal to the Loan, with debt service for
such loan equal to the portion of the Basic Rent attributable to the Loan
payable on each Rent Payment Date and a principal balance at the maturity
of such loan in an amount equal to the Loan at the end of the Lease Term or
(B) any Taxes that are or are in the nature of sales, use, rental, license
or property Taxes;
(iii) Taxes that result from any act, event or omission, or are
attributable to any period of time, that occurs after the earliest of (A)
the expiration of the Lease Term with respect to the Leased Property and,
if the Leased Property is required to be returned to the Lessor in
accordance with the Lease, such return and (B) the discharge in full of the
Lessee's obligations to pay the Lease Balance, or any amount
-36-
determined by reference thereto, with respect to the Leased Property and
all other amounts due under the Lease, unless such Taxes relate to acts,
events or matters occurring prior to the earliest of such times or are
imposed on or with respect to any payments due under the Operative
Documents after such expiration or discharge;
(iv) Taxes imposed on a Tax Indemnitee that result from any
voluntary sale, assignment, transfer or other disposition by such Tax
Indemnitee or any related Tax Indemnitee of any interest in the Leased
Property or any part thereof, or any interest therein or any interest or
obligation arising under the Operative Documents (including a sale of an
interest in the Note) or from any sale, assignment, transfer or other
disposition of any interest in such Tax Indemnitee or any related Tax
Indemnitee, it being understood that each of the following shall not be
considered a voluntary sale: (A) any substitution, replacement or removal
of any of the property by the Lessee shall not be treated as a voluntary
action of any Tax Indemnitee, (B) any sale or transfer resulting from the
exercise by the Lessee of any termination option, any purchase option or
sale option, (C) any sale or transfer while an Event of Default shall have
occurred and be continuing under the Lease and (D) any sale or transfer
resulting from the Lessor's exercise of remedies under the Lease;
(v) any Tax which is being contested in accordance with the
provisions of Section 7.4(c), during the pendency of such contest;
(vi) any Tax that is imposed on a Tax Indemnitee as a result of
such Tax Indemnitee's gross negligence or willful misconduct (other than
gross negligence on the part of the Lessor and the incorporators,
stockholders, directors, officers, employees and agents of the Lessor or
gross negligence or willful misconduct imputed to the Lessor or the Lender
solely by reason of their respective interests in the Leased Property);
(vii) any Tax that results from a Tax Indemnitee engaging, with
respect to the Leased Property, in transactions other than those permitted
by the Operative Documents; or
(viii) to the extent any interest, penalties or additions to tax
result in whole or in part from the failure of a Tax Indemnitee to file a
return that it is required to file in a proper and timely manner, unless
such failure (A) results from the transactions contemplated by the
Operative Documents in circumstances where the Lessee did not give timely
notice to Lessor (and the Lessor otherwise had no actual knowledge) of such
filing requirement that would have permitted a proper and timely filing of
such return or (B) results from the failure of the Lessee to supply
information necessary for the proper and timely filing of such return that
was not in the possession of the Lessor.
(c) If any claim shall be made against any Tax Indemnitee or if any
proceeding shall be commenced against any Tax Indemnitee (including a written
notice of such proceeding) for any Taxes as to which the Lessee may have an
indemnity obligation pursuant to this Section,
-37-
or if any Tax Indemnitee shall determine that any Taxes as to which the Lessee
may have an indemnity obligation pursuant to this Section may be payable, such
Tax Indemnitee shall promptly notify the Lessee. The Lessee shall be entitled,
at its expense, to participate in and to the extent that the Lessee desires to,
assume and control the defense thereof; provided, however, that the Lessee shall
not be entitled to assume and control the defense of any such action, suit or
proceeding (but the Tax Indemnitee shall then contest, at the sole cost and
expense of the Lessee, on behalf of the Lessee) if and to the extent that (A) an
Event of Default has occurred and is continuing, (B) such action, suit or
proceeding involves matters which are unrelated to the transactions contemplated
by the Operative Documents and if determined adversely could be materially
detrimental to the interests of such Tax Indemnitee notwithstanding
indemnification by the Lessee or (C) such action, suit or proceeding involves
the federal or any state income tax liability of the Tax Indemnitee. With
respect to any contests controlled by a Tax Indemnitee, (i) if such contest
relates to the federal or any state income tax liability of such Tax Indemnitee,
such Tax Indemnitee shall be required to conduct such contest only if the Lessee
shall have provided to such Tax Indemnitee an opinion of independent tax counsel
selected by the Lessee and reasonably satisfactory to the Tax Indemnitee stating
that a reasonable basis exists to contest such claim or (ii) in the case of an
appeal of an adverse determination of any contest relating to any Taxes, an
opinion of such counsel to the effect that such appeal is more likely than not
to be successful; provided, however, such Tax Indemnitee shall in no event be
required to appeal an adverse determination to the United States Supreme Court.
The Tax Indemnitee may participate in a reasonable manner at its own expense and
with its own counsel in any proceeding conducted by the Lessee in accordance
with the foregoing. Each Tax Indemnitee shall at the Lessee's expense supply the
Lessee with such information and documents reasonably requested by the Lessee as
are necessary or advisable for the Lessee to participate in any action, suit or
proceeding to the extent permitted by this Section. Unless an Event of Default
shall have occurred and be continuing, no Tax Indemnitee shall enter into any
settlement or other compromise with respect to any Claim which is entitled to be
indemnified under this Section without the prior written consent of the Lessee,
which consent shall not be unreasonably withheld (it being agreed that it will
not be unreasonable for Lessee to withhold consent if such compromise or
settlement would adversely affect material rights or property interests of the
Lessee, including, without limitation, Lessee's use, title or possession of the
Leased Property), unless such Tax Indemnitee waives its right to be indemnified
under this Section with respect to such Claim, provided the settlement would not
adversely affect materials rights or property interests of the Lessee,
including, without limitation, Lessee's use, title or possession of the Leased
Property. Notwithstanding anything contained herein to the contrary, (i) a Tax
Indemnitee will not be required to contest (and the Lessee shall not be
permitted to contest) a Claim with respect to the imposition of any Tax if such
Tax Indemnitee shall waive its right to indemnification under this Section with
respect to such Claim (and any related Claim with respect to other taxable years
the contest of which is precluded as a result of such waiver) and (ii) no Tax
Indemnitee shall be required to contest any Claim if the subject matter thereof
shall be of a continuing nature and shall have previously been decided
adversely, unless there has been a change in law which in the opinion of the
Lessee's counsel creates substantial authority for the success of such contest.
Each Tax Indemnitee and the Lessee shall consult in good faith with each other
regarding the conduct of such contest controlled by either.
-38-
(d) If (i) a Tax Indemnitee shall obtain a credit or refund of any
Taxes paid by the Lessee pursuant to this Section or (ii) by reason of the
incurrence or imposition of any Tax for which a Tax Indemnitee is indemnified
hereunder or any payment made to or for the account of such Tax Indemnitee by
the Lessee pursuant to this Section, such Tax Indemnitee at any time realizes a
reduction in any Taxes for which the Lessee is not required to indemnify such
Tax Indemnitee pursuant to this Section, which reduction in Taxes was not taken
into account in computing such payment by the Lessee to or for the account of
such Tax Indemnitee, then such Tax Indemnitee shall promptly pay to the Lessee
the amount of such credit or refund, together with the amount of any interest
received by such Tax Indemnitee on account of such credit or refund or an amount
equal to such reduction in Taxes, as the case may be; provided, however, that no
such payment shall be made so long as an Event of Default shall have occurred
and be continuing; and provided, further, that the amount payable to the Lessee
by any Tax Indemnitee pursuant to this subsection shall not at any time exceed
the aggregate amount of all indemnity payments made by the Lessee under this
Section to such Tax Indemnitee and all related Tax Indemnitees with respect to
the Taxes which gave rise to a credit or refund or with respect to the Tax which
gave rise to a reduction in Taxes less the amount of all prior payments made to
the Lessee by such Tax Indemnitee and related Tax Indemnitees under this
Section. Each Tax Indemnitee agrees to act in good faith to claim such refunds
and other available Tax benefits, and take such other actions as may be
reasonable to minimize any payment due from the Lessee pursuant to this Section
and to maximize the amount of any Tax savings available to it. The disallowance
or reduction of any credit, refund or other tax savings with respect to which a
Tax Indemnitee has made a payment to the Lessee under this subsection shall be
treated as a Tax for which the Lessee is obligated to indemnify such Tax
Indemnitee hereunder.
(e) Any Tax indemnifiable under this Section shall be paid directly to
the applicable taxing authority prior to delinquency if direct payment is
practicable and permitted. If direct payment to the applicable taxing authority
is not permitted or is otherwise not made, any amount payable to a Tax
Indemnitee pursuant to this Section shall be paid within thirty (30) days after
receipt of a written demand therefor from such Tax Indemnitee accompanied by a
written statement describing in reasonable detail the amount so payable, but not
before the date that the relevant Taxes are due. Any payments made pursuant to
this Section shall be made directly to the Tax Indemnitee entitled thereto or
the Lessee, as the case may be, in immediately available funds at such bank or
to such account as specified by the payee in written directions to the payor,
or, if no such direction shall have been given, by check of the payor payable to
the order of the payee by certified mail, postage prepaid at its Address as set
forth in this Participation Agreement. Upon the request of any Tax Indemnitee
with respect to a Tax that the Lessee is required to pay, the Lessee shall
furnish to such Tax Indemnitee the original or a certified copy of a receipt for
Lessee's payment of such Tax or such other evidence of payment as is reasonably
acceptable to such Tax Indemnitee.
(f) If the Lessee knows of any report, return or statement required to
be filed with respect to any Taxes that are subject to indemnification under
this Section, the Lessee shall, if the Lessee is permitted by Applicable Law,
timely file such report, return or statement (and, to the extent permitted by
law, show ownership of the Leased Property in the Lessee except to
-39-
the extent contrary to financial reporting requirements); provided, however,
that if the Lessee is not permitted by Applicable Law or does not have access to
the information required to file any such report, return or statement, the
Lessee will promptly so notify the appropriate Tax Indemnitee, in which case Tax
Indemnitee will file such report. In any case in which the Tax Indemnitee will
file any such report, return or statement, Lessee shall, upon written request of
such Tax Indemnitee, provide such Tax Indemnitee with such information as is
reasonably available to the Lessee.
(g) At the Lessee's request, the amount of any indemnity payment by
the Lessee or any payment by a Tax Indemnitee to the Lessee pursuant to this
Section shall be verified and certified by an independent public accounting firm
selected by the Lessee and reasonably acceptable to the Tax Indemnitee. Unless
such verification shall disclose an error in Lessee's favor of 5% or more, the
costs of such verification shall be borne by the Lessee. In no event shall the
Lessee have the right to review the Tax Indemnitee's tax returns or receive any
other confidential information from the Tax Indemnitee in connection with such
verification. The Tax Indemnitee agrees to cooperate with the independent
public accounting firm performing the verification and to supply such firm with
all information reasonably necessary to permit it to accomplish such
verification; provided, however, that the information provided to such firm by
such Tax Indemnitee shall be for its confidential use. The parties agree that
the sole responsibility of the independent public accounting firm shall be to
verify the amount of a payment pursuant to this Participation Agreement and that
matters of interpretation of this Participation Agreement are not within the
scope of the independent accounting firm's responsibilities.
(h) It is expressly understood and agreed that the indemnity provided
for herein shall survive the expiration or termination of and shall be separate
and independent from any remedy under the Lease or any other Operative Document.
SECTION 7.5 Increased Costs, Etc.
(a) Changes; Legal Restrictions. Subject to the provisions of Section
8.12, in the event that after the date hereof (i) the adoption of or any change
in any law, treaty, rule, regulation, guideline or determination of a court or
Governmental Authority or any change in the interpretation or application
thereof by a court or Governmental Authority or (ii) compliance by the Lender
with any request or directive (whether or not having the force of law) from any
central bank or other Governmental Authority:
(A) does or will subject the Lender to any tax, duty or other charge
of any kind which the Lender determines to be applicable to the Operative
Documents or the Loans or change the basis of taxation of payments to the
Lender of principal, interest, invested amount, yield, fees or any other
amount payable hereunder, except for taxes imposed on or measured by the
overall net income of the Lender; or
-40-
(B) does or will impose, modify, or hold applicable, in the
determination of the Lender, any reserve, special deposit, liquidity ratio,
compulsory loan, FDIC insurance or similar requirement against assets held
by, or deposits or other liabilities in or for the account of, advances or
loans by, commitments made, or other credit extended by, or any other
acquisition of funds by, the Lender;
and the result of any of the foregoing is to increase the cost to the Lender of
making, renewing or maintaining the Loans or to reduce any amount receivable
thereunder and the Lender gives the Lessee notice of any of the foregoing and
the approximate amount of such cost increase within 120 days after the calendar
year in which such increased costs were incurred by the Lender, then, in any
such case, the Lessee shall promptly pay to the Lender on an After-Tax Basis,
within thirty (30) days after demand made in writing by the Lender to the
Lessee, such amount or amounts (based upon an allocation thereof by the Lender
to the financing transactions contemplated by the Operative Documents and
affected by this Section) as may be reasonably necessary to compensate the
Lender for any such additional cost incurred or reduced amount received. The
Lender shall deliver to the Lessee a written statement of the costs or
reductions claimed and the basis therefor, and the allocation made by the Lender
of such costs and reductions shall be conclusive, absent demonstrable error.
(b) Capital Adequacy. Subject to the provisions of Section 8.12, if
the Lender shall have determined that, after the date hereof, the adoption of
any applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Lender with any
request or directive regarding capital adequacy (whether or not having the force
of law) of any such Governmental Authority, central bank or comparable agency,
has or would have the effect of reducing the rate of return on the Lender's
capital as a consequence of its obligations hereunder (including, without
limitation, the Loans) to a level below that which the Lender could have
achieved but for such adoption, change or compliance (taking into consideration
the Lender's policies with respect to capital adequacy), then from time to time,
within thirty (30) days after demand made in writing by the Lender to the
Lessee, the Lessee shall pay to the Lender such additional amount or amounts as
will compensate the Lender for such reduction. The Lender, upon determining in
good faith that any additional amounts will be payable pursuant to this
subsection, will give prompt written notice thereof to the Lessee which notice
shall show in reasonable detail the basis for calculation of such additional
amounts. Such notice shall be conclusive absent demonstrable error.
SECTION 7.6 End of Term Indemnity. In the event that at the end of the
Lease Term (i) the Lessor elects the option set forth in Section 15.6 of the
Lease and (ii) after the Lessor receives the sales proceeds from the Leased
Property under Section 15.6 or 15.7 of the Lease together with the Lessee's
payment of the Recourse Deficiency Amount, the Lessor shall not have received
the entire Lease Balance, then the Lessor or the Lender may obtain, at the
Lessee's sole cost and expense, an appraisal report of each Property from the
appraiser who prepared the most recent approval of the Property prepared in
accordance with Section 3 hereof
-41-
(or if such appraiser is not available, another appraiser reasonably
satisfactory to the Lessor or the Lender, as the case may be) in form and
substance satisfactory to the Lessor and the Lender to establish the reason for
any decline in value of the Leased Property from that anticipated for such date
in the appraisals delivered in accordance with Section 3 hereof. The Lessee
shall promptly reimburse the Lessor for the amount equal to such decline in
value to the extent any appraisal report delivered pursuant to the preceding
sentence concludes that any such decline was due to (i) extraordinary use,
failure to maintain, to repair, to restore, to rebuild or to replace the
Property in a manner consistent with reasonable preservation of its value,
failure to comply with all Applicable Laws, failure to use, workmanship, method
of installation or removal or maintenance, repair, rebuilding or replacement, or
any other cause or condition within the reasonable power of the Lessee to
control or effect resulting in Improvements failing to constitute a nursing home
or assisted living center facility (excepting in each case ordinary wear and
tear), (ii) any Alteration made to, or any rebuilding of, the Leased Property or
any part thereof by the Lessee, (iii) any restoration or rebuilding carried out
by the Lessee or any condemnation of any portion of the Leased Property pursuant
to Article XI of the Lease (after taking into account any Award in respect
thereof) or (iv) any use of the Leased Property or any part thereof by the
Lessee other than as permitted pursuant to Article VIII of the Lease. The
parties hereto acknowledge and agree that the obligation imposed upon the Lessee
under this Section arises from a higher standard of maintenance of the Leased
Property than that required under Article VII of the Lease and is applicable
whether or not the Lessee has failed to comply with any such other obligations
under the Operative Documents.
SECTION 7.7 Exculpation. The Lender has and shall have no liability or
obligation whatsoever or howsoever in connection with the construction,
completion or management of the Improvements, and has no obligation except to
make Loan Advances as provided in this Participation Agreement and the Loan
Agreement, and the Lender is not obligated to inspect the Improvements; nor is
the Lender liable and under no circumstances whatsoever shall the Lender be or
become liable for the performance or default of any contractor or subcontractor,
or for any failure to construct, complete, protect or insure the Improvements,
or any part thereof, or for the payment of any cost or expense incurred in
connection therewith, or for the performance or non-performance of any
obligation of the Lessor or the Lessee to the Lender or to any other person,
firm or entity without limitation; and nothing, including without limitation,
any disbursement of Loan Advances or acceptance of any document or instrument,
shall be construed as a representation or warranty, express or implied, on the
Lender's part. Further, the Lessee shall be solely responsible for all aspects
of the Lessee's business and conduct in connection with the construction,
completion and management of the Improvements including, but not limited to:
(a) The quality and suitability of the Plans and Specifications;
(b) Supervision of the work of Construction;
(c) The qualifications, financial condition and performance of all
architects, engineers, contractors, subcontractors and material
suppliers and consultants;
-42-
(d) Conformance of the work of Construction and the Improvements to the
requirements of all Applicable Laws and public and private
restrictions and requirements and to the requirements of this
Participation Agreement;
(e) The quality and suitability of all materials and workmanship; and
(f) The accuracy of all requests for the disbursement proceeds of the
Loans and the proper application of disbursed proceeds of the Loans.
The Lender shall have no obligation to supervise, inspect or inform the
Lessee, the Lessor or any third party of any aspect of the work or construction
of the Improvements or any other matter referred to above. Any inspection or
review made by or on behalf of the Lender shall be made for the purpose of
determining whether or not the obligations of the Lessee under this
Participation Agreement are being properly discharged, and neither the Lessee,
the Lessor nor any third party shall be entitled to rely upon any such
inspection or review.
The Lender owes no duty of care to the Lessee or the Lessor or any third
person to protect against or inform the Lessee, the Lessor or any third person
of the existence of negligent, faulty, inadequate or defective design or
construction of the Improvements.
SECTION 7.8 Role of Lender. Any term or condition hereof or of any of
the other Operative Documents to the contrary notwithstanding, the Lender shall
not have, and by its execution and acceptance of this Participation Agreement
hereby expressly disclaims, any obligation or responsibility for the management,
conduct or operation of the Improvements or business and affairs of the Lessee
and any term or condition hereof, or of any of the other Operative Documents,
permitting the Lender to disburse funds, whether from the proceeds of the Loans
or otherwise, or to take or refrain from taking any action with respect to the
Lessee or the Improvements shall be deemed to be solely for the benefit of the
Lender and may not be relied upon by any other person. Further, the Lender
shall not have, has not assumed and by its execution and acceptance of this
Participation Agreement hereby expressly disclaims, any liability or
responsibility for the payment or performance of any indebtedness or obligation
of the Lessee or the Lessor and no term or condition hereof, or of any of the
other Operative Documents, shall be construed otherwise.
SECTION 7.9 Lender's Benefits. All conditions precedent to the
obligation of Lender to make any Loan Advance are imposed hereby solely for the
benefit of Lender. No party other than the Lessor may require satisfaction of
any such condition precedent. No other party (including the Lessor) shall be
entitled to assume that Lender will refuse to make any Loan Advance in the
absence of strict compliance with such conditions precedent. Any requirement of
this Participation Agreement and any requirement of the Loan Agreement may be
waived by Lender, in whole or in part, at any time. Any requirement herein or in
any other Operative Document of submission of evidence to Lender of the
existence or non-existence of a fact shall be deemed, also, to be a requirement
that the fact shall exist or not exist, as the case may be,
-43-
and without waiving any condition or obligation of the Lessee or the Lessor,
Lender may at all times independently establish to its satisfaction such
existence or non-existence.
SECTION 7.10 Lessor's Benefits. All conditions precedent to the
obligation of Lessor to make any Contribution Advance are imposed hereby solely
for the benefit of Lessor. No party other than the Lender may require
satisfaction of any such condition precedent. No party other than the Lender
shall be entitled to direct Lessor to refuse to make any Contribution Advance in
the absence of strict compliance with such conditions precedent. Any
requirement of this Participation Agreement and any requirement of the Loan
Agreement may be waived by Lessor, in whole or in part, at any time, subject to
Lender's rights under the Assignment of Lease and Rents and the other Operative
Documents. Any requirement herein or in any other Operative Document of
submission of evidence to Lessor of the existence or non-existence of a fact
shall be deemed, also, to be a requirement that the fact shall exist or not
exist, as the case may be, and without waiving any condition or obligation of
the Lessee or the Lessor, Lender may at all times independently establish to its
satisfaction such existence or non-existence.
SECTION 8
MISCELLANEOUS
SECTION 8.1 Survival of Agreements. The indemnities of the parties
provided for in Section 7 of this Participation Agreement, shall survive the
termination or expiration of this Participation Agreement and any of the other
Operative Documents (including, without limitation, the termination of the Lease
pursuant to Section 15.7 thereof in connection with the Lessee's payment of the
Recourse Deficiency Amount), any disposition of any interest of the Lessor, or
the Lender in the Leased Property and shall be and continue in effect
notwithstanding any investigation made by any party hereto or to any of the
other Operative Documents and the fact that any such party may waive compliance
with any of the other terms, provisions or conditions of any of the Operative
Documents. The representations, warranties, covenants and agreements of the
parties provided for in the Operative Documents shall not be merged into any
Deed.
SECTION 8.2 Notices. Unless otherwise specified herein or in an
applicable Operative Document, it shall, for purposes of this Participation
Agreement and the other Operative Documents, be sufficient service or giving of
any notice, request, complaint, demand, instruction or other instrument or
document to any Person, if it is in writing to the Address set forth below. Any
notice given by telecopy or facsimile transmission shall be deemed given when
sent provided confirmed by regular U.S. mail. Any notice given by mail shall be
deemed to be given when sent by registered or certified mail, return receipt
requested. Any notice sent by any party hereto under the Operative Documents
shall also be sent to the other parties to this Participation Agreement. The
parties hereto may designate, by notice given to each of the other parties, any
further or different addresses than those set forth below to which subsequent
notices shall be sent. For purposes of the Operative Documents (but subject to
the preceding sentence), the Address of the Lessee, the Lender and the Lessor is
as follows:
-44-
(i) Lessee Atria Communities, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
Chief Financial Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) Lender Bank One, Kentucky, N.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Senior Vice
President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
(iii) Lessor Asset XVIII Holdings Company, L.L.C.
c/o JH Management Corporation
Room ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 8.3 Counterparts. This Participation Agreement may be executed
in any number of counterparts as may be convenient or necessary, and it shall
not be necessary that the signatures of all parties hereto or thereto be
contained on any one counterpart hereof or thereof. Additionally, the parties
hereto agree that for purposes of facilitating the execution of this
Participation Agreement, (a) the signature pages taken from the separate
individually executed counterparts of this Agreement may be combined to form
multiple fully executed counterparts and (b) a facsimile transmission shall be
deemed to be an original signature for all purposes. All executed counterparts
of this Participation Agreement shall be deemed to be originals, but all such
counterparts taken together or collectively, as the case may be, shall
constitute one and the same agreement.
SECTION 8.4 Amendments. No Operative Document nor any of the terms
thereof may be terminated, amended, supplemented, waived or modified with
respect to any party thereto except with the prior written consent of such party
thereto and, in all cases, the Lender and the Lessee. If and to the extent that
this Participation Agreement, the Loan Agreement, the Notes, the Lease, the
Assignment of Lease and Rents or the Mortgages constitutes an amendment,
supplement, termination, waiver or other modification to any Operative Document,
each of the parties hereto, by its execution of this Participation Agreement,
shall be deemed to have given its written consent to such amendment supplement,
termination, waiver or other modification.
-45-
SECTION 8.5 Headings, Etc. The Table of Contents and headings of the
various Sections of this Participation Agreement are for convenience of
reference only and shall not modify, define, expand or limit any of the terms or
provisions hereof.
SECTION 8.6 Parties in Interest. Except as expressly provided herein,
none of the provisions of this Participation Agreement is intended for the
benefit of any Person except the parties hereto, their successors and their
permitted assigns.
SECTION 8.7 Governing Law. THIS PARTICIPATION AGREEMENT HAS BEEN
DELIVERED IN, AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF KENTUCKY APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE.
SECTION 8.8 No Recourse. No recourse shall be had for any claims under
this Participation Agreement against any incorporator, shareholder, officer,
manager, member or director, past, present or future, of Lessor or of any
successor or of Lessor's constituent members or other affiliates or of JH
Management Corporation, or against JH Management Corporation, either directly or
through Lessor or any successor, whether by virtue of any constitution, statute
or rule of law or by the enforcement of any assessment or penalty or otherwise,
all such liability being, by acceptance hereof and as part of the consideration
for the acceptance hereof, expressly waived and released.
SECTION 8.9 Expenses.
(a) Expenses of Lessor and Lender. The reasonable fees, expenses and
disbursements (including reasonable counsel fees) of the Lessor and the Lender
in connection with the Operative Documents incurred from and after the Closing
Date (including all costs associated with the release and termination of the
Operative Documents in accordance with the terms thereof) shall be paid by the
Lessee as Supplemental Rent upon demand therefor by the Lessor or the Lender.
(b) Amendments Supplements and Appraisal. The Lessee agrees to pay
all reasonable and documented out-of-pocket costs and expenses of the Lessor and
the Lender in connection with the successful amendment or supplementing of the
Operative Documents and the documents and instruments referred to therein
(including, without limitation, the fees and disbursements of counsel for the
Lessor and the Lender).
SECTION 8.10 Severability. Any provision of this Participation Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
-46-
SECTION 8.11 Submission to Jurisdiction; Waivers. Each party hereto
hereby irrevocably and unconditionally (i) submits for itself and its property
in any legal action or proceeding relating to this Participation Agreement or
any other Operative Document, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the courts of
the State of Kentucky, the courts of the United States of America for the
Western District of Kentucky and appellate courts from any thereof, (ii)
consents that any such action or proceedings may be brought to such courts, and
waives any objection that it may now or hereafter have to the venue of any such
action or proceeding in any court or that such action or proceeding was brought
in an inconvenient court and agrees not to plead or claim the same, (iii) agrees
that service of process in any such action or proceeding may be effected by
mailing a copy thereof by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to such party at its address set forth
in Section 8.2 or at such other address of which the other parties hereto shall
have been notified pursuant to Section 8.2 and (iv) agrees that nothing herein
shall affect the right to effect service of process in any other manner
permitted by law. Each party, to the extent permitted by law, hereby
irrevocably and unconditionally waives any right to have a jury participate in
resolving any dispute, whether sounding in contract, tort, or otherwise, among
or between the parties hereto arising out of, in connection with, related to, or
incidental to the relationship established among the parties in connection with
this Participation Agreement, any other Operative Document or any other document
executed or delivered in connection herewith or the transactions related hereto.
This waiver shall not in any way affect, waive, limit, amend or modify the
Lender's ability to pursue any remedies contained in this Participation
Agreement, the other Operative Documents or any other agreement or document
related thereto.
SECTION 8.12 Limitation on Interest. Any provision to the contrary
contained in this Participation Agreement or in any of the other Operative
Documents notwithstanding, it is expressly provided that in no case or event
shall the aggregate of (i) all interest payable by the Lessee or the Lessor and
(ii) the aggregate of any other amounts accrued or paid pursuant to this
Participation Agreement or any of the other Operative Documents, which under
applicable laws are or may be deemed to constitute interest, ever exceed the
maximum rate of interest which could lawfully be contracted for, charged or
received. In this connection, it is expressly stipulated and agreed that it is
the intent of the Lessee, the Lessor and the Lender to contract in strict
compliance with the applicable usury laws of the ▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ (whichever permit the higher rate of interest) from time to time
in effect. In furtherance thereof, none of the terms of this Participation
Agreement or any of the other Operative Documents shall ever be construed to
create a contract to pay, as consideration for the use, forbearance or detention
of money, interest at a rate in excess of the maximum contract interest rate
permitted to be contracted for, charged or received by the applicable laws of
the United States or the State of Texas (whichever permit the higher rate of
interest). The Lessee, the Lessor and the other parties now or hereafter
becoming liable for payment of any indebtedness under this Participation
Agreement or any other Operative Documents shall never be liable for interest in
excess of the maximum rate that may be lawfully contracted for or charged under
the laws of the ▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ (whichever permit the
higher rate of interest). If under any circumstances the aggregate amounts paid
include amounts which by law are deemed
-47-
interest which would exceed the maximum amount of interest which could lawfully
have been contracted for, charged or received, the parties stipulate that such
amounts will be deemed to have been paid as a result of an error on the part of
the parties, and the party receiving such excess payment shall promptly, upon
discovery of such error or upon notice thereof from the party making such
payment, refund the amount of such excess or at the Lender's option, credit such
excess against any unpaid principal balance owing. To the maximum extent
permitted by applicable law, all amounts contracted for, charged or received for
the use, forbearance, or detention of money shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the full
term of the Loan. The provisions of this Section 8.12 shall control all of the
Operative Documents.
SECTION 8.13 Reproduction of Documents. The parties hereto agree and
stipulate that, to the extent permitted by applicable law, any reproduction of
this Participation Agreement or other Operative Documents (except the Notes)
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made by you in the regular course of
business) and any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence. This Section 8.13 shall
not prohibit the Lender or party hereto from contesting any such reproduction to
the same extent that it could contest the original, or from introducing evidence
to demonstrate the inaccuracy of any such reproduction.
SECTION 8.14 Waiver of Consumer Rights. Each of the parties hereto does
hereby represent and warrant with and to each of the other parties hereto that
(a) it is not in a significantly disparate bargaining position, (b) it is
represented by legal counsel in seeking or acquiring goods or services and such
legal counsel was not directly nor indirectly identified, suggested or selected
by another party hereto, (c) it has knowledge and experience in financial and
business matters that enable it to evaluate the merits and risks of a
transaction, including the transaction evidenced by the Operative Documents, and
(d) the Operative Documents are not a result of any disparity in bargaining
position among the Lessee, the Lessor and the Lender and were negotiated on an
arms-length basis and represent the bargained-for agreement of parties. EACH
PARTY WAIVES ITS RIGHTS UNDER THE DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION
ACT, SECTION 17.41 ET SEQ., BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS
SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF ITS OWN
SELECTION, IT VOLUNTARILY CONSENTS TO THIS WAIVER.
-48-
IN WITNESS WHEREOF, the parties hereto have caused this Participation
Agreement to be executed by their respective duly authorized officers as of the
day and year first above written.
ATRIA COMMUNITIES, INC., as Lessee
By:_____________________________________
J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
Chief Financial Officer
ASSET XVIII HOLDINGS COMPANY,
L.L.C., as Lessor
By Asset Holdings Corporation I,
a Delaware corporation, its
managing member
By:_____________________________________
▇▇▇▇ ▇▇▇▇▇▇▇, Secretary
BANK ONE, KENTUCKY, N.A., as Lender
By:_____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Senior Vice President
-49-
APPENDIX I
TO
MASTER PARTICIPATION AGREEMENT
MASTER LEASE AND DEVELOPMENT AGREEMENT AND LOAN AGREEMENT
---------------------------------------------------------
DEFINITIONS AND INTERPRETATION
[See separate text]
APPENDIX II
FORM OF FUNDING REQUISITION
---------------------------
[Date]
Bank One, Kentucky, N.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Senior Vice President
Asset XVIII Holdings Company, L.L.C.
c/o JH Management Corporation
Room ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
Re: Request for Loan Advances and a Contribution Advance under that
certain Master Participation Agreement, dated as of January 30, 1998
(the "Participation Agreement"), by and among Asset XVIII Holdings
Company, L.L.C., as Lessor (the "Lessor"), Atria Communities, Inc., as
Lessee (the "Lessee"), and Bank One, Kentucky, N.A. as Lender (the
"Lender")
I, [Name], [Officer] of the Lessee, [or its agent], acting for the Lessee
and as agent for the Lessor pursuant to the Participation Agreement, submit this
irrevocable Funding Requisition and certify, on behalf of the Lessee, the
following (all terms not defined herein shall have the meanings given in the
Participation Agreement):
1. The total amount of the Development Costs for which a
Funding is hereby requested is ___________ Dollars ($________). The Lender and
the Lessor are each hereby requested to make on the Funding Date of __________
[at least 3 Business Days after the submission date] a Loan Advance or
Contribution Advance, as applicable (subject to the satisfaction or waiver of
all conditions precedent thereto), which in the aggregate total the amount of
the Funding set forth in the first sentence of this paragraph and allocated in
accordance with the Participation Agreement, in the manner herein described.
2. The Funding relates to the following Properties in the
following amounts.
Parcel Loan Contribution
-------------------------------------- ------------------------------- -------------------------------
Property I $______________________ $______________________
Property II $______________________ $______________________
Property III $______________________ $______________________
Property IV $______________________ $______________________
[add further rows, if more than four Properties comprise the Leased Property]
3. The Lessee certifies that all conditions precedent to the
requested Funding contained in the Operative Documents have been satisfied, or
waived by Lender in writing.
4. The Lessee acknowledges that the [Base Rate][Applicable LIBOR
Rate] shall apply to the requested Funding for the Loans. [For LIBOR Fundings]
The duration of the Interest Period applicable to the Loan Advance and the
Contribution Advance requested hereby shall be one month. [For Base Rate
Fundings] The Lessee acknowledges that the Base Rate shall apply until the next
Loan Payment Date which is more than 3 Business Days after the submission of
this Funding Requisition, and unless the Lessee shall otherwise request, the
Applicable LIBOR Rate shall apply thereto, and the Funding Date for the
Contribution Advance requested herein shall be the next Loan Payment Date which
is more than 3 Business Days after the submission of this Funding Requisition.
5. The proceeds of the Funding requested herein shall be used
solely to pay Development Costs.
6. No part of the Development Costs paid with the funds advanced
under any previous Funding Requisition is a basis for this Funding Requisition,
and none of the Development Costs which are the subject of this Funding
Requisition was included in any prior Funding Requisition or is in respect of
interest on the Notes.
7. Attached to this Funding Requisition is a copy of each
invoice, purchase order, receipt or other such document (the "Invoices") for
Development Costs, which, individually, is in an amount in excess of $100,000,
which Invoices will be, or have been, paid with the proceeds of this Funding,
or, as applicable, the previous Fundings.
8. Construction of all Improvements to date has been performed in
a good and workmanlike manner, substantially in accordance with the Plans and
Specifications therefor, and in compliance with Applicable Law.
9. [If applicable] There has been no material change in the
estimated time of completion of construction of the Improvements and the Lessee
has no reason to believe that (i) the Completion Date cannot be achieved by the
Completion Deadline or (ii) the Total Development Costs of the Construction of
the Improvements will exceed the Total Commitments.
10. No applicable Law prohibits, and no litigation, governmental
investigation or other proceeding is pending or, to the knowledge of the Lessee,
threatened in which there is a reasonable possibility of an unfavorable
judgment, decree, order or other determination which could prevent or make
unlawful, or impose any material adverse condition upon, the Land, the
Improvement or the construction or operation thereof or any transaction
contemplated hereby or by any other Operative Document or the ability of the
Lessee to perform its obligations hereunder or thereunder or, to the Lessee's
knowledge, the Lessor's interest in the Improvements and the Land.
11. All amounts previously advanced pursuant to previous Funding
Requisitions were or will be paid to the parties entitled thereto as specified
in such Funding Requisitions.
12. All proceeds of the Loans and the Contribution have been
applied solely to Development Costs as required under the Operative Documents.
13. [Except as set forth in this item 13,] all conditions
precedent to the Funding requested herein set forth in the Participation
Agreement (as defined below) have been satisfied: [identify unfulfilled
conditions, the actions being taken by the Lessee to satisfy such conditions and
the date(s) by which the Lessee plans to satisfy such conditions].
14. All of the representations and warranties of the Lessee set
forth in the Operative Documents are true and correct on and as of the date
hereof or, as applicable, on and as of the date specified in such representation
and warranty. The Lessee is in compliance with all of its obligations under the
Operative Documents and there exists no Event of Default under the Operative
Documents.
15. The name, address and wire instructions for the disbursement
of the requested Advance is set forth in the attachment hereto, and the Lender
is hereby requested to make such disbursement of the Advance on the date set
forth above in accordance with said attachment.
Very truly yours,
ATRIA COMMUNITIES, INC.
By:________________________________
Name:______________________________
Title:_____________________________
APPENDIX III
TO
MASTER PARTICIPATION AGREEMENT
------------------------------
FINANCIAL COVENANTS
[Covenants to be inserted]
EXHIBIT K
---------
ARCHITECT'S CERTIFICATE
Pursuant to Section 3.2(a)(xvii) of the Participation Agreement,
________________ ______________, a _______________ ______________ (the
"Company") DOES HEREBY CERTIFY to ASSET XVIII HOLDINGS COMPANY, L.L.C. and BANK
ONE, KENTUCKY, N.A., as follows:
1. The Company has served as architect in connection with the preparation of,
and has prepared (or will prepare) architectural plans and specifications
(collectively, the "Plans and Specifications") for a project consisting of
the construction of a warehouse and distribution facility of approximately
_________ gross square feet (the "Intended Use") located on approximately
______ acres of currently unimproved land (the "Property") more
particularly described on Exhibit A attached hereto and incorporated herein
by reference (the "Project"). The Company has performed or will perform
all related architectural design work in connection with the development of
the Project pursuant to that certain contract dated _______________ by and
between the Company and Atria Communities, Inc., a copy of which is
attached hereto as Exhibit B (the "Contract"). Pursuant to the Contract,
the Company will act as the supervising architect during the development of
the Project.
2. The Plans and Specifications provide (or will provide) for the construction
referred to above which, when completed in conformity with the Plans and
Specifications, will comply in all material respects with the requirements
of all applicable laws of governmental authorities having jurisdiction
thereof including, without limitation, The Americans with Disabilities Act
of 1990 (and applicable regulations thereunder), environmental laws,
erosion control laws, zoning and subdivision ordinances, land use and
development laws, as well as applicable codes and regulations of municipal
and city authorities. As of the date hereof, all permits required by any
applicable governmental authority, will be issued or available for issuance
in order to permit the development and construction of the Project in a
timely manner. There are no facts or issues outstanding with respect to
the construction of the Project in accordance with the Plans and
Specifications which would cause any material delay or otherwise impair the
issuance of all applicable permits for the construction of the Project in a
timely manner or which would materially impair or delay construction of the
Project in a timely manner.
3. The Plans and Specifications have been (or will be) prepared in accordance
with the standards of sound architectural practice and same will specify
that only new materials will be utilized. Upon completion in accordance
with the Plans and Specifications, the Project will be of sound structure,
free of defects, adequately constructed for its Intended Use and with its
mechanical plan in working order.
4. It is our opinion that, upon completion of the Project in conformity with
the Plans and Specifications, all applicable permits, licenses and
certificates of occupancy to permit the use and operation of the Project
for its Intended Use will be obtainable.
5. The construction of the Project in accordance with the Plans and
Specifications will not affect any "wetlands" located on the Property, as
such term is defined in Section 328.3 of Title 33 of the Code of Federal
Regulations.
6. The Plans and Specifications require the following utilities:
(a) electricity
(b) telephone
(c) water
(d) sewer
(e) natural gas
7. We have confirmed that all such utilities are available to the boundaries
of the Project in proper location and in sufficient capacity to adequately
serve the Project upon completion of the construction in accordance with
the Plans and Specifications and that satisfactory commitments for
connection to and service of the Project have been obtained and that such
commitments for such utilities will not have expired at the time the
Project is completed.
8. The Plans and Specifications and Project comply with all applicable
requirements for parking and building setback lines. There is ingress and
egress to the Project from ______________________ which has been dedicated
to public use and accepted for maintenance by the
__________________________.
9. The Survey prepared by _________________ dated ____________ and last
revised ____________, has been reviewed and based on said survey and a
review of the site, there are no structures or utility lines on the site of
the Project which will materially interfere with the construction of
improvements at the site of the Project.
10. Upon completion of the Project in accordance with the Plans and
Specifications, the Project will comply with all lot area, height, floor
area and bulk, front, rear and side yard setbacks, and parking requirements
of all zoning ordinances and all other requirements of applicable
governmental authorities which apply to the Project, standing alone,
separate and distinct from any adjacent or contiguous parcel. Such
compliance is in no way dependent upon the common ownership of the Project
with any other property, and the land upon which the project will be
developed has been lawfully subdivided as a separate parcel.
11. Upon completion of the Project in accordance with the Plans and
Specifications, satisfactory methods of vehicular and pedestrian access to,
and egress from, the Project and adjoining or nearby public ways will be
available, sufficient to meet the reasonable needs of the Project's
Intended Use and all applicable requirements of public authorities. Design
conditions are such that no drainage of surface or other water across the
property of others, or over the site of the Project from land of others, is
called for or indicated by the Plans and Specifications or required for the
Project.
12. To the undersigned's best knowledge, neither the Project nor the site of
the Project contain or incorporate any asbestos, PCB's, ureaformaldehyde,
radioactive material, or other toxic or hazardous wastes, materials or
product, as defined in federal, state or local laws and regulations.