EXHIBIT 10.37
LEASE AGREEMENT
dated as of November 23, 1999,
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity, as expressly provided herein,
but solely as Owner Trustee,
Lessor
and
CORNELL CORRECTIONS, INC.,
CORNELL CORRECTIONS OF CALIFORNIA, INC.,
CORNELL CORRECTIONS OF TEXAS, INC.,
CORNELL CORRECTIONS OF OKLAHOMA, INC.,
WBP LEASING, INC.,
AND
CORNELL CORRECTIONS OF ALASKA, INC.
Lessees
TABLE OF CONTENTS
1. DEFINITIONS:..............................................................1
2. ACCEPTANCE AND LEASING OF EQUIPMENT:......................................1
4. DISCLAIMER:...............................................................2
5. QUIET ENJOYMENT:..........................................................2
6. NET LEASE; NO SET-OFF:....................................................2
7. USE, LOCATION AND POSSESSION; LIENS:......................................2
8. MAINTENANCE AND SERVICE; IMPROVEMENTS:....................................3
9. NO AGENCY:................................................................4
10.RISK OF DAMAGE AND LOSS:..................................................4
00.XXXXXXXXX:................................................................5
12.GENERAL TAX INDEMNITY:....................................................6
13.INCOME TAX INDEMNIFICATION:...............................................7
14.GENERAL INDEMNIFICATION:..................................................8
15.DEFAULT:..................................................................9
16.REMEDIES:................................................................10
17.ASSIGNMENT...............................................................12
18.REPORTS:.................................................................13
19.REPRESENTATIONS AND WARRANTIES OF LESSEES:...............................14
20.TERMINATION OPTION:......................................................15
21.PURCHASE OPTION:.........................................................15
22.RENEWAL OPTIONS:.........................................................15
-i-
23.RETURN OF EQUIPMENT:.....................................................16
24.MISCELLANEOUS, JURY WAIVER, GOVERNING LAW, JURISDICTION, VENUE:..........18
25.LIABILITY OF LESSOR LIMITED:.............................................20
26.JOINT AND SEVERAL LIABILITY..............................................20
-ii-
LEASE AGREEMENT
THIS LEASE AGREEMENT, dated as of November 23, 1999 (this "Lease"), is
between FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual
capacity, as expressly provided herein, but solely as Owner Trustee ("Lessor"),
with an office address at 00 Xxxxx Xxxx Xxxxxx, Xxxx Xxxx Xxxx, Xxxx 00000,
CORNELL CORRECTIONS, INC., a Delaware corporation, CORNELL CORRECTIONS OF
CALIFORNIA, INC., a California corporation, CORNELL CORRECTIONS OF TEXAS, INC.,
a Delaware corporation, CORNELL CORRECTIONS OF OKLAHOMA, INC., a Delaware
corporation, WBP LEASING, INC., a Delaware corporation, and CORNELL CORRECTIONS
OF ALASKA, INC., an Alaska corporation ("Lessees"), each with its address and
principal place of business at 0000 Xxxx Xxxx Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx
00000, which parties hereby agree as follows:
1. DEFINITIONS: Unless otherwise defined herein or required by the
context, all capitalized terms used herein shall have the respective meanings
assigned to such terms in Appendix A hereto for all purposes of this Lease.
2. ACCEPTANCE AND LEASING OF EQUIPMENT: Lessor hereby agrees (subject to
satisfaction of the conditions set forth in Article III of the Participation
Agreement), on each Closing Date, to accept delivery from Lessees under a Xxxx
of Sale dated on such Closing Date and simultaneously to lease to Lessees
hereunder, and Lessees hereby agree to lease from Lessor hereunder, the
Equipment covered by such Xxxx of Sale, as evidenced by the execution by Lessor
and Lessees of an Interim Lease Supplement leasing such Equipment hereunder. In
addition, on or before the Base Term Commencement Date, Lessor and Lessees agree
to execute a Lease Supplement incorporating all of the Equipment leased under
Interim Lease Supplements. Execution of an Interim Lease Supplement shall
constitute acceptance of delivery by the Lessees of the Equipment covered by
such Interim Lease Supplement, and such execution shall irrevocably constitute
acceptance by Lessees of the Equipment for all purposes of this Lease.
3. INITIAL TERM AND RENT: (a) INTERIM TERM. Except as otherwise provided
herein, the interim term for each Group of Equipment shall commence on the
Delivery Date for such Group of Equipment and end on December 31, 1999 (the
"Interim Term").
(b) INTERIM RENT. Lessees jointly and severally agree to pay to Lessor
Interim Rent for the Equipment for the Interim Term in an amount, subject to
adjustment as provided in Section 2.6 of the Participation Agreement, equal to
.079196% per day times the Equipment Cost. Interim Rent for the Equipment shall
be payable on the Base Term Commencement Date.
(c) BASE TERM. Except as otherwise provided herein, the Base Term for the
Equipment shall commence on the Base Term Commencement Date and end on the Base
Term Expiration Date.
(d) BASE RENT. Lessees jointly and severally agree to pay Lessor Base Rent
for the Equipment for the Base Term in 45 consecutive monthly installments, each
such installment to be in an amount, subject to adjustment as provided in
Section 2.6 of the Participation Agreement, equal to 2.375889% multiplied by the
Equipment Cost and payable in immediately available Dollars via
-1-
ACH debit from a bank account of Cornell to be designated by Cornell. Each such
installment shall be due and payable not later than each Rent Payment Date.
Payment shall not be effective until Dollars are received by the Paying Agent in
Chicago, Illinois.
(e) SUPPLEMENTAL RENT. Lessees also jointly and severally agree to pay to
Lessor, or to whomsoever shall be entitled thereto, any and all Supplemental
Rent promptly by ACH debit as the same shall become due and owing in Dollars
that are immediately available, and in the event of failure on the part of
Lessees to pay any Supplemental Rent, Lessor shall have all the rights, powers
and remedies provided for herein or by law or in equity or otherwise in the case
of nonpayment of Base Rent. Lessees jointly and severally will also pay Lessor,
on demand, as Supplemental Rent, to the extent permitted by applicable law,
interest, at the Default Rate, on any part of Base Rent not paid when due for
any period for which the same shall be overdue and on any Supplemental Rent not
paid when demanded by Lessor for the period until the same shall have been paid.
The expiration or termination of the Lessees' obligation to pay Base Rent
hereunder shall not limit or modify the obligations of Lessees with respect to
Supplemental Rent.
4. DISCLAIMER: LESSOR IS NEITHER THE MANUFACTURER NOR SELLER OF THE
EQUIPMENT, AND MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR
IMPLIED, WITH RESPECT TO THE EQUIPMENT, ALL OF WHICH ARE HEREBY EXPRESSLY
DISCLAIMED. LESSEES UNDERSTAND AND AGREE THAT NO WARRANTY IS TO BE IMPLIED WITH
RESPECT TO THE CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY, THE FITNESS OF
THE EQUIPMENT FOR A PARTICULAR PURPOSE, THE ACCURACY OF THE DESCRIPTION OF THE
EQUIPMENT, OR WITH RESPECT TO INFRINGEMENT, INTERFERENCE OR THE LIKE. LESSOR
SHALL NOT BE LIABLE IF, FOR WHATEVER REASON, THE EQUIPMENT IS DELAYED OR NOT
DELIVERED TO LESSEES.
5. QUIET ENJOYMENT: So long as no Event of Default (as defined below)
exists, Lessor will not interfere with Lessees' quiet enjoyment and use of the
Equipment during the Term therefor.
6. NET LEASE; NO SET-OFF: This Lease is a net lease and Lessees shall not
be entitled to any abatement or reduction of, or set-off against, any Rent by
reason of any (i) past, present or future claim against Lessor or any successor
or assignee of Lessor or any supplier of any Item or any other person, (ii)
defect in or damage to, or loss, prohibition, restriction on use, damage or
destruction of, any Item (except as expressly provided otherwise in Section 10)
from whatever cause, or (iii) other cause whatsoever, whether similar or
dissimilar to the foregoing, it being the intention of the parties that all Rent
shall continue to be payable in all events in the manner and at the times
specified in this Lease and that Lessees' obligation to pay Rent shall be
absolute and unconditional unless the obligation to pay the same shall be
terminated pursuant to the express provisions of this Lease.
7. USE, LOCATION AND POSSESSION; LIENS: (a) Lessees shall use each Item in
a manner such that each Item is maintained in such condition that is required
under the terms of this
-2-
Lease and for the use contemplated by the manufacturer thereof and in compliance
with all applicable laws, rules, and regulations and the provisions of the
insurance required to be maintained hereunder and the terms of any
manufacturer's warranty. Each Item shall at all times be kept at the location
specified in the Interim Lease Supplements and the Lease Supplement unless (i)
Lessees have given prior written notice to Lessor regarding changes in location
involving Equipment with an aggregate Fair Market Sales Value of $25,000 or
greater, (ii) Lessees have delivered to Lessor a Lien waiver executed by the
landlord or mortgagee of the new location, as the case may be, (iii) Lessees
shall have executed any other agreements, instruments or documents reasonably
required by Lessor in connection with such change in location (including,
without limitation, a precautionary UCC financing statement filing for the
jurisdiction in which such new location is located), (iv) such change in
location would not otherwise result in an Event of Default, and (v) if as a
result of such change of location the aggregate Fair Market Sales Value of all
Items for which a change of location has occurred exceeds $25,000, Lessor and
Lessees shall have agreed on a new Facility Cost for all Equipment located at
each Facility to or from which any Items have been moved since the Delivery Date
for such Items. Each Lessee shall at all times keep each Item at the Facilities
it operates.
(b) Lessees shall keep each Item free and clear of all Liens and shall not
create, incur, assume or suffer to exist any thereof in, on, of or to any Item,
other than Lessor Liens.
(c) Lessor shall have the right as owner, but not the obligation, at all
reasonable times, which, so long as no Event of Default has occurred and is
continuing, shall be during normal business hours, to enter upon the premises
where the Equipment is located or used to inspect the Equipment. Such
inspections shall be for, among other things, determining whether Lessees are
properly complying with their obligations hereunder. Neither Lessees nor any
third-party may rely upon any such inspections by Lessor and Lessor shall not be
obligated to inform Lessees or any third-party of the result of any such
inspection. Any inspection that is not followed by a notice of an Event of
Default shall not constitute a waiver of any Event of Default then existing and
Lessor's failure to inspect the Equipment or to discover any information
regarding the Equipment shall not constitute a waiver of any of Lessor's rights
hereunder.
8. MAINTENANCE AND SERVICE; IMPROVEMENTS: (a) Lessees shall, at their
expense, at all times maintain, service and repair each Item as would a prudent
owner of such Item in accordance with customary industry standards, and in any
event so as to keep each Item in good operating condition, ordinary wear and
tear excepted, in compliance with all applicable laws, rules, regulations, and
manufacturer's recommended basic warranty, extended warranty and/or maintenance
program requirements, and as otherwise may be required to enforce warranty
claims against each vendor and manufacturer of each Item. To the extent that
Lessees' maintenance, repair or servicing standards exceed the foregoing, then
Lessees shall keep each Item in at least as good condition as other comparable
equipment owned or used by Lessees. Lessees shall, if at any time requested to
do so by Lessor, affix in a prominent position on each Item plates, tags or
other identifying labels showing ownership thereof by Lessor.
(b) Any alterations or modifications with respect to any Item that may be
required at any time during the Term of this Lease to comply with any applicable
law or any governmental or other
-3-
rule or regulation shall be made by Lessees, at their expense, and shall
thereupon become the property of Lessor.
(c) Unless required pursuant to subsection (b), no Lessee shall, without
Lessor's prior consent, affix or install any accessory, equipment, or device on,
or modify, any Item if such addition or modification will impair the value or
original function or use thereof or cannot be readily removed without causing
damage to such Item. Further, no Lessee shall, without Lessor's prior written
consent, affix or install any Item to or in any other personal property, or to
or in any real property so that such Item shall constitute a fixture. Lessees
shall obtain and deliver to Lessor disclaimers or waivers from all owners and/or
mortgagees of real estate in which any Item is located in form and content
acceptable to Lessor.
9. NO AGENCY: Lessees acknowledge that they alone have selected the
Equipment and the supplier(s) thereof; that it has reviewed and approved each
written supply contract and purchase order covering the Equipment, or has been
advised by Lessor in writing of the identity of each supplier; that it may have
rights under each such supply contract and purchase order; and that it may
contact each supplier for a description of any such rights and/or supplier's
warranty. Nothing herein contained shall be construed to deprive Lessees of
whatever rights Lessees may have against parties other than Lessor or Lessor's
assignee, such as the supplier or manufacturer of any Item, and Lessees agree to
look solely to such third parties with respect to any and all claims concerning
the Equipment. So long as no Event of Default exists, Lessees may pursue such
claims for the mutual benefit of Lessor and Lessees in accordance with their
interests in the Equipment. Without in any way limiting any other provision in
this Lease, Lessor shall not in any event be liable for any consequential
damages hereunder or with respect to any Item. No supplier is the agent of
Lessor and no employee of any supplier is authorized to waive, supplement or
otherwise alter any provision of this Lease. Lessees and Lessor hereby agree
that they intend this Lease to be a "Finance Lease" as defined by Article 2A of
the UCC. Lessees acknowledge that Lessees have reviewed and approved any written
"Supply Contract" covering the Equipment from any "Supplier" (as such terms in
quotation marks are defined in Article 2A of the UCC).
10. RISK OF DAMAGE AND LOSS: (a) Lessees assume and shall be solely
responsible for the entire risk of any Item being lost, destroyed, damaged,
stolen, confiscated or condemned, from whatever source, until the date such Item
is returned and accepted by Lessor in accordance with Section 23. In the event
of damage to any Item, Lessees, at their expense, shall promptly repair the
same, restoring it to the condition required to be maintained hereunder. If all
of the Items at a Facility are lost, destroyed, stolen, damaged in such a way
that it is not commercially reasonable to repair such Items (or such repairs are
not completed within 60 days of the damage or by the end of the Lease Term with
respect thereto, whichever is shorter), confiscated or condemned (each, an
"Event of Loss"), then Lessees shall either (i) replace all such Items with
replacement Items that are free and clear of all Liens and are of the same type,
have a Fair Market Sales Value, utility, residual value, remaining economic
useful life and condition at least equal to the Items so replaced (assuming such
Items were in the condition required by this Lease) or (ii) pay to Lessor the
Stipulated Loss Value of such Items and all other Rent owing with respect to
such Items, which such payment shall be due on the first to occur of (A) the end
of the Lease Term or (B)
-4-
the sooner of (1) 60 days after such Event of Loss or (2) the second Base Rent
payment date following such Event of Loss. If any Item is lost, destroyed,
stolen, damaged in such a way that it is not commercially reasonable to repair
it (or such repairs are not completed within 60 days of the damage or by the end
of the Lease Term with respect thereto, whichever is shorter), confiscated or
condemned other than in connection with an Event of Loss, then Lessees shall
replace such Item with a replacement Item that is free and clear of all Liens
and is of the same type, has a Fair Market Sales Value, utility, residual value,
remaining economic useful life and condition at least equal to the Item so
replaced (assuming such Item was in the condition required by this Lease).
(b) At the time of replacement of any Item, Lessees, at their own expense,
shall (i) furnish Lessor with a Xxxx of Sale with respect to such replacement
Item and execute an amendment to, or replacement of, the Lease Supplement (when
the aggregate Fair Market Sales Value of replacement Items equals $25,000 or
more) and (ii) furnish Lessor and the Owner Participants with such documents as
they, or their counsel, shall reasonably request.
(c) If, in connection with an Event of Loss, Lessees pay to Lessor the
Stipulated Loss Value of the affected Items in accordance with Section 10(a)
above, then this Lease shall terminate with respect to such Items and Lessor
shall transfer title thereto to Lessees, without representation or warranty
other than as to Lessor Liens, and the obligation of Lessees to pay Base Rent in
respect of such Items for any period commencing after such Event of Loss shall
terminate, and the Base Rent shall be adjusted accordingly by an amendment
executed by Lessees and Lessor. If, in connection with an Event of Loss, the
affected Items are replaced in accordance with Section 10(a) above, then upon
compliance with Section 10(b) above, this Lease shall terminate with respect to
the replaced Items and Lessor shall transfer title thereto to Lessees, without
representation or warranty other than as to Lessor Liens, and the obligation of
Lessees to pay Base Rent in respect of such replaced Items for any period
commencing after such Event of Loss shall terminate, and the Base Rent shall be
adjusted accordingly by an amendment executed by Lessees and Lessor. So long as
no Event of Default exists, and provided that Lessees have complied with
Sections 10(a) and (b) above, any proceeds of insurance required hereunder
received by Lessor with respect to any damage or Event of Loss respecting any
Equipment shall be paid to Lessees. If an Event of Default exists, any proceeds
of insurance required hereunder received by Lessor with respect to any damage or
Event of Loss respecting any Equipment shall be retained by Lessor until such
Event of Default is waived or cured.
11. INSURANCE: (a) Lessees shall, at their expense, at all times through
the Return Date (i) keep the Equipment insured against all risks of loss or
damage from every cause whatsoever in an amount not less than the greater of
fair market value or the Stipulated Loss Value thereof, (ii) obtain liability
insurance, including automobile coverage if the Equipment includes motor
vehicles, respecting the Equipment covering liability for bodily injury,
including death, and property damage, in an amount of at least $3 million per
occurrence or such greater amount as may comply with general industry standards,
or such greater amount as Lessees may maintain, or in such other amounts as
Lessor may from time to time require and (iii) obtain business interruption
insurance in such amount as Lessor may from time to time require.
-5-
(b) Lessor shall be the sole named loss-payee with respect to damage or
loss to the Equipment with no provision for co-insurance and shall be named as
an additional insured on the liability insurance. All insurance shall be with
insurers and in form satisfactory to Lessor; have a deductible not to exceed
$50,000 per occurrence, or such other amount as Lessor may from time to time
require; shall provide for at least 30 days' prior written notice to Lessor
before any cancellation or material modification thereof; shall waive any claim
for premium against Lessor; and shall provide that Lessor will be insured
regardless of any breach by Lessees or any or some of them of any
representation, warranty or covenant in any such policy or any application
therefor. Lessees shall deliver to Lessor certificates of insurance and other
evidence satisfactory to Lessor evidencing the insurance required hereby, and at
Lessor's request Lessees will furnish copies of such policies to Lessor. In the
case of renewals, evidence of renewal shall be delivered to Lessor at least five
days prior to expiration of the current policy.
(c) In the event Lessees fail to provide Lessor with evidence of the
insurance coverage required by this Lease, Lessor may purchase insurance at
Lessees' expense to protect Lessor's interests in the Equipment. This insurance
may, but need not, protect Lessees' interests. The coverage purchased by Lessor
may not pay any claim made by Lessees or any claim that is made against Lessees
in connection with the Equipment. Lessees may later cancel any insurance
purchased by Lessor, but only after providing Lessor with evidence that Lessees
have obtained insurance as required by this Lease. If Lessor purchases insurance
for the Equipment, Lessees will be responsible for the costs of that insurance,
including interest and other charges imposed by Lessor in connection with the
placement of the insurance, until the effective date of the cancellation or
expiration of the insurance. The costs of the insurance constitute part of
Supplemental Rent. The costs of the insurance may be more than the cost of
insurance Lessees are able to obtain on their own.
12. GENERAL TAX INDEMNITY: Lessees jointly and severally agree to pay and
indemnify, on an After-Tax Basis, Lessor and each Owner Participant against all
income, sales, use, personal property, ad valorem, value added, leasing, stamp
or other taxes, levies, imposts, fees, duties, charges or withholdings of any
nature, including all license and registration fees, together with any
penalties, fines or interest thereon (collectively, "Taxes") arising out of the
transactions contemplated by this Lease (including the acquisition of any Item)
and imposed against Lessor, the Owner Participants, Lessees, this Lease
(including any Rent) or the Equipment or any Item by the United States or any
state or political subdivision thereof or any foreign government or taxing
authority, excluding, however, any Taxes based on or measured by the net income
of Lessor imposed by the United States or any state or political subdivision
thereof. Lessees will notify Lessor of the need to file any reports and returns
relating to any Imposition at least 60 days before the due date thereof and will
remit any amounts payable in connection therewith to Lessor 10 days before
payment is due. Lessor shall prepare and file all returns, and pay all Taxes,
unless Lessor directs Lessees otherwise. In the event that Lessor pays any such
Taxes, Lessees will on demand reimburse Lessor for the full amount paid by
Lessor therefor. Lessor shall have no obligation to contest or refuse to pay any
Tax. Lessees acknowledge that in some jurisdictions Taxes may not be billed,
audited, assessed or due until after this Lease has terminated and agrees that
in such event Lessees will remain liable for such Taxes notwithstanding such
termination. Lessor makes no warranty, express or implied, regarding Lessees'
tax or accounting treatment of this Lease.
-6-
13. INCOME TAX INDEMNIFICATION: (a) Each Lessee acknowledges, represents
and warrants that Lessor is the owner of the Equipment for state law and Federal
income tax purposes and that the most accelerated depreciation or cost recovery
deductions on the full amount of the Equipment Cost will be available to Lessor.
Each Lessee acknowledges that Lessor intends to claim and take the Depreciation
Deductions.
(b) Each Lessee also represents, warrants and covenants as follows:
(i) Lessor will not be required to include any amount in its
income in connection with any Item for any taxable year or part
thereof during the Lease Term other than (A) Interim Rent, Base Rent
and Renewal Rent, as such Rent accrues in accordance with the terms
hereof, (B) any amount constituting gain recognized with respect to
or by reason of the sale or other disposition of such Item upon the
termination of this Lease with respect thereto, (C) any amount
payable to Lessor to the extent such amount is required to be
determined by reference to the income tax effect to Lessor of the
receipt thereof, (D) any amount specifically identified as interest,
and (E) any other amount with respect to which Lessor shall be
entitled to a contemporaneous and equal offsetting deduction (any
amount so includable in Lessor's income other than as contemplated
in clauses (A) through (E) above being referred to herein as an
"Inclusion"); and
(ii) Each Item is classified as either five or seven year
property within the meaning of Section 168(e) of the Code and Lessor
will be entitled to Depreciation Deductions with respect to its
basis in the Equipment (which basis shall equal 100% of the
Equipment Cost for each Item) in accordance with such classification
of property.
(c) If for any reason whatsoever, including any act or omission of
Lessees or any or some of them or the inaccuracy of any representation or
warranty of Lessees or any or some of them in any of the Operative
Documents or in connection with the transactions contemplated hereby:
(i) Lessor shall lose or lose the right to claim, or be
advised or determines that it would be imprudent, improper or
inadvisable to claim, or there shall be disallowed or recaptured,
all or any portion of the anticipated Depreciation Deductions,
(ii) Lessor shall suffer an Inclusion, or
(iii) Any foreign tax credit of Lessor shall be reduced,
disallowed or recaptured, (any such loss, disallowance, reduction,
recapture or Inclusion being hereinafter called a "Tax Loss"), then
30 days after written notice to Lessees by Lessor that any Tax Loss
has occurred, Lessees shall pay Lessor, as an indemnity payment, a
lump sum amount which, on an After-Tax Basis after deduction of all
Federal, state and local Taxes required to be paid by Lessor in
respect of the receipt
-7-
of such payment, shall provide Lessor with not less than the same
net after-tax return that Lessor would have realized if such Tax
Loss had not occurred, including any interest and penalties payable
by Lessor attributable to such Tax Loss. In computing Lessees'
liability under this Section, the Federal, state and local Taxes
payable by Lessor shall be based upon the highest marginal corporate
tax rate in effect for the taxable year in which the Tax Loss
occurred.
(d) Lessees shall not be liable for indemnification respecting a Tax
Loss occurring solely as a result of: (i) Lessor being subject to the
application of the mid-quarter convention of Section 168(d)(3) of the
Code, (ii) Lessor making any election to claim the Depreciation Deductions
in a manner less rapid than contemplated by the definition thereof, (iii)
Lessor failing to have sufficient taxable income to utilize the
Depreciation Deductions, (iv) Lessor being subject to the Alternative
Minimum Tax, (v) a voluntary transfer or other voluntary disposition by
the Lessor of any interest in any Equipment or this Lease when no Lease
Default or Event of Default exists, or (vi) Lessor's failure to comply
with the Operative Documents if failure to so comply is the sole cause of
the Tax Loss.
(e) For the purposes of this Section the term "Lessor" shall include
any affiliated group within the meaning of Section 1504 of the Code of
which Lessor or any Owner Participant is a member, if consolidated returns
are filed for such affiliated group for Federal tax purposes, and a Tax
Loss shall be deemed to have occurred upon the earliest of:
(i) The happening of any event which may cause such Tax Loss,
(ii) The payment by Lessor to the taxing authority of the tax
increase resulting from such Tax Loss, or
(iii) The adjustment of the tax return of Lessor to reflect
such Tax Loss.
14. GENERAL INDEMNIFICATION: LESSEES HEREBY JOINTLY AND SEVERALLY AGREE TO
INDEMNIFY, SAVE, PROTECT, DEFEND AND KEEP HARMLESS LESSOR, EACH OWNER
PARTICIPANT, AND THEIR RESPECTIVE AGENTS, DIRECTORS, EMPLOYEES, SUCCESSORS AND
ASSIGNS, FROM AND AGAINST ANY AND ALL LOSSES, DAMAGES (INCLUDING INDIRECT,
SPECIAL OR CONSEQUENTIAL DAMAGE), HARM, EXPENSES, INCLUDING LEGAL FEES (AND A
REASONABLE ALLOCATION OF THE COMPENSATION, COSTS AND EXPENSES OF INTERNAL
COUNSEL, BASED UPON TIME SPENT), PENALTIES, INJURIES, CLAIMS, ACTIONS AND SUITS,
OF WHATSOEVER KIND AND NATURE, IN CONTRACT, TORT OR OTHERWISE, WHETHER CAUSED BY
THE ACTIVE OR PASSIVE NEGLIGENCE OF LESSOR OR ANY OWNER PARTICIPANT (EXCLUDING,
HOWEVER, LESSOR'S OR ANY OWNER PARTICIPANT'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT) OR OTHERWISE AND INCLUDING LESSOR'S AND OWNER PARTICIPANTS' STRICT
LIABILITY IN TORT, IN ANY WAY ARISING OUT OF, RELATED TO OR IN CONNECTION WITH
THE SELECTION, MODIFICATION, PURCHASE, ACCEPTANCE, REJECTION, OWNERSHIP,
DELIVERY, LEASE,
-8-
POSSESSION, MAINTENANCE, USE, CONDITION (INCLUDING LATENT OR OTHER DEFECTS,
WHETHER OR NOT DISCOVERABLE BY LESSOR, OWNER PARTICIPANTS OR LESSEES OR ANY OR
SOME OF THEM, AND ANY CLAIM FOR PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT),
RETURN OF, OR OPERATION OF ANY ITEM PRIOR TO ITS RETURN DATE OR RELATING TO ANY
DEFAULT BY LESSEES OR ANY OR SOME OF THEM OR EVENT OF DEFAULT.
15. DEFAULT: Each of the following shall constitute an event of default
(an "Event of Default") hereunder:
(a) Lessees or any or some of them shall fail to make any payment of Rent
when and as the same shall become due and payable;
(b) Lessees or any or some of them shall fail to pay or perform, as and
when due (including any applicable grace period), any obligations to Lessor or
any of its Affiliates arising under or in connection with this Lease, including,
but not limited to, Lessees' obligation under Sections 7, 8, 10 and 11 hereof,
or arising under any other document or instrument including, but not limited to,
any document or instrument executed in connection with any other presently
existing or future loans, leases or other credit arrangements from Lessor or any
of its Affiliates in favor of Lessees, or otherwise, and solely with respect to
Lessees' obligations under Section 18(b) of this Lease, such failure continues
for 15 days;
(c) Lessees or any or some of them shall make any representation or
warranty, respectively, in this Lease or in any certificate or statement
furnished at any time hereunder or in connection with this Lease which proves to
have been untrue or misleading in any material respect when made or furnished;
(d) Any Lessee shall file a voluntary petition in bankruptcy or a
voluntary petition or answer seeking liquidation, administration,
reorganization, arrangement, readjustment of its debts, or for any other relief
under the Bankruptcy Code, or under any other act or law pertaining to
insolvency or debtor relief, whether state, federal, or foreign, now or
hereafter existing; or any Lessee shall enter into any agreement indicating its
consent to, approval of, or acquiescence in, any such petition or proceeding; or
any Lessee shall apply for or permit the appointment by consent or acquiescence
of a receiver, custodian administrator, or trustee for all or a substantial part
of its property; or any Lessee shall make an assignment for the benefit of
creditors; or any Lessee shall be unable or shall fail to pay its debts
generally as such debts become due; or any Lessee shall admit, in writing, its
inability or failure to pay its debts generally as such debts become due;
(e) There shall have been filed against any Lessee an involuntary petition
in bankruptcy or seeking liquidation, administration, reorganization,
arrangement, readjustment of its debts or for any other relief under the
Bankruptcy Code, or under any other act or law pertaining to insolvency or
debtor relief, whether state, federal or foreign, now or hereafter existing, or
any Lessee shall suffer or permit the involuntary appointment of a receiver,
custodian, administrator, or trustee for all or a substantial part of its
property; or any Lessee shall suffer or permit the issuance of a warrant of
attachment, diligence, execution or similar process against all or any
substantial part of its property;
-9-
unless, in each other case, such petition, appointment or process is fully
bonded against, vacated or dismissed within 60 days from its effective date, but
not later than ten (10) days prior to any proposed disposition of any assets
pursuant to any such proceeding;
(f) The occurrence of any default in the payment or performance, and the
subsequent acceleration, of any debt or other obligations (including, but not
limited to, capital lease obligations or any corporate guaranty) owed by any
Lessee to any other Person or entity unaffiliated with Lessor with an
outstanding principal balance in excess of $1,000,000, whether now or hereafter
existing;
(g) There shall be a change in the beneficial ownership and control,
directly or indirectly, of the majority of the outstanding voting securities or
other interests entitled (without regard to the occurrence of any contingency)
to elect or appoint members of the board of directors or other managing body of
Cornell (a "change of control"), or there is any merger, consolidation,
dissolution, liquidation, winding up or sale or other transfer of all or
substantially all of the assets of any Lessee pursuant to which there is a
change of control or cessation of any Lessee or their businesses;
(h) The occurrence of any "Event of Default" under the Credit Agreement.
16. REMEDIES: (a) Upon the occurrence of any Event of Default, then, to
the extent permitted by applicable law, Lessor shall have the right to exercise
any one or more of the following remedies:
(i) Proceed by appropriate court action or actions, either at law or
in equity, to enforce performance by Lessees of their obligations
hereunder or to recover damages for breach thereof;
(ii) To take possession of any Item, wherever located, without
notice, legal process, prior judicial hearing, or liability for trespass
or other damage (WHICH RIGHTS LESSEES HEREBY VOLUNTARILY, INTELLIGENTLY
AND KNOWINGLY WAIVE) and thereafter hold, sell, operate or lease such Item
free of claims of Lessees, except as set forth below;
(iii) By notice to Lessees, to terminate or cancel this Lease and
declare all Rent then owing to Lessor hereunder immediately due and
payable (whereupon Lessees shall promptly pay the same);
(iv) To demand immediate payment of the Stipulated Loss Value of the
Equipment as liquidated damages, and not as a penalty, for all future Rent
for the remaining Lease Term (whereupon Lessees shall promptly pay the
same); and
(v) To pursue any other remedy available to Lessor at law or in
equity to the extent Lessor shall not already have recovered, in full, all
Rent due under this Lease, Stipulated Loss Value and all damages payable
by Lessees as a result of any Event of Default.
-10-
(b) Lessor and Lessees agree that an amount equal to the Stipulated Loss
Value of the Equipment represents a reasonable return for the use of the
Equipment and for the depreciation thereof, and shall be the basis for
liquidated damages for the remaining term for which Lessees shall be jointly and
severally liable to Lessor upon the occurrence of an Event of Default. Any
amounts realized by Lessor on account of the Equipment subsequent to Lessor's
taking possession thereof pursuant to Section 16(a)(ii) shall, after
reimbursement to Lessor of all its expenses incurred in connection therewith,
including legal fees (and a reasonable allocation of the compensation, costs and
expenses of internal counsel, based upon time spent), be credited to amounts of
Stipulated Loss Value and all other Rent owing by Lessees hereunder or, if such
Stipulated Loss Value and all other Rent has been paid, paid to Lessees.
(c) If Lessor elects not to sell, re-lease, or otherwise dispose of all or
any part of the Equipment, and holds such Equipment for Lessees for the
remaining Term, Lessor may recover, in addition to all Rent accrued and unpaid
as of the date of Lessor's recovery of possession of the Equipment, the present
value, as of such date, of the Rent for the remainder of the Term respecting
such Equipment. Present value shall be computed using a discount rate equal to
the Base Rate in effect on the Base Term Commencement Date.
(d) If Lessor sells, leases, or otherwise disposes of all or any part of
the Equipment, Lessor may recover from Lessees, in addition to any Rent accrued
and unpaid as of the date of Lessor's recovery of possession of the Equipment,
the present value computed by using a discount rate equal to the Base Rate in
effect on the Base Term Commencement Date, of the difference between (i) the
Rent for the remainder of the Lease Term respecting such Equipment, and (ii)
except in the case of a substantially similar lease, the Fair Market Rental
Value for such period of time determined by Lessor in its sole discretion, or
(iii) in the case of a lease of Equipment which is substantially similar to this
Lease, the total rent for the lease term of such substantially similar lease.
(e) Time of performance of Lessees' obligations hereunder is of the
essence. All remedies of Lessor hereunder are cumulative, and may, to the extent
permitted by law, be exercised concurrently or separately, and the exercise of
any one remedy shall not be deemed to be an election of such remedy to the
exclusion of any other remedy or to preclude the exercise of any other remedy at
any other time. However, Lessor is entitled to only one satisfaction. Failure on
the part of Lessor to exercise, or delay in exercising, any right or remedy
hereunder or Lessor's failure at any time to require performance by Lessees of
any of the provisions hereof shall not operate as a waiver thereof; nor shall
any single or partial exercise by Lessor of any right or remedy hereunder
preclude any other further exercise thereof or the exercise of any other right
or remedy. Lessees shall be jointly and severally liable for all reasonable
charges, costs, expenses and attorneys' fees incurred by Lessor and the Lead
Owner Participant (including a reasonable allocation of the compensation, costs
and expenses of internal counsel, based upon time spent): (i) in defending or
protecting its interests in the Equipment, or any Item or part thereof; (ii) in
the negotiation, execution and delivery of this Lease; PROVIDED THAT, Lessees
shall only be responsible for the payment of a maximum amount of up to $62,500
of such charges, costs, expenses and fees in connection with the negotiation,
execution and delivery of this Lease and the other Operative Documents; (iii) in
the administration, amendment or enforcement of this Lease and the other
Operative Documents or the collection of any Rent hereunder; and (iv) in any
lawsuit or other legal proceeding in any way connected with this Lease
-11-
and the other Operative Documents, including, but not limited to, any contract
or tort or other actions, any arbitration or other alternative dispute
resolution proceeding, all appeals and judgment enforcement actions and any
bankruptcy proceeding (including, but not limited to, any relief from stay
and/or adequate protection motions, cash collateral disputes,
assumption/rejection motions and disputes or objections to any proposed
disclosure statement or reorganization plan). Lessees acknowledge and agree that
the preceding sentence shall survive and not be merged with any judgment in
connection with any exercise of any remedy by Lessor provided hereunder. Lessees
shall pay to Lessor interest on any overdue payments after demand therefor and
until paid at the Default Rate.
17. ASSIGNMENT. (a) Lessor may sell, assign or otherwise transfer all or
any part of its right, title and interest in and to the Equipment and/or this
Lease to a third-party assignee, subject to the terms and conditions of this
Lease including, but not limited to, the right to the quiet enjoyment by Lessees
as set forth in Section 5 above. Any such assignee may assume all of the rights
and obligations of Lessor in connection with the Equipment sold, assigned or
otherwise transferred, in which case Lessor shall be relieved therefrom. To the
extent of any such assumption of obligations, all references to Lessor herein
shall thereafter mean such assignee.
(b) Lessor may also pledge, mortgage or grant a security interest in the
Equipment and assign this Lease as collateral. Each such pledgee, mortgagee,
lien holder or assignee shall have any and all rights as may be assigned by
Lessor but none of the obligations of Lessor hereunder. Any pledge, mortgage or
grant of security interest in the Equipment or collateral assignment of this
Lease shall be subject to the terms and conditions hereof including, but not
limited to, the right to the quiet enjoyment of the Equipment by Lessees as set
forth in Section 5 above.
(c) Lessees shall not be relieved of any of their obligations hereunder by
reason of any such sale, assignment, or other transfer referred to in subsection
(a) above, or any pledge, mortgage, grant of security interest or collateral
assignment referred to in subsection (b) above, all of which such obligations
shall remain absolute and unconditional, including, but not limited to, Lessees'
obligations to pay Rent as set forth herein. Each Lessee agrees that it will not
assert against any purchaser, pledgee, mortgagee, lien holder or assignee
(collectively, an "Assignee") any defense, counterclaim or offset that Lessee
may have against Lessor and Lessees acknowledge that any such assignment or
other transfer by Lessor, or any such pledge, mortgage, grant of security
interest or collateral assignment by Lessor, shall not change Lessees' duties or
obligations under this Lease nor increase the burdens or risks imposed on
Lessees. Upon the written request of Lessor, Lessees shall acknowledge all such
obligations to the Assignee, which acknowledgment shall be in such form and
substance as Lessor or any such Assignee may require, consistent with their
normal business practices.
(d) Lessees agree that in the case of the appointment of any successor
trustee or additional trustee pursuant to the terms of the Trust Agreement, such
successor trustee or additional trustee shall, upon written notice by such
successor trustee to Lessees, succeed all the rights, powers and title of Lessor
hereunder (or to such lesser extent as provided for in the appointment of such
additional trustee) and shall be deemed to be Lessor and the owner of the
Equipment for all purposes hereof (or for such purposes as specified in
connection with the appointment of such additional
-12-
trustee) without the necessity of any consent or approval by Lessees and without
in any way altering the terms of this Lease or Lessees' obligations hereunder.
One such appointment and designation of a successor trustee shall not exhaust
the right to appoint and designate further successor trustees pursuant to the
Trust Agreement, but such right, as well as the right to appoint additional
trustees, may be exercised repeatedly as long as this Lease shall be in effect.
(e) NO LESSEE SHALL SELL, TRANSFER, ASSIGN, SUBLEASE, CONVEY OR PLEDGE ANY
OF ITS INTEREST IN THIS LEASE OR ANY OF THE EQUIPMENT, WITHOUT THE PRIOR WRITTEN
CONSENT OF LESSOR. ANY SUCH SALE, TRANSFER, ASSIGNMENT, SUBLEASE, CONVEYANCE, OR
PLEDGE, WHETHER BY OPERATION OF LAW OR OTHERWISE, WITHOUT THE PRIOR WRITTEN
CONSENT OF LESSOR, SHALL BE VOID.
(f) For purposes of this Section 17, each reference herein to an
"assignee", secured party or holder of a mortgage or lien shall be deemed to be
a reference to a Person who meets the requirements set forth in the definition
of a Permitted Transferee.
18. REPORTS: (a) Lessees will immediately notify Lessor of:
(i) Each Event of Loss or accident involving or allegedly involving
any Item;
(ii) Any Lien (other than a Lessor's Lien) which shall have attached
to any Item; or
(iii) The occurrence of any Lease Default or any Event of Default.
(b) Cornell shall, as soon as practicable, and in any event within sixty
(60) days after the end of each fiscal quarter, furnish to Lessor its unaudited
financial statements including in each instance, balance sheets, income
statements, and statements of cash flow, on a consolidated and consolidating
basis, as appropriate, and separate profit and loss statements as of and for the
quarterly period then ended and for its fiscal year to date, prepared in
accordance with generally accepted accounting principles, consistently applied,
and Cornell hereunder shall, as soon as practicable, and in any event within
ninety (90) days after the end of each fiscal year, furnish to Lessor its annual
audited financial statements, including balance sheets, income statements and
statements of cash flow for the fiscal year then ended, on a consolidated and
consolidating basis, as appropriate, which have been prepared by its independent
accountants. Such audited financial statements shall be accompanied by the
independent accountant's opinion, which opinion shall be in form generally
recognized as "unqualified". All such financial statements shall also be
accompanied by a compliance certificate in form and substance satisfactory to
Lessor.
(c) Lessees will permit Lessor to inspect and examine the Equipment and
any Item and Lessees' records relating thereto at such times and from time to
time as Lessor may wish upon reasonable notice and, so long as no Event of
Default has occurred and is continuing, during normal business hours.
-13-
19. REPRESENTATIONS AND WARRANTIES OF LESSEES: Each Lessee hereby
represents and warrants to Lessor that on the date hereof, on each Closing Date
and throughout the Lease Term:
(a) COMMERCIAL PURPOSES. The Equipment will at all times be used for
commercial or business purposes.
(b) YEAR 2000 COMPLIANT. Each Lessee has made an assessment of the
microchip and computer-based systems and the software used in its business and
based upon such assessment believes that it will be "Year 2000 Compliant" by
January 1, 2000. For purposes of this paragraph, "Year 2000 Compliant" means
that all software, embedded microchips and other processing capabilities
utilized by, and material to the business operations or financial condition of,
such Lessee are able to interpret, store, transmit, receive and manipulate data
on and involving all calendar dates correctly and without causing any abnormal
ending scenarios in relation to dates in and after the Year 2000. From time to
time, at the request of Lessor, each Lessee shall provide to Lessor such updated
information as is requested regarding the status of its efforts to become Year
2000 Compliant.
(c) NO INCONSISTENT ACTION. Each Lessee agrees that neither it, nor any
Person controlled by it, in control of it, or under common control with it,
directly or indirectly, nor any Person or entity claiming by, through or under
such Lessee, nor any other user or Person in possession of any Equipment or a
part thereof (other than Lessor or the Owner Participants or any Person claiming
by, through or under Lessor or the Owner Participants other than Lessees), nor
any Affiliate of any of the foregoing, will at any time file any returns or
other documents or take any action in connection with the filing or examination
of any tax return inconsistent with the representations set forth except that
Lessees may take such action that is required by the term of the Lease, or by
any law or regulation applicable to Lessees, provided that Lessees shall notify
the Lead Owner Participant in writing of its requirement to do so.
(d) APPRAISAL. All information supplied by Lessees to the Appraiser in
connection with the appraisal obtained pursuant to the Operative Documents which
is described in such appraisal shall be accurate and complete in all material
respects at the time it was supplied by Lessees to the Appraiser and as of each
Closing Date.
(e) COMPLETENESS. As of each Closing Date, no Item of Equipment will
require any improvements, modifications or additions in order to be rendered
complete for its intended use and no Item is Limited Use Property.
(f) RECORDS. Each Lessee shall, upon request of the Lead Owner
Participant, furnish to the Lead Owner Participant such information or records
relating to each Item of Equipment which are regularly maintained by such Lessee
in the ordinary course of its business and which are reasonably necessary to
enable the Owner Participants to fulfill their respective tax return filing
obligations or respond to or contest tax audits.
-14-
(g) NO TAX-EXEMPT USE. During the Term, no Lessee will be a "tax-exempt
entity" within the meaning of Section 168(h)(2) of the Code and Lessees will not
take any action nor suffer any action to be taken by any Person that would cause
any Item to constitute "tax-exempt use property" within the meaning of Section
168(h)(1) of the Code.
(h) NO FOREIGN USE. During the Term, no Item will be used outside the
United States.
20. TERMINATION OPTION: Provided that no Event of Default is continuing
and Lessees shall have given the notice required by the next succeeding
sentence, Lessees shall have the right and, upon giving of such notice, the
obligation, to terminate the Lease at the end of the Base Term upon payment to
Lessor, on an After-Tax Basis, of the Cancellation Fee and the Contingent Rent
and return of all the Equipment as provided in Section 23 of the Lease. Lessees
shall give Lessor written notice not less than 180 days prior to the Base Term
Expiration Date of its election to exercise the option provided in this Section
20, which notice shall be irrevocable. In the event Lessees fail to give the
required written notice provided for in the preceding sentence, Lessees shall be
deemed to have exercised their option to renew the Lease for the First Renewal
Term.
21. PURCHASE OPTION: Provided no Event of Default is continuing and
Lessees shall have given notice required by the next succeeding sentence of this
Section 21, Lessees shall have the right and upon the giving of notice under
this Section 21 the obligation to purchase all, but not less than all, of the
Equipment at a price equal to the greater of (a) the Fair Market Sales Value, on
an installed basis, in-place and in-use, of all the Equipment at the expiration
of the Base Term or, if a Renewal Term is then in effect, at the end of such
Renewal Term or (b) 16% of the original Equipment Cost of all such Equipment (or
Fair Market Sales Value if a Renewal Term is in effect at the time the notice
required hereunder is given). Lessees shall give Lessor written notice not later
than 180 days and not more than 270 days prior to the end of the Base Term or
any Renewal Term, as the case may be, of its election to exercise the purchase
option provided for in this Section 21 which notice shall be irrevocable.
Lessees agree that any sale pursuant hereto shall be of Lessor's right, title
and interest, if any, in and to the Equipment, and shall be AS IS, WHERE IS,
WITHOUT WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WARRANTY OF
MERCHANTABILITY AND FITNESS FOR PURPOSE. Any such sale shall be on an After-Tax
Basis.
22. RENEWAL OPTIONS: Provided no Lease Default then exists, and the
Lessees shall not have exercised the option to purchase the Equipment pursuant
to Section 21 above or cancel the Lease pursuant to Section 20 above, Lessees
shall have the right, and, upon giving of notice under this Section 22 as below
provided, the obligation, to lease pursuant to this Lease all (but not less than
all) of the Equipment at the expiration of the Base Term or any applicable
Renewal Term. Lessees may exercise this renewal option by giving Lessor written
notice not later than 180 days nor more than 270 days prior to the end of the
Base Term (or in the circumstances described below the then Renewal Term) that
Lessees elect to renew this Lease with respect to all, but not less than all, of
the Equipment then leased hereunder. A Second Renewal Term is available only if
Lessees have completed the First Renewal Term. Rent during the First Renewal
Term shall, subject to adjustment as provided in Section 2.6 of the
Participation Agreement, be equal to 1.459343% times the Equipment Cost for each
of the first eight months of such Renewal Term and 1.267997% times the
-15-
Equipment Cost for each month thereafter during the First Renewal Term. Monthly
Rent in the Second Renewal Term shall, subject to adjustment as provided in
Section 2.6 of the Participation Agreement, be equal to 0.006% times the
Equipment Cost. All Rent pursuant to this Section 22 shall be payable monthly in
advance, each such payment being due on each Rent Payment Date. Notwithstanding
the foregoing, this Lease shall continue for the First Renewal Term if Lessees
do not exercise the option provided for in Section 20 hereof.
23. RETURN OF EQUIPMENT: Provided Lessees have not elected to exercise
their option to purchase the Equipment under Section 21 of this Lease, Lessees
agree that Lessee shall return all, and not less than all, of the Equipment on
or before the Return Date. Lessees shall, on or before the Return Date, return
all, and not less than all, of the Equipment to Lessor free and clear of any and
all Liens (other than Lessor's Liens) and Lessees shall, all at Lessees' sole
cost and expense, promptly return the Equipment to such location as Lessor may
specify for acceptance by Lessor in the condition required to be maintained
hereunder (Lessees agreeing to pay for any repairs required to place the
Equipment in such condition) and shall comply with the provisions that follow:
(a) provide to Lessor (1) written notice of Lessees' intent to return such
Equipment, and (2) a detailed inventory of all such Equipment and components
thereof, each to be delivered at least (i) 180 days prior to the Return Date.
The inventory shall include, but not be limited to, a listing of model and
serial numbers for all components comprising any part of the Items of Equipment
as well as the location of the Items and the name, phone number and contact
person at the location where the Items are located;
(b) provide to Lessor the following documents (as appropriate): (1) one
set of service manuals, blue prints, process flow diagrams and operating manuals
including replacements and/or additions thereto, such that all documentation is
completely up-to-date; and (2) one set of documents, detailing equipment
configuration, operating requirements, maintenance records, and other technical
data concerning the set-up and operation of each of the Items, including
replacements and/or additions thereto, such that all documentation is completely
up-to-date, such delivery to be made 180 days prior to the Return Date;
(c) at all reasonable times (which shall include, without limitation, all
normal business hours) prior to the actual return thereof, make all of the Items
available for on-site operational inspections by potential purchasers;
(d) not more than thirty (30) days prior to the Return Date, cause the
manufacturer's representative or a qualified equipment maintenance provider
acceptable to Lessor to perform a physical and operational inspection of all of
the Items, including testing all performance characteristics, materials and
workmanship thereof, and to provide to Lessor a written report detailing the
results of such inspection and testing and necessary and recommended
replacements and repairs;
(e) as of the time of return, make all necessary or recommended
replacements and proper repairs (using generally accepted procedures) detailed
in the manufacturer's representative's or
-16-
qualified equipment maintenance provider's report and otherwise to cause all of
the Items to conform to the condition required under this Lease;
(f) as of the time of return, cause all of the Items be maintained in a
clean and cosmetically acceptable condition, and otherwise in such condition so
that such Items of Equipment may be immediately placed in service by a new
operator, buyer or lessee;
(g) as of the time of return, properly remove and treat all rust and
corrosion from each Item and remove all identification of Lessees thereon;
(h) as of the time of return, ensure that each Item of Equipment has all
component parts in good operating condition, that all of those component parts
meet or exceed the manufacturer's minimum recommended performance and
operational specifications (unless improved or updated during the Lease Term
thereof), and that each Item complies with all federal, state or local
governmental rules, regulations and other requirements, and industry standards
then in effect;
(i) cause all of the Items to be deinstalled, packed, transported, and
certified as follows: (1) the manufacturer's representative or the qualified
maintenance provider shall deinstall all the Items (including all wire, cable
and mounting hardware) in accordance with the specifications of the
manufacturer; (2) each Item shall be returned with a certificate supplied by the
manufacturer's representative or the qualified maintenance provider certifying
that the Items of Equipment are in good condition and, where applicable,
eligible for the manufacturer's maintenance plan, which certificate of
eligibility shall be transferable to another operator of the Item; (3) each Item
shall be packed properly and in accordance with the manufacturer's
recommendations; and (4) Lessees shall transport all of the Items in a manner
consistent with the manufacturer's recommendations and practices;
(j) on or before the Return Date, cause all of the Items to be
transported, reassembled and reinstalled at such locations in the continental
United States as Lessor may select;
(k) upon Lessor's request, cause to be provided to Lessor storage suitable
to Lessor, for the period between the Return Date and the date the Items are
transported, reassembled and reinstalled at the locations selected by Lessor,
which period shall not exceed 60 days; and
(l) during any period that any Lessee remains in possession of any of the
Items and during any storage period as described above, cooperate with Lessor in
attempting to remarket any such Items to prospective third party purchasers or
lessees and permit Lessor, during normal business hours, to display and
demonstrate the Items to the prospective purchasers or lessees on such Lessee's
premises or at the storage facility, as applicable, and keep each such Item
fully operational with all required power and/or fuel supplies available to
allow such demonstration. (In the event that any auction or other public sale of
any Item is deemed necessary or advisable by Lessor, such Lessee agrees that
such auction or public sale may be held on such Lessee's premises or at the
storage facility, as applicable.)
All costs of the foregoing shall be the sole responsibility of the
Lessees.
-17-
Notwithstanding anything to the contrary in this Lease, during any
Holdover Term, Lessees agrees to pay Lessor monthly Rent, in advance for each
month or any part of a month of the Holdover Term, in an amount equal to one
hundred and twenty five percent (125%) of the highest periodic Base Rent during
the Lease Term with respect to such Equipment.
24. MISCELLANEOUS, JURY WAIVER, GOVERNING LAW, JURISDICTION,
VENUE: (a) Nothing herein contained shall give or convey to Lessees any right,
title or interest in and to any Equipment leased hereunder except as a lessee.
Should Lessor permit the use of any Equipment beyond the specified Lease Term
thereof, the obligations of Lessees hereunder shall continue (including the
obligation to pay the Base Rent at the highest rate applicable during the Lease
Term with respect thereto) and such permissive use shall not be construed as
renewal of the Lease Term thereof nor as a waiver of any right or continuation
of any obligation of Lessor hereunder. Lessees' obligations pursuant to Sections
12, 13, 14 and 23 shall survive the expiration or earlier termination of this
Lease, and Lessees shall remain liable therefor. Equipment shall at all times
remain personal property of Lessor notwithstanding any affixation to the real
estate.
(b) The Equipment subject hereto is and at all times shall be and remain
the sole and exclusive property of Lessor, and Lessees shall have no right,
title or interest therein or thereto, except as expressly set forth in this
Lease. As a precaution, each Lessee hereby also grants to Lessor a first
priority continuing lien and security interest in that portion of the Equipment
subject hereto and leased by such Lessee and the proceeds thereof to secure any
obligation of Lessees under this Lease and any other agreement between Lessor
and Lessees. Each Lessee further agrees that such Lessee's obligations hereunder
are additionally secured by all security interests, liens and encumbrances
heretofore, now or hereafter granted by such Lessee to Lessor under any
instrument, whether or not related to this Lease. Lessees agree to execute any
instrument or instruments necessary or expedient for filing, recording,
perfecting, or notifying of the interest of Lessor in the Equipment upon request
of, and as determined by, Lessor. Each Lessee hereby specifically authorizes
Lessor to file financing statements not signed by such Lessee or to execute same
for and on behalf of such Lessee as such Lessee's attorney-in-fact, irrevocably
and coupled with an interest, for such purposes.
(c) To the extent permitted by applicable law, Lessees hereby waive any
and all rights and remedies conferred upon a lessee by such applicable law
(including but not limited to Article 2A of the UCC) to: (i) cancel this Lease;
(ii) repudiate this Lease; (iii) reject the Equipment; (iv) revoke acceptance of
the Equipment; (v) recover damages from Lessor for any breaches of warranty
regarding the Equipment or for any other reason; (vi) a security interest in the
Equipment in Lessees' possession or control for any reason; (vii) deduct all or
any part of any claimed damages resulting from Lessor's default, if any, under
this Lease; (viii) accept partial delivery of the Equipment; (ix) recover any
general, special, incidental or consequential damages, for any reason
whatsoever; and (x) obtain specific performance, replevin, detinue,
sequestration, claim and delivery or the like for any Equipment identified to
this Lease. To the extent permitted by applicable law, Lessees also hereby waive
any rights now or hereafter conferred by statute or otherwise which may require
Lessor to sell, lease or otherwise use any Equipment in mitigation of Lessor's
damages of this Lease or which may otherwise limit or modify any of Lessor's
rights or remedies under this Lease.
-18-
(d) Any action by Lessees against Lessor for any default by Lessor under
this Lease, including breach of warranty or indemnity, shall be commenced within
one (1) year after any such cause of action accrues. LESSOR AND LESSEES EACH
WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY LITIGATION ARISING HEREFROM OR IN
RELATION HERETO.
(e) All notices hereunder shall be in writing and shall be delivered by
hand, by overnight courier or by certified or registered mail, return receipt
requested, to each party at its address set forth below, as such address may be
changed by such notice. All notices shall be deemed given when received, when
delivery is refused or when the same are returned for failure to be called for.
(f) If Lessees fails to perform any of their obligations hereunder Lessor
may, but shall not be obligated to, perform the same (without such performance
constituting a cure or waiver of Lessees' failure to so perform) and Lessees
will on demand reimburse Lessor for all its costs and expenses incurred in
connection therewith.
(g) THIS LEASE AND THE RIGHTS AND OBLIGATION OF THE PARTIES HEREUNDER
SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, REGARDLESS OF THE LOCATION OF THE EQUIPMENT OR THE STATE OF
INCORPORATION OR PRINCIPAL PLACE OF BUSINESS OF THE LESSEES. LESSEES (I) CONSENT
AT LESSOR'S ELECTION AND WITHOUT LIMITING LESSOR'S RIGHT TO COMMENCE AN ACTION
IN ANY OTHER JURISDICTION, TO THE EXCLUSIVE JURISDICTION AND VENUE OF ANY COURTS
(FEDERAL, STATE OR LOCAL) SITUATED IN XXXX COUNTY, ILLINOIS; (II) WAIVE ANY
OBJECTION TO IMPROPER VENUE AND FORUM NON CONVENIENS; AND (III) CONSENT TO
SERVICE OF PROCESS BY CERTIFIED MAIL, POSTAGE PREPAID, TO LESSEES AT THE ADDRESS
SET FORTH ON THE SIGNATURE PAGE HEREOF, WHICH SERVICE SHALL BE DEEMED COMPLETE
WITHIN TEN (10) DAYS AFTER THE DATE OF MAILING THEREOF. If any provision of this
Lease shall contravene or be invalid under applicable law or regulation, such
contravention or invalidity shall not affect the entire Lease, the provisions
held to be invalid to be deemed deleted or modified and the Lease interpreted
and construed as though such invalid provision or provisions were not part
hereof or conformed thereto.
(h) This Lease, together with the Lease Supplements, constitutes the
entire agreement of the parties with respect to the subject matter hereof, and
supersedes and replaces any prior or contradictory representations, warranties
or agreements by Lessor and Lessees. This is a non- cancelable Lease and
Lessees' obligations hereunder are absolute and unconditional. This Lease, any
amendments to, variations or modifications of this Lease, any waiver of its
provisions or conditions, any consent hereunder shall not be valid unless in
writing and signed by an authorized officer or manager of Lessor.
-19-
25. LIABILITY OF LESSOR LIMITED: It is expressly understood and agreed
that all of the representations, warranties and undertakings of Lessor hereunder
shall be binding on Lessor only in its capacity as trustee under the Trust
Agreement, and the institution acting as Lessor shall not be liable in its
individual capacity for any breach thereof except for its gross negligence or
willful misconduct.
26. JOINT AND SEVERAL LIABILITY: Each Lessee hereby irrevocably and
unconditionally: (a) agrees that it is jointly and severally liable to the
Lessor for the full and prompt payment of Rent and the performance by each
Lessee of its obligations under this Lease and the other Operative Documents in
accordance with the terms hereof and thereof; and (b) agrees as a primary
obligation to indemnify the Lessor on demand for and against any loss incurred
by the Lessor as a result of any of the obligations of any Lessee being or
becoming void, voidable, unenforceable or ineffective for any reason whatsoever,
whether or not known to the Lessor or any Person, the amount of such loss being
the amount which the Lessor would otherwise have been entitled to recover from
such Lessee.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.
-20-
IN WITNESS WHEREOF, the parties hereto have executed this Lease as
of the date first above written.
LESSOR:
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, NOT IN ITS INDIVIDUAL
CAPACITY, AS EXPRESSLY PROVIDED HEREIN,
BUT SOLELY AS OWNER TRUSTEE
By: /s/ XXX X. XXXXX
Name: Xxx X. Xxxxx
Title: Vice President
Address: 00 Xxxxx Xxxx Xxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxx Xxxxx
Facsimile No. 000-000-0000
LEASE AGREEMENT
SIGNATURE PAGE
LESSEES:
CORNELL CORRECTIONS, INC.
CORNELL CORRECTIONS OF CALIFORNIA,
INC.,
CORNELL CORRECTIONS OF TEXAS, INC.,
CORNELL CORRECTIONS OF OKLAHOMA,
INC.,
WBP LEASING, INC.,
CORNELL CORRECTIONS OF ALASKA, INC.
By: /s/ XXXX X. XXXXXXX
Xxxx X. Xxxxxxx
Vice President and Chief Financial
Officer of each of the companies
named above
Address: 0000 Xxxx Xxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxxx
Facsimile No.: (000) 000-0000
LEASE AGREEMENT
SIGNATURE PAGE
SCHEDULE 1
STIPULATED LOSS VALUE
The Stipulated Loss Value of Equipment as of any date of determination shall
mean the amount determined by multiplying the Equipment Cost for such Equipment
by the percentage set forth below opposite the Rent Payment Date on which such
Stipulated Loss Value is being determined; provided that during any Renewal
Term, "Stipulated Loss Value" shall be determined by using the last factor set
forth below:
RENT PAYMENT FACTOR RENT PAYMENT FACTOR
DATE DATE
January 1, 2000 105% November 1, 2001 86%
February 1, 2000 104% December 1, 2001 85%
March 1, 2000 104% January 1, 2002 84%
April 1, 2000 103% February 1, 2002 82%
May 1, 2000 102% March 1, 2002 81%
June 1, 2000 102% April 1, 2002 80%
July 1, 2000 101% May 1, 2002 78%
August 1, 2000 100% June 1, 2002 77%
September 1, 2000 99% July 1, 2002 76%
October 1, 2000 98% August 1, 2002 74%
November 1, 2000 98% September 1, 2002 73%
December 1, 2000 97% October 1, 2002 72%
January 1, 2001 96% November 1, 2002 70%
February 1, 2001 95% December 1, 2002 69%
March 1, 2001 94% January 1, 2003 67%
April 1, 2001 93% February 1, 2003 65%
May 1, 2001 92% March 1, 2003 64%
June 1, 2001 91% April 1, 2003 62%
July 1, 2001 90% May 1, 2003 60%
August 1, 2001 89% June 1, 2003 58%
September 1, 2001 88% July 1, 2003 57%
October 1, 2001 87% August 1, 2003 55%
September 1, 2003 53%
