EXHIBIT 10.36
PARTICIPATION AGREEMENT
Dated as of
November 23, 1999
Among
CORNELL CORRECTIONS, INC.,
CORNELL CORRECTIONS OF CALIFORNIA, INC.,
CORNELL CORRECTIONS OF TEXAS, INC.,
CORNELL CORRECTIONS OF OKLAHOMA, INC.,
WBP LEASING, INC.,
and
CORNELL CORRECTIONS OF ALASKA, INC.
Lessees,
XXXXXX FINANCIAL LEASING, INC.,
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
and
SAFECO CREDIT COMPANY, INC.
Owner Participants
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION
not in its individual capacity, except as expressly
provided herein, but solely as Owner Trustee
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION AGREEMENT...............1
ARTICLE II
SALE AND PURCHASE; PARTICIPATION IN COST OF THE EQUIPMENT; CLOSING........2
Section 2.1 SALE AND PURCHASE..........................................2
Section 2.2 PARTICIPATION BY OWNER PARTICIPANTS........................2
Section 2.3 GENERAL PROVISIONS.........................................3
Section 2.4 TIME AND PLACE OF CLOSING..................................3
Section 2.5 INTEREST PAYMENTS TO OWNER PARTICIPANTS....................3
Section 2.6 CALCULATION OF ADJUSTMENTS TO BASE RENT AND STIPULATED
LOSS VALUE................................................4
ARTICLE III
CONDITIONS................................................................5
Section 3.1 CONDITIONS PRECEDENT TO THE PARTICIPATIONS IN THE
EQUIPMENT.................................................5
ARTICLE IV
LESSEES' REPRESENTATIONS, WARRANTIES AND INDEMNITIES......................7
Section 4.1 IN GENERAL.................................................7
ARTICLE V
CERTAIN COVENANTS OF LESSEES..............................................9
Section 5.1 FURTHER ASSURANCES.........................................9
Section 5.2 MERGER, ETC................................................9
Section 5.3 FILINGS, ETC..............................................10
Section 5.4 FINANCIAL COVENANTS.......................................10
Section 5.5 PUBLICITY.................................................12
Section 5.6 NOTICES...................................................12
Section 5.7 LANDLORD WAIVER CORRECTIONS...............................12
ARTICLE VI
OWNER FOR FEDERAL TAX PURPOSES...........................................12
ARTICLE VII
NOTICES; CONSENT TO JURISDICTION.........................................12
Section 7.1 NOTICES...................................................12
Section 7.2 SERVICES OF PROCESS AND JURISDICTION......................13
ARTICLE VIII
MISCELLANEOUS............................................................14
Section 8.1 SURVIVAL..................................................14
Section 8.2 MISCELLANEOUS.............................................14
Section 8.3 NONRECOURSE...............................................14
Section 8.4 LIABILITY.................................................15
Section 8.5 GOVERNING LAW.............................................15
ARTICLE IX
EXPENSES; SECURITY DEPOSIT...............................................15
Section 9.1 TRANSACTION EXPENSES......................................15
Section 9.2 SECURITY DEPOSIT..........................................15
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT dated as of November 23, 1999, among (i)
Cornell Corrections, Inc., a Delaware corporation, Cornell Corrections of
California, Inc., a California corporation, Cornell Corrections of Texas, Inc.,
a Delaware corporation, Cornell Corrections of Oklahoma, Inc., a Delaware
corporation, WBP Leasing, Inc., a Delaware corporation, and Cornell Corrections
of Alaska, Inc., an Alaska corporation (herein called "Lessees"), (ii) Xxxxxx
Financial Leasing, Inc., The CIT Group/Equipment Financing, Inc., and Safeco
Credit Company, Inc. (each an "Owner Participant and collectively the "Owner
Participants") and (iii) First Security Bank, National Association, a national
banking association, not in its individual capacity, except as expressly
provided herein, but solely as Owner Trustee under the Trust Agreement (herein,
in such latter capacity, together with any successor owner trustee, the "Owner
Trustee");
RECITALS:
WHEREAS, the Lessees are the owner of certain Equipment;
WHEREAS, concurrently with the execution and delivery of this
Participation Agreement, the Owner Participants are entering into a Trust
Agreement with the Owner Trustee, pursuant to which Trust Agreement the Owner
Trustee agrees, among other things, to hold the Trust Estate for the use and
benefit of the Owner Participants;
WHEREAS, pursuant to the terms of the Trust Agreement, Trustee is
authorized and directed to purchase from Lessees on each Closing Date certain of
the Equipment by paying to Lessees the Equipment Costs thereof; and
WHEREAS, concurrently with the execution and delivery of this
Participation Agreement, the Owner Trustee and Lessees are entering into the
Lease Agreement whereby, subject to the terms and conditions set forth therein,
the Owner Trustee agrees to lease to Lessees, and Lessees agree to lease from
the Owner Trustee, the Equipment, such lease to be evidenced by the execution
and delivery of one or more Interim Lease Supplements covering the Equipment;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION AGREEMENT
Unless otherwise defined herein or unless the context shall otherwise
require, capitalized terms used in this Participation Agreement shall have the
meanings assigned to such terms in Appendix A to the Lease Agreement, dated as
of November 23, 1999, between the Owner Trustee
and Lessees. Unless otherwise indicated, all references herein to Sections,
Schedules and Exhibits refer to Sections, Schedules and Exhibits of this
Participation Agreement.
ARTICLE II
SALE AND PURCHASE; PARTICIPATION IN COST OF THE EQUIPMENT; CLOSING
Section 2.1 SALE AND PURCHASE. (a) FIRST CLOSING DATE. Subject to the
terms and conditions hereof and on the basis of the representations and
warranties set forth herein, Lessees agree to sell to the Owner Trustee, and the
Owner Trustee agrees to purchase from Lessees, on the first Closing Date the
Group of Equipment described in the Interim Lease Supplement executed and
delivered on such Closing Date and in connection therewith, the Owner Trustee
agrees to pay to Lessees the Equipment Cost for such Group of Equipment. On the
first Closing Date, Lessees shall deliver the such Group of Equipment to the
Owner Trustee, and the Owner Trustee shall accept such delivery.
(b) SECOND CLOSING DATE. Subject to the terms and conditions hereof and on
the basis of the representations and warranties set forth herein, Lessees agree
to sell to the Owner Trustee, and the Owner Trustee agrees to purchase from
Lessees, on the second Closing Date the Group of Equipment described in the
Interim Lease Supplement executed and delivered on such Closing Date and in
connection therewith, the Owner Trustee agrees to pay to Lessees the Equipment
Cost for such Group of Equipment. On the second Closing Date, Lessees shall
deliver such Group of Equipment to the Owner Trustee, and the Owner Trustee
shall accept such delivery.
(c) THIRD CLOSING DATE. Subject to the terms and conditions hereof and on
the basis of the representations and warranties set forth herein, Lessees agree
to sell to the Owner Trustee, and the Owner Trustee agrees to purchase from
Lessees, on the third Closing Date the Group of Equipment described in the
Interim Lease Supplement executed and delivered on such Closing Date and in
connection therewith, the Owner Trustee agrees to pay to Lessees the Equipment
Cost for such Group of Equipment. On the third Closing Date, Lessees shall
deliver such Group of Equipment to the Owner Trustee, and the Owner Trustee
shall accept such delivery.
(d) FOURTH CLOSING DATE. Subject to the terms and conditions hereof and on
the basis of the representations and warranties set forth herein, Lessees agree
to sell to the Owner Trustee, and the Owner Trustee agrees to purchase from
Lessees, on the fourth Closing Date the Group of Equipment described in the
Interim Lease Supplement executed and delivered on such Closing Date and in
connection therewith, the Owner Trustee agrees to pay to Lessees the Equipment
Cost for such Group of Equipment. On the fourth Closing Date, Lessees shall
deliver such Group of Equipment to the Owner Trustee, and the Owner Trustee
shall accept such delivery.
Section 2.2 PARTICIPATION BY OWNER PARTICIPANTS. Subject to the terms and
conditions of this Participation Agreement, on each Closing Date each Owner
Participant hereby agrees to participate in the payment of the Equipment Cost
for each Group of Equipment by making an equity
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investment in the beneficial ownership of the Equipment on such Closing Date by
transferring to FSB, for the account of the Owner Trustee, not later than 11:30
a.m., Salt Lake City time, on the applicable Closing Date immediately available
funds in Dollars, in the amount equal to such Owner Participant's commitment
percentage set forth on Schedule 1 hereto (the "Owner Participant's Commitment")
times the Equipment Cost for the Group of Equipment being purchased on such
Closing Date. If the conditions in Section 3.1 have been met to the Lead Owner
Participant's satisfaction with respect to any Closing Date and any Owner
Participant shall fail or refuse to make available to Owner Trustee at such time
an amount equal to its Owner Participant's Commitment for the Group of Equipment
described in the Interim Lease Supplement being delivered on such Closing Date,
then (a) the Lead Owner Participant shall make such amount available to Owner
Trustee, (b) such Owner Participant shall be deemed to have assigned its Owner
Participant's Commitment to the Lead Owner Participant, (c) the Lead Owner
Participant's commitment percentage set forth on Schedule 1 hereto shall be
automatically increased to take into account the Owner Participant's Commitment
that was not funded and (d) the Lessees shall be deemed to have assigned to the
Lead Ownership Participant any Claims it may have against the Owner Participant
that failed to fund. Upon any transfer of all or a portion of an Owner
Participant's Beneficial Interest to a Permitted Transferee in accordance with
the terms of the Trust Agreement, the parties hereto shall execute an amendment
to Schedule 1 hereto to reflect any revised Owner Participant's Commitment
caused by such transfer.
Section 2.3 GENERAL PROVISIONS. Upon receipt by the Owner Trustee of all
amounts to be furnished to it on each Closing Date pursuant to this Article II
and the satisfaction of the conditions set forth in Article III hereof, Lessees
shall transfer title to, and deliver, the Group of Equipment being purchased on
such Closing Date to the Owner Trustee, and the Owner Trustee shall purchase and
take title to and accept delivery of such Group of Equipment. In consideration
for each such transfer of title to and delivery of such Equipment, and
contemporaneously therewith the Equipment Cost thereof shall be paid by the
Owner Trustee to Lessees for such Group of Equipment.
Section 2.4 TIME AND PLACE OF CLOSING. Each Closing Date shall be selected
by Lessees, subject to compliance with the further provisions of this Article II
and provided that no Closing Date shall be a date later than December 31, 1999.
The closing (a "Closing") on each Closing Date shall take place at 11:00 a.m.,
Chicago time, at the offices of the Lead Owner Participant, or at such other
time and place as the parties hereto shall agree. At least five Business Days
prior to each Closing Date (other than the first Closing Date), Lessees shall
deliver to the Owner Participants and the Owner Trustee written notice of the
proposed Closing Date and the amounts to be made available pursuant to Article
II by each Owner Participant. Each notice shall include Lessees' estimate of the
Fair Market Sales Value of the Group of Equipment being purchased on such
Closing Date, subject to the overall limitation that the Equipment Cost shall
not exceed $21,100,000 in the aggregate for all of the Equipment.
Section 2.5 INTEREST PAYMENTS TO OWNER PARTICIPANTS. If for any reason
whatsoever (other than, as to an Owner Participant, the failure of such Owner
Participant to make available to the Owner Trustee the amount specified to be
made available by it in Article II hereof except if such
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failure is occasioned by the nonfulfillment of any condition precedent contained
in Article III hereof (other than a condition solely to be performed or complied
with by such Owner Participant)), the transactions contemplated hereby shall not
be consummated on a Closing Date proposed by Lessees in the written notice
delivered pursuant to Section 2.4, then: (i) Lessees shall reimburse each Owner
Participant for the loss of the use of any funds that it made available to the
Owner Trustee occasioned by such failure by paying on demand interest, at the
Base Rate, on the amount of such funds for the period from and including such
Closing Date to but excluding the earlier of the Business Day on which such
funds shall be returned to such Owner Participant (unless such funds shall be
returned later than 1:00 p.m., Salt Lake City time, in which event such Business
Day shall be included) or the actual date on which the transactions contemplated
for such Closing Date shall occur; and (ii) Lessees shall also reimburse the
Owner Participants for any loss reasonably incurred in liquidating or employing
deposits, swaps or other xxxxxx with third-parties.
The Owner Trustee shall not be liable to Lessees or the Participants for
any failure to invest funds held by it under the circumstances described in this
Section 2.5.
All funds made available to the Owner Trustee by any Owner Participant
under Section 2.5 and any investments made by the Owner Trustee of such funds
shall be held in trust for the benefit of the respective Owner Participants by
the Owner Trustee.
Section 2.6 CALCULATION OF ADJUSTMENTS TO BASE RENT AND STIPULATED LOSS
VALUE.
(a) CALCULATION OF ADJUSTMENTS. In the event that (A) the actual aggregate
Equipment Cost is different from $21,100,000, (B) there is any change in, or
cost relating to a revision in, the structure of the transaction contemplated
hereby, (C) there is any change in the Code or in the regulations promulgated
thereunder or other official administrative pronouncement, which change is
proposed, enacted or effective after the date hereof and prior to the end of the
Lease Term, and which change alters or eliminates the tax assumptions used in
calculating Interim Rent, Base Rent, Renewal Rent and Stipulated Loss Values, or
(D) the Index Rate on the Base Term Commencement Date is different from 5.70%
(but in no event shall the Index Rate used for any calculation be less than
5.5%) then, in each such case, the Lead Owner Participant shall recalculate the
payments or amounts, as the case may be, of Interim Rent, Base Rent, Stipulated
Loss Values and Renewal Rent to preserve the Net Economic Return that the Owner
Participants would have realized had such event not occurred. In performing any
such recalculation and in determining each Owner Participant's Net Economic
Return, the Lead Owner Participant shall utilize the same methods and
assumptions originally used in making the computations of Interim Rent, Base
Rent, Stipulated Loss Values and Renewal Rent with respect to the Lease Term
(other than those assumptions changed as a result of any of the events described
in clauses (A) through (D) of the preceding sentence necessitating such
recalculation; it being agreed that such recalculation shall reflect solely any
changes of assumptions or facts resulting directly from the event or events
necessitating such recalculation).
(b) CONFIRMATION AND VERIFICATION. Upon completion of any recalculation
described in Section 2.6(a), the Lead Owner Participant shall provide a
certificate to Lessees either (x) stating that
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the payments of Interim Rent, Base Rent, Stipulated Loss Values and Renewal Rent
with respect to the Lease Term do not require change, or (y) setting forth such
adjustments to the payments of Interim Rent, Base Rent, Stipulated Loss Values
and Renewal Rent with respect to the Lease Term as have been calculated by the
Lead Owner Participant in accordance with Section 2.6(a). Lessees shall execute
a Lease Supplement or amendment reflecting its concurrence with such adjustment,
but in the absence of such execution, Lessees will be deemed to have approved
the same five Business Days after receipt of the certificate.
ARTICLE III
CONDITIONS
Section 3.1 CONDITIONS PRECEDENT TO THE PARTICIPATIONS IN THE EQUIPMENT.
It is agreed that the obligations of each Owner Participant to participate in
the payment to Lessees of Equipment Cost and to make available the amount of its
respective Owner Participant's Commitment therefor are subject to the
satisfaction prior to or on each Closing Date of the following conditions
precedent:
(a) The following documents shall have been duly authorized, executed and
delivered by the respective party or parties thereto, and shall be in full force
and effect and executed counterparts shall have been delivered to Lessees, each
Owner Participant, and the Owner Trustee or their respective counsel:
(i) the Lease;
(ii) an Interim Lease Supplement covering a Group of Equipment dated
such Closing Date;
(iii) the Trust Agreement;
(iv) a Trust Supplement covering the Equipment dated such Closing
Date;
(v) a Xxxx of Sale;
(vi) an ACH Debit Authorization, the effect of which is to permit
the Paying Agent to debit a bank account of Cornell for Rent;
(vii) an invoice addressed to the Owner Trustee from Lessees, dated
the applicable Closing Date, specifying the purchase price payable for the
Group of Equipment, such aggregate purchase price to equal the Equipment
Cost therefor; and
(viii)in the case of the final Closing Date, a Lease Supplement
covering all of the Equipment and reflecting the total Equipment Cost paid
by the Owner to Lessees.
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All of the foregoing documents, together with this Participation
Agreement, are sometimes referred to herein, collectively, as the
"Operative Documents" and, individually, as an "Operative Document."
(b) A precautionary Uniform Commercial Code financing statement or
statements shall have been executed and delivered by Lessees.
(c) The Owner Participant shall have received, in each case in form and
substance satisfactory to it, such documents and evidence with respect to
Lessees, the Owner Trustee and the other Owner Participants as it, or its
counsel, may reasonably request in order to establish the authority of such
parties to consummate the transactions contemplated by this Participation
Agreement and the taking of all corporate proceedings in connection therewith.
(d) All appropriate action required to have been taken prior to each
Closing Date in connection with the transactions contemplated by this
Participation Agreement shall have been taken by any governmental authority, and
all orders, permits, waivers, authorizations, exemptions and approvals of such
Persons required to be in effect on such Closing Date in connection with the
transactions contemplated by this Participation Agreement shall have been
issued, and all such orders, permits, waivers, authorizations, exemptions and
approvals shall be in full force and effect on such Closing Date.
(e) The Lead Participant shall have received a favorable opinion addressed
to the Owner Trustee and each Owner Participant, and reasonably satisfactory to
it, from Xxxxx Xxxxxxx & Xxxx, LLP, special counsel for Lessees, covering such
matters as the Lead Owner Participant may request.
(f) Solely with respect to each Closing Date other than the first Closing
Date, to the extent requested, the Lead Owner Participant shall have received
favorable opinions addressed to the Owner Trustee and the Owner Participants,
and reasonably satisfactory as to scope and substance, from such local counsel
for Lessees as it may require, as to such matters as it may reasonably request.
(g) The Owner Participants shall have received, at least 10 days prior to
the first Closing Date, an appraisal report of the Appraiser, which report shall
be satisfactory to the Owner Participant in its sole discretion and shall (i)
set forth the estimated Fair Market Sales Value of the Equipment and (ii) state
such other matters as the Lead Owner Participant may reasonably request.
(h) The Lead Owner Participant shall have received an independent
insurance broker's report, in form and substance satisfactory to the Lead Owner
Participant, as to the due compliance with the terms of the Lease relating to
insurance with respect to the Equipment and as otherwise required by the Lease.
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(i) On each Closing Date it shall be true that no Event of Loss with
respect to any Equipment being acquired on such Closing Date has occurred, and
the Owner Trustee has good and marketable title to the Equipment, free and clear
of Liens.
(j) In the opinion of the Lead Owner Participant and its special counsel,
there shall have been, since the date hereof, no amendment, modification,
addition, or change in or to the provisions of the Code, as amended through the
date hereof, and the Treasury Regulations (including Temporary Treasury
Regulations), Internal Revenue Service Revenue Procedures or Revenue Rulings, or
other administrative interpretations, applicable judicial precedents or
Executive Orders of the President of the United States, all as in effect on the
date hereof, the effect of which might preclude the Owner Participants from
obtaining any of the income tax benefits and consequences assumed to be
available to the Owner Participants in establishing their Net Economic Return.
(k) The Owner Participants shall have received such other documents and
evidence with respect to the other parties hereto as an Owner Participant may
reasonably request in order to establish consummation on such Closing Date of
the transactions contemplated by the Operative Documents, the taking of all
corporate proceedings in connection therewith and compliance with the conditions
set forth herein.
(l) The Lead Owner Participant shall have received from each landlord or
mortgagee of the premises on which Equipment is located, an agreement,
satisfactory to the Lead Owner Participant, that such Person waives any interest
in the Equipment, will allow the Owner Trustee access to the premises for
purposes of maintenance, repair and/or removal of the Equipment and will give
the Owner Trustee prior notice of any foreclosure by the Mortgagee on the
premises.
(m) Solely with respect to each Closing Date other than the first Closing
Date, no material adverse change in Lessees' financial condition shall have
occurred since such first Closing Date.
ARTICLE IV
LESSEES' REPRESENTATIONS, WARRANTIES AND INDEMNITIES
Section 4.1 IN GENERAL. Each Lessee represents and warrants to each Owner
Trustee and each Owner Participant that as of each Closing Date:
(a) Each Lessee is a corporation duly organized and validly existing
pursuant to the laws of the jurisdiction of its incorporation, has the corporate
power and authority to own or hold under lease its properties wherever located
or used and to enter into and perform its obligations under the Operative
Documents to which it is a party and is duly qualified to do business as a
foreign corporation in good standing wherever necessary to carry out its
obligations under the Operative Documents;
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(b) the execution, delivery and performance by each Lessee of the
Operative Documents to which it is a party have been duly authorized by all
necessary corporate action on the part of such Lessee, do not require any
stockholder approval, or approval or consent of any trustee or holders of any
indebtedness or obligations of such Lessee except such as have been duly
obtained or by such Closing Date will have been duly obtained, and none of such
agreements contravenes any applicable law binding on such Lessee or the
Certificate of Incorporation or Bylaws of such Lessee or contravenes the
provisions of, or constitutes a default under, or results in the creation of any
Lien upon the property of such Lessee under, any indenture, mortgage, contract
or other agreement to which such Lessee is a party or by which it or its
properties may be bound or affected, except as specifically provided in the
Operative Documents;
(c) neither the execution and delivery by each Lessee of the Operative
Documents to which it is a party nor the performance by each Lessee of its
obligations hereunder or thereunder requires the consent or approval of, the
giving of notice to, or the registration with, or the taking of any other action
in respect of, any Federal, state or foreign governmental authority;
(d) on each Closing Date, the Operative Documents to which it is a party
will each constitute legal, valid and binding obligations of each Lessee,
enforceable against each Lessee in accordance with the respective terms thereof,
subject to applicable bankruptcy, fraudulent transfer, fraudulent conveyance,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(e) there are no pending or threatened actions or proceedings before any
court or administrative agency which (A) involve the Equipment or (B) might
materially adversely affect the ability of each Lessee to perform its
obligations under the Operative Documents;
(f) there has not occurred any event which constitutes a Lease Default or
an Event of Default that is presently continuing;
(g) each Lessee is solvent and will not be rendered insolvent by the sale
of the Equipment; after the sale of the Equipment the capital of each Lessee
will not be unreasonably small for the conduct of the business in which such
Lessee is engaged or is about to engage; no Lessee has any intention or belief
that it is about to incur debts beyond its ability to pay as they mature; and
each Lessee's sale of the Equipment is made without any intent to hinder, delay
or defraud either present or future creditors, purchasers or other interested
Persons;
(h) the proceeds of the sale of the Equipment to the Owner Trustee will
not be used by Lessees directly or indirectly for any purpose violative of
Regulation G or U of the Board of Governors of the Federal Reserve System (12
C.F.R. Part 207, as amended);
(i) the audited financial statements of Cornell contained in Cornell's
Annual Report on Form 10-K for the year ended December 31, 1998, and the
unaudited financial statements contained in Cornell's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999 (copies of
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which have been furnished to the Lead Owner Participant), have been prepared in
accordance with generally accepted accounting principles consistently applied,
fairly set forth the financial position of Cornell as of said dates and such
financial statements do not contain any material misstatement or omission which
would render such financial statements false or misleading; since September 30,
1999, there has been no material adverse change in such financial position; and
nothing has occurred to the knowledge of Cornell which in the reasonable opinion
of Cornell is likely to materially adversely affect the ability of Lessees to
perform their obligations under the Operative Documents;
(j) the chief executive office (as such term is used in Article IX of the
UCC) of each Lessee and the office where each Lessee will keep its corporate
records concerning the Equipment are located in Houston, Texas;
(k) each Lessee has filed or caused to be filed all Federal, state and
local Tax returns that are required to be filed by it and has paid or caused to
be paid all Taxes shown to be due and payable on such returns or on any
assessment received by it to the extent that such Taxes have become due and
payable, except to the extent the same are being contested in good faith. To the
extent, if any, that such Taxes are not due and payable or are being contested
in good faith by such Lessee, each Lessee has established reserves (segregated
to the extent required by generally accepted accounting principles) that are
adequate for the payment or settlement thereof;
(l) neither the aforesaid financial statements nor any other document
furnished or to be furnished by Lessees to the Lead Owner Participant or to any
appraiser or counsel in connection with the transactions contemplated hereby or
in connection with any Operative Document contains or will contain any untrue
statement of a material fact or omits or will omit a material fact necessary to
make the statements contained therein not misleading, under the circumstances
under which any such statement shall have been made; and
(m) no Lessee is a party to any agreement or instrument or subject to any
charter or other corporate restriction that individually or in the aggregate
might adversely affect its ability to perform its obligations under the
Operative Documents to which it is or is to be a party.
ARTICLE V
CERTAIN COVENANTS OF LESSEES
Each Lessee covenants and agrees with each of the Owner Participants and
the Owner Trustee, in its capacity as such and in its individual capacity, as
follows:
Section 5.1 FURTHER ASSURANCES. Lessees will cause to be done, executed,
acknowledged and delivered all and every such further acts, conveyances and
assurances as the Owner Trustee or the Owner Participants shall reasonably
require for accomplishing the purposes of this Participation Agreement and the
other Operative Documents.
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Section 5.2 MERGER, ETC. No Lessee will consolidate with or merge into any
other corporation (except for Cornell or another Lessee) or convey, transfer or
lease substantially all of its assets as an entirety to any Person.
Section 5.3 FILINGS, ETC. Lessees, at their expense, will take, or cause
to be taken, such action with respect to the recording, filing, rerecording and
re-filing of the Operative Documents and any financing statements or other
instruments as are necessary to maintain the ownership interest of the Owner
Trustee in the Equipment or will furnish to the Owner Trustee timely notice of
the necessity of such action, together with such instruments, in execution form,
and such other information as may be required to enable the Owner Trustee to
take such action.
Section 5.4 FINANCIAL COVENANTS. Cornell will not permit its:
(a) EBITDA RATIO I: EBITDA Ratio I with respect to any period ending on a
date that falls within any period set forth below under the column entitled
"Period" to exceed the applicable ratio set forth under the caption "Ratio"
opposite such period:
PERIOD RATIO
November ___, 1999 through and including 4.00 to 1
September 30, 2000
October 1, 2000 through and including March 31, 3.75 to 1
2001
April 1, 2001 through and including September 30, 3.50 to 1
2001
October 1, 2001 through and including March 31, 3.25 to 1
2002
April 1, 2002 through and including September 30, 3.00 to 1
2002
October 1, 2002 through and including March 31, 2.50 to 1
2003
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(b) EBITDA RATIO II: EBITDA Ratio II with respect to any period ending on
a date that falls within any period set forth below under the column entitled
"Period" to exceed the applicable ratio set forth under the caption "Ratio"
opposite such period:
PERIOD RATIO
November ___, 1999 through and including 5.00 to 1
September 30, 2000
October 1, 2000 through and including March 31, 4.75 to 1
2001
April 1, 2001 through and including September 30, 4.50 to 1
2001
October 1, 2001 through and including March 31, 4.25 to 1
2002
April 1, 2002 through and including September 30, 4.00 to 1
2002
October 1, 2002 through and including March 31, 3.50 to 1
2003
(c) NET WORTH: Net Worth to be less than $80,000,000.
(d) INTEREST COVERAGE RATIO: Interest Coverage Ratio with respect to any
period ending on a date that falls within any period set forth below under the
column entitled "Period" to be less than the applicable ratio set forth under
the caption "Ratio" opposite such period:
PERIOD RATIO
November 1, 1999 through and including 2.50 to 1
September 30, 2000
October 1, 2000 through and including 2.75 to 1
September 30, 2001
October 1, 2001 through and including 3.00 to 1
March 31, 2003
(e) FIXED CHARGES RATIO: Fixed Charges Ratio to be less than 1.25 to 1 at
any time.
Upon written request of Cornell, the Owner Participants agree to review
modification of the foregoing financial covenant requirements based upon future
covenant amendments to the Credit
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Agreement, which review shall be done reasonably, but the Owner Participants
shall not be obligated to agree to any modification or amendment to any such
requirement.
Section 5.5 PUBLICITY. Lessees consent to the securing, by the Lead Owner
Participant, of printed publicity through newspapers and other media (such as
tombstones commemorating the transaction) utilizing any Lessee's name,
tradename, trademarks, the Equipment Cost or other references to the
transactions contemplated hereby (provided the cost of such publicity is not
borne by Lessees), so long as the form thereof is reasonably acceptable to
Cornell.
Section 5.6 NOTICES. No Lessee will sell, lease or grant a mortgage on the
premises on which Equipment is located or any interest therein unless prior
thereto the purchaser, lessee or mortgagee, respectively, has entered into an
agreement in favor of the other parties hereto, in form and substance
satisfactory to such parties, agreeing to grant access to such parties to the
premises on which Equipment is located for purposes of maintenance, repair
and/or removal of the Equipment, agreeing to give notice to such parties before
exercising remedies against the premises on which Equipment is located and
waiving any interest in the Equipment.
Section 5.7 LANDLORD WAIVER CORRECTIONS. To the extent any of the landlord
waivers delivered under Section 3.1(l) above in connection with the first
Closing Date reflect tenants other than Lessees or have other technical defects,
Lessees shall cause to be executed and delivered to Owner Trustee within 30 days
after such first Closing Date such additional agreements required by Owner
Trustee to ensure that Owner Trustee has the benefit of such landlord waivers.
ARTICLE VI
OWNER FOR FEDERAL TAX PURPOSES
It is hereby agreed between Lessees and the Owner Participants that for
Federal income tax purposes the Owner Trustee will be the owner of the Equipment
to be delivered under the Lease and Lessees will be the lessees thereof.
ARTICLE VII
NOTICES; CONSENT TO JURISDICTION
Section 7.1 NOTICES. All notices, demands, instructions and other
communications required or permitted to be given to or made upon any party
hereto shall be in writing and shall be personally delivered or sent by
registered or certified mail postage prepaid, or by facsimile, or by prepaid
courier service, and shall be deemed to be given for purposes of this
Participation Agreement on the day that such writing is delivered to the
intended recipient thereof in accordance with the provisions of this Section
7.1. Unless otherwise specified in a notice sent or delivered in accordance with
the foregoing provisions of this Section 7.1, notices, demands, instructions and
other communications in writing shall be given to or made upon the respective
parties hereto at their
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respective addresses as follows: (A) if to Lessees, the Owner Trustee or the
Owner Participants, to the respective addresses set forth below the signatures
of such parties at the foot of this Participation Agreement, or (B) if to a
subsequent Owner Participant, addressed to such subsequent Owner Participant at
such address as such subsequent Owner Participant shall have furnished by notice
to the parties hereto.
Section 7.2 SERVICES OF PROCESS AND JURISDICTION. Each of the parties
hereto (i) hereby irrevocably submits to the non-exclusive jurisdiction of the
Courts of Xxxx County, Illinois (without prejudice to the right of any party to
remove to the United States District Court for the Northern District of
Illinois) and to the jurisdiction of the United States District Court for the
Northern District of Illinois, for the purposes of any suit, action or other
proceeding arising out of this Participation Agreement, the other Operative
Documents, or the subject matter hereof or thereof or any of the transactions
contemplated hereby or thereby brought by any of the parties hereto or their
successors or assigns, (ii) hereby irrevocably agrees that all claims in respect
of such action or proceeding may be heard and determined in such Illinois State
court or, to the fullest extent permitted by applicable law, in such Federal
court, and (iii) to the extent permitted by applicable law, hereby irrevocably
waives, and agrees not to assert, by way of motion, as a defense, or otherwise,
in any such suit, action or proceeding any claim that is not personally subject
to the jurisdiction of the above-named courts, that the suit, action or
proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that this Participation Agreement, the other
Operative Documents, or the subject matter hereof or thereof, may not be
enforced in or by such court. EACH PARTY HEREBY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS PARTICIPATION AGREEMENT OR ANY OTHER OPERATIVE DOCUMENT. A final judgment
obtained in respect of any action, suit or proceeding referred to in this
Section 7.2 shall be conclusive and may be enforced in other jurisdictions by
suit as the judgment or in any manner as provided by applicable law. Each
Lessee, other than Cornell, irrevocably appoints Cornell as its agent, to
receive on its behalf service of copies of the summons and complaint and any
other process which may be served in any such action or proceeding. Cornell
irrevocably appoints CT Corporation Systems (the "Process Agent"), with an
office at 000 Xxxxx XxXxxxx, Xxxxxxx, XX 00000, as its agent, to receive on its
behalf service of copies of the summons and complaint and any other process
which may be served in any such action or proceeding. Service of process may be
made by mailing or delivering by registered mail, Federal Express, DHL or
similar courier at the address to which notices to it are to be given or to
Cornell in the case of the Process Agent at the Process Agent's above address,
it being agreed that service in either such manner shall constitute valid
service upon Lessees or their successors or assigns in connection with any such
action or proceeding only; PROVIDED, HOWEVER that nothing in this Section 7.2
shall affect the right of any of such parties or their respective successors or
assigns to bring any action or proceeding against any other one of such parties
or its respective property in the courts of other jurisdictions.
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ARTICLE VIII
MISCELLANEOUS
Section 8.1 SURVIVAL. The representations, warranties, indemnities and
agreements of Lessees provided for in this Participation Agreement, and
Lessees', the Owner Trustee's, and each Owner Participant's obligation under any
of the Operative Documents, shall survive the making available of the respective
Owner Participant's Commitments, the delivery of the Equipment and the
expiration or other termination of this Participation Agreement and the other
Operative Documents.
Section 8.2 MISCELLANEOUS. This Participation Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument. Neither this Participation Agreement
nor any of the terms hereof may be terminated, amended, supplemented, waived or
modified, except by an instrument in writing signed by the party against which
the enforcement of the termination, amendment, supplement, waiver or
modification is sought; and no such termination, amendment, supplement, waiver
or modification shall be effective unless a signed copy thereof shall have been
delivered to Owner Trustee. The terms of this Participation Agreement shall be
binding upon, and inure to the benefit of, Lessees and their respective
successors and permitted assigns, each Owner Participant and its successors and
assigns and the Owner Trustee and its successors as Owner Trustee under the
Trust Agreement. This Participation Agreement shall in all respects be governed
by, and construed in accordance with, the laws of the State of Illinois,
including all matters of construction, validity and performance. This
Participation Agreement is being delivered in the State of Illinois.
Section 8.3 NONRECOURSE. The parties hereto agree that all of the
statements, representations, covenants and agreements made by the Owner Trustee
(when made in such capacity) contained in this Participation Agreement and any
agreement referred to herein, unless expressly otherwise stated, are made and
intended only for the purpose of binding the Trust Estate and establishing the
existence of rights and remedies which can be exercised and enforced against the
Trust Estate. Therefore, anything contained in this Participation Agreement or
such other agreements to the contrary notwithstanding (except for any express
provisions that the Owner Trustee is responsible for in its individual
capacity), no recourse shall be had with respect to this Participation Agreement
or such other agreements against the Owner Trustee in its individual capacity or
against any Person which becomes a successor trustee or co-trustee or any
officer, director, trustee, servant or direct or indirect parent or controlling
Person or Persons of any of them; PROVIDED, however that this Section 8.3 shall
not be construed to prohibit any action or proceeding against any party hereto
for its own willful misconduct or grossly negligent conduct for which it would
otherwise be liable; and PROVIDED, FURTHER, that nothing contained in this
Section 8.3 shall be construed to limit the exercise and enforcement in
accordance with the terms of this Participation Agreement or such other
agreements of rights and remedies against the Trust Estate. The foregoing
provisions of this Section 8.3 shall survive the termination of this
Participation Agreement and the other Operative Documents.
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Section 8.4 LIABILITY. The Owner Participants will have no liability for
any actions or omissions of the Owner Trustee unless the Owner Trustee is
acting, or is failing to act, in accordance with the instructions of the Owner
Participants.
Section 8.5 GOVERNING LAW. This Participation Agreement shall in all
respects be governed by, and construed in accordance with, the laws of the State
of Illinois, including all matters of construction, validity and performance.
ARTICLE IX
EXPENSES; SECURITY DEPOSIT
Section 9.1 TRANSACTION EXPENSES. The following expenses shall be paid by
Lessees: the reasonable and actual fees, expenses and disbursements of (1)
counsel for Owner Trustee under the Trust Agreement, such information to be
furnished by the Owner Trustee, (2) Xxxxxxxx Xxxxxxxx & Xxxxxx P.C., special
counsel for the Lead Owner Participant, such information to be furnished by the
Lead Owner Participant, and (3) (i) all fees, Taxes and other charges payable in
connection with the recording or filing of instruments and financing statements,
such information to be furnished by the Person having knowledge thereof, (ii)
the initial fee and reasonable and actual disbursements of the Owner Trustee
under the Trust Agreement, such information to be furnished by the Owner Trustee
and (iii) the fee of the Appraiser (or of such other appraiser as shall be
acceptable to Lessees and the Lead Owner Participant) with respect to the
appraisal of the Equipment pursuant to Article III hereof, such information to
be furnished by the Lead Owner Participant. Notwithstanding anything herein to
the contrary, Lessees shall only be responsible for payment of a maximum amount
of up to $62,500 of initial transaction expenses under clauses (1), (2), (3)(i)
and (3)(ii) above.
Section 9.2 SECURITY DEPOSIT.
(a) On each Closing Date, Lessees agree to pay to the Owner Trustee, in
its capacity as Lessor, a security deposit equal to five percent of the
Equipment Cost being paid on such Closing Date. Upon receipt of such security
deposit, Owner Trustee shall deliver to each Owner Participant its pro rata
share of such security deposit based on the Owner Participant's Commitments.
Owner Trustee may, in its sole discretion, apply, from time to time, all or a
portion of said security deposit to the payment of Rent not timely paid by
Lessees (in such order and manner as Lessor may elect), and upon such election,
Owner Trustee shall notify each Owner Participant, who in turn shall promptly
deliver to Owner Trustee its pro rata share of such amount so applied based on
the Owner Participant's Commitments.
(b) Lessees hereby grant to Owner Trustee, for the benefit of the Owner
Participants, a security interest in the security deposit contemplated in clause
(a) above and acknowledge and agree that (i) the security deposit may be
commingled by the Owner Participants with other funds, and (ii) the security
deposit will not bear interest.
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(c) Each Owner Participant hereby acknowledges and agrees that such Owner
Participant is acting as bailee for Owner Trustee for purposes of perfecting the
security interest in the security deposit granted in clause (b) above.
(d) At the end of the Base Term, if no Lease Default or Event of Default
then exists, the Owner Trustee shall return to Cornell so much of the security
deposit as has not been applied to the payment of Rent in accordance with clause
(a) above. If any amount is to be so returned, Owner Trustee shall notify each
Owner Participant, who in turn shall promptly deliver to Owner Trustee its pro
rata share of such amount based on the Owner Participant's Commitments.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.
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IN WITNESS WHEREOF, the parties hereto have caused this Participation
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
CORNELL CORRECTIONS, INC.
CORNELL CORRECTIONS OF CALIFORNIA,
INC.,
CORNELL CORRECTIONS OF TEXAS, INC.,
CORNELL CORRECTIONS OF OKLAHOMA,
INC.,
WBP LEASING, INC.,
CORNELL CORRECTIONS OF ALASKA, INC.
By: /s/ XXXX X. XXXXXXX
Xxxx X. Xxxxxxx
Vice President and Chief Financial Officer
of each of the companies named above
Address: 0000 Xxxx Xxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxxx
PARTICIPATION AGREEMENT
SIGNATURE PAGE
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity, except
as expressly provided herein, but solely as Owner
Trustee
By: /s/ XXX X. XXXXX
Name: Xxx X. Xxxxx
Title: Vice President
Address:
Corporate Trust Services
00 Xxxxx Xxxx Xxxxxx
0xx Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000-0000
Attention: Xxx Xxxxx
PARTICIPATION AGREEMENT
SIGNATURE PAGE
XXXXXX FINANCIAL LEASING, INC.
By: /s/ XXXX X. XXXXX
Name: Xxxx X. Xxxxx
Title: Assistant Vice President
Address:
000 Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: CEFG Region Credit Manager
PARTICIPATION AGREEMENT
SIGNATURE PAGE
THE CIT GROUP/EQUIPMENT FINANCING
By: /s/ XXX XXXXXXXXX
Name: Xxx Xxxxxxxxx
Title: Senior Vice President
Address:
0000 Xxxx Xxxxx Xxxx, Xxxxx 000
Xxxx Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxx
PARTICIPATION AGREEMENT
SIGNATURE PAGE
SAFECO CREDIT COMPANY, INC.
By: /s/ XXX XXXXXXX
Name: Xxx Xxxxxxx
Title: Division Assistant Vice President
Address:
00000 Xxxxxxx Xxxx XX, 0xx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxx Xxxxxxx
PARTICIPATION AGREEMENT
SIGNATURE PAGE
SCHEDULE 1
OWNER PARTICIPANT'S COMMITMENTS
OWNER PARTICIPANT PERCENTAGE
Xxxxxx Financial Leasing, Inc. 73.934%
Safeco Credit Company, Inc. 14.218%
The CIT Group/Equipment Financing, Inc. 11.848%
