LEASE AGREEMENT
Exhibit
10.1
This
LEASE AGREEMENT (this “Agreement”) is made as of November 19, 2004, by and among
CFHS Holdings, Inc., a Delaware corporation (“Lessee”), CFHS Equipment Holdings
Trust, a Delaware statutory trust (“Trust”) and CFHS Leasing, LLC, a Delaware
limited
liability company (“LLC”) (Trust and LLC are individually referred to herein as
“Lessor”
and
collectively as “Lessors”). This Agreement is entered into pursuant to that
certain Sale and Leaseback Agreement dated as of the date hereof, by and among
Lessors and Lessee (the “Sale and Leaseback Agreement”). The equipment listed on
Exhibit A of the Sale and Leaseback Agreement, together with all present and
future additions, parts, accessories, attachments, substitutions, repairs,
improvements, and replacements thereof or thereto shall be referred to as
“Equipment” and Exhibit A of the Sale and Leaseback Agreement shall be referred
to herein as the “Schedule” (the Lease Agreement, together with the Schedule
hereinafter referred to as the “Lease”). Except as contemplated herein, Lessors
have no obligation to enter into any additional leases with, or extend any
future financing to, Lessee.
1.
LEASE.
Subject to, and upon all of the terms and conditions of, this Agreement
and
the
Schedule, Lessors hereby agree to lease to Lessee and Lessee hereby agrees
to
lease from
Lessors
the Equipment for the Term (as defined in Paragraph
2
below)
thereof. All rights of Lessors hereunder (including, but not limited to, the
right to give and receive notices and to exercise their rights upon an Event
of
Default) shall be governed by that certain Tenants-in-Common Agreement dated
as
of the date hereof, by and among Lessors and Lessee (the “TIC Agreement,” the
TIC Agreement, together with the Lease and the Sale and Leaseback Agreement,
shall hereinafter be referred to as the “Lease Documents”).
2.
TERM.
The Lease shall be effective and the term of the Lease (“Term”) shall commence
on the date Lessors make the initial purchase of Equipment under the Sale and
Leaseback Agreement (the “Lease Commencement Date”) and, unless sooner
terminated (as hereinafter provided), shall expire on the date two years from
the date of this Agreement (the “Initial Term”). So long as no Event of Default
or event which, with the giving of notice, the passage of time, or both, would
constitute an Event of Default, shall have occurred and be continuing, Lessee
shall have the right to exercise up to three one-year renewal options, subject
to the provisions of this Paragraph
2
(the
first renewal option, referred to herein as the “First Renewal,” the second
renewal option, referred to herein as the “Second Renewal” and the third renewal
option, referred to herein as the “Third Renewal”). Lessee shall exercise the
First Renewal by sending notice to Lessors of Lessee’s intention to extend the
Term for an additional year (the “First Renewal Term”) at least thirty (30) day
prior to the expiration of the Initial Term. Lessee shall exercise the Second
Renewal (if Lessee exercised the First Renewal) by sending notice to Lessors
of
Lessee’s intention to extend the Term for an additional year (the “Second
Renewal Term”) at least thirty (30) days prior to the expiration of the First
Renewal Term. Lessee shall exercise the Third Renewal (if Lessee exercised
the
First Renewal and the Second Renewal and only if Lessors send the Lessors
Extension Notice to Lessee, as defined in the next sentence, to Lessee) by
sending notice to Lessors of Lessee’s intention to extend the Term for an
additional year (the “Third Renewal Term”) at least thirty (30) days prior to
the expiration of the Second Renewal Term. If Lessee exercises the First Renewal
and the Second Renewal, the Term shall expire at the end of the Second Renewal
Term (without regard to whether Lessee attempts to
exercise the Third Renewal) unless Lessors send notice to Lessee (the “Lessors
Extension Notice”) at least forty-five (45) days prior to the expiration of the
Second Renewal Term of Lessors’ intention to permit Lessee to exercise the Third
Renewal. Obligations due to be performed by Lessee during the Term shall
continue until they have been performed in full.
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3.
RENT.
Lessee shall pay Lessors rent for the use of the Equipment pursuant to the
terms
of this Paragraph
3
(“Rent”). Rent shall accrue during the Initial Term, and Lessee shall
pay
Lessors Rent attributable to the Initial Term at the expiration of the Term
(in
connection with
Lessee’s
payment under its purchase obligation pursuant to Paragraph
7
below),
subject to Lessee’s right to pay Rent currently as it accrues. Lessee shall pay
Rent to Lessors on a quarterly basis during each of the First Renewal Term,
the
Second Renewal Term and the Third Renewal Term, in each case if Lessee exercises
the applicable renewal option. Rent during the Initial Term shall be equal
to an
annual rate of twelve percent (12%) of the Purchase Price (as defined in the
Sale and Leaseback Agreement, taking into account the dates on which each
installment of the Purchase Price is actually paid to Lessee), compounded
quarterly. The Rent during the First Renewal Term shall be equal to an annual
rate of thirteen percent (13%) of the Purchase Price (compounded quarterly
if
Lessee fails to pay Rent currently as required by this Paragraph
3).
Rent
during the Second Renewal Term shall be equal to an annual rate of fourteen
percent (14%) of the Purchase Price (compounded quarterly if Lessee fails to
pay
Rent currently as required by this Paragraph
3).
Rent
during the Third Renewal Term shall be equal to an annual rate of fifteen
percent (15%) of the Purchase Price (compounded quarterly if Lessee fails to
pay
Rent currently as required by this Paragraph
3).
If any
Rent or other amount payable by Lessee is not paid within five days after the
day on which it becomes payable, Lessee will pay on demand, as a late charge,
an
amount equal to 5% of such unpaid Rent or other amount but only to the extent
permitted by applicable law. All payments provided for herein shall be payable
to Lessors at the address specified in Paragraph
23
below,
or at any other place designated by Lessors. For purposes of calculating the
amount of Rent that accrues during any period, the Purchase Price shall be
reduced by 100/105ths of any amounts treated as a reduction of Exercise Price
in
accordance with the last sentence of Paragraph
7
below,
as of the date such amounts are paid to Lessors.
4.
LEASE
NOT CANCELABLE; LESSEE’S OBLIGATIONS ABSOLUTE. The Lease may not be canceled or
terminated except as expressly provided herein. Lessee’s obligation to pay all
Rent due or to become due hereunder shall be absolute and unconditional and
shall not be subject to any delay, reduction, set-off, defense, counterclaim,
or
recoupment for any reason whatsoever, including any failure of the Equipment
or
any representations by the manufacturer or the vendor thereof. If the Equipment
is unsatisfactory for any reason, Lessee shall make any claim solely against
the
manufacturer or the vendor thereof and shall, nevertheless, pay Lessors all
Rent
payable hereunder.
5.
SELECTION AND USE OF EQUIPMENT. Lessee agrees that it shall be responsible
for
selecting and using, and any results obtained from, the Equipment and any other
associated equipment or services.
6.
WARRANTIES. LESSORS MAKE NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
AS
TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE DESIGN OR CONDITION
OF THE EQUIPMENT
OR ITS MERCHANTABILITY, SUITABILITY, QUALITY, OR FITNESS FOR
A
PARTICULAR PURPOSE, AND HEREBY DISCLAIMS ANY SUCH WARRANTY. LESSEE SPECIFICALLY
WAIVES ALL RIGHTS TO MAKE A CLAIM AGAINST LESSORS FOR BREACH OF ANY WARRANTY
WHATSOEVER. LESSEE LEASES THE EQUIPMENT “AS IS.” IN NO EVENT SHALL LESSORS HAVE
ANY LIABILITY, NOR SHALL LESSEE HAVE ANY REMEDY AGAINST LESSORS, FOR ANY
LIABILITY, CLAIM, LOSS, DAMAGE, OR EXPENSE CAUSED DIRECTLY OR INDIRECTLY BY
THE
EQUIPMENT OR ANY DEFICIENCY OR DEFECT THEREOF OR THE OPERATION, MAINTENANCE,
OR
REPAIR THEREOF OR ANY CONSEQUENTIAL DAMAGES AS THAT TERM IS USED IN SECTION
2-719(3) OF THE MODEL UNIFORM COMMERCIAL CODE, AS AMENDED FROM TIME TO TIME
(“UCC”). Lessors grant to Lessee, for the sole purpose of prosecuting a claim,
the benefits of any and all warranties made available by the manufacturer or
the
vendor of the Equipment to the extent assignable.
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7. PURCHASE
OBLIGATION. On or prior to the last day of the Term (at the election of Lessee
but in no event later than the last day of the Term), or as required by Lessors
pursuant to Paragraph
20
below
(or otherwise required by this Agreement) (the “Purchase Date”), in addition to
payment of any other amounts owed by Lessee to Lessors pursuant to the Lease
Documents, Lessee shall purchase the Equipment from Lessors for an amount equal
to the sum of (i) the Rent, as accrued or owed pursuant to Paragraph
3
above to
the extent not previously paid, and (ii) one hundred and five percent (105%)
of
the Purchase Price (such sum hereinafter referred to as the “Exercise Price,” as
adjusted pursuant to the last sentence of this Paragraph 7). On the Purchase
Date, Lessee shall pay to Lessors the Exercise Price, together with all sales
and other taxes applicable to the transfer of the Equipment and any other amount
payable and arising hereunder, in immediately available funds, whereupon Lessors
shall transfer to Lessee, without recourse or warranty of any kind, express
or
implied, all of Lessors’ right, title, and interest in and to such Equipment on
an “As Is, Where Is” basis. The Exercise Price shall be reduced by any payments
made by Lessee to Lessors in excess of amounts otherwise owed by Lessee to
Lessors pursuant to the Lease Documents (including, without limitation, pursuant
to Paragraph
8(d)(ii)
below)
to the extent Lessee and Lessors agree to characterize the payment as a
reduction in the Exercise Price at the time of the payment.
8. OWNERSHIP;
INSPECTION; MARKING; FINANCING STATEMENTS; FINANCIAL COVENANTS.
(a)
Lessee shall affix to the Equipment any labels supplied by Lessors indicating
ownership of such Equipment. The Equipment is and shall be the sole property
of
Lessors. Lessee shall have no right, title, or interest therein, except as
lessee under the Lease. The Equipment is and shall at all times be and remain
personal property and shall not become a fixture. Lessee shall obtain and record
such instruments and take such steps as may be necessary to prevent any person
from acquiring any rights in the Equipment by reason of the Equipment being
claimed or deemed to be real property. Unless the Lessors shall have provided
advance written consent, the Equipment shall continue to be located on real
property that is owed by Lessee (except as otherwise set forth on Schedule
8(a)
attached hereto) or which is neither leased (other than pursuant to a ground
lease) nor mortgaged. Lessee shall make the Equipment and its maintenance
records available for inspection by Lessors at reasonable times and upon
reasonable notice.
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(b) To
secure
the prompt payment and performance to Lessors, Lessee hereby assigns, pledges
and grants to Lessors for its benefit a continuing security interest in and
to
the Equipment and all other equipment owned by Lessee, whether now owned or
existing or hereafter acquired or arising and wheresoever located (other than
property otherwise agreed to in writing by Lessors as not subject to the
continuing security interest) (collectively, the “Collateral”). Lessee shall
xxxx its books and records as may be necessary or appropriate to evidence,
protect and perfect Lessors’ security interest and shall cause its financial
statements to reflect such security interest.
(c) Lessee
shall take all action that may be necessary or desirable, or that Lessors may
reasonably request, so as at all times to maintain the validity, perfection,
enforceability and priority of Lessors’ security interest in the Collateral or
to enable Lessors to protect, exercise or enforce its rights hereunder and
in
the Collateral, including, but not limited to, (i) immediately discharging
all
liens in the Collateral, (ii) delivering to Lessors, endorsed or accompanied
by
such instruments of assignment as Lessors may specify, and stamping or marking,
in such manner as Lessors may specify, any and all chattel paper, instruments,
letters of credits and advices thereof and documents evidencing or forming
a
part of the Collateral, (iii) entering into warehousing, lockbox and other
custodial arrangements satisfactory to Lessors, and (iv) executing and
delivering financing statements, control agreements, instruments of pledge,
notices and assignments, in each case in form and substance satisfactory to
Lessors, relating to the creation, validity, perfection, maintenance or
continuation of Lessors’ security interest under the UCC or other applicable
law. Lessors are hereby authorized to file financing statements signed by
Lessors instead of Lessee in accordance with the UCC as adopted in any
applicable State from time to time. By its signature hereto, Lessee hereby
authorizes Lessors to file against Lessee, one or more financing, continuation,
or amendment statements pursuant to the UCC in form and substance satisfactory
to Lessors (which statements may have a description in respect of the Collateral
which is broader than that set forth herein). All charges, expenses and fees
Lessors may incur in doing any of the foregoing, and any local taxes relating
thereto, shall be reimbursed by Lessee to Lessors immediately upon
demand.
(d) Lessee
will safeguard and protect all Collateral for Lessors’ general account and make
no disposition thereof whether by sale, lease or otherwise except for the
disposition or transfer of obsolete and worn-out equipment in the ordinary
course of business during any fiscal year having an aggregate fair market value
of not more than $100,000 and only to the extent that the proceeds of any such
disposition are either (i) used to acquire replacement equipment which is
subject to Lessors’ first priority security interest or (ii) are paid to Lessors
and treated as a reduction in the Exercise Price in accordance with the last
sentence of Paragraph
7
above.
(e) During
the existence of an Event of Default, in addition to the rights and remedies
set
forth in Paragraph
20
below,
Lessors: (i) may at any time take any steps Lessors deem necessary to protect
Lessors’ interest in, and to preserve the Collateral; (ii) may hire security
guards or place other security protection measures as Lessors may deem
appropriate; (iii) may employ and maintain, at any of any Lessee’s premises, a
custodian who shall have full authority to do all acts necessary to protect
Lessors’ interests in the Collateral; (iv) may lease warehouse facilities to
which Lessors may move all or part of the Collateral; (v) may use any of
Lessee’s owned or leased lifts, hoists, trucks and other facilities or equipment
for handling or removing the Collateral; and (v) shall have, and is hereby
granted, a right of ingress and egress to the places
where the Collateral is located, and may proceed over and through any of
Lessee’s owned or leased property; provided, however,
that
Lessors shall (x) notify Lessee of any actions taken pursuant to this
Paragraph
8(e);
(y) make
an effort to minimize business disruption to Lessee; and (z) take no action
under clause (ii) above that Lessors have knowledge would cause Lessee to be
in
material violation of applicable laws. Lessee shall cooperate fully with all
of
Lessors’ efforts to preserve the Collateral and will take any actions directed
by Lessors to preserve the Collateral. Lessee shall reimburse Lessors for any
expenses incurred by them to preserve the Collateral, including any expenses
relating to the bonding of a custodian, shall be reimbursed by Lessee to Lessors
immediately upon demand.
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(f) Until
(i)
satisfaction of Lessee’s obligations under the Lease Documents and (ii)
termination of this Agreement, Lessors’ interests in the Collateral shall
continue in full force and effect. During such period Lessee shall not, without
Lessors’ prior written consent, pledge, sell (except to the extent permitted in
Paragraph
8(d)
above),
assign, transfer, create or suffer to exist a lien upon or encumber or allow
or
suffer to be encumbered in any way, any part of the Collateral. Lessee shall
defend Lessors’ interests in the Collateral against any and all persons
whatsoever. At any time more than five (5) days following demand by Lessors
for
payment of amounts owed by Lessee under this Agreement and until such payment
is
made (including any penalty in connection with any late payment), Lessors shall
have the right to take possession of the indicia of the Collateral and the
Collateral in whatever physical form. If Lessors exercise their right to take
possession of the Collateral, Lessee shall, upon demand, assemble it and make
it
available to Lessors at a place reasonably convenient to Lessors. Lessors also
shall be entitled to all of the rights and remedies set forth herein and further
provided by the UCC or other applicable law. Lessee shall, and Lessors may,
at
their option, instruct all suppliers, carriers, forwarders, warehousers or
others receiving or holding Collateral to deliver the Collateral to Lessors
or
subject to Lessors’ order.
(g) At
all
times, Lessee shall have positive Liquidity (i.e., Liquidity of greater than
$0). For purposes of this Agreement, “Liquidity” shall mean, as calculated as of
any measurement date: (i) Available Cash on hand as of such measurement date
(and if such measurement date is the date on which any Permitted Distribution
(as defined in Paragraph 9(c)(iii)) is to be made or paid (a “Distribution
Date”) or the date any payment is to be made pursuant to the Lease (a “Lease
Payment Date”), taking into account the making or payment of such Permitted
Distribution or Lease Payment), plus (or minus, if EBITDA for such Test Period
is negative) (ii) EBITDA of Lessee for the trailing Test Period ending on the
last day of the calendar month for which monthly financial statements have
been
delivered to Lessors pursuant to Paragraph
26(c)
below
(the “Month-End Test Date”), plus (iii) Fixed Charges that are scheduled to
become due or that are otherwise committed (in the case of Capital Expenditures)
or declared (in the case of dividends) to be made or paid during the Test Period
commencing on the day immediately succeeding such Month-End Test Date; provided
that in each case, as applicable, (A) for calculations related to term debt
(which shall not include the term loan portion of the Credit Facility (as
defined in Paragraph 9(c)(i)) nor the Lease Documents), compare the actual
amortization to straight line amortization (as of final maturity) for the
remaining term, and use the greater of the two amounts during the Test Period;
(B) for calculations related to revolving or line of credit debt (which shall
not include the revolving facility portion of the Credit Facility), use the
average outstanding daily amount during the preceding Test Period, and use
straight line amortization over the remaining term; (C) for calculations
of Interest Expense (which shall include cash interest only, and no
paid-in-capital interest; provided, however,
to the
extent paid-in-capital has been capitalized, such calculation shall be subject
to clauses (A) and (B) above, as applicable) for each item of indebtedness
(including, without limitation, interest or comparable obligations in connection
with the Credit Facility and the Lease), (1) determine the outstanding principal
amount of such item of indebtedness and the current interest borne by such
indebtedness as of the Month-End Test Date and then calculate the aggregate
accrual of interest in such indebtedness as if the outstanding principal amount
remaining the same over the entire Test Period, unless maturing prior to the
last day of the Test Period, in which event the calculation shall be through
such earlier maturity date and then (2) add to such total all fees and other
amounts comprising Interest Expense payable during the Test Period based on
the
foregoing calculation methodology (provided that if Interest Expense for any
item of indebtedness is not reasonably susceptible to calculation in this
manner, as determined by Lessors in their reasonable discretion, then calculate
the Interest Expense for such item of indebtedness on a trailing six (6) month
basis); and (D) for purposes of the calculation of taxes, use six months
trailing taxes. Notwithstanding the forgoing, Liquidity, as calculated for
any
Month-End Test Date ending prior to the last day of the sixth (6th) complete
calendar month following the Closing Date by using a Test Period equal to the
number of complete calendar months between the Closing Date and such Month-End
Test Date multiplied by six (6), in the case of one month; three (3) in the
case
of two months, two (2) in the case of three months; three-halves (3/2) in the
case of four months; and six-fifths (6/5) in the case of five
months.
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For
purposes of the covenants set forth in this Paragraph
8(g),
the
terms listed below shall have the following meanings:
“Available
Cash” shall mean, for and on any date, the sum without duplication of the
following for Lessee: (a) unrestricted cash on hand on such date, (b) Cash
Equivalents held on such date, and (c) the unborrowed availability under
applicable loan documents of Lessee on and as of such date.
“Capital
Expenditures” shall mean all expenditures (whether paid in cash or accrued as
liabilities) that are or should be treated as capital expenditures under
GAAP.
“Capital
Lease” shall mean, as to any person, a lease of any interest in any kind of
property or asset by that Person as lessee that is, should be or should have
been recorded as a “capital lease” in accordance with GAAP.
“Cash
Equivalents” shall mean (a) securities issued, or directly and fully guaranteed
or insured, by the United States or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged in
support thereof) having maturities of not more than six months from the date
of
acquisition, (b) U.S. dollar denominated time deposits, certificates of deposit
and bankers’ acceptances of (i) any domestic commercial bank of recognized
standing having capital and surplus in excess of $500,000,000, or (ii) any
bank
(or the parent company of such bank) whose short-term commercial paper rating
from Standard & Poor’s Ratings Services (“S&P”) is at least A-2 or the
equivalent thereof or from Xxxxx’x Investors Service, Inc. (“Xxxxx’x”) is at
least P-2 or the equivalent thereof in each case with maturities of not more
than six months
from the date of acquisition (any bank meeting the qualifications specified
in
clauses (b)(i) or (ii), an “Approved Bank”), (c) repurchase obligations with a
term of not more
than
seven days for underlying securities of the types described in clause (a),
above,
entered
into with any Approved Bank, (d) commercial paper issued by any Approved Bank
or
by the parent company of any Approved Bank and commercial paper issued by,
or
guaranteed by, any industrial or financial company with a short-term commercial
paper rating of at least A-2 or the equivalent thereof by S&P or at least
P-2 or the equivalent thereof by Moody’s, or guaranteed by any industrial
company with a long term unsecured debt rating of at least A or A2, or the
equivalent of each thereof, from S&P or Moody’s, as the case may be, and in
each case maturing within six months after the date of acquisition and (e)
investments in money market funds substantially all of whose assets are
comprised of securities of the type described in clauses (a) through (d)
above.
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“EBITDA”
shall mean, as calculated as of any measurement date and for any Test
Period,
the sum,
without duplication, of the following for Lessee, on a consolidated basis for
Lessee: Net Income determined in accordance with GAAP, plus, (a) Interest
Expense, (b) taxes on income, whether paid, payable or accrued, (c) depreciation
expense, (d) amortization expense, (e) all other non-cash, non recurring charges
and expenses, excluding
accruals for cash expenses made in the ordinary course of business, and (f)
loss
from any
sale of assets, other than sales in the ordinary course of business, all of
the
foregoing determined in accordance with GAAP, minus (x) gains from any sale
of
assets, other than sales in the ordinary course of business and (y) other
extraordinary or non-recurring gains.
“Fixed
Charges” shall mean, the sum of the following: (a) Total Debt Service, (b)
Capital Expenditures, and (c) income taxes paid in cash.
“GAAP”
shall mean generally accepted accounting principals.
“Interest
Expense” shall mean, for any Test Period, total interest expense (including
attributable to Capital Leases in accordance with GAAP) fees with respect to
all
outstanding Indebtedness including capitalized interest but excluding
commissions, discounts and other fees owed with respect to letters of credit
and
bankers’ acceptance financing and net costs under Interest Rate
Agreements.
“Interest
Rate Agreement” shall mean any interest rate swap, cap or collar agreement or
other similar agreement or arrangement designed to hedge the position with
respect to interest rates.
“Net
Income” shall mean, the net income (or loss) determined in conformity with
GAAP,
provided
that there shall be excluded (i) the income (or loss) of any person in which
any
other person (other than Lessee) has a joint interest, except to the extent
of
the amount of dividends
or other distributions actually paid to Lessee by such person, (ii) the income
(or
loss) of
any person accrued prior to the date it becomes part of Lessee or is merged
into
or consolidated with Lessee or that person’s assets are acquired by Lessee,
(iii) the income of any subsidiary of Lessee to the extent that the declaration
or payment of dividends
or similar distributions of that income by that subsidiary is not at the time
permitted by operation of the terms of the charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable
to
that subsidiary, (iv) compensation expense resulting from the issuance of
capital stock, stock options or stock appreciation rights to former or current
employees, including officers, of Lessee, or the exercise of such options or
rights, in each case to the extent the obligation (if any) associated therewith
is not expected to be settled by the payment of cash by Lessee or any affiliate
thereof, and (v) compensation expense resulting from the repurchase of capital
stock, options and rights described in clause (iv) of this definition of Net
Income.
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“Test
Period” shall mean two (2) consecutive fiscal quarters of Lessee (taken as one
accounting period) or such other period as may be otherwise specified in this
Paragraph
8(g).
“Total
Debt Service” shall mean the sum of (i) scheduled or other required payments of
principal on indebtedness, and (ii) Interest Expense, in each case for such
period.
9. EQUIPMENT
USE; CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE AND ASSETS; RESTRICTED
PAYMENTS.
(a) Lessee
agrees that the Equipment will be operated by competent, qualified personnel
in
connection with Lessee’s business for the purpose for which the Equipment was
designed and in accordance with applicable operating instructions, laws, and
government regulations, and that Lessee shall use all reasonable precautions
to
prevent loss or damage to the Equipment from fire and other hazards. Lessee
shall procure and maintain in effect all orders, licenses, certificates,
permits, approvals, and consents required by federal, state, or local laws
or by
any governmental body, agency, or authority in connection with the delivery,
installation, use, and operation of the Equipment.
(b) Lessee
shall, until satisfaction of Lessee’s obligations under the Lease Documents and
termination of this Agreement, (i) conduct continuously and operate actively
its
business according to good business practices and maintain all of its properties
useful or necessary in its business in good working order and condition
(reasonable wear and tear excepted and except as may be disposed of in
accordance with the terms of this Agreement); (ii) keep in full force and effect
its existence and comply in all material respects with the laws and regulations
governing the conduct of its business; and (iii) make all such reports and
pay
all such franchise and other taxes and license fees and do all such other acts
and things as may be lawfully required to maintain its rights, licenses, leases,
powers and franchises under the laws of the United States or any political
subdivision thereof.
(c) During
the Term and until Lessee satisfies its obligations under the Lease Documents,
Lessee shall not, without prior written consent of Lessors:
(i)
create, incur, assume or suffer to exist any indebtedness, or become liable
upon
the obligations of any person by assumption, endorsement or guaranty thereof
or
otherwise, except the following (collectively, “Permitted
Indebtedness”): (A) indebtedness up to $105,000,000 under the Revolving Credit,
Term Loan and Security Agreement dated November 18, 2004, by and between Lessee
and CapitalSource Finance LLC, a Delaware limited liability company, as such
agreement may be amended or supplemented after the date hereof (the “Credit
Facility”); (B) non-recourse indebtedness secured by fixed assets other than (1)
the Collateral or (2) the Hospital Core Properties; and (C) other indebtedness
so long as Lessee remains in compliance, on a pro forma incurrence basis with
Paragraph
8(g)
above,
after taking into account such indebtedness permitted hereunder (For purposes
of
this Paragraph
9(c),“Hospital
Core Properties” shall mean the Hospital buildings, the land on which the
Hospitals are located, and the fixtures and personal property located in the
Hospital buildings and used in connection with or incidental to the Hospital
Core Activities. For purposes of clarity, it is understood that the Lessee
may
sub-divide or re-parcel the land on which the Hospital building are located
and
that any resulting parcels on which the Hospital buildings are not located
shall
not be deemed to be Hospital Core Properties if and to the extent Hospital
Core
Activities do not take place on or in connection with such sub-divided or
re-parceled land. For purposes of this Paragraph
9(c),“Hospitals”
shall mean the hospitals known as (x) Centinela Hospital Medical Center, located
at 000 X. Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxx, (y) Xxxxxx Xxxxxxx Memorial
Hospital, located at 000 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxx and (z)
Xxxxxx Xxxxxxx Xxxxxx Hospital, located at [4650 and 0000] Xxxxxxx Xxxxxxxxx,
Xxxxxx Xxx Xxx, Xxxxxxxxxx);
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(ii)
create, incur, assume or suffer to exist any lien upon, in or against, or pledge
of, any of the Collateral, except the following (collectively, “Permitted
Liens”): (A) liens under the Credit Facility, the Lease Documents or otherwise
arising in favor of Lessors; (B) liens imposed by law for taxes (other than
payroll taxes), assessments or charges of any governmental authority for claims
not yet due or which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves or other appropriate
provisions are being maintained by such person in accordance with generally
accepted accounting principals (“GAAP”) to the satisfaction of Lessors in their
sole discretion; (C) (1) statutory liens of landlords and of carriers,
warehousemen, mechanics, materialmen, and (2) other Liens imposed by law or
that
arise by operation of law in the ordinary course of business from the date
of
creation thereof, in each case only for amounts not yet due or which are being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves or other appropriate provisions are being maintained by such
Person in accordance with GAAP to the satisfaction of Lessors in their sole
discretion; (D) liens (1) incurred or deposits made in the ordinary course
of
business (including, without limitation, surety bonds and appeal bonds) in
connection with workers’ compensation, unemployment insurance and other types of
social security benefits
or to secure the performance of tenders, bids, leases, contracts (other than
for
the repayment of Indebtedness), statutory obligations and other similar
obligations, or (2) arising as a result of progress payments under government
contracts; and (E) encumbrances on real estate consisting of easements, rights
of way, zoning restrictions, restrictions on the use of real property and
defects and irregularities in the title thereto, landlord’s or lessor’s liens
and other minor liens, provided that none of such liens interferes materially
with the use of the property affected in the ordinary conduct of the business
of
Lessee;
-9-
| (iii) |
(A)
declare, pay or make any dividend or distribution on any shares of
capital
stock or other securities or interests (other than dividends or
distributions payable in its stock, or split-ups or reclassifications
of
its stock); (B) apply any of its funds, property or assets to the
acquisition, redemption or other retirement of any capital stock
or other
securities or interests or of any options to purchase or acquire
any of
the foregoing (provided, however, that Lessee may redeem its capital
stock
from terminated employees pursuant to, but only to the extent required
under, the terms of the related employment agreements as long as
no Event
of Default has occurred and is continuing or would be caused by or
result
therefrom); (C) otherwise make any payments or distributions to any
stockholder or other equity owner in such Person’s capacity as such;
provided, however,
that in the event that (1) Lessee has obtained and maintains both
its
Medi-Cal provider number/in-patient service contracts and its Medicare
provider number; (2) no Event of Default has occurred and is continuing
or
would otherwise arise from or be caused by such proposed Permitted
Distribution (as defined below); and (3) Lessee would not be in breach
of
the covenant set forth in Paragraph 8(g) as of the applicable Distribution
Date after giving effect to such proposed Permitted Distribution,
Lessee
may, upon twenty (20) days prior written notice to Lender, (each,
a
“Permitted Distribution”), (x) declare and pay cash dividends or other
distributions to any of its stockholders in and on account of their
capacity as such, at Lessee’s sole discretion; (y) apply its funds,
property or assets to the acquisition, redemption or other retirement
of
any capital stock or other securities or interests or of any options
to
purchase or acquire any of the foregoing, and/or (z) otherwise make
any
payments or distributions to any stockholder or other equity owner
in such
person’s capacity as such;
|
| (iv) |
enter
into or consummate any transaction with respect to the management
of
Lessee, the Hospitals or the Hospital Core Properties with any of
its
affiliates or any of their respective affiliates other than the payment
of: (A) management or services fees to Westridge Capital LLC in an
amount
not to exceed $500,000 per year plus reasonable out-of-pocket expenses;
(B) the $750,000 closing fee to Westridge Capital LLC provided for
in the
existing agreement between Lessee and Westridge Capital LLC; (C)
reimbursement of expenses incurred by Westridge Capital LLC in connection
with the transactions contemplated hereby; (D) the $100,000 closing
fee to
Hospital Acquisition 005, Inc. (“HAI”) pursuant to the existing agreement
between Lessee and HAI; (E) payment of purchase price and other amounts
to
HAI pursuant to the Purchase Agreement between HAI and Lessee related
to
the rights to acquire the Hospital Properties; and (F) management
bonuses
paid in the ordinary course to executive officers and managers of
Lessee
who, by virtue of the ownership interest in the Lessee are also
affiliates, consistent with management bonuses of other executive
officers
and managers. Nothing in the preceding sentence shall prevent Lessee
from
entering into an agreement with any affiliate with respect to any
matter
other than management of Lessee, the Hospital or Hospital Core Properties,
provided that such agreement is entered into for a fair consideration
in
an arm’s length transaction;
|
-10-
| (v) |
(A)
amend, modify, restate or change its certificate of incorporation
or
formation or bylaws or similar charter documents in a manner that
would be
adverse to Lessors; (B) change its fiscal year unless Lessee demonstrates
to Lessors’ satisfaction compliance with the covenants contained herein
for both the fiscal year in effect prior to any change and the new
fiscal
year period by delivery to Lessors of appropriate interim and annual
pro
forma, historical and current compliance certificates for such periods
and
such other information as Lessors may reasonably request; (C) without
at
least twenty (20) days prior written notice to Lessors, change its
name or
change its jurisdiction of organization; (D) amend, alter or suspend
or
terminate or make provisional in any material way, any permit affecting
the Collateral or otherwise affecting in any material way the operation
of
any of the Hospitals or other Hospital facilities without the prior
written consent of Lessors, which consent shall not be unreasonably
withheld; (E) wind up, liquidate or dissolve (voluntarily or
involuntarily) or commence or suffer any proceedings seeking or that
would
result in any of the foregoing;
|
| (vi) |
furnish
to Lessors any certificate or other document that contains any untrue
statement of a material fact or that omits to state a material fact
necessary to make it not misleading in light of the circumstances
under
which it was furnished;
|
| (vii) |
sell,
lease, transfer, assign or otherwise dispose of any interest in the
Collateral or in any of the Hospital Core Properties (other than
obsolete
equipment or excess equipment no longer needed in the conduct of
the
business in the ordinary course of business), or agree to do any
of the
foregoing at any future time;
|
| (viii) |
enter
into any merger, consolidation or other reorganization with or into
any
other person or acquire all or a substantial portion of the assets
or
stock of any person or permit any other person to consolidate with
or
merge with it, in each case that would result in a change in control
of
Lessee;
|
-11-
| (ix) | directly
or
indirectly in any fiscal year (A) contract for, purchase or make any
capital expenditure or commitments for capital expenditures and (B)
enter
as lessee into any lease arrangement real or personal
property with a
value, in an aggregate amount (including amounts described in both
clause
(A) and (B)) in excess of $10,500,000;
|
| (x) | once accreditation of the Hospitals by JCAHO to operate fully all services at the Hospitals shall have been obtained by each of the Hospitals, fail to keep such accreditation in full force and effect; |
|
(xi)
|
form
or acquire any wholly owned subsidiary unless (A) such subsidiary
expressly joins in this Agreement in writing as a lessee and becomes
jointly and severally liable for the obligations of
Lessee hereunder and (B) Lessors shall have received all documents,
including legal opinions, they may reasonably require to establish
compliance with each of the foregoing
conditions.
|
10.
MAINTENANCE. Lessee, at its sole cost and expense, shall keep the Collateral
in
a suitable environment as specified by the manufacturer’s guidelines or the
equivalent, shall meet all recertification requirements, and shall maintain
the
Collateral in its original condition and working order, ordinary wear and tear
excepted. At the reasonable request of Lessors, Lessee shall furnish proof
of
maintenance of the Collateral.
11.
ALTERATION; MODIFICATIONS; PARTS. Lessee may alter or modify the Collateral
so
as to reduce the value of the Collateral or render it unfit for the use for
which it is intended only with the prior written consent of Lessors. Any
alteration shall be removed and the Collateral restored to its normal, unaltered
condition at Lessee’s expense (without damaging the Collateral’s originally
intended function or its value) prior to its delivery to Lessors. Any part
installed in connection with warranty or maintenance service or which cannot
be
removed in accordance with the preceding sentence shall be the property of
Lessors.
12. RETURN
OF
EQUIPMENT ON DEFAULT. The Equipment shall not be returned to Lessors unless
Lessors exercise their rights pursuant to Paragraph
20
below or
as otherwise provided in this Agreement.
13. CASUALTY
INSURANCE; LOSS OR DAMAGE. Lessee will maintain, at its own expense, liability
and property damage insurance relating to the Collateral, insuring against
such
risks as are customarily insured against on the type of equipment leased
hereunder by businesses in which Lessee is engaged in such amounts, in such
form, and with insurers satisfactory to Lessors; provided, however,
that the
amount of insurance against damage or loss shall not be less than the greater
of
(i) 125% of the Purchase Price or (ii) the replacement value of the Collateral.
Each liability insurance policy shall provide coverage (including, without
limitation, personal injury coverage) of not less than $1,000,000 for each
occurrence, and shall name Lessors as an additional insured; and each property
damage policy shall name Lessors as sole
loss
payee up to the amount of Lessee’s obligations to Lessors hereunder, and all
policies shall contain a clause requiring the insurer to give Lessors at least
thirty days’ prior written notice of any alteration in the terms or cancellation
of the policy. Upon request by Lessors, Lessee shall furnish to Lessors a copy
of each insurance policy (with endorsements) or other evidence satisfactory
to
Lessors that the required insurance coverage is in effect (including any annual
certificates necessary to evidence the continuing effectiveness of the insurance
coverage each year); provided, however,
Lessors
shall have no duty to ascertain the existence of or to examine the insurance
policies to advise Lessee if the insurance coverage does not comply with the
requirements of this Paragraph
13.
If
Lessee fails to insure the Equipment as required, Lessors shall have the right
but not the obligation to obtain such insurance, and the cost of the insurance
shall be for the account of Lessee due as part of the Rent. Lessee consents
to
Lessors’ release, upon Lessee’s failure to obtain appropriate insurance
coverage, of any and all information necessary to obtain insurance with respect
to the Equipment or Lessors’ interest therein.
-12-
Lessee
shall bear the entire risk of the theft or destruction of, or damage to, the
Equipment including, without limitation, any condemnation, seizure, or
requisition of title or use (“Casualty Loss”). No Casualty Loss shall relieve
Lessee from its obligations to pay Rent or fulfill Lessee’s obligations
hereunder. All insurance proceeds received by Lessors as a result of claims
made
under an insurance policy required to be maintained by Lessee under this
Paragraph
13
shall be
treated as a reduction in the Exercise Price in accordance with the last
sentence of Paragraph
7
above.
14.
TAXES.
Lessee shall pay when due, and indemnify and hold each Lessor harmless from,
all
sales, use, excise, and other taxes, charges, and fees (including, but not
limited to, income, franchise, business and occupation, gross receipts,
licensing, registration, titling, personal property, stamp and interest
equalization taxes, levies, imposts, duties, charges, or withholdings of any
nature), and any fines, penalties, or interest thereon, imposed or levied by
any
governmental body, agency, or tax authority upon or in connection with the
Equipment, its purchase, ownership, delivery, leasing, possession, use, or
relocation of the Equipment or otherwise in connection with the transactions
contemplated hereunder, excluding any taxes on or measured by the net income
of
a Lessor (except as provided in Paragraph
30
below).
Upon request,
Lessee will provide proof of payment of any taxes (or other amounts) required
to
be paid
by
Lessee pursuant to the prior sentence. Unless Lessors elect otherwise, Lessee
will pay all property taxes on the Equipment. Lessee shall timely prepare and
file all reports and returns which are required to be made with respect to
any
obligation of Lessee under this Paragraph
14.
Lessee
shall, to the extent permitted by law, cause all xxxxxxxx of any fees, taxes,
levies, imposts, duties, withholdings, and governmental charges to be made
to
Lessors in care of Lessee. Upon request, Lessee will provide Lessors with copies
of all such xxxxxxxx. The provision of this Paragraph
14
shall
survive the termination of this Agreement.
15.
LESSORS’
PAYMENT. If Lessee fails to perform its obligations under Paragraph
13
or
Paragraph
14
above,
or Paragraph
21
below,
Lessors shall have the right to substitute performance, in which case Lessee
shall immediately reimburse Lessors therefor.
16. GENERAL
INDEMNITY. The Lease is a net lease. Therefore, Lessee shall indemnify Lessors
and their successors and assigns against, and hold Lessors and their successors
and assigns harmless from, any and all claims, actions, damages, obligations,
liabilities, and all costs and expenses, including, without limitation, legal
fees incurred by Lessors or its successors and assigns arising out of the Lease
including, without limitation, the purchase, ownership, delivery, lease,
possession, maintenance, condition, use, or return of the Equipment, or arising
by operation of law, except that Lessee shall not be liable for any claims,
actions, damages, obligations, and costs and expenses determined by a
non-appealable, final order of a court of competent jurisdiction to have
occurred as a result of the gross negligence or willful misconduct of Lessors
or
their successors and assigns. Lessee agrees that upon written notice by Lessors
of the assertion of any claim, action, damage, obligation, liability, or lien,
Lessee shall assume full responsibility for the defense thereof, provided that
Lessors’ failure to give such notice shall not limit or otherwise affect its
rights hereunder. Any payment pursuant to this Paragraph
16
(except
for any payment of Rent) shall be of such amount as shall be necessary so that,
after paying any taxes required to be paid thereon by Lessors, including taxes
on or measured by the net income of Lessors, the balance will equal the amount
due hereunder. The provisions of this Paragraph
16
with
regard to matters arising during the Lease shall survive the expiration or
termination of the Lease.
-13-
17.
ASSIGNMENT BY LESSEE. Lessee shall not, without the prior written consent of
Lessors (other than as provided in Paragraph
8(d)
above),
(a) assign, transfer, pledge, or otherwise dispose of the Lease or Collateral,
or any interest therein; (b) sublease or lend any Collateral
or permit it to be used by anyone other than Lessee and its employees; or (c)
move any
Collateral away from the location where the Collateral is situated as of the
date hereof.
18.
ASSIGNMENT BY LESSORS. Lessors may assign its interest or grant a security
interest in the Lease, the Equipment and the Collateral, individually or
together, in whole or in part. If Lessee is given written notice of any such
assignment, it shall immediately make all payments of Rent and other amounts
hereunder directly to the assignee. The assignee shall have all of the rights
of
Lessors under the Lease, and Lessee shall not assert, against any assignee,
any
set-off, defense or counterclaim that Lessee may have against Lessors or any
other person.
19.
DEFAULT;
NO WAIVER. The occurrence of any of the following events shall constitute an
event of default hereunder (each, an “Event of Default”): (a) Lessee’s failure
to pay within five days after notice of when due any amount required to be
paid
by Lessee hereunder; (b) Lessee’s failure to perform any other provision
hereunder; (c) any representation made or financial information delivered or
furnished by Lessee hereunder shall prove to have been inaccurate in any
material respect when made; (d) Lessee shall make an assignment for the benefit
of creditors, whether voluntary or involuntary, or consent to the appointment
of
a trustee or receiver and, in the case of any involuntary proceeding, the
proceeding remains undismissed or unstayed for forty-five days following the
commencement thereof; (e) any judgment shall be rendered against Lessee which
shall remain unpaid or unstayed for a period of sixty days; (f) Lessee shall
dissolve, liquidate, wind up or cease its business, sell or otherwise dispose
of
all or substantially
all of its assets, or make any material change in its line of business without
the prior
written
consent of Lessors; (g) Lessee shall amend or modify its name, unless Lessee
delivers to Lessors, thirty days prior to any such proposed amendment or
modification, written notice of the amendment or modification and within ten
days before the amendment or modification delivers executed financing statements
(in form and substance satisfactory to Lessors); (h) Lessee shall merge
or
consolidate with any other entity or make any material change in its capital
structure, in each case without Lessors’ prior written consent; (i) Lessee shall
suffer any loss or suspension of any material license, permit, or other right
or
asset necessary to the conduct of its business, fail generally to pay its debts
as they mature, or call a meeting for purposes of compromising its debts; (j)
Lessee shall deny or disaffirm its obligations hereunder or under any of the
documents delivered in connection herewith; (k) Lessee shall suffer a material
adverse change in its business,
operations, results of operations, assets, liabilities, or condition (financial
or otherwise);
or (l)
Lessee shall be in default under any loan document or documents which in the
aggregate have a principal loan amount in excess of $10,000,000.
-14-
20.
REMEDIES.
(a) Upon
the
occurrence and continuation of an Event of Default, Lessors shall have the
right, in their sole discretion, to terminate the Lease and trigger Lessee’s
purchase obligation under Paragraph
7
above
(which shall be in addition to any other obligations of Lessee under the Lease
Documents). During the existence of any Event of Default, Lessors shall have
the
right to exercise any and all other rights and remedies provided for herein,
under the UCC and at law or equity
generally, including, without limitation, the right to foreclose the security
interests granted
herein
and to realize upon any Collateral by any available judicial procedure or to
take possession of and sell any or all of the Collateral with or without
judicial process. During the existence of an Event of Default, Lessors may
enter
any of Lessee’s premises without legal process and without incurring liability
to Lessee therefor, and Lessors may thereupon, or at any time thereafter, in
its
discretion without notice or demand, take and remove the Collateral to any
place
deemed advisable by Lessors, and Lessors may require Lessee to make the
Collateral available to Lessors at a convenient place. During the existence
of
an Event of Default, with or without having the Collateral at the time or place
of sale, Lessors may sell the Collateral, or any part thereof, at public or
private sale, at any time or place, in one or more sales, at such price or
prices, and upon such terms, either for cash, credit or future delivery, as
Lessors may elect. Lessors shall give Lessee any written notice mailed to Lessee
at least five (5) days prior to any sale or sales. At any public sale, Lessors
may bid for and become the purchaser, and Lessors or any other purchaser at
any
such sale thereafter shall hold the Collateral sold absolutely free from any
claim or right of whatsoever kind, including any equity of redemption and such
right and equity are hereby expressly waived and released by Lessee. Lessors
may
sell the Collateral without giving any warranties as to the Collateral. Lessors
specifically disclaim any warranties of title, possession, quiet enjoyment
and
the like. If Lessors dispose of any of the Collateral upon credit, Lessee will
be credited with only those payments actually made by the purchaser and received
by Lessors. In the event the purchaser of Collateral fails to pay for such
Collateral, Lessors may resell such Collateral and Lessee shall be credited
with
any cash proceeds of the sale.
(b) Lessors
shall have the right in its sole discretion to determine which rights, liens,
security interests or remedies Lessors may at any time pursue, relinquish,
subordinate, or modify or to take any other action with respect thereto and
any
such determination will not in any way modify or affect any of Lessors’ rights
hereunder.
(c) In
addition to any other rights which Lessors may have under applicable law, upon
the occurrence of an Event of Default hereunder, Lessors shall have a right
to
apply Lessee’s
property held by Lessors to reduce any of Lessee’s obligations under the Lease
Documents.
-15-
(d)
The
enumeration of the foregoing rights and remedies under this Paragraph
20
is not
intended to be exhaustive and the exercise of any right or remedy shall not
preclude the exercise of any other right or remedies provided for herein or
otherwise provided by law, all of which shall be cumulative and not
alternative.
21. LESSORS’
EXPENSE. Lessee shall pay Lessors on demand all out-of-pocket costs and expenses
incurred (a) in the preparation, negotiation and execution of the Lease, the
Sale and Leaseback Agreement and the TIC Agreement (and any ancillary
documentation related thereto), including legal, appraisal and filing fees;
(b)
in the course of traveling to and inspecting the Collateral; (c) in connection
with protecting and enforcing Lessors’ rights and interests in the Lease and the
Collateral, including, legal, collection, and remarketing fees; and (d) by
Lessors in enforcing
the terms, conditions, or provisions of the Lease, the Sale and Leaseback
Agreement or
the TIC
Agreement or upon the occurrence and continuation of an Event of
Default.
22. LESSEE’S
WAIVERS. To the extent permitted by applicable law, Lessee hereby waives any
and
all rights and remedies conferred upon a lessee by Sections 2A-508 through
2A-522 of the UCC. To the extent permitted by applicable law, Lessee also hereby
waives any rights now or hereafter conferred by statute or otherwise which
may
require Lessors to sell, lease, or otherwise use any Equipment in mitigation
of
Lessors’ damages as set forth in Paragraph
20
above or
which may otherwise limit or modify any of Lessors’ rights or remedies under
Paragraph
20
above.
Any action by Lessee against Lessors for any default by Lessors under any Lease
shall be commenced within one year after any such cause of action
accrues.
23. NOTICES;
ADMINISTRATION. Except as otherwise provided herein, all notices, approvals,
consents, correspondence, or other communications required or desired to be
given hereunder shall be given in writing and shall be delivered by overnight
courier, hand delivery, or certified or registered mail, postage
prepaid:
if
to
Lessee, at its address at:
CFHS
Holdings, Inc.
c/o
Centinela Hospital Medical Center
000 Xxxx
Xxxxx Xxxxxx
Xxxxxxxxx,
XX 00000
Attention:
Xxxxxxx Xxxxxx
Telephone
No.: (000) 000-0000 Telecopy No.: (000) 000-0000
-16-
with
a
copy to:
Xxxxx
Peabody LLP
Xxx
Xxxxxxxxxxx Xxxxxx
Xxxxx
0000
Xxx
Xxxxxxxxx, XX 00000-0000 Attention: Xxxx X. Xxxxxx Telephone No.: 000-000-0000
Telecopy No.: 000-000-0000
if
to
Lessors, at the address of LLC at:
CFHS
Leasing, LLC
c/o
Equis
Financial Group
000
Xxxxx Xxxx Xx.
Xxxxxxxx,
XX 00000
Attention:
Xxxxx X. Xxxxx Telephone No.: 000-000-0000 Telecopy No.:
000-000-0000
with
a
copy to:
Xxxxxxx
& Xxxxxxxx Ltd.
000
X.
Xxxxxxxx Xxx., Xxxxx 0000
Xxxxxxx,
Xxxxxxxx 00000
Attention:
Xxxxxxx X. Xxxxxx Telephone No.: 000-000-0000 Telecopy No.:
000-000-0000
and
a
copy to the Investor Representative (as defined in the TIC Agreement)
at
the
address instructed by Trust
or
to
such other address as shall be designated by such party in a written notice
to
the other party. All such notices shall be deemed given (i) if sent by certified
or registered mail, three days after being postmarked, (ii) if sent by overnight
delivery service, when received at the above stated addresses or when delivery
is refused and (iii) if sent by facsimile transmission, when receipt of such
transmission is acknowledged.
24.
REPRESENTATIONS. Lessee represents and warrants to Lessors that (a) Lessee
is
duly organized, validly existing, and in good standing under the laws of the
State of its incorporation; (b) the execution, delivery, and performance by
Lessee of this Agreement are within Lessee’s powers, have been duly authorized
by all necessary action, and do not and will not contravene (i) Lessee’s
organizational documents or (ii) any law, regulation, rule, or any contract
or
other agreement to which Lessee is a party; (c) no authorization or approval
or
other action by, and no notice to or filing with, any governmental authority
or
regulatory body is required for the due execution, delivery, and performance
by
Lessee of this Agreement; (d) the Lease constitutes the legal, valid, and
binding obligation of Lessee enforceable against Lessee in accordance with
its
terms; and (e) all information supplied by Lessee to Lessors in connection
with
the
Lease is materially correct and does not omit any material statement necessary
to insure that the information supplied is not misleading.
-17-
25.
FURTHER
ASSURANCES. Lessee, upon the request of Lessors, will execute, acknowledge,
record, or file, as the case may be, such further documents and do such further
acts as may be reasonably necessary, desirable, or proper to carry out more
effectively the purposes of this Agreement. Lessee hereby appoints LLC as its
attorney-in-fact to execute on behalf of Lessee and authorizes LLC to file
without Lessee’s signature any UCC financing statements and amendments LLC deems
advisable.
26.
FINANCIAL STATEMENTS. Lessee shall deliver to LLC (and following an Event of
Default also to Trust): (a) as soon as available, but not later than 120 days
after the end of each fiscal year of Lessee and its consolidated subsidiaries,
the consolidated balance sheet, income statement, and statements of cash flows
and shareholders equity for Lessee and its consolidated subsidiaries (the
“Financial Statements”) for such year, reported on by independent certified
public accountants without an adverse qualification together with a
certification duly executed by a responsible officer of Lessee that the
Financial Statements have been prepared in accordance with generally accepted
accounting principles and are fairly stated in all material respects (subject
to
normal year-end audit adjustments); (b) as soon as available, but not later
than
60 days after the end of each of the first three fiscal quarters in any fiscal
year of Lessee and its consolidated subsidiaries, the financial statements
for
the most recently completed fiscal quarter; (c) any Financial Statements or
other similar report provided to any of Lessee’s lenders; and (d) any other
relevant documents Lessors reasonably request. Prior to an Event of Default,
within 90 days after the end of each fiscal year of Lessee, Lessee shall deliver
to Trust a summary of significant financial and other events. Lessee shall
also
deliver to Lessors as soon as available copies of all press releases and other
similar communications issued by Lessee.
27.
CONSENT
TO JURISDICTION. Lessee irrevocably submits to the jurisdiction of any Delaware
state or federal court sitting in Delaware for any action or proceeding arising
out of or relating to this Agreement or the transactions contemplated hereby,
and Lessee irrevocably agrees that all claims in respect of any such action
or
proceeding may be heard and determined in such Delaware state or federal
court.
28. WAIVER
OF
JURY TRIAL. LESSEE AND LESSORS IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY
IN
ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
29.
FINANCE
LEASE. Lessee and Lessors agree that the Lease is a “Finance Lease” as defined
by Section 2A-103(1)(g) of the UCC as adopted in any applicable State from
time
to time.
30.
SPECIAL
TAX INDEMNIFICATION. Each of the parties hereby agrees to treat the Lease (a)
as
one or more loans (taken together with the Sale and Leaseback Agreement) from
Lessors to Lessee in the principal amount equal to the Purchase Price (as
defined in the Sale and Leaseback Agreement) for federal income tax purposes
under the Internal Revenue Code of 1986, as amended, and any corresponding
state
or local income tax laws and state and local sales and
use
tax laws (and agree to report these transaction as one or more loans on all
federal, state and local tax, informational or other returns unless required
to
report them differently by any applicable taxing jurisdiction or under any
applicable law) and (b) as a financing transaction under the laws of any
applicable State (including Cal. Code Regs. 18 section 1660(a) (3) if California
law is deemed applicable). If Lessors are required to treat the Lease (or the
Lease taken together with the Sale and Leaseback Agreement) as one or more
transactions other than loans from Lessors to Lessee for federal, state or
local
tax purposes, and a Lessor is subject to additional federal, state or local
taxes as a result of such a recharacterization of the Lease (or the Lease taken
together with the Sale and Leaseback Agreement), Lessee shall pay the Lessor
additional rent (“Additional Rent”) in a lump sum in an amount needed to provide
the Lessor with the same after-tax yield and after-tax cash flow as would have
been realized by the Lessor had the Lessor been entitled to treat the Lease
(taken together with the Sale and Leaseback Agreement) as a loan from Lessors
to
Lessee. The Additional Rent shall be computed by Lessors, which computation
shall be binding on Lessee. The Additional Rent shall be due immediately upon
written notice by Lessors to Lessee of a Lessor’s inability to obtain tax
benefits, the inclusion of any amount in income other than the Rent or the
recognition of income in respect of the Rent earlier than anticipated pursuant
to this Agreement. The provision of this Paragraph
30
shall
survive the termination of this Agreement.
-18-
31. OBSERVER
RIGHTS. Lessors shall designate up to two (2) authorized representatives
who shall be entitled to (a) attend all meetings of Lessee’s Board of Directors
and
committees appointed by Lessee’s Board of Directors as a non-voting observer and
(b) receive all information provided to members of Lessee’s Board of Directors
and members of committees appointed by Lessee’s Board of Directors.
32. GOVERNING
LAW; SEVERABILITY. The Lease shall be governed by the laws of the State of
New
York without giving effect to the conflict of law principles thereof. If any
provision shall be held to be invalid or unenforceable, the validity and
enforceability of the remaining provisions shall not in any way be affected
or
impaired.
Lessee
acknowledges that Lessee has read the Lease, understands it, and agrees to
be
bound by its terms and conditions. Further, Lessee and Lessors agree that the
Lease, the Sale and Leaseback Agreement and the TIC Agreement are the complete
and exclusive statement of the agreement between the parties relating to the
subject matter hereof, superseding all proposals or prior agreements, oral
or
written, and all other communications between the parties relating to the
subject matter hereof.
33. CONCERNING
THE TRUST COMPANY. Notwithstanding any other provision herein or elsewhere,
this
Agreement has been executed and delivered by Deutsche Bank National Trust
Company, not in its individual capacity, but solely in its capacity as Equipment
Trustee of Trust, in no event shall Deutsche Bank National Trust Company or
the
Equipment Trustee have any liability in respect of the representations,
warranties, or obligations of Trust hereunder, as to all of which recourse
shall
be had solely to the assets of the relevant series of Trust, and for all
purposes of this Agreement, Deutsche Bank National Trust Company shall be
entitled to the benefits of the governing instrument of Trust.
[Remainder
of Page Intentionally Left Blank]
-19-
IN
WITNESS WHEREOF, the parties hereto have executed or caused this Agreement
to be
duly executed as of the date first written above.
LESSEE:
CFHS
HOLDINGS, INC.,
a
Delaware corporation
By:
Name:
Title:
LESSORS:
CFHS
EQUIPMENT HOLDINGS TRUST,
a
Delaware statutory trust
By:
DEUTSCHE BANK NATIONAL TRUST COMPANY, not it its individual capacity but solely
as Equipment Trustee
By:
Name:
Title:
CFHS
LEASING, LLC,
a
Delaware limited liability company
By:
Name:
Title:
