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LEASE, SECURITY AGREEMENT AND FINANCING STATEMENT
between
THE KINDERCARE REALTY TRUST 1999
as Lessor,
and
KINDERCARE LEARNING CENTERS, INC.,
as Lessee
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Dated as of September 2, 1999
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THIS LEASE IS SUBJECT TO A SECURITY INTEREST IN FAVOR OF THE CHASE MANHATTAN
BANK, AS AGENT (THE "AGENT"), UNDER A CREDIT AGREEMENT, DATED AS OF SEPTEMBER 2,
1999 AMONG THE KINDERCARE REALTY TRUST 1999, THE LENDERS, AND THE AGENT, AS
AMENDED OR SUPPLEMENTED. THIS LEASE HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS.
TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM
IS DEFINED IN THE UNIFORM COMMERCIAL CODE OF THE STATE WHERE THE PROPERTY IS
LOCATED, NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED THROUGH THE TRANSFER
OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL COUNTERPART CONTAINING
THE RECEIPT THEREFOR EXECUTED BY THE AGENT ON THE SIGNATURE PAGE HEREOF.
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS ..................................................... 1
1.1 Defined Terms .............................................. 1
SECTION 2. PROPERTY AND TERM ............................................... 1
2.1 Property ................................................... 1
2.2 Lease Term ................................................. 1
2.3 Title ...................................................... 1
2.4 Lease Supplements .......................................... 1
SECTION 3. RENT ............................................................ 2
3.1 Rent ....................................................... 2
3.2 Supplemental Rent .......................................... 2
3.3 Performance on a Non-Business Day .......................... 2
SECTION 4. UTILITY CHARGES ................................................. 3
4.1 Utility Charges ............................................ 3
SECTION 5. QUIET ENJOYMENT ................................................. 3
5.1 Quiet Enjoyment ............................................ 3
SECTION 6. NET LEASE ....................................................... 3
6.1 Net Lease; No Setoff; Etc. ................................. 3
6.2 No Termination or Abatement ................................ 4
SECTION 7. OWNERSHIP OF PROPERTY ........................................... 4
7.1 Ownership of the Property .................................. 4
SECTION 8. CONDITION OF PROPERTY ........................................... 6
8.1 Condition of the Property .................................. 6
8.2 Possession and Use of the Property ......................... 6
SECTION 9. COMPLIANCE ...................................................... 6
9.1 Compliance with Legal Requirements and Insurance
Requirements ............................................... 6
9.2 Environmental Matters ...................................... 6
SECTION 10. ................................................................. 7
10.1 Maintenance and Repair; Return ............................. 7
10.2 Right of Inspection ........................................ 8
10.3 Environmental Inspection ................................... 9
SECTION 11. MODIFICATIONS .................................................. 9
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11.1 Modifications, Substitutions and Replacements .............. 9
SECTION 12. TITLE ..........................................................10
12.1 Warranty of Title ..........................................10
12.2 Grants and Releases of Easements ...........................10
SECTION 13. PERMITTED CONTESTS .............................................11
13.1 Permitted Contests Other Than in Respect of Impositions ....11
SECTION 14. INSURANCE ......................................................11
14.1 Public Liability and Workers' Compensation Insurance .......11
14.2 Hazard and Other Insurance .................................12
14.3 Coverage ...................................................12
SECTION 15. CONDEMNATION AND CASUALTY ......................................13
15.1 Casualty and Condemnation ..................................13
SECTION 16. LEASE TERMINATION ..............................................15
16.1 Termination upon Certain Events ............................15
16.2 Procedures .................................................15
SECTION 17. DEFAULT ........................................................15
17.1 Lease Events of Default ....................................15
17.2 Final Payment ..............................................17
17.3 Lease Remedies .............................................17
17.4 Waiver of Certain Rights ...................................19
17.5 Assignment of Rights Under Contracts .......................19
17.6 Remedies Cumulative ........................................19
SECTION 18. LESSOR'S RIGHT TO CURE .........................................19
18.1 Lessor's Right to Cure Lessee's Lease Defaults .............19
SECTION 19. LEASE TERMINATION ..............................................20
19.1 Provisions Relating to Lessee's Termination
of this Lease or Exercise of Purchase Option ...............20
19.2 Aggregate Tranche A Percentage .............................20
SECTION 20. PURCHASE OPTION ................................................20
20.1 Purchase Option ............................................20
20.2 Maturity Date Purchase Option ..............................21
20.3 Obligation to Purchase All Properties ......................21
20.4 Partial Sale Option ........................................21
SECTION 21. SALE OF PROPERTY ...............................................21
21.1 Sale Procedure .............................................22
21.2 Application of Proceeds of Sale ............................22
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21.3 Indemnity for Excessive Wear ...............................22
21.4 Appraisal Procedure ........................................23
21.5 Certain Obligations Continue ...............................23
SECTION 22. HOLDING OVER ...................................................23
22.1 Holding Over ...............................................23
SECTION 23. RISK OF LOSS ...................................................24
23.1 Risk of Loss ...............................................24
SECTION 24. SUBLETTING AND ASSIGNMENT ......................................24
24.1 Subletting and Assignment ..................................24
24.2 Subleases ..................................................24
SECTION 25. ESTOPPEL CERTIFICATES ..........................................24
25.1 Estoppel Certificates ......................................24
SECTION 26. NO WAIVER ......................................................25
26.1 No Waiver ..................................................25
SECTION 27. ACCEPTANCE OF SURRENDER ........................................25
27.1 Acceptance of Surrender ....................................25
SECTION 28. NO MERGER OF TITLE .............................................25
28.1 No Merger of Title .........................................25
SECTION 29. NOTICES ........................................................25
29.1 Notices ....................................................25
SECTION 30. MISCELLANEOUS ..................................................27
30.1 Miscellaneous ..............................................27
30.2 Amendments and Modifications ...............................27
30.3 Successors and Assigns .....................................27
30.4 Headings and Table of Contents .............................27
30.5 Counterparts ...............................................27
30.6 GOVERNING LAW ..............................................27
30.7 Limitations on Recourse ....................................28
30.8 Memorandum of Lease ........................................28
30.9 Priority ...................................................28
30.10 Ground Lease ...............................................28
30.11 Construction Period Limitation .............................28
30.13 State Law Recitals and Provisions ..........................29
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Exhibits
Exhibit A Lease Supplement
Exhibit B Memorandum of Lease
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LEASE, SECURITY AGREEMENT AND FINANCING STATEMENT (together with any
Lease Supplements and Lease memoranda, this "Lease") dated as of September 2,
1999 between THE KINDERCARE REALTY TRUST 1999, a Delaware business trust, having
its principal office at Wilmington Trust Company, Xxxxxx Square North, 0000
Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000-0000, as lessor (the "Lessor"),
and KINDERCARE LEARNING CENTERS, INC., a Delaware corporation, having its
principal office at 000 XX Xxxxxxxx, Xxxxx 0000, Xxxxxxxx, Xxxxxx 00000,
Attention: Chief Financial Officer, as lessee (the "Lessee").
In consideration of the mutual agreements herein contained, and of
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. Capitalized terms used herein but not otherwise
defined in this Lease shall have the respective meanings specified in Annex A to
the Participation Agreement dated as of the date hereof among Lessee, Lessor,
Agent, the Investors and the Lenders named therein, as such Participation
Agreement may be amended, supplemented or otherwise modified from time to time,
and the rules of usage set forth in Annex A to the Participation Agreement.
SECTION 2. PROPERTY AND TERM
2.1 Property. Subject to the terms and conditions hereinafter set
forth and contained in the respective Lease Supplement relating to each
Property, Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor,
each Property.
2.2 Lease Term. The Property is leased for the Term, unless extended
or earlier terminated in accordance with the provisions of this Lease.
2.3 Title. The Property is leased to Lessee without any representation
or warranty, express or implied, by Lessor (except as expressly provided in the
Operative Agreements) and subject to the rights of parties in possession, the
existing state of title (including, without limitation, the Permitted
Exceptions) and all applicable Legal Requirements. Lessee shall in no event have
any recourse against Lessor for any defect in title to the Property.
2.4 Lease Supplements. On each Property Closing Date, Lessee and
Lessor shall each execute and deliver a Lease Supplement for the Property to be
leased on such date in substantially the form of Exhibit A hereto and thereafter
such Property shall be subject to the terms of this Lease.
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SECTION 3. RENT
3.1 Rent. (a) On each applicable Payment Date occurring after the
termination of the Construction Period with respect to a Construction Period
Property and on each applicable Payment Date after the Property Closing Date
with respect to a Completed Property, Lessee shall pay the Basic Rent
attributable to such Property.
(b) Basic Rent shall be due and payable in lawful money of the United
States and shall be paid by wire transfer of immediately available funds on the
due date therefor to such account or accounts at such bank or banks or to such
other Person or in such other manner as Lessor shall from time to time direct.
(c) Neither Lessee's inability or failure to take possession of all,
or any portion, of the Property when delivered by Lessor, nor Lessor's inability
or failure to deliver all or any portion of the Property to Lessee, whether or
not attributable to any act or omission of Lessee or any act or omission of
Lessor, or for any other reason whatsoever, shall delay or otherwise affect
Lessee's obligation to pay Rent in accordance with the terms of this Lease.
3.2 Supplemental Rent. (a) Lessee shall pay to Lessor or the Person
entitled thereto any and all Supplemental Rent promptly as the same shall become
due and payable, and if Lessee fails to pay any Supplemental Rent, Lessor shall
have all rights, powers and remedies provided for herein or by law or equity or
otherwise in the case of nonpayment of Basic Rent. Lessee shall pay to Lessor as
Supplemental Rent, among other things, on demand, to the extent permitted by
applicable Legal Requirements, interest at the applicable Overdue Rate on any
installment of Basic Rent not paid when due for the period for which the same
shall be overdue and on any payment of Supplemental Rent not paid when due or
demanded by Lessor for the period from the due date or the date of any such
demand, as the case may be, until the same shall be paid. The expiration or
other termination of Lessee's obligations to pay Basic Rent hereunder shall not
limit or modify the obligations of Lessee with respect to Supplemental Rent.
Unless expressly provided otherwise in this Lease or any other Operative
Agreement, in the event of any failure on the part of Lessee to pay and
discharge any Supplemental Rent as and when due, Lessee shall also promptly pay
and discharge any fine, penalty, interest or cost which may be assessed or added
for nonpayment or late payment of such Supplemental Rent, all of which shall
also constitute Supplemental Rent.
(b) Lessee shall make a payment of Supplemental Rent equal to the
Maximum Residual Guarantee Amount in accordance with Section 21.1(c).
3.3 Performance on a Non-Business Day. If any payment is required
hereunder on a day that is not a Business Day, then such payment shall be due on
the next succeeding Business Day, unless, in the case of payments based on the
Eurodollar Rate, the result of such extension would be to extend such payment
into another calendar month, in which event such payment shall be made on the
immediately preceding Business Day.
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SECTION 4. UTILITY CHARGES
4.1 Utility Charges. Lessee shall pay, or cause to be paid, all
charges for electricity, power, gas, oil, water, telephone, sanitary sewer
service and all other rents and utilities used in or on each Property during the
Term. Lessee shall be entitled to receive any credit or refund with respect to
any utility charge paid by Lessee and the amount of any credit or refund
received by Lessor on account of any utility charges paid by Lessee, net of the
costs and expenses incurred by Lessor in obtaining such credit or refund, shall
be promptly paid over to Lessee. All charges for utilities imposed with respect
to the Property for a billing period during which this Lease expires or
terminates shall be adjusted and prorated on a daily basis between Lessor and
Lessee, and each party shall pay or reimburse the other for each party's pro
rata share thereof.
SECTION 5 QUIET ENJOYMENT
5.1 Quiet Enjoyment. So long as no Lease Event of Default shall have
occurred and be continuing, Lessee shall peaceably and quietly have, hold and
enjoy each Property for the Term, free of any claim or other action by Lessor or
anyone rightfully claiming by, through or under Lessor.
SECTION 6. NET LEASE
6.1 Net Lease; No Setoff; Etc. This Lease shall constitute a net lease
and, notwithstanding any other provision of this Lease, it is intended that
Basic Rent and Supplemental Rent shall be paid without counterclaim, setoff,
deduction or defense of any kind and without abatement, suspension, deferment,
diminution or reduction of any kind, and Lessee's obligation to pay all such
amounts is absolute and unconditional. The obligations and liabilities of Lessee
hereunder shall in no way be released, discharged or otherwise affected for any
reason, including, without limitation, to the maximum extent permitted by law:
(a) any defect in the condition, merchantability, design, construction, quality
or fitness for use of any portion of any Property, or any failure of any
Property to comply with all Legal Requirements, including any inability to
occupy or use any Property by reason of such non-compliance; (b) any damage to,
abandonment, loss, contamination of or Release from or destruction of or any
requisition or taking of any Property or any part thereof, including eviction;
(c) any restriction, prevention or curtailment of or interference with any use
of any Property or any part thereof, including eviction; (d) any defect in title
to or rights to any Property or any Lien on such title or rights or on any
Property; (e) any change, waiver, extension, indulgence or other action or
omission or breach in respect of any obligation or liability of or by Lessor,
any Investor, Agent or any Lender; (f) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other like
proceedings relating to Lessee, Lessor, any Investor, Agent, any Lender or any
other Person, or any action taken with respect to this Lease by any trustee or
receiver of Lessee, Lessor, any Investor, Agent, any Lender or any other Person,
or by any court, in any such proceeding; (g) any claim that Lessee has or might
have against any Person, including, without limitation, Lessor, any Investor,
Agent or any Lender; (h) any failure on the part of Lessor to perform or comply
with any of the terms of this Lease, any other Operative Agreement or of any
other agreement;
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(i) any invalidity or unenforceability or disaffirmance against or by Lessee of
this Lease or any provision hereof or any of the other Operative Agreements or
any provision of any thereof; (j) the impossibility of performance by Lessee,
Lessor or both; (k) any action by any court, administrative agency or other
Governmental Authority; any restriction, prevention or curtailment of or any
interference with the construction on or any use of any Property or any part
thereof; or (m) any other occurrence whatsoever, whether similar or dissimilar
to the foregoing, whether or not Lessee shall have notice or knowledge of any of
the foregoing. This Lease shall be noncancellable by Lessee for any reason
whatsoever except as expressly provided herein, and Lessee, to the extent
permitted by Legal Requirements, waives all rights now or hereafter conferred by
statute or otherwise to quit, terminate or surrender this Lease, or to any
diminution, abatement or reduction of Rent payable by Lessee hereunder. If for
any reason whatsoever this Lease shall be terminated in whole or in part by
operation of law or otherwise, except as otherwise expressly provided herein,
Lessee shall, unless prohibited by Legal Requirements, nonetheless pay to Lessor
(or, in the case of Supplemental Rent, to whomever shall be entitled thereto) an
amount equal to each Rent payment at the time and in the manner that such
payment would have become due and payable under the terms of this Lease if it
had not been terminated in whole or in part, and in such case, so long as such
payments are made and no Lease Event of Default shall have occurred and be
continuing, Lessor will deem this Lease to have remained in effect. Each payment
of Rent made by Lessee hereunder shall be final and, absent manifest error in
the computation of the amount thereof, Lessee shall not seek or have any right
to recover all or any part of such payment from Lessor, any Investor, Agent or
any party to any agreements related thereto for any reason whatsoever. Lessee
assumes the sole responsibility for the condition, use, operation, maintenance,
and management of the Property and Lessor shall have no responsibility in
respect thereof and shall have no liability for damage to the property of Lessee
or any subtenant of Lessee on any account or for any reason whatsoever.
6.2 No Termination or Abatement. Lessee shall remain obligated under
this Lease in accordance with its terms and shall not take any action to
terminate, rescind or avoid this Lease, notwithstanding any action for
bankruptcy, insolvency, reorganization, liquidation, dissolution, or other
proceeding affecting Lessor, or any action with respect to this Lease which may
be taken by any trustee, receiver or liquidator of Lessor or by any court with
respect to Lessor, except as otherwise expressly provided herein. Lessee hereby
waives all right (i) to terminate or surrender this Lease, except as otherwise
expressly provided herein, or (ii) to avail itself of any abatement, suspension,
deferment, reduction, setoff, counterclaim or defense with respect to any Rent.
Lessee shall remain obligated under this Lease in accordance with its terms and
Lessee hereby waives any and all rights now or hereafter conferred by statute or
otherwise to modify or to avoid strict compliance with its obligations under
this Lease. Notwithstanding any such statute or otherwise, Lessee shall be bound
by all of the terms and conditions contained in this Lease.
SECTION 7. OWNERSHIP OF PROPERTY
7.1 Ownership of Property. (a) Lessor and Lessee intend that (i) for
financial accounting purposes with respect to Lessee (A) this Lease will be
treated as an "operating lease" pursuant to Statement of Financial Accounting
Standards (SFAS) No. 13, as amended, (B) Lessor will be treated as the owner and
lessor of the Property and (C) Lessee will
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be treated as the lessee of the Property, but (ii) for federal, state and local
income tax and all other purposes (A) this Lease will be treated as a financing
arrangement, (B) the Lenders will be treated as senior lenders making loans to
Lessee in an amount equal to the Loans, which Loans will be secured by the
Property, (C) Lessor will be treated as a subordinated lender making a loan to
Lessee in an amount equal to the Investor Contribution, which loan is secured by
the Property, and (D) Lessee will be treated as the owner of the Property and
will be entitled to all tax benefits ordinarily available to an owner of
property like the Property for such tax purposes.
(b) Lessor and Lessee further intend and agree that, for the purpose
of securing Lessee's obligations for the repayment of the above-described loans,
(i) this Lease shall also be deemed to be a security agreement and financing
statement within the meaning of Article 9 of the Uniform Commercial Code and a
real property mortgage or deed of trust, as applicable; (ii) the conveyance
provided for in Section 2 shall be deemed a grant of a security interest in and
a mortgage lien on the Lessee's right, title and interest in the Properties
(including the right to exercise all remedies as are contained in the applicable
Mortgage and Memorandum of Lease upon the occurrence of a Lease Event of
Default) and all proceeds of the conversion, voluntary or involuntary, of the
foregoing into cash, investments, securities or other property, whether in the
form of cash, investments, securities or other property, for the benefit of the
Lessor to secure the Lessee's payment of all amounts owed by the Lessee under
this Lease and the other Operative Agreements and Lessor holds title to the
Properties so as to create and grant a first lien and prior security interest in
each Property (A) pursuant to this Lease for the benefit of the Agent under the
Assignment of Lease, to secure to the Agent the obligations of the Lessee under
the Lease and (B) pursuant to the Mortgages to secure to the Agent the
obligations of the Lessor under the Mortgages and the Notes; (iii) the
possession by Lessor or any of its agents of notes and such other items of
property as constitute instruments, money, negotiable documents or chattel paper
shall be deemed to be "possession by the secured party" for purposes of
perfecting the security interest pursuant to Section 9-305 of the Uniform
Commercial Code; and (iv) notifications to Persons holding such property, and
acknowledgments, receipts or confirmations from financial intermediaries,
bankers or agents (as applicable) of Lessee shall be deemed to have been given
for the purpose of perfecting such security interest under applicable law.
Lessor and Lessee shall, to the extent consistent with this Lease, take such
actions as may be necessary to ensure that, if this Lease were deemed to create
a security interest in the Properties in accordance with this Section, such
security interest would be deemed to be a perfected security interest of first
priority under applicable law and will be maintained as such throughout the
Basic Term. Nevertheless, Lessee acknowledges and agrees that none of Lessor,
any Investor, the Trust Company, Agent, or any Lender has provided or will
provide tax, accounting or legal advice to Lessee regarding this Lease, the
Operative Agreements or the transactions contemplated hereby and thereby, or
made any representations or warranties concerning the tax, accounting or legal
characteristics of the Operative Agreements, and that Lessee has obtained and
relied upon such tax, accounting and legal advice concerning the Operative
Agreements as it deems appropriate.
(c) Lessor and Lessee further intend and agree that in the event of
any insolvency or receivership proceedings or a petition under the United States
bankruptcy laws or any other applicable insolvency laws or statute of the United
States of America or any State or Commonwealth thereof affecting Lessee or
Lessor, the transactions evidenced by this Lease shall be regarded as loans made
by an unrelated third party lender to Lessee.
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SECTION 8. CONDITION OF PROPERTY
8.1 Condition of the Property. LESSEE ACKNOWLEDGES AND AGREES THAT IT
IS RENTING EACH PROPERTY "AS IS" WITHOUT REPRESENTATION, WARRANTY OR COVENANT
(EXPRESS OR IMPLIED) BY LESSOR (EXCEPT AS EXPRESSLY PROVIDED IN THE OPERATIVE
AGREEMENTS) AND SUBJECT TO (A) THE EXISTING STATE OF TITLE, (B) THE RIGHTS OF
ANY PARTIES IN POSSESSION THEREOF, (C) ANY STATE OF FACTS WHICH AN ACCURATE
SURVEY OR PHYSICAL INSPECTION MIGHT SHOW AND (D) VIOLATIONS OF LEGAL
REQUIREMENTS WHICH MAY EXIST ON THE DATE HEREOF. NONE OF LESSOR, THE INVESTOR,
THE AGENT AND ANY LENDER HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY
REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED, INCLUDING THE
CONDITION OF ANY IMPROVEMENTS THEREON, THE SOIL CONDITION, OR ANY ENVIRONMENTAL
OR HAZARDOUS MATERIAL CONDITION) OR SHALL BE DEEMED TO HAVE ANY LIABILITY
WHATSOEVER AS TO THE TITLE, VALUE, HABITABILITY, USE, CONDITION, DESIGN,
OPERATION, OR FITNESS FOR USE OF THE PROPERTY (OR ANY PART THEREOF), OR ANY
OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO ANY PROPERTY (OR ANY PART THEREOF) AND NONE OF LESSOR, THE INVESTOR,
THE AGENT AND ANY LENDER SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT
DEFECT THEREIN OR THE FAILURE OF ANY PROPERTY, OR ANY PART THEREOF, TO COMPLY
WITH ANY LEGAL REQUIREMENT.
8.2 Possession and Use of the Property. Each Property shall be used in
a manner consistent with the Agency Agreement and, after the Completion Date for
the Property, as a child care center or other facility operated by the Lessee in
the conduct of its business. Lessee shall pay, or cause to be paid, all charges
and costs required in connection with the use of the Properties. Lessee shall
not commit or permit any waste of any Property or any part thereof.
SECTION 9. COMPLIANCE
9.1 Compliance with Legal Requirements and Insurance Requirements.
Subject to the terms of Section 13 relating to permitted contests, Lessee, at
its sole cost and expense, shall (a) comply with all Legal Requirements
(including all Environmental Laws) and Insurance Requirements relating to each
Property, including the use, construction, operation, maintenance, repair and
restoration thereof, whether or not compliance therewith shall require
structural or extraordinary changes in the Improvements or interfere with the
use and enjoyment of each Property, and (b) procure, maintain and comply with
all licenses, permits, orders, approvals, consents and other authorizations
required for the construction, renovation, use, maintenance and operation of
each Property and for the use, operation, maintenance, repair and restoration of
the Improvements.
(a) Environmental Matters. Promptly upon Lessee's actual knowledge of
the presence of Hazardous Substances in any portion of a Property in
concentrations and conditions that constitute an Environmental Violation, Lessee
shall notify Lessor in writing of
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such condition. In the event of such Environmental Violation, Lessee shall, not
later than thirty (30) days after Lessee has actual knowledge of such
Environmental Violation, either deliver to Lessor and the Agent an Officer's
Certificate and a Termination Notice with respect to such Property pursuant to
Section 16.1, if applicable, or, at Lessee's sole cost and expense, promptly and
diligently undertake any response, clean up, remedial or other action necessary
to remove, cleanup or remediate the Environmental Violation in accordance with
the terms of Section 9.1. If Lessee does not deliver a Termination Notice with
respect to such Property pursuant to Section 16.1, Lessee shall, upon completion
of remedial action by Lessee, cause to be prepared by an environmental
consultant reasonably acceptable to Lessor a report describing the Environmental
Violation and the actions taken by Lessee (or its agents) in response to such
Environmental Violation, and a statement by the consultant that such
Environmental Violation has been remedied in full compliance with applicable
Environmental Laws.
(b) In addition, Lessee shall provide to Lessor, within five (5)
Business Days of receipt, copies of all written or electronic communications
with any Governmental Authority relating to any Environmental Law in connection
with any Property. Lessee shall also promptly provide such detailed reports of
any such existing or threatened environmental claims as reasonably may be
requested by Lessor, any Investor and the Agent.
SECTION 10. MAINTENANCE AND REPAIR
10.1 Maintenance and Repair; Return. (a) Lessee, at its sole cost and
expense, shall maintain each the Property in good condition (ordinary wear and
tear excepted) and make all necessary repairs thereto, of every kind and nature
whatsoever, whether interior or exterior, ordinary or extraordinary, structural
or nonstructural or foreseen or unforeseen, in each case as required by all
Legal Requirements and Insurance Requirements and on a basis reasonably
consistent with the operation and maintenance of commercial properties
comparable in type and location to the applicable Property subject, however, to
the provisions of Section 15 with respect to Condemnation and Casualty.
(b) Lessor shall under no circumstances be required to build any
Improvements on any Property, make any repairs, replacements, alterations or
renewals of any nature or description to any Property, make any expenditure
whatsoever in connection with this Lease or maintain any Property in any way.
Lessor shall not be required to maintain, repair or rebuild all or any part of
any Property, and Lessee waives the right to (i) require Lessor to maintain,
repair, or rebuild all or any part of any Property, or (ii) make repairs at the
expense of Lessor pursuant to any Legal Requirement, Insurance Requirement,
contract, agreement, covenants, condition or restriction at any time in effect.
(c) Lessee shall, upon the expiration or earlier termination of the
Term with respect to a Property, vacate, surrender and transfer such Property to
Lessor, at Lessee's own expense, free and clear of all Liens other than
Permitted Liens and Lessor Liens, in as good condition as they were on the
Completion, ordinary wear and tear excepted, and in compliance with all Legal
Requirements and the other requirements of this Lease (and in any event without
(x) any asbestos installed or maintained in any part of such Property, (y) any
polychlorinated byphenyls (PCBs) in, on or used, stored or located at such
Property, and (z) any other Hazardous
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Substances). Unless Lessee has previously irrevocably exercised the Maturity
Date Purchase Option, Lessee shall provide, or cause to be provided or
accomplished, at the sole cost and expense of Lessee, to or for the benefit of
Lessor or a purchaser, at least thirty Business Days prior to the expiration or
earlier termination of the Term with respect to a Property, each of the
following: (i) an endorsement to the title policy issued for such Property
showing (A) record title of the Lessor in the leasehold or fee estate, as the
case may be, subject to no Liens other than Permitted Liens described in clauses
(i) and (viii) of the definition of Permitted Liens, Liens described in clause
(ii) of the definition of Permitted Exceptions, and Lessor Liens and (B) the
Mortgage as a valid and perfected first lien; (ii) an environmental assessment
for such Property satisfying the requirements set forth in Section 10.3 below;
(iii) an assignment (to the extent assignable) of all of the Lessee's right,
title and interest in and to each agreement executed by Lessee in connection
with the construction, renovation, development, use, maintenance or operation of
such Property (including all warranty, performance, service and indemnity
provisions); (iv) copies of all Plans and Specifications relating to the design,
construction, renovation or development of such Property; (v) an assignment (to
the extent assignable) of all permits, licenses, approvals and other
authorizations from all Governmental Authorities in connection with the
construction, operation and use of such Property; (vi) copies of all books and
records and in the case of any Non-Completed Property, all Budgets and
construction schedules, with respect to the construction, renovation,
maintenance, repair, operation or use of such Property; (vii) in the case of any
Non-Completed Property, (x) evidence satisfactory to Lessor that all building
materials purchased or contracted for purchase which have not been incorporated
into the Improvements at such Property are (A) owned by Lessor free from any
Liens, (B) secured, segregated and identifiable (and if stored off-site, the
location of such place of storage) and (C) insured under policies in amounts and
by insurers reasonably satisfactory to Lessor; (y) evidence satisfactory to
Lessor that adequate provision has been made for the protection of materials
stored on-site and for the protection of the Improvements, to the extent then
constructed, against deterioration and against other loss or damage or theft,
and (z) an agreement, in form and substance reasonably satisfactory to Lessor,
from all contractors, construction managers, architects, engineers and other
designee professionals that each will continue to perform under their respective
contracts for the benefit of Lessor or its assignee; and (viii) an estoppel
certificate in form and substance reasonably acceptable to Lessor from the
ground lessor of any Ground Lease. Lessee shall cooperate with any independent
purchaser of such Property in order to facilitate the ownership and operation by
such purchaser of such Property after such expiration or earlier termination of
the Term, including providing all books, reports and records regarding the
maintenance, repair and ownership of such Property and all data and technical
information relating thereto, granting or assigning all licenses necessary for
the operation and maintenance of such Property and cooperating in seeking and
obtaining all necessary licenses, permits and approvals of Governmental
Authorities. Lessee shall have also paid the total cost for the completion of
all Modifications commenced prior to such expiration or earlier termination of
the Term. The obligation of Lessee under this Section 10.1(c) shall survive the
expiration or termination of this Lease.
10.2 Right of Inspection. Lessor may, at reasonable times and with
reasonable prior notice, enter upon, inspect and examine at its own cost and
expense (unless a Lease Event of Default exists, in which case the out-of-pocket
costs and expenses of Lessor shall be paid by Lessee), any Property. Lessee
shall furnish to Lessor statements, no more than once per year, accurate in all
material respects, regarding the condition and state of repair of each Property.
9
Lessor shall have no duty to make any such inspection or inquiry and shall not
incur any liability or obligation by reason of not making any such inspection or
inquiry.
10.3 Environmental Inspection. Not less than 9 months prior to the
Maturity Date (unless Lessee has previously irrevocably exercised the Maturity
Date Purchase Option), and not more than thirty Business Days prior to surrender
of possession of a Property, Lessor shall, at Lessee's sole cost and expense,
obtain a report by an environmental consultant selected by Lessor certifying
that each Property or any portion thereof (i) does not contain Hazardous
Substances under circumstances or in concentrations that could result in a
violation of or liability under any Environmental Law and (ii) is in compliance
with all Environmental Laws. If such is not the case on either such date, then
Lessee shall be deemed to have irrevocably exercised the Maturity Date Purchase
Option pursuant to Section 20.2.
SECTION 11. MODIFICATIONS
11.1 Modifications, Substitutions and Replacements. (a) So long as no
Lease Event of Default has occurred and is continuing, Lessee, at its sole cost
and expense, may at any time and from time to time make alterations,
renovations, improvements and additions to a Property or any part thereof
(collectively, "Modifications"); provided, that: (i) except for any Modification
required to be made pursuant to a Legal Requirement or an Insurance Requirement,
no Modification, individually, or when aggregated with any (A) other
Modification or (B) grant, dedication, transfer or release pursuant to Section
12.2, shall impair the value of such Property or the utility or useful life of
such Property from that which existed immediately prior to such Modification;
(ii) the Modification shall be performed expeditiously and in a good and
workmanlike manner; (iii) Lessee shall comply with all Legal Requirements
(including all Environmental Laws) and Insurance Requirements applicable to the
Modification, including the obtaining of all permits and certificates of
occupancy, and the structural integrity of such Property shall not be adversely
affected; (iv) Lessee shall maintain or cause to be maintained commercially
reasonable builders' risk insurance at all times when a Modification is in
progress; (v) subject to the terms of Section 13 relating to permitted contests,
Lessee shall pay all costs and expenses and discharge any Liens arising with
respect to the Modification; (vi) such Modifications shall comply with Sections
8.2 and 10.1 and shall not change the primary character of such Property; and
(vii) no Improvements shall be demolished, except to the extent such demolition
does not impair the value, utility or useful life of such Property. All
Modifications (other than those that may be readily removed without impairing
the value, utility or remaining useful life of such Property) shall remain part
of the realty and shall be subject to this Lease, and title thereto shall
immediately vest in Lessor. So long as no Lease Event of Default has occurred
and is continuing, Lessee may place upon a Property any inventory, trade
fixtures, machinery, equipment or other property belonging to Lessee or third
parties and may remove the same at any time during the term of this Lease;
provided that such inventory, trade fixtures, machinery, -------- equipment or
other property, or their respective operations, do not impair the value, utility
or remaining useful life of such Property.
(b) Following the Completion Date with respect to any Property, Lessee
shall notify Lessor of the undertaking of any Modifications to the Property the
cost of which is anticipated to exceed $500,000. Prior to undertaking any such
Modifications, Lessee shall
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deliver to Lessor (i) a brief narrative of the work to be done and a copy of the
plans and specifications relating to such work; and (ii) an Officer's
Certificate stating that such work when completed will comply with the
requirements of Section 11(a) hereof. Lessor, by itself or its agents, shall
have the right, but not the obligation, from time to time to inspect such
Modifications to ensure that the same is completed consistent with the plans and
specifications.
(c) Following the Completion Date with respect to any Property, Lessee
shall not without the consent of Lessor undertake any Modifications to such
Property if such Modifications cannot be completed on or prior to the Expiration
Date.
SECTION 12. TITLE
12.1 Warranty of Title. (a) Lessee agrees that, except as otherwise
provided herein and subject to the terms of Section 13 relating to permitted
contests, Lessee shall not directly or indirectly create or allow to remain, and
shall promptly discharge at its sole cost and expense, any Lien, defect,
attachment, levy, title retention agreement or claim upon any Property or any
Modifications or any Lien, attachment, levy or claim with respect to the Rent or
with respect to any amounts held by the Agent pursuant to the Credit Agreement,
other than Permitted Liens. Lessee shall promptly notify Lessor in the event it
receives knowledge that a Lien (other than a Permitted Lien) exists with respect
to the Property.
(b) Nothing contained in this Lease shall be construed as constituting
the consent or request of Lessor, expressed or implied, to or for the
performance by any contractor, mechanic, laborer, materialman, supplier or
vendor of any labor or services or for the furnishing of any materials for any
construction, alteration, addition, repair or demolition of or to any Property
or any part thereof. NOTICE IS HEREBY GIVEN THAT LESSOR IS NOT AND SHALL NOT BE
LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO
LESSEE, OR TO ANYONE HOLDING ANY PROPERTY OR ANY PART THEREOF THROUGH OR UNDER
LESSEE, AND THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR
MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LESSOR IN AND TO ANY
PROPERTY.
12.2 Grants and Releases of Easements. Provided that no Lease Event of
Default shall have occurred and be continuing and subject to the provisions of
Sections 8, 9, 10 and 11, Lessor hereby consents to the following actions by
Lessee, in the name and stead of Lessor, but at Lessee's sole cost and expense:
(a) the granting (prior to the Lien of the Mortgage) of easements, licenses,
rights-of-way and other rights and privileges in the nature of easements
reasonably necessary or desirable for the construction, use, repair, renovation
or maintenance of any Property as herein provided; (b) the release (free and
clear of the Lien of the Mortgage) of existing easements or other rights in the
nature of easements which are for the benefit of any Property; (c) the
dedication or transfer (prior to the Lien of the Mortgage) of unimproved
portions of any Property for road, highway or other public purposes; (d) the
execution of petitions to have any Property annexed to any municipal corporation
or utility district; (e) the execution of closing statements and transfer
affidavits required to be signed at the initial purchase or closing of the
Property, provided such transfer affidavits are specifically without recourse to
the Lessor; and (f) the execution of amendments to any covenants and
restrictions
11
affecting any Property; provided, that in each case Lessee shall have delivered
to Lessor an Officer's Certificate stating that: (i) such grant, release,
dedication or transfer does not impair the present or future value or present or
future utility or remaining useful life of the applicable Property, (ii) such
grant, release, dedication or transfer is necessary in connection with the
construction, use, maintenance, alteration, renovation or improvement of the
applicable Property, (iii) Lessee shall remain obligated under this Lease and
under any instrument executed by Lessee consenting to the assignment of Lessor's
interest in this Lease as security for indebtedness, in each such case in
accordance with their terms, as though such grant, release, dedication or
transfer, had not been effected and (iv) Lessee shall pay and perform any
obligations of Lessor under such grant, release, dedication or transfer. Without
limiting the effectiveness of the foregoing, provided that no Lease Event of
Default shall have occurred and be continuing, Lessor shall, upon the request of
Lessee, and at Lessee's sole cost and expense, execute and deliver any
instruments necessary or appropriate to confirm any such grant, release,
dedication or transfer to any Person permitted under this Section.
SECTION 13. PERMITTED CONTESTS
13.1 Permitted Contests Other Than in Respect of Impostions. Except to
the extent otherwise provided for in Section 12.2 of the Participation
Agreement, Lessee, on its own or on Lessor's behalf but at Lessee's sole cost
and expense, may contest, by appropriate administrative or judicial proceedings
conducted in good faith and with due diligence, the amount, validity or
application, in whole or in part, of any Legal Requirement, or utility charges
payable pursuant to Section 4.1 or any Lien, attachment, levy, encumbrance or
encroachment, and Lessor agrees not to pay, settle or otherwise compromise any
such item, provided that (a) the commencement and continuation of such
proceedings shall suspend the collection thereof from, and suspend the
enforcement thereof against the applicable Properties, Lessor, the Agent, the
Investor and the Lenders; (b) there shall be no risk of the imposition of a Lien
(other than a Permitted Lien) on any Property and no part of any Property nor
any Rent would be in any danger of being sold, forfeited, lost or deferred; (c)
at no time during the permitted contest shall there be a risk of the imposition
of criminal liability or civil liability on Lessor, the Agent or any Lender for
failure to comply therewith; and (d) in the event that, at any time, there shall
be a material risk of extending the application of such item beyond the earlier
of the Maturity Date and the Expiration Date for the applicable Property, then
Lessee shall deliver to Lessor an Officer's Certificate certifying as to the
matters set forth in clauses (a), (b) and (c) of this Section 13.1. Lessor, at
Lessee's sole cost and expense, shall execute and deliver to Lessee such
authorizations and other documents as may reasonably be required in connection
with any such contest and, if reasonably requested by Lessee, shall join as a
party therein at Lessee's sole cost and expense.
SECTION 14. INSURANCE
14.1 Public Liability and Workers' Compensation Insurance. During the
Term, Lessee shall procure and carry, at Lessee's sole cost and expense,
commercial general liability insurance for claims for injuries or death
sustained by persons or damage to property while on each Property. Such
insurance shall be on terms and in amounts that are no less favorable than
insurance maintained by owners of similar properties, that are in accordance
with normal
12
industry practice. The policy shall be endorsed to name Lessor, the Trust
Company, the Investor, the Agent and the Lenders as additional insureds. The
policy shall also specifically provide that the policy shall be considered
primary insurance which shall apply to any loss or claim before any contribution
by any insurance which Lessor, the Trust Company, the Agent or the Lenders may
have in force. Lessee shall, in the operation of the Property, comply with the
applicable workers' compensation laws and protect Lessor against any liability
under such laws.
14.2 Hazard and Other Insurance. (a) During the Term, Lessee shall
keep each Property insured against loss or damage by fire and other risks on
terms and in amounts that are no less favorable than insurance maintained by
owners of similar properties, that are in accordance with normal industry
practice, are in amounts equal to the actual replacement cost of the
Improvements. Notwithstanding the foregoing, during the Construction Period for
any Property, Lessee will maintain builder's risk insurance providing for
replacement cost coverage and deductibles not to exceed $1,000 (subject to (i)
deductibles described in Section 14.2(c) with respect to earthquake insurance
and (ii) a deductible of the greater of 2% of the value of the Property or
$25,000 for flood and coastal wind coverage). So long as no Lease Event of
Default exists, any loss payable under the insurance policy required by this
Section will be paid to and adjusted solely by Lessee, subject to Section 15.
(b) If at any time during the Term the area in which any Property is
located is designated a "flood-prone" area pursuant to the Flood Disaster
Protection Act of 1973 or any amendments or supplements thereto, then Lessee
shall comply with the National Flood Insurance Program as set forth in the Flood
Disaster Protection Act of 1973, as may be amended. In addition, Lessee will
fully comply with the requirements of the National Flood Insurance Act of 1968
and the Flood Disaster Protection Act of 1973, as each may be amended from time
to time, and with any other Legal Requirement, concerning flood insurance to the
extent that it applies to any Property.
(c) Lessor may require, to be decided by Lessor in its sole
discretion, and Lessee shall obtain upon request by Lessor, insurance against
loss or damage by earthquake in amounts equal to the probable maximum loss of
all property owned or leased by KinderCare Learning Centers, Inc. and any of its
Subsidiaries in the State of California. Notwithstanding the foregoing, during
the Construction Period for any Property, the amount of such earthquake
insurance shall at all times equal or exceed an aggregate of $5,000,000 for
Construction Period Properties, with a deductible of not greater than 2% of the
value of the Property or $25,000, whichever is greater, and an aggregate of
$15,000,000 for all properties operated by the Company (including the
Properties). The Lessor may reasonably request Lessee to revise its
determinations regarding probable maximum loss. The Lessor may request, at its
sole discretion, that an independent consultant review Lessee's determinations
regarding probable maximum loss.
14.3 Coverage. (a) Lessee shall furnish Lessor with certificates
showing the insurance required under Sections 14.1 and 14.2 to be in effect and
naming Agent, the Lenders, the Lessor, each Investor, and the Trust Company as
an additional insured with respect to liability insurance and showing the
mortgagee endorsement required by Section 14.3(c). All such insurance shall be
at the cost and expense of Lessee. Such certificates shall include a provision
in which the insurer agrees to provide thirty (30) days' advance written notice
by the insurer to Lessor and the Agent in the event of cancellation or
modification of such insurance that could be
13
adverse to the interests of Lessor, the Trust Company or the Agent. If a Lease
Event of Default has occurred and is continuing and Lessor so requests, Lessee
shall deliver to Lessor copies of all insurance policies required by this Lease.
(b) Lessee agrees that the insurance policy or policies required by
this Lease shall include an appropriate clause pursuant to which such policy
shall provide that it will not be invalidated should Lessee waive, in writing,
prior to a loss, any or all rights of recovery against any party for losses
covered by such policy. Lessee hereby waives any and all such rights against
Lessor, the Trust Company, each Investor, the Agent and the Lenders to the
extent of payments made under such policies.
(c) All insurance policies required by Section 14.2 shall include a
"New York" or standard form mortgagee endorsement in favor of the Agent.
(d) Neither Lessor nor Lessee shall carry separate insurance
concurrent in kind or form or contributing in the event of loss with any
insurance required under this Lease except that Lessor may carry separate
liability insurance so long as (i) Lessee's insurance is designated as primary
and in no event excess or contributory to any insurance Lessor may have in force
which would apply to a loss covered under Lessee's policy and (ii) each such
insurance policy will not cause Lessee's insurance required under this Lease to
be subject to a coinsurance exception of any kind.
(e) Lessee shall pay as they become due all premiums for the insurance
required by this Lease, shall renew or replace each policy prior to the
expiration date thereof and shall promptly deliver to Lessor and the Agent
certificates for renewal and replacement policies.
(f) Other than with respect to Section 14.2(c) of this Lease or
Section 6.3 of the Agency Agreement with regard to Construction Period
Properties, Lessee shall have the right to maintain insurance deductibles
consistent with its current program.
SECTION 15. CONDEMNATION AND CASUALTY
15.1 Casualty and Condemnation. (a) Subject to the provisions of this
Section 15 and Section 16 (in the event Lessee delivers, or is obligated to
deliver, a Termination Notice), and prior to the occurrence and continuation of
a Lease Default, Lessee shall be entitled to receive (and Lessor hereby
irrevocably assigns to Lessee all of Lessor's right, title and interest in) any
award, compensation or insurance proceeds to which Lessee or Lessor may become
entitled by reason of their respective interests in a Property (i) if all or a
portion of such Property is damaged or destroyed in whole or in part by a
Casualty or (ii) if the use, access, occupancy, easement rights or title to such
Property or any part thereof is the subject of a Condemnation; provided,
however, if a Lease Default shall have occurred and be continuing such award,
compensation or insurance proceeds shall be paid directly to Lessor or, if
received by Lessee, shall be held in trust for Lessor, and shall be paid over by
14
Lessee to Lessor, and provided further that in the event of any Casualty or
Condemnation, the estimated cost of restoration of which is in excess of
$500,000, any such award, compensation or insurance proceeds shall be paid
directly to Lessor, or if received by Lessee, shall be held in trust for Lessor
and shall be paid over by Lessee to Lessor to be held and applied by Lessor
toward payment of the cost of restoration in accordance with Section 15.1(e),
or, if applicable, in accordance with Section 16.
(b) So long as no Lease Event of Default has occurred and is
continuing, Lessee may appear in any proceeding or action to negotiate,
prosecute, adjust or appeal any claim for any award, compensation or insurance
payment on account of any such Casualty or Condemnation and shall pay all
expenses thereof; provided that if the estimated cost of restoration of the
Property or the payment on account of such title defect is in excess of
$500,000, then Lessor shall be entitled to participate in any such proceeding or
action. At Lessee's reasonable request, and at Lessee's sole cost and expense,
Lessor and the Agent shall participate in any such proceeding, action,
negotiation, prosecution or adjustment. Lessor and Lessee agree that this Lease
shall control the rights of Lessor and Lessee in and to any such award,
compensation or insurance payment.
(c) If Lessor or Lessee shall receive notice of a Casualty or a
possible Condemnation of a Property or any interest therein, Lessor or Lessee,
as the case may be, shall give notice thereof to the other and to the Agent
promptly after the receipt of such notice.
(d) In the event of a Casualty or receipt of notice by Lessee or
Lessor of a Condemnation, Lessee shall, not later than thirty (30) days after
such occurrence, deliver to Lessor and the Agent an Officer's Certificate
stating that either (i) (x) such Casualty is not a Significant Casualty or (y)
such Condemnation is neither a Total Condemnation nor a Significant Condemnation
and that this Lease shall remain in full force and effect with respect to the
applicable Property and, at Lessee's sole cost and expense, Lessee shall
promptly and diligently restore the applicable Property in accordance with the
terms of Section 15.1(e) or (ii) this Lease shall terminate with respect to the
applicable Property in accordance with Section 16.1.
(e) If pursuant to this Section 15.1, this Lease shall continue in
full force and effect following a Casualty or Condemnation with respect to the
affected Property, Lessee shall, at its sole cost and expense, promptly and
diligently repair any damage to the applicable Property caused by such Casualty
or Condemnation in conformity with the requirements of Sections 10.1 and 11.1
using the as-built plans and specifications for the applicable Property (as
modified to give effect to any subsequent Modifications, any Condemnation
affecting the Property and all applicable Legal Requirements) so as to restore
the applicable Property to the same condition, operation, function and value as
existed immediately prior to such Casualty or Condemnation. In such event, title
to the applicable Property shall remain with Lessor. Lessor shall make
disbursements from time to time of any award, compensation or insurance proceeds
held by it to Lessee for application to the cost of restoration subject to the
satisfaction of the following conditions: (i) Lessor shall have received a fully
executed counterpart of a Requisition requesting funds in an amount not
exceeding the cost of work completed or incurred since the last disbursement,
together with reasonably satisfactory evidence of the stage of completion and of
performance of the work in a good and xxxxxxx-like manner and in accordance with
the as-built plans and specifications, (ii) at the time of any such
disbursement, no Lease Default shall have occurred and be continuing, and no
mechanic's or materialmen's liens shall have been filed and remain undischarged,
except those discharged by the disbursement of the requested funds or bonded,
(iii) Lessor shall be reasonably satisfied that sufficient funds are available
to complete such restoration and (iv) title to the Property shall conform to the
representation set forth in
15
Section 7.7 (b) of the Participation Agreement. Provided no Lease Default shall
have occurred and be continuing, any award, compensation or insurance proceeds
remaining after restoration of the Project as herein provided shall be paid to
Lessee.
(f) In no event shall a Casualty or Condemnation with respect to which
this Lease remains in full force and effect under this Section 15.1 affect
Lessee's obligations to pay Rent pursuant to Section 3.1.
(g) Notwithstanding anything to the contrary set forth in Section
15.1(a) or Section 15.1(e), if during the Term a Casualty occurs with respect to
a Property or Lessee receives notice of a Condemnation with respect to a
Property, and following such Casualty or Condemnation, such Property cannot
reasonably be restored on or before the date which is twelve months prior to the
Maturity Date to substantially the same condition as existed immediately prior
to such Casualty or Condemnation or before such day such Property is not in fact
so restored, then Lessee shall exercise its Purchase Option with respect to such
Property on the next Payment Date or irrevocably agree in writing to exercise
the Maturity Date Purchase Option with respect to such Property, and in either
such event such remaining Casualty or Condemnation proceeds shall be paid to the
Agent, which shall pay such funds to Lessee upon the closing of the purchase of
such Property.
SECTION 16. LEASE TERMINATION
16.1 Termination upon Certain Events. (a) If Lessor or Lessee shall
have received notice of a Total Condemnation, then Lessee shall be obligated,
within thirty (30) days after Lessee receives notice thereof, to deliver a
written notice in the form described in Section 16.2(a) (a "Termination Notice")
of the termination of this Lease with respect to the applicable Property.
(b) If either: (i) Lessee or Lessor shall have received notice of a
Condemnation, and Lessee shall have delivered to Lessor an Officer's Certificate
that such Condemnation is a Significant Condemnation; or (ii) a Casualty occurs,
and Lessee shall have delivered to Lessor an Officer's Certificate that such
Casualty is a Significant Casualty; or (iii) an Environmental Violation occurs
or is discovered and Lessee shall have delivered to Lessor an Officer's
Certificate stating that, in the reasonable, good-faith judgment of Lessee, the
cost to remediate the same will exceed $1,000,000; then, Lessee shall,
simultaneously with the delivery of the Officer's Certificate pursuant to the
preceding clause (i), (ii) or (iii), deliver a Termination Notice with respect
to the affected Property.
16.2 Procedures. (a) A Termination Notice shall contain: (i) notice of
termination of this Lease with respect to the affected Property on a date not
more than thirty (30) days after Lessor's receipt of such Termination Notice
(the "Termination Date"); (ii) a binding and irrevocable agreement of Lessee to
pay the Termination Value and purchase such Property on such Termination Date
and (iii) the Officer's Certificate described in Section 16.1(b).
(b) On the Termination Date, Lessee shall pay to Lessor the
Termination Value for the applicable Property, plus all amounts owing in respect
of Rent for such Property
16
(including Supplemental Rent) theretofore accruing and Lessor shall convey such
Property to Lessee (or Lessee's designee) all in accordance with Section 19.1.
SECTION 17. DEFAULT
17.1 Lease Events of Default. If any one or more of the following
events (each a "Lease Event of Default") shall occur:
(a) Lessee shall fail to make payment of (i) any Basic Rent or any
Supplemental Rent representing amounts owed under the Credit Agreement or
the other Credit Documents within five (5) or more days after the same has
become due and payable or (ii) any Maximum Residual Guarantee Amount,
Purchase Option Price or Termination Value after the same has become due
and payable; or
(b) Lessee shall fail to make payment of any other Supplemental Rent
due and payable within five (5) or more days after receipt of notice
thereof; or
(c) Lessee shall fail to maintain insurance as required by Section 14;
or
(d) Lessee shall fail to observe or perform any term, covenant or
condition of Lessee under the Participation Agreement or any other
Operative Agreement other than the Lease to which it is a party (other than
those set forth in Section 17.1(a), (b) or (c) hereof) and such failure
shall continue for thirty (30) days after written notice thereof from
Lessor or any representation or warranty by Lessee set forth in this Lease
or in any other Operative Agreement or in any document entered into in
connection herewith or therewith or in any document, certificate or
financial or other statement delivered in connection herewith or therewith
shall be false or inaccurate in any material way; or
(e) Lessee shall fail to observe or perform any term, covenant or
condition of Lessee under this Lease (other than those set forth in Section
17.1(a), (b), (c) or (d) hereof) and such failure shall continue for thirty
days after written notice thereof from Lessor, provided that, if such
failure is curable but cannot be cured within such thirty-day period, so
long as the Lessee is diligently taking steps to cure such failure, the
Lessee shall have an additional period, not to exceed ninety (90) days, in
which to cure such failure; or
(f) an Agency Agreement Event of Default shall have occurred and be
continuing; or
(g) Lessee or any Guarantor shall (i) file a petition under the United
States bankruptcy laws or any other applicable insolvency law or statute of
the United States of America or any State or Commonwealth thereof, (ii)
make a general assignment for the benefit of its creditors, (iii) consent
to the appointment of a receiver of itself or the whole or any substantial
part of its property, (iv) fail to cause the discharge of any custodian,
trustee or receiver appointed for Lessee or any Guarantor or the whole or a
substantial part of its property within ninety (90) days after such
appointment, or (v) file a petition or
17
answer seeking or consenting to reorganization under the United States
bankruptcy laws or any other applicable insolvency law or statute of the
United States of America or any State or Commonwealth thereof; or
(h) insolvency proceedings or a petition under the United States
bankruptcy laws or any other applicable insolvency law or statute of the
United States of America or any State or Commonwealth thereof shall be
filed against Lessee or any Guarantor and not dismissed within ninety (90)
days from the date of its filing, or a court of competent jurisdiction
shall enter an order or decree appointing, without its consent of, a
receiver of Lessee or any Guarantor or the whole or a substantial part of
its property, and such order or decree shall not be vacated or set aside
within ninety (90) days from the date of the entry thereof; or
(i) a Credit Agreement Event of Default shall have occurred and be
continuing;
(j) an event of default under the Corporate Credit Agreement shall
have occurred and be continuing; or
(k) any Security Document shall cease to be in full force and effect,
or shall cease to give the Agent the Liens, rights, powers and privileges
purported to be created thereby, in favor of the Agent on behalf of the
Lenders, superior to and prior to the rights of all third Persons and
subject to no other Liens (except in each case to the extent expressly
permitted herein or in the other Operative Agreements); or
(l) the Guarantee or any material provision thereof shall cease to be
in full force and effect or any Guarantor shall deny or disaffirm such
Guarantor's obligations under the Guarantee;
then, in any such event, Lessor may, so long as such event is continuing, in
addition to the other rights and remedies provided for in this Section 17 and in
Section 18.1, terminate this Lease by giving Lessee five (5) Business Days
notice of such termination, and this Lease shall terminate. Lessee shall, to the
fullest extent permitted by law, pay as Supplemental Rent all costs and expenses
incurred by or on behalf of Lessor, including fees and expenses of counsel, as a
result of any Lease Event of Default hereunder; provided, however, that Lessee
may cure a default under clause (c), (d),(e) or (f) of Section 17.1 in the event
such default relates to a specific Property by (i) purchasing such Property for
its Termination Value and (ii) terminating this Lease with respect to such
Property in accordance with Section 19.1 within ten (10) Business Days of such
Lease Event of Default.
17.2 Final Payment. If an Event of Default shall have occurred and be
continuing, Lessor shall have the right to recover, by demand to Lessee and at
Lessor's election, and Lessee shall pay to Lessor, as and for a final payment,
but exclusive of the indemnities payable under Section 12 of the Participation
Agreement, and in lieu of all damages beyond the date of such demand the sum of
(a) the Termination Value, plus (b) all other amounts owing in respect of Rent
and Supplemental Rent theretofore accruing under this Lease; provided, however,
if an Event of Default has occurred pursuant to Section 17.1(g) or (h), such
final payment shall
18
be immediately due and payable without demand or notice. Upon payment of the
amount specified pursuant to the first sentence of this Section 17.2, Lessee
shall be entitled to receive from Lessor, at Lessee's request and cost, an
assignment of Lessor's right, title and interest in the Property, in each case
in recordable form and otherwise in conformity with local custom and free and
clear of the Lien of this Lease. The Property shall be quitclaimed to Lessee (or
Lessee's designee) "AS IS" and in their then present physical condition. If any
statute or rule of law shall limit the amount of such final payment to less than
the amount agreed upon, Lessor shall be entitled to the maximum amount allowable
under such statute or rule of law. It is the intent of the Lessor and the Lessee
that the payment required to be made pursuant to this Section together with the
payment of the Maximum Residual Guarantee Amount shall be treated as an
obligation on the part of the Lessee to repay a loan obligation to the Lenders
and the Lessor in such amounts; provided, that Lessee shall not be entitled to
receive an assignment of Lessor's interest under the Ground Leases, if any, or
in the Properties unless Lessee shall have paid in full the Termination Value of
each of the Properties.
17.3 Lease Remedies. Lessor and Lessee intend that for commercial law
and bankruptcy law purposes, this Lease will be treated as a financing
arrangement, as set forth in Section 7. If, as a result of applicable state law,
which cannot be waived, this Lease is deemed to be a lease of the Properties,
rather than a financing arrangement, and Lessor is unable to enforce the
remedies set forth in Section 17.2, the following remedies shall be available to
Lessor:
(a) Surrender of Possession. If a Lease Event of Default shall have
occurred and be continuing, and whether or not this Lease shall have been
terminated pursuant to Section 17.1, Lessee shall, upon thirty (30) days written
notice, surrender to Lessor possession of the Property and Lessee shall quit the
same. Lessor may enter upon and repossess the Property by such means as are
available at law or in equity, and may remove Lessee and all other Persons and
any and all personal property and Lessee's equipment and personalty and
severable Modifications from the Property. Lessor shall have no liability by
reason of any such entry, repossession or removal performed in accordance with
applicable law.
(b) Reletting. If a Lease Event of Default shall have occurred and be
continuing, and whether or not this Lease shall have been terminated pursuant to
Section 17.1, Lessor may, but shall be under no obligation to, relet all, or any
portion, of the Property, for the account of Lessee or otherwise, for such term
or terms (which may be greater or less than the period which would otherwise
have constituted the balance of the Term) and on such conditions (which may
include concessions or free rent) and for such purposes as Lessor may determine,
and Lessor may collect, receive and retain the rents resulting from such
reletting. Lessor shall not be liable to Lessee for any failure to relet the
Property or for any failure to collect any rent due upon such reletting.
(c) Damages. None of (i) the termination of this Lease pursuant to
Section 17.1; (ii) the repossession of the Property; or (iii) except to the
extent required by applicable law, the failure of Lessor to relet all, or any
portion, of the Property, the reletting of all or any portion thereof, nor the
failure of Lessor to collect or receive any rentals due upon any such reletting
shall relieve Lessee of its liability and obligations hereunder, all of which
shall survive any such termination, repossession or reletting. If any Lease
Event of Default shall have occurred and be continuing and notwithstanding any
termination of this Lease pursuant to Section 17.1, Lessee
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shall forthwith pay to Lessor all Basic Rent and other sums due and payable
hereunder to and including the date of such termination. Thereafter, on the days
on which the Basic Rent or Supplemental Rent, as applicable, are payable under
this Lease or would have been payable under this Lease if the same had not been
terminated pursuant to Section 17.1 and until the end of the Term or what would
have been the Term in the absence of such termination, Lessee shall pay Lessor,
as current liquidated damages (it being agreed that it would be impossible
accurately to determine actual damages) an amount equal to the Basic Rent and
Supplemental Rent that are payable under this Lease or would have been payable
by Lessee hereunder if this Lease had not been terminated pursuant to Section
17.1, less the net proceeds, if any, which are actually received by Lessor with
respect to the period in question of any reletting of the Property or any
portion thereof; provided that Lessee's obligation to make payments of Basic
Rent and Supplemental Rent under this Section 17.3 shall continue only so long
as Lessor shall not have received the amounts specified in Section 17.2. In
calculating the amount of such net proceeds from reletting, there shall be
deducted all of Lessor's, the Agent's and any Lenders' expenses in connection
therewith, including repossession costs, brokerage commissions, fees and
expenses for counsel and any necessary repair or alteration costs and expenses
incurred in preparation for such reletting. To the extent Lessor receives any
damages pursuant to this Section 17.3, such amounts shall be regarded as amounts
paid on account of Rent.
(d) Acceleration of Rent. If a Lease Event of Default shall have
occurred and be continuing, and this Lease shall not have been terminated
pursuant to Section 17.1, and whether or not Lessor shall have collected any
current liquidated damages pursuant to Section 17.3(c), Lessor may upon written
notice to Lessee accelerate all payments of Basic Rent due hereunder and, upon
such acceleration, Lessee shall immediately pay Lessor, as and for final
liquidated damages and in lieu of all current liquidated damages on account of
such Lease Event of Default beyond the date of such acceleration (it being
agreed that it would be impossible accurately to determine actual damages) an
amount equal to the sum of (a) all Basic Rent (assuming interest at a rate per
annum equal to the Overdue Rate), as applicable, due from the date of such
acceleration until the end of the Term, plus ---- (b) the Maximum Residual
Guarantee Amount that would be payable under Section 21.1(c) assuming the
proceeds of the sale pursuant to such Section 21.1(c) are equal to zero, which
sum is then discounted to present value at a rate equal to the rate then being
paid on United States treasury securities with maturities corresponding to the
then remaining Term. Following payment of such amount by Lessee, Lessee will be
permitted to stay in possession of the Property for the remainder of the Term,
subject to the terms and conditions of this Lease, including the obligation to
pay Supplemental Rent, provided that no further Lease Event of Default shall
occur and be continuing, following which Lessor shall have all the rights and
remedies set forth in this Section 17 (but not including those set forth in this
Section 17.3). If any statute or rule of law shall limit the amount of such
final liquidated damages to less than the amount agreed upon, Lessor shall be
entitled to the maximum amount allowable under such statute or rule of law.
17.4 Waiver of Certain Rights. If this Lease shall be terminated
pursuant to Section 17.1, Lessee waives, to the fullest extent permitted by law,
(a) any notice of re-entry or the institution of legal proceedings to obtain
re-entry or possession; (b) any right of redemption, re-entry or repossession;
(c) the benefit of any laws now or hereafter in force exempting property from
liability for rent or for debt; and (d) any other rights which might otherwise
limit or modify any of Lessor's rights or remedies under this Section 17.
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17.5 Assignment of Rights Under Contracts. If a Lease Event of Default
shall have occurred and be continuing, and whether or not this Lease shall have
been terminated pursuant to Section 17.1, Lessee shall upon Lessor's demand
immediately assign, transfer and set over to Lessor all of Lessee's right, title
and interest in and to each agreement executed by Lessee in connection with the
construction, renovation, development, use or operation of the Property
(including all right, title and interest of Lessee with respect to all warranty,
performance, service and indemnity provisions), as and to the extent that the
same relate to the construction renovation, and operation of the Property.
17.6 Remedies Cumulative. The remedies herein provided shall be
cumulative and in addition to (and not in limitation of) any other remedies
available at law, equity or otherwise including, without limitation, any
mortgage foreclosure remedies contained in the Memorandum of Lease.
SECTION 18. LESSOR'S RIGHT TO CURE
18.1 Lessor's Right to Cure Lessee's Lease Defaults. Lessor, without
waiving or releasing any obligation or Lease Event of Default, may (but shall be
under no obligation to) remedy any Lease Event of Default for the account and at
the sole cost and expense of Lessee, including the failure by Lessee to maintain
any insurance required by Section 14, and may, to the fullest extent permitted
by law, and notwithstanding any right of quiet enjoyment in favor of Lessee,
enter upon any Property for such purpose and take all such action thereon as may
be necessary or appropriate therefor. No such entry shall be deemed an eviction
of Lessee. All out-of-pocket costs and expenses so incurred (including the fees
and expenses of counsel), together with interest thereon at the Overdue Rate
from the date on which such sums or expenses are paid by Lessor, shall be paid
by Lessee to Lessor on demand as Supplemental Rent.
SECTION 19. LEASE TERMINATION
19.1 Provisions Relating to Lessee's Termination of this Lease or
Exercise of Purchase Option. In connection with any termination of this Lease
with respect to any Property pursuant to the terms of Section 16.2, or in
connection with Lessee's exercise of its Purchase Option or Maturity Date
Purchase Option, upon the date on which this Lease is to terminate with respect
to the applicable Property or upon the Expiration Date with respect to the
applicable Property, and upon tender by Lessee of the amounts set forth in
Section 16.2(b), 20.1 or 20.2, as applicable:
(a) Lessor shall execute and deliver to Lessee (or to Lessee's
designee) at Lessee's cost and expense an assignment of Lessor's entire interest
in the applicable Properties (by a special or limited warranty deed in the case
of real property) in each case in recordable form and otherwise in conformity
with local custom and free and clear of the Lien of the applicable Mortgage and
any Lessor Liens; and
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(b) Lessor shall execute and deliver to Lessee any real estate tax
affidavit, a FIRPTA affidavit and any other similar document required to be
executed and delivered by law and in conformity with local custom; and
(c) The applicable Property shall be conveyed to Lessee "AS IS" and in
then present physical condition.
19.2 Aggregate Tranche A Percentage. Notwithstanding any other
provision of this Lease or the other Operative Agreements, the Lessee shall not
be permitted to terminate this Lease with respect to a Property pursuant to
Section 16 or exercise its Purchase Option with respect to a Property pursuant
to Section 20.1 if the Aggregate Tranche A Percentage, after giving effect to
the termination of this Lease with respect to such Property, would be less than
87.0%.
SECTION 20. PURCHASE OPTION
20.1 Purchase Option. Provided that no Lease Default or Lease Event of
Default shall have occurred and be continuing, Lessee shall have the option
(exercisable by giving Lessor irrevocable written notice (the "Purchase Notice")
of Lessee's election, which election shall be irrevocable, to exercise such
option not less than ten (10) days prior to the date of purchase pursuant to
such option) to purchase one or more of the Properties on the date specified in
such Purchase Notice, which date must occur prior to the date which is nine
months prior to the Maturity Date, at a price equal to the Termination Value
(the "Purchase Option Price") (which the parties do not intend to be a "bargain"
purchase price) of such Property. If Lessee exercises its option to purchase one
or more of the Properties pursuant to this Section 20.1 (the "Purchase Option"),
Lessor shall transfer to Lessee or Lessee's designee (as contemplated in Section
191. hereof) all of Lessor's right, title and interest in and to such Property
as of the date specified in the Purchase Notice upon receipt of the Purchase
Option Price and all Rent and other amounts then due and payable under this
Lease and any other Operative Agreement, in accordance with Section 19.1.
20.2 Maturity Date Purchase Option. Not less than nine months prior to
the Maturity Date, Lessee may give Lessor and Agent irrevocable written notice
(the "Maturity Date Election Notice") that Lessee is electing to exercise the
Maturity Date Purchase Option. If Lessee does not give a Maturity Date Election
Notice on or before the date nine months prior to the Maturity Date, then Lessee
shall be obligated to remarket the Properties pursuant to Section 21. If Lessee
has elected to exercise the Maturity Date Purchase Option, then on the Maturity
Date Lessee shall pay to Lessor an amount equal to the Termination Value for all
the Properties (which the parties do not intend to be a "bargain" purchase
price) and, upon receipt of such amount plus all Rent and other amounts then due
and payable under this Lease and any other Operative Agreement, Lessor shall
transfer to Lessee or Lessee's designee all of Lessor's right, title and
interest in and to the Properties in accordance with Section 19.1.
20.3 Obligation to Purchase All Properties. If on the date which is
nine months prior to the Maturity Date the then Termination Value of all the
Properties is less than the
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Maximum Purchase Option Amount, then on the Maturity Date Lessee shall be
required to exercise its Purchase Option on the Maturity Date with respect to
all remaining Properties.
20.4 Partial Sale Option. If the Property includes any undeveloped
(excluding any de minimis site improvements) surplus land area that is not part
of Lessee's business operation, and provided that no Lease Default or Lease
Event of Default shall have occurred and be continuing, Lessee shall have the
option (the "Partial Sale Option"), exercisable by giving Lessor not less than
fifteen (15) days written notice of Lessee's election to transfer and convey any
such undeveloped surplus Land (the "Surplus Land") on the following terms and
conditions: (a) the Person to whom the transfer and conveyance is made shall not
be an Affiliate of Lessee; (b) the purchase price for the Surplus Land shall be
equal to or greater than Fair Market Sales Value thereof and the net proceeds
from the sale of the Surplus Land shall be retained by Lessee; (c) the
applicable Property, excluding the Surplus Land transferred and conveyed
therefrom, shall (on and after the date of such transfer and conveyance) (A)
satisfy all of the terms and conditions of the Operative Agreements and (B)
comply with all applicable Legal Requirements (including building, planning and
zoning codes) and (d) all Rent and other amounts due and payable by Lessee under
any Operative Agreement shall be paid on or prior to the date of such transfer
and conveyance. Lessee shall not be permitted to exercise the Partial Sale
Option unless it shall deliver to Lessor a certificate of Lessee, executed by an
executive officer of Lessee, certifying that the Fair Market Sales Value of the
Property without such Surplus Land shall be equal to or greater than the Project
Costs applicable to such Property; provided, however, that, in the event the
Fair Market Sales Value of the Surplus Land constitutes more than fifteen
percent (15%) of the Project Costs applicable to such Property, Lessor may
require Lessee to deliver an update to the Appraisal which indicates that the
Fair Market Sales Value of the Property without such Surplus Land shall be equal
to or greater than the Project Costs applicable to such Property.
SECTION 21. SALE OF PROPERTY
21.1 Sale Procedure (a) With respect to each Property, unless Lessee
shall have elected to purchase such Property and has paid the Purchase Option
Price with respect thereto, or otherwise terminated this Lease with respect
thereto and paid the Termination Value with respect thereto, Lessee shall (i)
pay to Lessor the Maximum Residual Guarantee Amount for such Property as
provided for in Section 21.1(c), and (ii) sell such Property to one or more
third parties for cash in accordance with Section 21.1(b).
(b) During the Marketing Period, Lessee, as nonexclusive broker for
Lessor, shall use its best efforts to obtain bids for the cash purchase of each
Property being sold for the highest price available in the relevant market,
shall notify Lessor promptly of the name and address of each prospective
purchaser and the cash price which each prospective purchaser shall have offered
to pay for such Property and shall provide Lessor with such additional
information about the bids and the bid solicitation procedure as Lessor may
request from time to time. Lessor (as directed by the Required Investors) may
reject any and all bids and may assume sole responsibility for obtaining bids by
giving Lessee written notice to that effect; provided, however, that
notwithstanding the foregoing, Lessor may not reject a bid if such bid, together
with any amounts to be paid pursuant to Section 21.3, is greater than or equal
to the sum of the Limited Deficiency Amount and all costs and expenses referred
to in Section 21.2(i) and is a
23
bona fide offer by a third party purchaser who is not an Affiliate of Lessee. If
the price which a prospective purchaser shall have offered to pay for all or any
of the Properties is less than the sum of the Limited Deficiency Amount and all
costs and expenses referred to in Section 21.2(i), Lessor (as directed by the
Required Investors) may elect to retain the Property by giving Lessee at least
two Business Days' prior written notice of Lessor's election to retain the
Property, and upon receipt of such notice, Lessee shall surrender the Property
to Lessor pursuant to Section 10.1(c). Unless Lessor shall have elected to
retain the Property pursuant to the preceding sentence, Lessor shall sell the
Property free of any Lessor Liens attributable to it, without recourse or
warranty, for cash to the purchaser or purchasers identified by Lessee or
Lessor, as the case may be. Lessee shall surrender the Property so sold to each
purchaser in the condition specified in Section 10.1.
(c) On each date during the Marketing Period on which a Property is
sold pursuant to Section 21.1(b), and on the Maturity Date with respect to any
Properties remaining unsold, Lessee shall pay to Lessor the Maximum Residual
Guarantee Amount for such Property.
21.2 Application of Proceeds of Sale. Lessor shall apply the proceeds
of sale of each Property in the following order of priority:
(i) FIRST, to pay or to reimburse Lessor for the payment of all
reasonable costs and expenses incurred by Lessor in connection with the
sale; and
(ii) SECOND, the balance shall be paid to the Agent to be applied
pursuant to the provisions of the Credit Agreement.
21.3 Indemnity for Excessive Wear. If the proceeds of the sale
described in Section 21.1(b) with respect to any Property, less all expenses
incurred by Lessor in connection with such sale, shall be less than the Limited
Deficiency Amount for such Property at the time of such sale and if it shall
have been determined (pursuant to the Appraisal Procedure) that the Fair Market
Sales Value of such Property shall have been impaired by greater than expected
wear and tear during the Term, Lessee shall pay to Lessor within ten (10) days
after receipt of Lessor's written statement (i) the amount of such excess wear
and tear determined by the Appraisal Procedure or (ii) the amount of the Net
Sale Proceeds Shortfall, whichever amount is less.
21.4 Appraisal Procedure. For determining the Fair Market Sales Value
of a Property or any other amount which may, pursuant to any provision of any
Operative Agreement, be determined by an appraisal procedure, Lessor and Lessee
shall use the following procedure (the "Appraisal Procedure"). Lessor and Lessee
shall endeavor to reach a mutual agreement as to such amount for a period of ten
(10) days from commencement of the Appraisal Procedure, and if they cannot agree
within ten (10) days, then two qualified appraisers, one chosen by Lessee and
one chosen by Lessor, shall mutually agree thereupon, but if either party shall
fail to choose an appraiser within twenty (20) days after notice from the other
party of the selection of its appraiser, then the appraisal by such appointed
appraiser shall be binding on Lessee and Lessor. If the two appraisers cannot
agree within twenty (20) days after both shall have been appointed, then a third
appraiser shall be selected by the two appraisers or, failing agreement as to
such third appraiser within thirty (30) days after both shall have been
appointed, by the American Arbitration Association. The decisions of the three
appraisers shall be given within twenty (20) days of the appointment of the
third appraiser and the decision of the appraiser most different
24
from the average of the other two shall be discarded and such average shall be
binding on Lessor and Lessee; provided that if the highest appraisal and the
lowest appraisal are equidistant from the third appraisal, the third appraisal
shall be binding on Lessor and Lessee. The fees and expenses of all of the
appraisers shall be paid by the Lessee. Notwithstanding the foregoing, for
determining the Fair Market Sales Value of a Property for any purpose under this
Section 21, in lieu of the foregoing Appraisal Procedure, an appraiser may be
selected by Lessor (as directed by the Required Lenders) and consented to by the
Agent (which consent shall not be unreasonably withheld).
21.5 Certain Obligations Continue. During the Marketing Period, the
obligation of Lessee to pay Rent with respect to each Property (including the
installment of Basic Rent due on the Maturity Date) shall continue undiminished
until payment in full to Lessor of the sale proceeds, the Maximum Residual
Guarantee Amount, if any, the amount due under Section 21.3, if any, and all
other amounts due to Lessor with respect to the Property. Lessor shall have the
right, but shall be under no duty, to solicit bids, to inquire into the efforts
of Lessee to obtain bids or otherwise to take action in connection with any such
sale, other than as expressly provided in this Section 21.
SECTION 22. HOLDING OVER
22.1 Holding Over. If Lessee shall for any reason remain in possession
of a Property after the expiration or earlier termination of this Lease (unless
the Property is conveyed to Lessee), such possession shall be as a tenancy at
sufferance during which time Lessee shall continue to pay Supplemental Rent that
would be payable by Lessee hereunder were the Lease then in full force and
effect with respect to such Property and Lessee shall continue to pay Basic Rent
at an annual rate equal to the rate payable hereunder immediately preceding such
expiration or earlier termination; provided, however, that from and after the
sixtieth (60th) day Lessee shall remain in possession of such Property after
such expiration or earlier termination, Lessee shall pay Basic Rent at an annual
rate equal to two hundred percent (200%) of the Basic Rent payable hereunder
immediately preceding such expiration or earlier termination. Such Basic Rent
shall be payable from time to time upon demand by Lessor. During any period of
tenancy at sufferance, Lessee shall, subject to the second preceding sentence,
be obligated to perform and observe all of the terms, covenants and conditions
of this Lease, but shall have no rights hereunder other than the right, to the
extent given by law to tenants at sufferance, to continue its occupancy and use
of the Property. Nothing contained in this Section 22 shall constitute the
consent, express or implied, of Lessor to the holding over of Lessee after the
expiration or earlier termination of this Lease as to any Property and nothing
contained herein shall be read or construed as preventing Lessor from
maintaining a suit for possession of any Property or exercising any other remedy
available to Lessor at law or in equity.
SECTION 23. RISK OF LOSS
23.1 Risk of Loss. The risk of loss of or decrease in the enjoyment
and beneficial use of the Property as a result of the damage or destruction
thereof by fire, the
25
elements, casualties, thefts, riots, wars or otherwise is assumed by Lessee, and
Lessor shall in no event be answerable or accountable therefor.
SECTION 24. SUBLETTING AND ASSIGNMENT
24.1 Subletting and Assignment. Lessee may not assign this Lease or
any of its rights or obligations hereunder in whole or in part. Provided no
Event of Default exists and is continuing, Lessee may, without the consent of
Lessor, sublease the Property or a portion thereof to any Person. No sublease or
other relinquishment of possession of the Property shall in any way discharge or
diminish any of Lessee's obligations to Lessor hereunder and Lessee shall remain
directly and primarily liable under this Lease as to the Property, or any
portion thereof, so sublet. Any sublease of the Property shall be made subject
to and subordinate to this Lease and to the rights of Lessor hereunder and shall
be terminable by Lessor upon the termination of this Lease.
24.2 Subleases. Promptly following the execution and delivery of any
sublease permitted by this Section 24, Lessee shall deliver a copy of such
executed sublease to Lessor and the Agent.
SECTION 25. ESTOPPEL CERTIFICATES
25.1 Estoppel Certificates. At any time and from time to time upon not
less than twenty (20) days prior request by Lessor, the Lessee shall furnish to
the Lessor a certificate signed by an individual having the office of vice
president or higher in the Certifying Party certifying that this Lease is in
full force and effect (or that this Lease is in full force and effect as
modified and setting forth the modifications); the dates to which the Basic Rent
or Renewal Rent and Supplemental Rent have been paid; to the best knowledge of
the signer of such certificate, whether or not the Lessor is in default under
any of its obligations hereunder (and, if so, the nature of such alleged
default); and such other matters under this Lease as the Lessor may reasonably
request. Any such certificate furnished pursuant to this Section 25 may be
relied upon by the Lessor, and any existing or prospective mortgagee, purchaser
or lender, and any accountant or auditor, of, from or to the Lessor (or any
Affiliate thereof).
SECTION 26. NO WAIVER
26.1 No Waiver. No failure by Lessor or Lessee to insist upon the
strict performance of any term hereof or to exercise any right, power or remedy
upon a default hereunder, and no acceptance of full or partial payment of Rent
during the continuance of any such default, shall constitute a waiver of any
such default or of any such term. To the fullest extent permitted by law, no
waiver of any default shall affect or alter this Lease, and this Lease shall
continue in full force and effect with respect to any other then existing or
subsequent default.
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SECTION 27. ACCEPTANCE OF SURRENDER
27.1 Acceptance of Surrender. (a) As of the Expiration Date, if any
Default shall have occurred and be continuing under the Lease or the
representations and warranties set forth in Sections 7.5 and 7.7 of the
Participation Agreement shall not be true and correct in all material respects,
then Lessee shall be deemed to have irrevocably exercised the Maturity Date
Purchase Option pursuant to Section 20.2.
(b) Except as otherwise expressly provided in this Lease, no surrender
to Lessor of this Lease or of all or any portion of the Property or of any
interest therein shall be valid or effective unless agreed to and accepted in
writing by Lessor and, prior to the payment or performance of all obligations
under the Credit Documents, the Agent, and no act by Lessor or the Agent or any
representative or agent of Lessor or the Agent, other than a written acceptance,
shall constitute an acceptance of any such surrender.
SECTION 28. NO MERGER OF TITLE
28.1 No Merger of Title. There shall be no merger of this Lease or of
the leasehold estate created hereby by reason of the fact that the same Person
may acquire, own or hold, directly or indirectly, in whole or in part, (a) this
Lease or the leasehold estate created hereby or any interest in this Lease or
such leasehold estate, (b) the fee estate in the Property, except as may
expressly be stated in a written instrument duly executed and delivered by the
appropriate Person, or (c) a beneficial interest in Lessor.
SECTION 29. NOTICES
29.1 Notices. Unless otherwise specifically provided herein, all
notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof to be given to any
Person to be effective shall be in writing (including by facsimile transmission)
and shall be deemed to have been duly given or made (a) when delivered by hand,
(b) one Business Day after delivery to such nationally recognized courier
service specifying overnight delivery, (c) three Business Days after being
deposited in the mail, certified or registered, postage prepaid or (d) in the
case of facsimile notice, when sent and receipt has been confirmed, addressed to
such Person as indicated:
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If to Lessee:
KinderCare Learning Centers, Inc.
000 XX Xxxxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Attention: Chief Financial Officer
Fax: (000) 000-0000
With a copy to:
KinderCare Learning Centers, Inc.
000 XX Xxxxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Attention: General Counsel
Fax: (000) 000-0000
Stoel Rives LLP
000 XX Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Attn: Xxxx X. Xxxxxx
Fax: (000) 000-0000
KinderCare Learning Centers, Inc.
x/x Xxxxxxxx Xxxxxx Xxxxxxx & Co., L.P.
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxx
Fax: (000) 000-0000
If to Lessor:
Wilmington Trust Company
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Corporate Trust Administration
Fax: (000) 000-0000
with a copy to the Agent:
The Chase Manhattan Bank
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Credit and Lending Group
Facsimile: (000) 000-0000
and to the Investor:
28
Scotiabanc Inc.
x/x Xxx Xxxx xx Xxxx Xxxxxx
000 XX 0xx Xxx., Xxxxx 000
Xxxxxxxx, XX 00000-0000
Attention: Xxxxx Xxxxx
Facsimile: (000) 000-0000
or such additional parties and/or other address as such party may hereafter
designate.
SECTION 30. MISCELLANEOUS
30.1 Miscellaneous. Anything contained in this Lease to the contrary
notwithstanding, all claims against and liabilities of Lessee or Lessor arising
from events commencing prior to the expiration or earlier termination of this
Lease shall survive such expiration or earlier termination. If any term or
provision of this Lease or any application thereof shall be declared invalid or
unenforceable, the remainder of this Lease and any other application of such
term or provision shall not be affected thereby. If any right or option of
Lessee provided in this Lease, including any right or option described in
Sections 15, 16, 22 or 21, would, in the absence of the limitation imposed by
this sentence, be invalid or unenforceable as being in violation of the rule
against perpetuities or any other rule of law relating to the vesting of an
interest in or the suspension of the power of alienation of property, then such
right or option shall be exercisable only during the period which shall end
twenty-one (21) years after the date of death of the last survivor of the
descendants of Xxxxxxxx X. Xxxxxxxxx, the former President of the United States,
Xxxxx Xxxx, the deceased automobile manufacturer, and Xxxx X. Xxxxxxxxxxx, the
founder of the Standard Oil Company, known to be alive on the date of the
execution and delivery of this Lease.
30.2 Amendments and Modifications. Neither this Lease nor any
provision hereof may be amended, waived, discharged or terminated except by an
instrument in writing signed by Lessor and Lessee.
30.3 Successors and Assigns. All the terms and provisions of this
Lease shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
30.4 Headings and Table of Contents. The headings and table of
contents in this Lease are for convenience of reference only and shall not limit
or otherwise affect the meaning hereof.
30.5 Counterparts; Original Lease. This Lease may be executed in any
number of counterparts, each of which shall be an original, but all of which
shall together constitute one and the same legally binding instrument.
Notwithstanding the foregoing, to the extent this Lease constitutes chattel
paper, as such term is defined in the UCC, a single executed original of this
Lease containing the receipt of lessor therefor on or following the signature
page thereof shall be the "original executed counterpart" of this Lease and no
security interest in this Lease may be created through the transfer or
possession of any counterpart other than the "original executed counterpart".
29
30.6 GOVERNING LAW. THIS LEASE HAS BEEN DELIVERED IN, AND SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK (INCLUDING 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW
BUT EXCLUDING TO THE MAXIMUM EXTENT PERMITTED BY LAW ALL OTHER CHOICE OF LAW AND
CONFLICTS OF LAW RULES) APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE, EXCEPT AS TO MATTERS RELATING TO THE CREATION,
PERFECTION AND ENFORCEMENT OF LIENS AND SECURITY INTERESTS AND THE EXERCISE OF
REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE IN WHICH THE APPLICABLE PROPERTY IS
LOCATED.
30.7 Limitations on Recourse. Except as expressly set forth in the
Operative Agreements, Lessee agrees to look solely to Lessor's estate and
interest in the Property, the proceeds of sale thereof, any insurance proceeds
or any other award or any third party proceeds received by Lessor in connection
with the Property for the collection of any judgment requiring the payment of
money by Lessor in the event of liability by Lessor, and no other property or
assets of Lessor, the Trust Company member, partner or other owner of an
interest, direct or indirect, in Lessor, or any director, officer, shareholder,
employee, beneficiary, Affiliate of any of the foregoing shall be subject to
levy, execution or other enforcement procedure for the satisfaction of Lessee's
remedies under or with respect to this Lease, the relationship of Lessor and
Lessee hereunder or Lessee's use of the Property or any other liability of
Lessor to Lessee; provided that nothing in this Section shall be construed to
impair or limit the rights of Lessee against the Investor under the Operative
Agreements. Nothing in this Section shall be interpreted so as to limit the
terms of Section 6.1 or 6.2.
30.8 Memorandum of Lease. This Lease shall not be recorded, but Lessor
and Lessee shall, upon the execution and delivery of each Lease Supplement,
execute and deliver a memorandum of this Lease (a "Memorandum of Lease")
substantially in the form of Exhibit B and otherwise in form suitable for
recording under the laws of the jurisdiction in which the Property covered by
such Lease Supplement is located, which memorandum shall be recorded at Lessee's
sole cost and expense.
30.9 Priority. On and prior to the Maturity Date, the Mortgage shall
be subject and subordinate to this Lease and following the Maturity Date, the
Mortgage, at the sole election of the Agent, shall be senior to this Lease
without any further act by any Person.
30.10 Ground Lease. During the Term, Lessee shall observe and perform
all of the obligations of Lessor under any Ground Lease (including the payment
of all rent and other amounts thereunder) and, in connection therewith, shall,
prior to the occurrence and continuation of a Lease Event of Default, have the
benefit of all of Lessor's rights as lessee under any Ground Lease.
30.11 Construction Period Limitation. Notwithstanding any provisions
in this Lease to the contrary, upon the occurrence of a default by the Lessee
with respect to a Construction Period Property during the Construction Period,
the Lessee shall not have any
30
greater obligations hereunder with respect to such Construction Period Property
than the Construction Agent has with respect to such Construction Property under
the Agency Agreement.
30.12 Security Agreement and Financing Statement. The mailing address
of debtor (the Lessee herein) and of the secured party (the Lessor herein) from
which information concerning security interests hereunder may be obtained is as
set forth on the signature pages of this Agreement. A carbon, photographic or
other reproduction of this Agreement or of any financing statement related to
this Agreement shall be sufficient as a financing statement for any of the
purposes referenced herein.
30.13 State Law Recitals and Provisions.
(a) Statutory Notice Concerning Insurance. Effective January 1,
1996, Chapter 313 of Oregon Laws 1995 amends ORS 746.201 to require that in
loans in which the lender has the right to purchase insurance in the event the
borrower fails to carry insurance, the loan document must contain a warning in
substantially the following form in 10-point type:
"WARNING
"Unless you provide us with evidence of the insurance coverage as
required by our contract or loan agreement, we may purchase insurance
at your expense to protect our interest. This insurance may, but need
not, also protect your interest. If the collateral becomes damaged,
the coverage we purchase may not pay any claim you make or any claim
made against you. You may later cancel this coverage by providing
evidence that you have obtained property coverage elsewhere.
"You are responsible for the cost of any insurance purchased by
us. The cost of this insurance may be added to your contract or loan
balance. If the cost is added to your contract or loan balance, the
interest rate on the underlying contract or loan will apply to this
added amount. The effective date of coverage may be the date your
prior coverage lapsed or the date you failed to provide proof of
coverage.
"The coverage we purchase may be considerably more expensive than
insurance you can obtain on your own and may not satisfy any need for
property damage coverage or any mandatory liability insurance
requirements imposed by applicable law."
(b) Statutory Notice Concerning Written Agreements. UNDER OREGON
LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY LENDERS AFTER OCTOBER 3,
1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL,
FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST
BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY LENDERS TO BE ENFORCEABLE.
31
30.14 Limited Power of Attorney. To the extent required by Lessee,
Lessor hereby agrees to provide Lessee with a Limited Power of Attorney
permitting Lessee to act on behalf of Lessor in connection with the matters
referenced in Section 12.2 (provided, all such actions shall be conducted in
compliance with the terms of such Section 12.2, without modification of such
provisions pursuant to the utilization of the Limited Power of Attorney by
Lessee); provided, however, the Limited Power of Attorney may be utilized only
to the extent no Default or Event of Default shall have occurred or be
continuing at the time of the contemplated exercise of the Limited Power of
Attorney.
To the extent any Event of Default has occurred and is continuing or the
Lessee has received written notice of the occurrence of any Default, the Limited
Power of Attorney shall immediately terminate and be void and of no further
force or effect unless reinstated in writing by the Lessor and acknowledged and
agreed to by the Agent. Each action taken by the Lessee under the Limited Power
of Attorney shall automatically, without further action, be deemed to be a
representation and warranty as of such date that the conditions set forth in the
first sentence of this Section 30.14 are satisfied in full as of such date.
IN WITNESS WHEREOF, the parties have caused this Lease, Security
Agreement and Financing Statement be duly executed and delivered as of the date
first above written.
KINDERCARE LEARNING CENTERS, INC.
By: XXX X. XXXXXXX
------------------------------------
Name: Xxx X. Xxxxxxx
Title: Vice President
Financial Control & Planning
THE KINDERCARE REALTY TRUST 1999
By: WILMINGTON TRUST COMPANY, not
individually but solely as Trustee
By: XXXX X. XXXXXXXX
------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Financial Services Officer
Receipt of this original counterpart of the foregoing Lease is hereby
acknowledged on this 2nd day of September, 1999.
THE CHASE MANHATTAN BANK, as the Agent
for the Lenders
By: XXXXXXX X. XXXXXX
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Managing Director
