1
EXHIBIT 10(iii)C
================================================================================
MASTER PARTICIPATION AGREEMENT
Dated as of April 3, 1998
among
ASSET XVI HOLDINGS COMPANY, L.L.C., as Lessor
EAGLE USA AIRFREIGHT, INC., as Lessee
and
BANK ONE, TEXAS, N.A., as Lender
---------------------------------------------
Lease Financing
for Eagle USA Airfreight, Inc.
Corporate Real Estate Program
================================================================================
2
TABLE OF CONTENTS
Page
----
SECTION 1 DEFINITIONS; INTERPRETATION...........................................................................1
SECTION 2 ACQUISITION, CONSTRUCTION AND LEASE; LOAN; NATURE OF TRANSACTION......................................1
SECTION 2.1 Agreement to Acquire, Construct, Fund and Lease.............................................1
SECTION 2.2 Funding of Property Costs; Loan and Contribution............................................2
SECTION 2.3 Nature of Transaction.......................................................................4
SECTION 2.4 Amounts Due Hereunder and Under Lease and Loan
Agreement.............................................................................5
SECTION 2.5 Controlling Agreements......................................................................6
SECTION 2.6 Permitted Applications of Loan Advances and Contribution
Advances..............................................................................6
SECTION 2.7 Covenants Concerning Construction...........................................................6
SECTION 3 CONDITIONS PRECEDENT; DOCUMENTS.......................................................................9
SECTION 3.1 Conditions to the Obligations of the Lessor and the Lender on
the Closing Date......................................................................9
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..........................................................16
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........................................................................22
SECTION 4.1 Representations of the Lessee..............................................................22
SECTION 4.2 Representations and Covenants of the Lessor................................................24
SECTION 4.3 Covenant of Lender.........................................................................26
SECTION 4.4 Tax Treatment..............................................................................26
SECTION 4.5 Repayment Obligation of Closing Date Costs.................................................27
SECTION 5 COVENANTS OF THE LESSEE..............................................................................27
SECTION 5.1 Qualification as to Corporate Status.......................................................27
SECTION 5.2 Further Assurances.........................................................................27
SECTION 5.3 Reporting..................................................................................27
SECTION 5.4 Financial Covenants of Lessee..............................................................29
SECTION 5.5 Affirmative Covenants of Lessee............................................................30
3
Page
----
SECTION 6 TRANSFERS BY LESSOR AND LENDER.......................................................................31
SECTION 6.1 Lessor Transfers...........................................................................31
SECTION 6.2 Lender Transfers...........................................................................31
SECTION 7 INDEMNIFICATION......................................................................................31
SECTION 7.1 General Indemnification....................................................................31
SECTION 7.2 Environmental Indemnity....................................................................33
SECTION 7.3 Proceedings in Respect of Claims...........................................................34
SECTION 7.4 General Tax Indemnity......................................................................36
SECTION 7.5 Increased Costs, etc.......................................................................41
SECTION 7.6 End of Term Indemnity......................................................................42
SECTION 7.7 Exculpation................................................................................43
SECTION 7.8 Role of Lender.............................................................................44
SECTION 7.9 Lender's Benefits..........................................................................44
SECTION 7.10 Lessor's Benefits.........................................................................44
SECTION 8 MISCELLANEOUS........................................................................................45
SECTION 8.1 Survival of Agreements.....................................................................45
SECTION 8.2 Notices....................................................................................45
SECTION 8.3 Counterparts...............................................................................46
SECTION 8.4 Amendments.................................................................................46
SECTION 8.5 Headings, Etc..............................................................................46
SECTION 8.6 Parties in Interest........................................................................46
SECTION 8.7 Governing Law..............................................................................46
SECTION 8.8 No Recourse................................................................................47
SECTION 8.9 Expenses...................................................................................47
SECTION 8.10 Severability..............................................................................47
SECTION 8.11 Submission to Jurisdiction; Waivers.......................................................47
SECTION 8.12 Limitation on Interest....................................................................48
SECTION 8.13 Waiver of Consumer Rights.................................................................48
APPENDIX I Definitions and Interpretation
APPENDIX II Form of Funding Requisition
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)
4
Page
----
EXHIBIT J Form of Opinion of Counsel to the Lessor (Parcel Closing Date)
EXHIBIT K Form of Architect's Certificate
5
MASTER PARTICIPATION AGREEMENT
THIS MASTER PARTICIPATION AGREEMENT (this "Participation Agreement"),
dated as of April 3, 1998, is among ASSET XVI HOLDINGS COMPANY, L.L.C., a
Massachusetts limited liability company, as Lessor, EAGLE USA AIRFREIGHT, INC.,
a Texas corporation, as Lessee, and BANK ONE, TEXAS, 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 Note and the other
Operative Documents, (i) the Lessor will acquire the Land and has agreed to
lease the Land to the Lessee, (ii) the Lessee has agreed to construct
Improvements on the Land for the Lessor and has agreed to lease the Improvements
from the Lessor as part of the Leased Property under the Lease, (iii) the Lessor
and the Lessee wish to obtain, and the Lender has agreed to provide, funding
pursuant to a loan in the amount of up to $19,000,000 for the acquisition of the
Land and the development and construction of the Improvements, and (iv) Lessor
has agreed to make Contribution Advances from its own equity resources in an
aggregate sum not to exceed $1,000,000 to pay a portion of the cost of
acquisition of the Land and the development and construction of the
Improvements;
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; LOAN;
NATURE OF TRANSACTION
SECTION 2.1 Agreement to Acquire, Construct, Fund and Lease.
(a) Land. Subject to the terms and conditions of this
Participation Agreement and the other Operative Documents, on each Parcel
Closing Date, (i) the Lessor shall acquire an interest in the related Parcel of
Land, (ii) the Lessor has agreed to provide funding for the Property Costs
associated with the acquisition of such interest, (iii) the Lessor shall lease
such Parcel of the Land to the Lessee pursuant to the Lease and the related
Parcel Lease Supplement and (iv) the Lessee shall lease such Parcel of the Land
from the Lessor pursuant to the Lease and the related Parcel Lease Supplement.
6
(b) Improvements. Subject to the terms and conditions of this
Participation Agreement and the other Operative Documents, and to the extent any
parcel is not otherwise satisfactorily improved, (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 Property Costs of the Leased Property associated with such
construction and installation of such Improvements, (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 Property Costs; Loan and Contribution.
(a) Subject to the terms and conditions of this Participation
Agreement and the Loan Agreement, the Lender has agreed to make the Loan to the
Lessor up to the amount of its Loan Commitment in order finance Property Costs
of the Leased Property. 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 Property 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. Except as provided in subsection (c) of this Section, Lessor, in
turn, shall remit the proceeds of each Loan Advance and each Contribution
Advance to Lessee, and Lessee shall use the proceeds of each such Loan Advance
and each such Contribution Advance to pay, or reimburse itself for paying,
Property Costs, as provided in Section 2.6 hereof. Except as provided in
Sections 2.2 (c) and 2.2 (d), 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. The Loan shall (i) be a term and construction loan consisting of the
aggregate total of the Loan Advances, (ii) be in an amount not to exceed the
Loan Commitment, (iii) bear interest as to each Loan Advance from the date such
Loan Advance was made in accordance with Section 2.4 of the Loan Agreement,
payable on each Loan Payment Date, (iv) bear interest as to overdue amounts at
the Overdue Rate, (v) be repayable as to principal as provided in to the Loan
Agreement with a final scheduled Loan Payment Date on the Scheduled Termination
Date, (vi) be evidenced by the Note, and (vii) have the other terms and
conditions as provided in the Loan Agreement and the Note. 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 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 Lessor in respect of the Contribution
Return on each Rent Payment Date after the related Parcel Completion Date.
-2-
7
(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 Advance
and Lessor agrees to make a Contribution Advance, as the case may be, in the
respective amounts equal to 95%, and 5% of the amount described in Section 3.1
(g) hereof. Beginning with a date at least three Business Days prior to the
Parcel Closing Date for each 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 Loan
Advance and a Contribution Advance (together, a "Funding") for Property 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 April 1,
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 Property
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 Advance and
Contribution Advance to be made with respect to such Funding, and the aggregate
principal amounts of the related Parcel Tranche and Parcel Contribution Tranche
immediately following the requested 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 Note 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 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
(including the Parcel Requirements), the Lender shall, on the Funding Date, make
a Loan Advance in an amount equal to the product of the Funding
-3-
8
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) For each Property, on each Loan Payment Date to and
including the earlier to occur of the Completion Deadline for such Property or
the related Parcel Completion Date, the Lender, without the necessity or
requirement of (i) the submission of a Funding Requisition, (ii) satisfaction of
the conditions precedent set forth in Section 3.3 hereof, or (iii) any notice to
or consent of Lessor or Lessee, shall make a Loan Advance in respect of the
related Property (which shall be added to the outstanding amount of the related
Parcel Tranche) in an amount equal to the interest due and payable to the Lender
on the related Parcel Tranche on such Loan Payment Date, and the proceeds of
such Loan Advance shall be retained by the Lender to pay all of the interest
then due and payable under such Parcel Tranche; provided, however, that the
Lender shall not be obligated to make a Loan Advance in respect of interest if
an Event of Default shall have occurred and is then continuing. The Lender shall
promptly notify the Lessee of the date and amount of each such Loan Advance made
in respect of this Section 2.2(c).
(d) For each Property, on each Loan Payment Date to and
including the earlier to occur of the Completion Deadline for such Property or
the related Parcel Completion Date, the Lessor, without the necessity or
requirement of (i) the submission of a Funding Requisition, (ii) satisfaction of
the conditions precedent set forth in Section 3.3 hereof, or (iii) any notice to
or consent of the Lessee, shall be deemed to have made a Contribution Advance in
respect of such Property in an amount equal to the Contribution Return then
accrued and unpaid with respect to the related Parcel Contribution Tranche, and
such Parcel Contribution Tranche (and the Contribution) shall be increased by
such amount as payment of the Contribution Return then so accrued and unpaid in
respect of such Parcel Contribution Tranche. The Lessor shall promptly notify
the Lessee of the date and amount of each such Contribution Advance deemed to
have been made in respect of this Section 2.2(d).
(e) 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. 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
-4-
9
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) during the period from the Parcel Closing Date to the earlier to occur
of the Completion Deadline for each Property or the Parcel Completion Date
therefor, payment of interest on each Parcel Tranche on each Loan Payment Date
shall be made from a Loan Advance automatically made by the Lender, as provided
in Section 2.2(c) of this Participation Agreement, (ii) during the period from
the Parcel Closing Date to the earlier to occur of the Completion Deadline for
each Property or the Parcel Completion Date therefor, payment of Contribution
Return on the related Parcel Contribution Tranche on each Loan Payment Date
shall be made from a Contribution Advance automatically deemed to have been made
by the Lessor, as provided in Section 2.2(d) of this Participation Agreement,
(iii) from and after the earlier to occur of the Completion Deadline for each
Property or the related Parcel Completion Date, 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 related Parcel Tranche and the Contribution Return on the related
Parcel Contribution Tranche, (iv) if the Lessee becomes obligated to purchase
the Leased Property under the Lease, the sum of (A) the principal amount of the
Note, 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, (v) if the Lessee
elects to exercised the Purchase Option with respect to any Property, Lessee
shall be obligated to pay the Lease Balance for such Property in full in
accordance with Sections 15.1, 15.3 15.4 and 15.5 hereof, (vi) 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 Loan, 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 (vii) 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
-5-
10
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 made under the Loan Agreement 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
"Property 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 the Improvements for each Property, 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 the
Construction, (iii) capitalized interest on the Loan and capitalized
Contribution Return with respect to the Contribution (but only to the extent and
pursuant to the procedures set forth in Section 2.2(c) and Section 2.2(d)) and
(iv) "soft costs" related to the foregoing, including, without limitation,
architect's fees, engineering fees, permit and license fees and charges,
testing, survey costs, title charges and attorneys' fees and expenses payable
pursuant to Section 3.1(g) hereof and other related costs and expenses properly
attributable to any of the foregoing Property 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, which consent shall not be unreasonably withheld and a decision
shall be communicated to Lessee within thirty (30) days of Lender's receipt of
Lessee's request for consent; provided, however, that so long as no Default or
Event of Default shall have occurred and is then outstanding, no such consent
relating to Improvements to a Property the Property Costs of which are
reasonably estimated by the Lessee to cost in the aggregate less than $500,000,
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 120 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 April 1, 2000. All Improvements will be constructed substantially in
accordance with the related
-6-
11
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 30 days of the filing of such lien, and in
any event prior to the commencement of an action to foreclose on such lien, any
Permitted Exceptions 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, 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 of VIII or better and shall include a standard mortgagee clause
(without contribution) in
-7-
12
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) Commercial general liability insurance, including
products/completed operation liability and personal injury
with limits of liability of at least $5,000,000 per
occurrence, including that provided by umbrella or excess
liability policies, if any, and with a deductible satisfactory
to the Lender;
(3) Flood hazard coverage, if appropriate, in an amount acceptable
to the Lender and with a deductible acceptable to the Lender;
and
(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 days of the occurrence thereof of any Default or Event of Default
as to which Lessee has knowledge.
-8-
13
(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:
(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) Note. The Note (substantially in the form
attached as an exhibit 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) 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
-9-
14
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.
(vii) Opinion of Lessee's Counsel. The opinion of
Franklin, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, 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.
(viii) 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.
(ix) 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.
-10-
15
(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.
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, 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;
-11-
16
(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 Property
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 Property 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 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. If Improvements
having a Property Costs exceeding $500,000 are to be
constructed on the Parcel, 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
-12-
17
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 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. With respect to
any Parcel the Estimated Property Costs in respect thereof
exceed Five Million Dollars ($5,000,000), (a) the opinion of
Franklin, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, 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 Texas, 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
-13-
18
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. Failure by Lender or
Lessor to approve or disapprove such reports within ten (10)
days of actual receipt thereof by the same by providing notice
in accordance with this Participation Agreement to Lessee
shall be deemed approval of such reports by the party so
failing to give such notice.
(xvi) Plans and Specifications. Copies of the Plans
and Specifications, either "as built" in the event the
Improvement for such Property have been 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. If Improvements are to
be constructed a 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
-14-
19
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 the Estimated Parcel Property
Costs. The cost of such appraisal shall be borne solely by the
Lessee.
(xxii) Estimated Parcel Property Costs; Approved
Budget. The Lessee shall deliver an Officer's Certificate
certifying Lessee's best estimate of the Estimated Parcel
Property 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.
(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.
(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.
-15-
20
(g) Location of Parcel. If the Parcel is not located in a
county in which Lessee, as of the Closing Date, owned or leased real property,
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, but once given shall
be irrevocable).
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 case may be, pursuant to the Funding Requisition
following the Initial Loan Advance, 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, subject to the following proviso, 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, and provided, further, that with
respect to Improvements on such Parcel the Property Costs,
which are reasonably estimated by the Lessee to be less than
$500,000, the Lender's approval shall not be required;
(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
-16-
21
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;
(iv) Improvements Permit. All building permits or
other authorizations required by any Governmental Authority
for the Construction to the extent not previously obtained;
(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. If Improvements having estimated
Property Costs in excess of $500,000 are being Constructed on a Parcel, 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 Loan is 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;
-17-
22
(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 Property 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 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 Property
Costs 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 Property Costs 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
-18-
23
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, whether or not the Property Costs 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.
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 (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 ordinary course of Lessee's
business. All fixtures, equipment, materials and other property contemplated
under the
-19-
24
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
(F) the Property is in compliance with all applicable
zoning laws and regulations; and
-20-
25
(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 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 Texas, (ii) is duly qualified as a foreign corporation and in
good standing under the laws of each other 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
-21-
26
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 Loan 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.
(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.
-22-
27
(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)
prevent or interfere with the continued operation and maintenance of the Leased
Property as contemplated by the Operative Documents.
-23-
28
(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 the Operative
Documents, the Lessor will not create, incur, suffer to be created or incurred,
or guarantee any obligation or indebtedness.
-24-
29
(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).
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
-25-
30
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 4.5 Repayment Obligation of Closing Date Costs. Pursuant to
Section 2.2 (b) hereof, the Lender and the Lessor have committed to make a
Funding in respect of certain Property Costs on the Closing Date. In the event
that the initial Parcel Closing Date shall not have occurred by July 1, 1998,
the Lessee hereby covenants and agrees to pay the following amounts upon the
demand therefor by the Lender: (i) to the Lender, an amount equal to all
principal and interest then due as of the date of payment on the Note (including
Breakage Costs) and (ii) to the Lessor, an amount equal to the Contribution and
all Contribution Return then due as of the date of payment thereof.
-26-
31
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
Texas or any other state of the United States of America and shall remain
qualified to do business in all such states.
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 Price Waterhouse, L.L.P. or other 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
-27-
32
the examination by such accountants in connection with such
consolidated financial statements has been made in accordance with
generally accepted auditing standards;
(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)
-28-
33
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.
SECTION 5.4 Financial Covenants of Lessee.
(a) The Lessee shall not permit Consolidated Tangible Net
Worth, as determined as of the last day of any fiscal quarter, to be less than
the sum of (i) $45,705,000 plus (ii) an amount equal to 30% of the sum of
Consolidated Net Income for each fiscal quarter from and including the fiscal
quarter beginning January 1, 1998 plus (iii) 100% of all proceeds received by
the Lessee in respect of Lessee's issuance of capital stock from and after the
date hereof (provided that any net loss for any fiscal quarter shall be excluded
from such calculation).
(b) The Lessee shall not permit Consolidated Net Worth, as
determined as of the last day of any fiscal quarter, to be less than (i)
$65,705,000 plus (ii) an amount equal to 30% of the sum of Consolidated Net
Income for each fiscal quarter from and including the fiscal quarter beginning
January 1, 1998 plus (iii) 100% of all proceeds received by the Lessee in
respect of Lessee's issuance of capital stock from and after the date hereof
(provided that any net loss for any fiscal quarter shall be excluded from such
calculation).
(c) The Lessee shall not permit the Fixed Charge Coverage
Ratio as determined as of the last day of any fiscal quarter for the period of
four consecutive fiscal quarters then ended, to be less than 1.50 to 1.00.
(d) The Lessee shall be permitted to incur, assume or in any
manner become or be liable in respect of Debt to any one creditor or one group
of creditors pursuant to a single commitment, to lend not to exceed Fifty
Million Dollars ($50,000,000) provided that such Debt is only to any single
creditor or group of creditors (it being understood that the Debt permitted by
this subsection (d) shall never, individually or in the aggregate, exceed Fifty
Million Dollars ($50,000,000)).
(e) The Lessee shall not incur, assume or in any manner become
or be liable at any time in respect of Debt (other than that permitted by
subsection (d) above or as evidenced by the transactions contemplated hereby)
which, in the aggregate, exceeds Ten Million Dollars ($10,000,000).
-29-
34
SECTION 5.5 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 5.5(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.
-30-
35
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, subject to
all rights and obligations hereunder, to such banks and other financial
institutions as the Lender shall, in its sole discretion, determine; provided,
however, that the rights of Lessee hereunder shall in no way be diminished nor
any of its obligations be increased.
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
-31-
36
from any violation of law or in tort (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; or
(vii) any breach of any requirement, condition, restriction or
limitation in any Deed;
provided, however, that the Lessee shall not be required to indemnify any
Indemnitee under this Section for (w) any Claim first asserted after the seventh
(7th) anniversary of the Lease Termination Date, (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
-32-
37
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 federal, state or local government agency,
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;
(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
agency 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;
-33-
38
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 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.
-34-
39
(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 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.
-35-
40
(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), 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)) 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 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.
-36-
41
(b) Sections 7.1 and 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 or property Taxes, (B) withholding Taxes imposed by the United
States or any state (1) on payments with respect to the Note, 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 Note 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 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;
(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 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
-37-
42
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, 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
-38-
43
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.
(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
-39-
44
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 when due to the applicable taxing authority if direct payment is
practicable and permitted. If direct payment to the applicable taxing authority
is not permitted or is otherwise not made, any amount payable to a Tax
Indemnitee pursuant to 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 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.
-40-
45
(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.
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 Loan 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
(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 Loan 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
-41-
46
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 Loan) 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 appraisal of the Property prepared in
accordance with Section 3 hereof (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 warehouse
and distribution facility (excepting in each case ordinary wear and tear), (ii)
any Alteration made to, or any rebuilding of, the Leased
-42-
47
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;
(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 Loan.
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
-43-
48
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 Loan
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, 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 other party (including the
Lender) shall be entitled to assume that Lessor will 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.
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
-44-
49
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 in
accordance with their terms 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 the 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:
(i) Lessee Eagle USA Airfreight, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
-45-
50
(ii) Lender Bank One, Texas, N.A.
Bank One Center
7th Floor
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
(iii) Lessor Asset XVI 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 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 Note, 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.
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.
-46-
51
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 TEXAS 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, other than for wilful misrepresentation or
intentional misconduct, 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 shall be paid by the Lessee as Supplemental Rent upon demand
therefor by the Lessor, provided that no such fees shall be payable by Lessee
unless specifically authorized by the Operative Documents.
(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.
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
-47-
52
courts of the State of Texas, the courts of the United States of America for the
District of Texas 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.
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 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 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
-48-
53
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.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-49-
54
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.
EAGLE USA AIRFREIGHT, INC., as Lessee
By:
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
ASSET XVI HOLDINGS COMPANY, L.L.C.,
as Lessor
By Asset Holdings Corporation I, a
Delaware corporation, its managing
member
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
BANK ONE, TEXAS, N.A., as Lender
By:
----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
Title: Vice President
-50-
55
APPENDIX I
TO
MASTER PARTICIPATION AGREEMENT
MASTER LEASE AND DEVELOPMENT AGREEMENT AND LOAN AGREEMENT
DEFINITIONS AND INTERPRETATION
[See separate text]
I-1
56
APPENDIX II
FORM OF FUNDING REQUISITION
[Date]
Bank One, Texas, N.A.
Bank One Center
7th Floor
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇
Asset XVI 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 April
3, 1998 (the "Participation Agreement"), by and among Asset
XVI Holdings Company, L.L.C., as Lessor (the "Lessor"), Eagle
USA Airfreight, Inc., as Lessee (the "Lessee"), and Bank One,
Texas, 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 Property 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.
II-1
57
2. The Funding relates to the following Parcels of the Land in
the following amounts.
Parcel Loan Contribution
------ ---- -------------
Parcel I $______________________ $______________________
Parcel II $______________________ $______________________
Parcel III $______________________ $______________________
Parcel IV $______________________ $______________________
[ADD FURTHER ROWS, IF MORE THAN FOUR PARCELS COMPRISE THE LEASED PROPERTY]
3. The Lessee certifies that all conditions precedent to the
requested Funding contained in the Operative Documents have been satisfied.
4. The Lessee acknowledges that the [Base Rate][Applicable
LIBOR Rate] shall apply to the requested Funding. [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 Property Costs.
6. No part of the Property Costs paid with the funds advanced
under any previous Funding Requisition is a basis for this Funding Requisition,
and none of the Property Costs which are the subject of this Funding Requisition
was included in any prior Funding Requisition or is in respect of interest on
the Note.
7. Attached to this Funding Requisition is a copy of each
invoice, purchase order, receipt or other such document (the "Invoices") for
Property Costs, which, individually, is in an amount in excess of $500,000,
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.
II-2
58
9. 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 Property 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 Loan and the Contribution have been
applied solely to Property 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,
EAGLE USA AIRFREIGHT, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
II-3
59
EXHIBIT K
ARCHITECT'S CERTIFICATE
Pursuant to Section 3.2(a)(xvii) of the Participation Agreement,
________________ ______________, a _______________ ______________ (the
"Company") DOES HEREBY CERTIFY to ASSET XVI HOLDINGS COMPANY, L.L.C. and BANK
ONE, TEXAS, 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
Eagle USA Airfreight, 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.
K-1
60
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
K-2
61
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.
------------------------------------
K-3