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EXHIBIT 10.3D
OLIVE BRANCH DISTRIBUTION FACILITY LEASE
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LEASE AGREEMENT
BY AND BETWEEN
HEWSON/DESOTO PHASE I, L.L.C.
AND
WILLIAMS-SONOMA, INC.
DATED: AS OF DECEMBER 1, 1998
PREPARED BY:
BAKER, DONELSON, BEARMAN & CALDWELL
2000 FIRST TENNESSEE BUILDING
165 MADISON AVENUE
MEMPHIS, TENNESSEE 38103
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TABLE OF CONTENTS
Section Page
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ARTICLE I TERM
1.1. Initial Term............................................................................ 3
1.2. Improvements; Occupancy................................................................. 3
1.3. Fixtures; Equipment..................................................................... 5
1.4. Option Periods.......................................................................... 6
ARTICLE II RENT
2.1 Rent..................................................................................... 8
2.2 Net-Net-Net Lease........................................................................ 10
2.3 Proration of Taxes....................................................................... 14
2.4 Payment of Taxes; Payment Deferral....................................................... 15
2.5 Evidence of Tax Payment.................................................................. 16
2.6 Global Basic Rent Adjustment............................................................. 16
2.7 Option Period Rent Rates................................................................. 17
ARTICLE III USE, OPERATION, MAINTENANCE AND ALTERATION
3.1 Use & Occupancy.......................................................................... 20
3.2 Use of Insurance Proceeds................................................................ 24
3.3 Alterations; Improvements................................................................ 28
3.4 Signage.................................................................................. 33
3.5 Liens; Encumbrances...................................................................... 33
3.6 Indemnification.......................................................................... 34
3.7 Inspection of Project.................................................................... 35
3.8 Landlord's Entry to Project Following Default............................................ 35
ARTICLE IV INSURANCE
4.1 Insurance Requirements................................................................... 36
4.2 Form of Policy........................................................................... 38
4.3 Notice of Damage or Destruction.......................................................... 39
4.4 Net Proceeds............................................................................. 39
ARTICLE V CONDEMNATION
5.1 Notice of Condemnation................................................................... 40
5.2 Partial Condemnation..................................................................... 40
5.3 Substantial Condemnation; Condemnation in Excess of $5,000,000........................... 42
ARTICLE VI SALES, MORTGAGES, ETC. AND GENERAL CONDITIONS
6.1 Assignment by Tenant..................................................................... 46
6.2 Exercise of Rights or Remedies by Landlord............................................... 47
6.3 Tenant's Right of First Refusal.......................................................... 47
6.4 Financial Covenants of Lessee............................................................ 48
6.5 Compliance with Bond Documents by Landlord............................................... 53
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6.6 Financial Statements of Tenant........................................................... 54
ARTICLE VII DEFAULT
7.1 Events of Default........................................................................ 55
7.2 Landlord Remedies........................................................................ 56
7.3 Re-Entry................................................................................. 60
7.4 Remedies Cumulative...................................................................... 60
7.5 Lessee's Indemnification; Attorney Fees.................................................. 60
7.6 Mutual Indemnification; Costs............................................................ 61
7.7 Right of Offset.......................................................................... 61
7.8 Certification by Subtenants.............................................................. 62
ARTICLE VIII ARBITRATION
8.1 Submission to Board of Arbitrators....................................................... 62
ARTICLE IX COVENANT OF QUIET ENJOYMENT
9.1 Quiet Enjoyment; Non-Disturbance......................................................... 64
ARTICLE X MISCELLANEOUS
10.1 Tenancy Beyond Lease Term............................................................... 64
10.2 Notices................................................................................. 65
10.3 Definition of "Landlord."............................................................... 66
10.4 Headings; Table of Contents............................................................. 66
10.5 Counterparts............................................................................ 67
10.6 Governing Law........................................................................... 67
10.7 Cure on Behalf of Landlord.............................................................. 67
10.8 Binding on Successors and Assigns....................................................... 67
10.9 Authority of Signatories................................................................ 67
10.10 Benefits of the Act..................................................................... 68
10.11 [RESERVED.]............................................................................ 69
10.12 Waivers................................................................................ 69
10.13 Mechanic's Liens....................................................................... 69
10.14 Utilities.............................................................................. 70
10.15 [RESERVED.]............................................................................ 70
10.16 Cure on Behalf of Tenant............................................................... 70
10.17 Severability........................................................................... 70
10.18 Venue.................................................................................. 71
10.19 [RESERVED.]............................................................................ 71
10.20 Waiver of Jury Trial................................................................... 71
10.21 Waiver of Right of Recovery............................................................ 72
10.22 Design and Construction Indemnity...................................................... 72
10.23 Landlord Waiver of Liens............................................................... 73
10.24 Tenant Right to Terminate.............................................................. 73
10.25 Litigation............................................................................. 75
10.26 Costs of Action........................................................................ 75
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10.27 Nondisturbance......................................................................... 75
10.28 Tenant Subordination of Lease.......................................................... 76
10.29 Agency................................................................................. 76
10.30 Amendment.............................................................................. 77
Exhibits:
Exhibit "A" Real Property Description................................................. A-1
Exhibit "B" Plans for Building and Improvements....................................... B-1
Exhibit "C" Rent Schedule............................................................. C-1
Exhibit "D" Environmental Notices..................................................... D-1
Exhibit "E" Easements Affecting Real Property......................................... E-1
Exhibit "F" Letter Regarding Future Phases............................................ F-1
Exhibit "G" Existing Indebtedness..................................................... G-1
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LEASE AGREEMENT
THIS LEASE, entered into as of the 1st day of December, 1998, by and
between HEWSON/DESOTO PHASE I, L.L.C., an Arizona limited liability company (the
"Landlord"), and WILLIAMS-SONOMA, INC., a California corporation (the "Tenant");
W I T N E S S E T H, that:
This Lease constitutes a financing agreement for the purposes of Sections
57-10-409 and 27-7-22.3 of the Mississippi Code of 1972, as amended.
Landlord hereby leases to Tenant and Tenant hereby hires from Landlord for
the term of this Lease, at the rental and subject to the provisions herein set
forth, that entire certain parcel of land (the "Property"), containing 66.847
acres, more or less, and the easements and appurtenances thereto, located in the
County of DeSoto, State of Mississippi, as described in Exhibit "A" attached
hereto and made a part hereof, together with the building, and on-site and
off-site improvements, all as described in the Plans (as defined in the Loan
Agreement, as hereinafter defined) in Exhibit "B," attached hereto (the
"Improvements") (the Property and Improvements being herein sometimes called the
"Project"). The Tenant shall, during the course of and upon completion of the
construction of the Improvements, at the Tenant's sole cost and expense, install
in the Improvements certain fixtures ("Fixtures") and equipment (the
"Equipment"). The Project is to be financed through the issuance of $30,300,000
Taxable Industrial Development Revenue Bonds, Series 1998 (Hewson/DeSoto Phase
I, L.L.C. Project) (the "Bonds") by the Mississippi Business Finance Corporation
(the "Issuer"), pursuant to a Loan Agreement of even date herewith between the
Issuer and Landlord (the "Loan Agreement"). The Bonds are issued pursuant to the
Trust Indenture ("Indenture") of even date herewith executed by and between the
Issuer and Union Planters National Bank, N.A., as Trustee (the "Trustee"), and
are secured by a deed of trust of even date herewith and executed by Landlord in
favor of the Issuer (the "Deed of Trust"), which has been assigned by the Issuer
to the Trustee pursuant to the Indenture. Interests of various parties in the
Project are further subject to a Tenant Estoppel, Subordination,
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Non-Disturbance and Attornment Agreement (the "Non-Disturbance Agreement") of
even date herewith by and among the Landlord, the Tenant, the Issuer and the
Trustee.
Tenant expressly acknowledges that, as security for Landlord's obligations
under the Loan Agreement and as additional security for the Bonds, the Landlord
has assigned its interests hereunder to the Issuer pursuant to an Assignment of
Rents, Leases and Profits of even date herewith (the "Assignment"), the Issuer's
interest in which has been assigned to the Trustee pursuant to the Indenture. As
such, any rights or obligations of Landlord hereunder, including, but not
limited to, approvals, consents and enforcement of remedies may, but need not
be, exercised or performed by the Trustee and/or the holders of any Bonds (the
"Holders" or the "Bondholders") so long as any of the Bonds remain Outstanding
(as defined in the Indenture). So long as the Tenant is not in default under
this Lease, such approvals or consents shall not be unreasonably withheld unless
this Lease or the Loan Agreement otherwise specifically provides. When no Bonds
remain Outstanding and the Loan Agreement has been terminated and the Indenture
released, references to the Trustee herein shall have no further force or
effect.
This Lease is made upon the following terms, provisions, conditions and
limitations, and the parties respectively covenant and agree as follows:
ARTICLE I
TERM
I.1. Initial Term. The initial term of this Lease shall commence on the
Occupancy Commencement Date (as hereinafter defined) and continues until January
1, 2022 (the "Primary Term"). Thereafter, as used herein, unless the context
shall otherwise require, the phrase "term of this Lease" shall mean the Primary
Term plus the option periods exercised pursuant to Section 1.4 hereof.
I.2. Improvements; Occupancy. (a) The parties hereto understand and agree
that the Improvements to be erected as part of the Project are anticipated to be
complete and ready for occupancy as evidenced by a Certificate of Occupancy to
be issued by the relevant jurisdiction on or about the 1st day of June, 1999
(the "Estimated Completion Date"). Landlord shall exert its best efforts toward
the end that the Improvements be
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completed on or before June 1, 1999. Landlord agrees to give Tenant written
notice as to whether or not the Improvements will be completed by the Estimated
Completion Date as soon as possible, but in any event not later than thirty (30)
days prior to the Estimated Completion Date.
(b) Tenant's responsibility for payment of amounts set forth in Article II
hereof shall commence on that date (the "Rental Commencement Date") which is the
earliest of (i) ten (10) business days following receipt by the Tenant of a copy
of those items required under Section 4.4 of the Loan Agreement, (ii) that date
on which Tenant commences actual productive use (as distinct from installation
of Fixtures and Equipment) of the Project as a distribution facility, or (iii)
November 1, 1999. Tenant's occupancy of the Project shall commence on that date
(the "Occupancy Commencement Date") which is the earlier of (i) ten (10)
business days following receipt by the Tenant of a copy of those items required
under Section 4.4 of the Loan Agreement or (ii) that date on which Tenant
commences actual productive use (as distinct from installation of Fixtures and
Equipment) of the Project as a distribution facility. Notwithstanding anything
to the contrary herein, Tenant shall have no obligation to pay Company Payments
(as hereinafter defined) until after the Occupancy Commencement Date and until
after all amounts (if any) due to Tenant under the Agreement and Indemnification
(as hereinafter defined) have been paid in full.
(c) Tenant's obligation to pay those amounts set forth in Article II
hereof (other than Company Payments) shall arise on the Rental Commencement Date
regardless of any disputes which may occur between Landlord and Tenant
concerning construction of the Improvements, subject to the provisions of
paragraph 7.7.
(d) The Landlord shall construct or cause to be constructed the
Improvements substantially in accordance with the Plans. The Landlord shall
obtain all approvals requisite to the construction of the Project, and shall
construct the Project in material compliance with all federal, State and local
laws and regulations. On or before the Occupancy Commencement Date, the Landlord
will furnish to the Tenant copies of all required permits and authorizations
except those permits and authorizations which Tenant must obtain, authorizing
the occupancy and uses of the Project for the purposes contemplated by the
Tenant. The Landlord will take such action and institute such proceedings as
shall be necessary to cause and require all contractors and material suppliers
to complete their
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contracts, including the correction of any defective work, and the Landlord
agrees that the Tenant may, from time to time, in its own name, or in the name
of the Landlord, take such action as may be necessary or advisable, as
determined by the Tenant, to assure that the construction of the Improvements
will proceed in an efficient and workmanlike manner. Any amounts recovered as
damages, refunds, adjustments or otherwise in connection with the foregoing (a)
shall be paid to the Tenant if the Tenant has corrected, at its own expense, the
matter which gave rise to such default or breach, or (b) shall be paid to the
Landlord if the Landlord has corrected, at its own expense, the matter which
gave rise to such default or breach, or (c) shall be paid to the Landlord if the
matter which gave rise to such default or breach has not yet been corrected and
if such payment is prior to the Occupancy Commencement Date (in which event
Landlord shall thereafter promptly apply such amount to the correction of such
matter, with the balance, if any, disposed of as set forth in Section 4.5 of the
Loan Agreement), or (d) shall be paid to the Tenant if the matter which gave
rise to such default or breach has not yet been corrected and if such payment is
after the Occupancy Commencement Date (in which event Tenant shall thereafter
promptly apply such amount to the correction of such matter, with the balance,
if any, disposed of as set forth in Section 3.2(b) of this Lease).
I.3. Fixtures; Equipment. The parties hereto understand and agree that
the Landlord has no responsibility whatsoever regarding the delivery and
installation of the Fixtures and Equipment in the Project, and that this Lease
and the Tenant's covenants and agreements contained herein are in no way
conditioned upon such delivery or installation.
I.4. Option Periods. (a) In addition to the Primary Term of this Lease
and in partial consideration of Tenant's entering into this Lease, Landlord
hereby grants to Tenant an option to extend the term of this Lease for an
additional period equal to five (5) years plus the number of months (if any),
rounded to the nearest whole month by which the Rental Commencement Date
precedes the Occupancy Commencement Date, commencing at the conclusion of the
Primary Term (as such Primary Term may be extended pursuant to the provisions of
Section 3.3(a)(iii) hereof) (hereinafter referred to as the "First Option
Period") at the rental to be determined in accordance with Section 2.7(a) and
(b) hereof, but otherwise upon the same terms and conditions as those set forth
in this Lease.
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(b) In addition to the Primary Term of this Lease and in addition to the
First Option Period and in partial consideration of Tenant's entering into this
Lease, Landlord hereby grants to Tenant an additional option to further extend
the term of this Lease for an additional five (5) year period commencing at the
conclusion of the First Option Period (hereinafter referred to as the "Second
Option Period") at the rental to be determined in accordance with Section 2.7(a)
and (c) hereof, but otherwise upon the same terms and conditions as those set
forth in this Lease, together with any additions or amendments made for the
First Option Period.
(c) [RESERVED.]
(d) [RESERVED.]
(e) (i) The options under this Section 1.4 may be exercised solely at
the discretion of Tenant. Tenant may exercise the option for the First
Option Period by delivering written notice of such exercise to Landlord at
any time prior to that date which precedes the conclusion of the Primary
Term of this Lease by one (1) year (the "First Option Exercise Date"). If
Tenant has not delivered to Landlord written notice of Tenant's exercise
of the option for the First Option Period by the First Option Exercise
Date, the options for the First Option Period and the Second Option Period
under this Section 1.4 shall lapse and be deemed of no further effect.
(ii) Tenant may exercise the option for the Second Option Period by
delivering written notice of such exercise to Landlord at any time during
the First Option Period prior to that date which precedes the conclusion
of the First Option Period by one (1) year (the "Second Option Exercise
Date"). If Tenant has not delivered to Landlord written notice of Tenant's
exercise of the option for the Second Option Period by the Second Option
Exercise Date, the option for the Second Option Period under this Section
1.4 shall lapse and be deemed of no further effect.
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(iii) Neither the option for the First Option Period nor the option
for the Second Option Period may be exercised at any time during which
Tenant is in default under any of the terms of this Lease.
(f) As used hereinafter, "Option Period" shall be deemed to mean either
the First Option or the Second Option Period.
ARTICLE II
RENT
II.1 Rent. (a) From and after the Rental Commencement Date, Tenant shall
pay Global Basic Rent, subject to adjustment as provided in Section 2.6 hereof;
"Global Basic Rent" being defined (i) during the Primary Term (as such Primary
Term may be extended pursuant to the provisions of Section 3.3(a)(iii) hereof)
as the sum of Basic Rent (as defined below) and Company Payments (as defined
below) (provided, however, that Tenant shall have no obligation to pay Company
Payments until after the Occupancy Commencement Date and until after all amounts
due to Tenant under the Agreement and Indemnification have been paid in full);
and (ii) during the Option Periods, as set forth in Section 2.7 hereof
(provided, however, that during said Option Periods all Global Basic Rent shall
also constitute Company Payments hereunder);
(b) During the Primary Term, the Global Basic Rent shall be payable in the
amounts set forth in Exhibit "C" attached hereto ("Rent Schedule") and made a
part hereof, subject to adjustment of the Basic Rent as provided in Section 2.6
hereof. Any such Basic Rent adjustment will be documented by an amended Exhibit
"C," agreed to by the parties, at the time of such adjustment. During any Option
Period, the Global Basic Rent shall be determined as set forth in Section 2.7
hereof; and
(c) From and after the Rental Commencement Date and so long as any Bonds
remain Outstanding or the Indenture has not been released during the Primary
Term, Tenant shall timely pay to Trustee in accordance with
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the terms of the Loan Agreement at Union Planters Bank, N.A., Corporate Trust
Department, 6200 Poplar Avenue, Memphis, Tennessee 38119 or such other person or
at such other place as Trustee designates in writing to Tenant, without previous
demand therefor and without deduction or offset, the amount of quarterly
payments of interest accruing on Outstanding Bonds and semi-annual Mandatory
Sinking Fund Payments (as defined in the Indenture) due on the Bonds (the "Basic
Rent"). Attached as part of Exhibit "C" is a schedule of payments of Basic Rent
over the term of the Bonds assuming no prepayments and assuming no change in the
rate of interest borne by the Bonds as described in Section 2.6(b). All payments
of Basic Rent by Tenant to Trustee shall be credited against Tenant's obligation
to pay Global Basic Rent. Attached as part of Exhibit "C" is a schedule of
Company Payments for the Primary Term assuming no prepayment under Section
2.6(a). Provided that all amounts due to Tenant under the Agreement and
Indemnification have been paid in full, from and after the Occupancy
Commencement Date and during the Primary Term, Tenant shall pay such amounts
("Company Payments") to Landlord, _ Hewson Properties, Inc. at 4636 E.
University Drive, Suite 265, Phoenix, Arizona 85034, or to such other person or
place as Landlord designates in writing to Tenant, quarterly (on the same day as
quarterly interest payments are due on the Bonds), without previous demand
therefor, in an amount equal to one-quarter ( 1/4) of the difference between (i)
the then applicable Global Basic Rent (as adjusted in Section 2.6 hereof during
the Primary Term) for the applicable lease year and (ii) the Basic Rent for the
applicable lease year ("lease year" being the successive one (1) year periods).
Should the Primary Term be extended as provided in Section 3.3(a)(iii) hereof,
the Company Payments shall be made for the period of such extension as provided
in Section 3.3(a)(iii). During any Option Period, all Global Basic Rent shall be
deemed to be Company Payments for purposes of this Lease, and shall be paid to
Landlord quarterly as set forth in this Section 2.1(c).
II.2 Net-Net-Net Lease. (a) This Lease constitutes what is commonly known
as a "net-net-net lease," it being understood that the Trustee and the Landlord
shall receive the Basic Rent and Company Payments, respectively, free and clear
of any and all impositions, taxes, liens, charges or expenses of any nature
whatsoever in connection with Landlord's ownership and leasing of the Project.
In addition to the Global Basic Rent provided for in Section 2.1 hereof, from
and after the Rental Commencement Date, the Tenant shall pay to Landlord or to
third parties as provided herein (particularly in Sections 2.3 and 2.4) as
additional rent ("Additional Rent") all impositions, taxes, payments or fees in
lieu of taxes, insurance premiums, operating charges, costs and expenses
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which arise or may be contemplated under any provisions of this Lease during the
Primary Term and any Option Periods. Upon the failure of Tenant to pay any of
such costs, charges or expenses, Landlord shall have the same rights and
remedies as otherwise provided in this Lease for the failure of Tenant to pay
Basic Rent. It is the intention of the parties hereto that Tenant shall in no
event be entitled to any abatement of or reduction in Global Basic Rent payable
hereunder except as expressly provided herein. Any present or future law to the
contrary shall not alter this agreement of the parties.
Amounts payable by Tenant hereunder shall include, but not be limited to,
the following:
(i) Insurance premiums required to maintain the insurance policies
described in Article IV hereof;
(ii) Expenses of occupying, operating, altering, maintaining and
repairing the Project throughout the term of this Lease; and
(iii) All taxes, assessments, fees in lieu of taxes and other
governmental charges, as set forth in Section 6.2 of the Loan Agreement,
except as hereinafter provided in subsection 2.4 and except as prorated
pursuant to Section 2.3(a) of this Lease, and all other expenses and
charges (including any asserted by the Issuer or the Trustee, including
but not limited to Trustee's regular and extraordinary fees, as to all of
which Landlord shall be entitled to prompt reimbursement by Tenant) which
during the term of this Lease shall be levied, assessed or imposed by any
governmental authority upon or with respect to, or incurred in connection
with the ownership, possession, occupation, operation, alteration,
maintenance, repair or use of the Project.
If at any time during the term of this Lease under the laws of the State
of Mississippi or any political subdivision thereof in which the Project is
situated, a tax or excise on rents or other tax, however described, is levied or
assessed by said State or political subdivision against Landlord or the rentals
set forth in Section 2.1 hereof, Tenant covenants to pay and discharge such tax
or excise on rents or other tax, but only to the extent of the
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amount thereof which is lawfully assessed or imposed upon Landlord and which was
so assessed or imposed as a direct result of Landlord's interest in the Project,
or of this Lease or of the rentals accruing hereunder, it being the intention of
the parties hereto that all sums payable by Tenant hereunder (including, without
limitation, Basic Rent, Company Payments, Additional Rent and all other sums,
all of which are herein sometimes collectively called "Rent") shall be paid to
Landlord absolutely net without offset of any kind or deduction of any nature
whatsoever except as expressly provided in this Lease with respect to Company
Payments. Any payment or discharge by Tenant of any tax or excise on rents or
other tax referred to in the preceding sentence shall not be deemed to be
Additional Rent. Nothing in this Lease shall be construed to require Tenant to
pay any franchise, estate, inheritance, succession, capital levy or transfer tax
of Landlord, or any income, excess profits or revenue tax or any other tax or
impost charged or levied against Landlord upon the rentals payable by Tenant
under this Lease, except to the extent hereinabove provided. In the case of any
assessment for public improvement wherein the cost of the public improvement is
permitted to be paid in installments, then and in such event only, such
installments falling due during the term of this Lease shall be paid by Tenant,
and all such installments falling due subsequent to the term of this Lease shall
be paid by Landlord, notwithstanding the provisions of Section 2.3 hereof. For
the purpose of the foregoing sentence, an installment is due on the last day
prior to the date upon which such an installment becomes delinquent.
Upon the occurrence and continuation of an event of default hereunder (an
"Event of Default"), the Landlord may require the Tenant to deposit with the
Trustee (or Landlord if there is no Trustee) in an escrow account bearing
interest for the benefit of Tenant (i) an amount equal to (A) all taxes which
are due and payable which Tenant is obligated to pay under this Section,
including accrued ad valorem taxes, if any, or, in the alternative all amounts
due as payments or fees in lieu of taxes, with respect to the Project plus (B)
any then delinquent insurance premiums with respect to the insurance required
under Section 4.1 hereof, and (ii) thereafter, each month, an amount equal to
one-twelfth (1/12th) of the annual charges for taxes to be paid under this
Section 2.2 and insurance premiums.
Tenant covenants to cooperate fully with Landlord in taking any actions
necessary to apply for and receive ad valorem tax relief for the Property,
including, but not limited to, meeting the requirements of Mississippi Code
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Section 27-31-101 and Section 27-31-104. Tenant expressly acknowledges that no
right of offset with respect to payment of Basic Rent to the Trustee or the
payment of other amounts (except Company Payments) hereunder shall arise in the
event of the loss of ad valorem tax relief. Landlord agrees that, so long as
Tenant is not in default hereunder, if any actions on the part of Landlord
result in the occurrence of an event of default under the Loan Agreement or
leads to a foreclosure on the Deed of Trust or any other event the result of
which is the loss of ad valorem tax relief under the Loan Agreement, Landlord
will indemnify Tenant to the extent Tenant is required under this Section 2.2.
to pay ad valorem taxes in excess of the payments in lieu of taxes which
otherwise would have been paid by Tenant hereunder.
(b) Tenant agrees, within six (6) months following the earlier of (i) the
Occupancy Commencement Date or (ii) the date of issuance of the Series 1998
Bonds, the Tenant will certify in writing to the Landlord as to the number of
jobs created or, if prior to the Occupancy Commencement Date, anticipated to be
created, as a result of the Project.
(c) Tenant will reimburse Landlord with respect to certain environmental
inspection matters as follows:
(i) On an annual basis, Tenant will reimburse Landlord for the costs
of a "walk-through" inspection of the Project by a qualified environmental
engineer reasonably acceptable to Tenant.
(ii) If such inspection yields evidence of any potential
environmental hazards related to Tenant's use and occupancy of the
Project, Tenant will reimburse Landlord for such additional environmental
inspections and reports as are deemed reasonably necessary by such
engineer.
II.3 Proration of Taxes. (a) The taxes, fees in lieu of taxes, and other
charges and expenses described in Section 2.2(a) above shall be prorated when
appropriate between Landlord and Tenant in order that all of such taxes and
other charges and expenses which relate to the period prior to the Occupancy
Commencement Date and the period subsequent to the termination of the term of
this Lease shall be borne by Landlord and in order that all
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of such taxes and other charges and expenses which relate to the term of this
Lease shall be borne by Tenant. Such proration shall be computed in accordance
with generally accepted accrual accounting principles and Landlord and Tenant
shall each indemnify and hold the other harmless from any taxes and other
charges and expenses relating to their respective periods of responsibility
which may have become a charge upon the other.
(b) Tenant shall not enter into any non-terminable contracts or agreements
with respect to the Project extending beyond the term of this Lease without the
prior written consent of Landlord, which consent Landlord may not withhold
unreasonably and arbitrarily.
II.4 Payment of Taxes; Payment Deferral. (a) Tenant shall pay each sum
payable pursuant to Section 2.2(a) above prior to the time that such sum becomes
delinquent; provided, however, that if any authority having jurisdiction or
alleging to have jurisdiction assesses real estate taxes or assessments (or fees
in lieu thereof), personal property taxes or assessments (or fees in lieu
thereof), or assesses or levies any other charges against the Project as
contemplated and provided in this Lease, and Tenant deems the same or any of
them excessive, improper or illegal, Tenant may defer payment thereof to the
extent permitted by law so long as the validity or amount thereof is contested
by Tenant in good faith. In such event, if an Event of Default has occurred and
is continuing, Tenant, if requested by Landlord or Trustee so to do, shall
furnish to Landlord and Trustee a corporate surety bond, satisfactory to
Landlord and Trustee as beneficiary, in an amount equal to the aggregate of (a)
the taxes, assessments, or other charges so assessed, plus (b) all penalties and
interest which may reasonably be estimated to be incurred if such contest is
adversely determined thereon at the annual rate provided for by law. In the
event that during the period of such deferred payment, and while such Event of
Default remains unwaived or uncured, such penalties and interest increase to an
amount beyond the amount of such bond, Tenant shall furnish to Landlord and
Trustee such additional corporate surety bond or bonds, satisfactory to Landlord
and Trustee as beneficiary, in such amount as may be necessary to fully cover
such increases in said taxes, assessments, or other charges and penalties and
interest thereon as aforesaid.
(b) With the exception of Global Basic Rent, which shall be due and
payable as set forth in Section 2.1, Tenant shall pay, within twenty (20) days
after receipt of Landlord's written demand and supporting documentation therefor
unless otherwise specified herein, all amounts which Tenant shall otherwise be
obligated to
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pay to Landlord or otherwise by reason of the provisions of this Lease, provided
that Tenant shall not be required to pay any amount prior to the date such
amount is due and payable hereunder.
II.5 Evidence of Tax Payment. At any time upon request, Tenant shall
provide Landlord with a true copy of a receipted bill, if available, for any
tax, assessment or other governmental charge which has become due and payable by
Tenant under this Lease or any other evidence reasonably satisfactory to
Landlord of the payment thereof.
II.6 Global Basic Rent Adjustment. (a) The parties hereto contemplate that
the Costs of the Project leased hereunder ("Costs of the Project"), as defined
in Section 1.1 of the Loan Agreement, will equal the aggregate sum of Thirty
Million Three Hundred Thousand Dollars ($30,300,000.00), such amount being
herein also sometimes called the "Target Cost." If the Project is completed for
less than the Target Cost (resulting in the transfer of such surplus amount of
Bond proceeds from the Acquisition Fund to the Bond Fund (each as defined in the
Loan Agreement) under Section 5.3(b) of the Indenture, the application of such
amount by the Trustee under Section 5.4(a) of the Indenture to the redemption of
Bonds at par pro rata at the earliest possible date and the corresponding
reduction in the amount of principal and interest payments due on the Bonds),
the Global Basic Rent during the Primary Term shall be reduced as follows: (1)
Basic Rent during the portion of the Primary Term occurring after the Occupancy
Commencement Date shall be reduced proportionately, and (2) quarterly Company
Payments shall be reduced by an amount equal to (x) the product of 0.5% times
such surplus amount of bond proceeds divided by (y) four (4).
(b) The Bonds are subject to an interest rate increase on July 1, 2009 or
if such day is not a business day, the next succeeding business day (the "Rate
Adjustment Date"), as provided in Section 2.2 of the Indenture, up to a maximum
of thirteen percent (13%) per annum. Landlord and Tenant agree that, upon
receiving notice from the Trustee that such an increase in rate has occurred,
the Basic Rent component of the Global Basic Rent during the remaining portion
of the Primary Term shall be increased accordingly.
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(c) Following the occurrence of any circumstances set forth in Section 6.9
of the Loan Agreement requiring or permitting the partial prepayment of Bonds,
such amounts will be used to redeem Bonds as provided in Section 3.1 of the
Indenture. If any such redemption occurs during the Primary Term, the Basic Rent
component of the Global Basic Rent during the remaining portion of the Primary
Term shall be reduced proportionately.
II.7 Option Period Rent Rates. (a) The Global Basic Rent for the First
Option Period and for any subsequent Option Period shall be determined as set
forth hereinafter prior to the commencement of each such Option Period by
negotiation between the parties hereto and shall, within the limitations
hereinafter set forth, be based on a negotiated fair market rental rate based
upon the prevailing rental rate for similar industrial space in the vicinity of
Olive Branch, Mississippi including southeast Shelby County, Tennessee,
comparably improved (without reference, however, to Tenant's Fixtures and
Equipment), and of substantially similar age, quality, layout, building size and
land size as that existing in the Project ("Fair Market Rental").
If the parties hereto fail to reach agreement on the Global Basic Rent for
any Option Period within thirty (30) days prior to the commencement of such
Option Period, the Fair Market Rental determination underlying the relevant
amount of Global Basic Rent for such Option Period shall be determined as
follows:
(i) Landlord and Tenant shall each appoint a qualified, licensed,
experienced real estate appraiser, who is a Member of the American
Institute of Appraisers, and who is familiar with the rentals being
charged in the vicinity of Olive Branch, Mississippi, including southeast
Shelby County, Tennessee for industrial space of a similar kind and
nature, the appointment of each appraiser to be made within fifteen (15)
days following written notice of either party to the other of the
necessity of making such appointment.
(ii) The two (2) appraisers, as so selected, shall themselves select
a third appraiser whose qualifications meet those set forth for the first
two (2) appraisers, the appointment of the third appraiser to take place
within fifteen (15) days following the appointment of the first two (2)
appraisers.
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(iii) The three (3) appraisers shall then reach a determination as
to whether the parties shall employ, as the Fair Market Rental upon which
the Global Basic Rent for the Option Period in dispute will be based, the
rentals proposed by the Landlord or the rentals proposed by the Tenant.
(iv) The decision of a majority of the three (3) appraisers shall be
binding.
(v) Each party shall pay the costs, fees and expenses of its own
appraiser, and the cost of the third appraiser shall be shared equally by
the parties. If either party shall fail to select an appraiser within the
time set forth above, the non-defaulting party may select such appraiser
for the defaulting party. If two (2) appraisers, as selected, fail to
agree upon an appointed third appraiser, both appraisers shall be
dismissed and the matter shall be submitted to arbitration under the
applicable provisions of the American Arbitration Association.
(b) During the First Option Period, the Global Basic Rent shall be the
Fair Market Rental of the Project.
(c) During the Second Option Period, the Global Basic Rent shall be the
Fair Market Rental of the Project.
(d) [RESERVED.]
(e) [RESERVED.]
(f) Any rental payment not made when due shall be subject to the Default
Rate (as defined in the Loan Agreement).
ARTICLE III
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USE, OPERATION, MAINTENANCE AND ALTERATION
III.1 Use & Occupancy. (a) Tenant agrees to use and occupy the Project as
a distribution facility, for any other lawful uses in connection with its
business, and for other permitted related uses, all of which shall be consistent
with the provisions of Section 57-10-401, et seq. of the Mississippi Code of
1972, as amended, and for no other purpose. Tenant further agrees that in the
use and occupancy of the Project and in the conduct of its business therein,
Tenant will comply with all requirements of all applicable laws, ordinances,
orders and regulations of all governmental authorities having jurisdiction.
Tenant represents that, to its best knowledge, no Hazardous Substances (as
hereinafter defined) have been stored, processed or disposed of on or released
or discharged (including ground water contamination) from the Property which
would materially and adversely affect the value of the Project and no above or
underground storage tanks exist on the Property, and except as set forth on
Exhibit "D" attached hereto, no private or governmental lien or judicial or
administrative notice or action related to Hazardous Substances or other
environmental matters has been filed against the Property or otherwise issued to
or received by Tenant with respect to the Property.
Tenant will maintain at all times all the Property in material compliance
with all Environmental Laws (as hereinafter defined), will handle any Hazardous
Substances located, stored, used or processed at the Property in material
compliance with all Environmental Laws and will not dispose of, release,
discharge, handle, use, process or store any Hazardous Substances in violation
of any Environmental Laws, and will promptly notify the Landlord and Trustee
following receipt of any notice, action, lien or other similar action alleging
either the location of any Hazardous Substances or the violation of any
Environmental Laws with respect to the Property.
As used herein, "Environmental Laws" means all local, state or federal
laws, rules or regulations pertaining to environmental regulation, contamination
or cleanup, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1976 or any state lien or superlien
or environmental cleanup statutes.
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Also as used herein, "Hazardous Substances" shall mean and include all
hazardous and toxic substances, wastes or materials, any pollutants or
contaminants (including, without limitation, asbestos and raw materials which
include hazardous constituents), or any other similar substances or materials
which are included under or regulated by any Environmental Laws.
Except as to those arising or resulting from the acts or omissions of the
Landlord or its agents, the Tenant agrees to indemnify and save the Landlord,
the Issuer and the Trustee harmless from any and all claims, damages, demands,
expenses, liabilities and losses of any nature whatsoever (including, without
limitation, all reasonable attorney's fees and expenses) asserted by or on
behalf of any person arising out of, resulting from, or in any way connected
with any and all claims, demands, judgments, damages, actions, causes of action,
injuries, administrative orders, consent agreements and orders, liabilities,
penalties, costs, and expenses of any kind whatsoever including claims arising
out of loss of life, injury to persons, property, or business and/or damages to
natural resources in connection with the activities of Tenant or its
predecessors in interest, or third parties who have trespassed on the Project,
or any of them, whether or not occasioned wholly or in part by any condition,
accident or event caused by any act or omission of Tenant which (i) arises out
of the actual, alleged or threatened discharge, dispersal, release, storage,
treatment, generation, disposal or escape of pollutants or other toxic or
Hazardous Substances, including any solid, liquid, gaseous or thermal irritant
or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals
and waste (including materials to be recycled, reconditioned or reclaimed), or
(ii) actually or allegedly arises out of the use, specification or inclusion of
any product, material or process containing chemicals, the failure to detect the
existence or proportion of chemicals in the soil, air, surface water or
groundwater, or the performance or failure to perform the abatement of any
pollution source or the replacement or removal of any soil, water, surface water
or groundwater containing chemicals.
(b) Subject to Tenant's rights under Sections 3.2 and 5.3 hereof,
throughout the Primary Term of this Lease (and all Option Periods) Tenant will,
at its own expense, keep the Project, including, but not limited to, the HVAC
and roof of the building, in good condition, repair and working order (ordinary
wear and tear excepted) making all repairs and replacements thereto (whether
ordinary or extraordinary, structural or non-structural, foreseen or
unforeseen), and operate the Project in a sound and economic manner (provided,
however, that nothing
22
contained herein shall be construed to impair any rights of Tenant against third
parties). Notwithstanding the foregoing, but subject to the provisions of
Section 10.21, Landlord shall be responsible for all damages (and repairs
necessitated thereby) caused by Landlord, its agents, employees, invitees and/or
contractors. Nothing contained in this Lease shall give Tenant any right to
offset against amounts due as Basic Rent for claims it may have against
Landlord. Subject to Tenant's rights under Sections 3.2 and 5.3 hereof, at its
expense Tenant will maintain the Project in compliance with (i) all laws,
ordinances, orders and regulations of all governmental authorities applicable to
the Project, and (ii) all requirements of those insurance companies with which
Tenant maintains the insurance policies required by Article IV hereof (provided,
however, that nothing contained herein shall be construed to impair any rights
of Tenants against third parties). Tenant also shall comply with and abide by
all covenants, restrictions, conditions and other matters, if any, to which
title to the Project is subject as of the Occupancy Commencement Date,
including, without limitation, those certain easements described on Exhibit "E"
hereto, and shall comply with all such matters becoming effective subsequent to
the Occupancy Commencement Date if such matters were created by the acts of or
agreed to by Tenant. A final unappealable judgment of any court of competent
jurisdiction or the admission by Tenant in any action or proceeding that Tenant
has violated any laws, statutes, ordinances, rules, regulations, requirements or
such matters affecting title in the use of the Project shall conclusively
determine that fact as between the Landlord and the Tenant. In connection with
any repairs, renewals or replacements which are covered by warranties received
by Landlord in connection with the construction or purchase of the Project,
Landlord shall exert its best efforts to cause the issuer of such warranties, if
any, to make such repairs, renewals or replacements.
(c) In the event that any building, structure or other improvement erected
or made by Tenant, at any time during the term of this Lease, shall encroach
upon any property, street, right-of-way, easement or set-back line or shall
violate the agreements or conditions contained in any restrictive covenant
affecting the Project, then, promptly after written request of the Trustee or of
any person affected by any such encroachment, violation, hindrance, obstruction
or impairment, the Tenant shall, at its expense, either: (i) obtain valid and
effective waivers or settlements of all claims, liabilities and damages
resulting from each such encroachment, violation, hindrance, obstruction or
impairment; or (ii) make such changes in the buildings, structures or other
improvements and take
23
such other action as shall be necessary to remove such encroachments, hindrances
or obstructions or to end such violations or impairments.
(d) The Tenant anticipates that the Project will result in the creation of
134 full-time jobs.
III.2 Use of Insurance Proceeds. (a) In the event of damage or destruction
resulting in an award of Net Proceeds (as defined in Section 4.4 hereof) in
excess of $5,000,000, Tenant shall not be required to repair or restore the
Project if, while any Bonds remain Outstanding, the award is made during the
last year of the term of this Lease, or if no Bonds remain Outstanding, during
the last year of the Primary Term or any Option Period, unless the Tenant has
previously exercised an option to extend for the next ensuing Option Period (if
any then be). If the Tenant has exercised its option to extend for the next
ensuing Option Period, Tenant shall be obligated to repair and restore the
portion of the Project remaining after the event of damage or destruction as
provided above. In the event that Tenant has not exercised its option to extend
and is not, therefore, obligated to repair or restore the Project as provided
above, the Landlord shall be required to promptly repair and restore the Project
in accordance with Section 7.1(a) of the Loan Agreement. If, while the Bonds
remain Outstanding or the Indenture has not been released, such repair or
restoration by Landlord is not commenced and prosecuted promptly, Tenant agrees
to promptly repair and restore the Project [in which event, Landlord will
indemnify Tenant for any and all costs and expenses incurred by Tenant with
respect thereto, Tenant expressly acknowledging that no right of offset with
respect to payment of Basic Rent to Trustee or the payment of other amounts
(except Company Payments) hereunder shall arise in such event]. If the building
is structurally sound and the remaining portions accessible, Tenant shall have
the option to remain in the unrestored building on the Property until the end of
the Primary Term of this Lease, or the then current Option Period, as the case
may be, at which time the Tenant's rights of continued occupancy shall cease and
terminate for all purposes.
(b) If the Project shall be less than totally damaged or destroyed at any
time that any Bonds remain Outstanding, the Loan Agreement has not been
terminated or the Indenture has not been released, if the loss is covered by
hazard insurance, subject to the provisions of Section 3.2(a), Net Proceeds of
insurance resulting from any claim in an amount less than $500,000 shall be paid
to Tenant and shall be used promptly to repair and restore
24
the Project. If such Net Proceeds are in excess of $500,000, such amounts shall
be made payable to and deposited with the Trustee and disbursed in accordance
with the provisions of Section 7.1(a) of the Loan Agreement. If the partial loss
is in excess of $500,000 and is not an insured loss, or if insurance proceeds
required to be deposited with the Trustee are insufficient to cover costs of
repair and reconstruction, subject to Section 3.2(a), Tenant shall deposit sums
sufficient to cover repair and reconstruction costs with the Trustee who shall
disburse in accordance with Section 7.1(a) of the Loan Agreement. If all Bonds
have been redeemed, the Loan Agreement terminated and the Indenture released,
all Net Proceeds shall be made payable to Tenant for use in repair and
restoration of the Project. In either a case of an insured or uninsured loss,
subject to the provisions of this Section 3.2(a), Tenant shall promptly replace,
repair, rebuild or restore the Project to substantially the same condition,
value and utility as an operating entity as existed prior to such damage or
destruction, with such changes, alterations and modifications (including the
substitution and addition of other property) as may be desired by Tenant and
submitted to the Trustee for approval, if required in accordance with Section
3.3 hereof, and as will not impair the overall operating utility, use, value or
service capacity or the character of the Project. Tenant shall be entitled to
retain any balance of such Net Proceeds of insurance remaining after payment of
all costs of such restoration.
(c) (i) If the Project shall be totally destroyed at any time,
whether or not any Bonds remain Outstanding, or the Loan Agreement
terminated or the Indenture released, and if there has been no default
hereunder, Tenant shall have a period of forty-five (45) days from the
date of destruction to decide whether or not to reconstruct the Project,
or to terminate this Lease. If, while any Bonds remain Outstanding, Tenant
elects by written notice to Landlord and Trustee to terminate the Lease,
Landlord shall direct the Trustee to effect a redemption of the Bonds in
whole under Section 3.1(a) of the Indenture with the Net Proceeds of
insurance. If there is any deficiency in Net Proceeds necessary to redeem
the Bonds, Tenant shall pay such amounts; if there are any excess Net
Proceeds following redemption, Tenant shall be entitled to such amounts.
If Tenant elects to repair or reconstruct the Project, Net Proceeds of
insurance shall be deposited with the Trustee and disbursed in accordance
with the provisions of Section 7.1(b) of the Loan Agreement. If the loss
is not an insured loss, or if insurance proceeds are insufficient to cover
the costs of repair and reconstruction, Tenant shall deposit sums
sufficient to cover repair and reconstruction costs with the Trustee who
shall disburse in accordance with Section 7.1(b) of
25
the Loan Agreement. Following reconstruction of the Project in accordance
with Section 7.1(b) of the Loan Agreement, Tenant shall be entitled to
receive any unexpended Net Proceeds of insurance.
(ii) If at any time following an election by Tenant to repair or
reconstruct the Project under this Section, an Event of Default shall
occur hereunder and be continuing, the Trustee must obtain the written
consent of sixty-six and two-thirds percent (66 2/3%) of Bondholders for
Tenant to obtain funds from the insurance loss trust account held by
Trustee pursuant to the Indenture, which consent shall not be unreasonably
withheld or delayed. While obtaining such consent, the Trustee may cease
to honor requisitions for disbursements for repair and reconstruction and
may proceed to accelerate the Bonds under the Indenture.
(iii) Landlord agrees to join in any direction necessary to effect
the exercise by Tenant of the options set forth in subsection (i).
(iv) For the purposes of this section (c), "totally destroyed" shall
mean damage or destruction to the extent of fifty percent (50%) or more of
the usable floor space in the building on the Project or which has the
effect of reducing Tenant's distribution capacity in the building on the
Project to fifty percent (50%) or less of full, pre-casualty capacity.
(d) All such replacements, repairs, rebuilding or restoration made
pursuant to this Section, whether or not requiring the expenditure of the
Tenant's own money, shall automatically become a part of the Project, as if the
same were specifically described herein.
(e) At all times prior to the termination of this Lease in accordance with
subsection (c) above following total destruction of the Project, Tenant shall
remain liable for Global Basic Rent and all other expenses payable by Tenant in
accordance with this Lease.
26
III.3 Alterations; Improvements. (a) The provisions of this Section 3.3
shall be subject to, and, if in conflict with, superseded by, the provisions of
Section 3.2 hereof. Subject to the preceding sentence, and subject to the Loan
Agreement, Tenant may make, from time to time, permanent remodeling,
alterations, improvements or expansions to the Project which the parties hereto
understand and intend to constitute fixtures and permanent accessions to the
Project ("Permanent Improvements"), subject, however, in all cases to the
following conditions, which Tenant shall observe and perform:
(i) Prior to making any alterations, improvements or expansions to
the Project which: (A) do not affect the outside or facade of the building
or do not involve removal of any part of any floor, load-bearing wall,
column, girder or other support, or do not affect roof load and (B)
involve a cost which Tenant reasonably and in good faith estimates to be
less than Five Hundred Thousand Dollars ($500,000.00), Tenant shall
furnish to Landlord and Trustee information (including sketches and
drawings which may be prepared by officers or employees of Tenant) as to
the proposed changes in walls and partitions or relocations thereof and
plans and specifications, if available, covering any proposed work, but
Tenant may proceed forthwith to make such specified alterations or
improvements. The cost of all such improvements shall be paid by Tenant.
(ii) Prior to making any alterations, improvements or expansions to
the Project which: (A) affect the outside or facade of the building, or
involve removal of any part of any floor, load-bearing wall, column,
girder or other support, or affect roof load, or (B) involve a cost which
Tenant reasonably and in good faith estimates to be Five Hundred Thousand
Dollars ($500,000.00) or more, Tenant shall furnish to Landlord and
Trustee plans and specifications or other detailed information covering
the proposed work, and Tenant shall not commence such work unless within
thirty (30) business days thereafter, Landlord and Trustee shall either
approve or shall not advise Tenant of Landlord's disapproval of such plans
and specifications, which approval Landlord and Trustee will not
unreasonably withhold. Tenant acknowledges that Trustee will submit the
proposed alteration, improvement or expansion to the Project to the
Bondholders and Trustee will either approve or disapprove of such proposed
work based upon the recommendation of Holders of sixty-six and two-thirds
percent (66 2/3%) of the Bonds then
27
Outstanding with the affirmative recommendation of such Holders not to be
unreasonably withheld or delayed. The cost of all such improvements shall
be paid by Tenant, and such improvements shall automatically become a part
of the Project as if the same were specifically described herein.
(iii) Notwithstanding the foregoing, Landlord and Tenant contemplate
the future expansion of the Improvements by the construction of an
addition of approximately 320,000 square feet, at a cost not to exceed
$25,000,000 (the "Addition") as to which no further approval of the
Trustee or the Bondholders shall be required. At such time as Tenant in
its sole and absolute discretion determines that it needs the Addition,
Landlord and Tenant shall cooperate in good faith with respect to (a)
development by the Landlord of detailed plans and drawings meeting
Tenant's specifications for the Addition, (b) determination by the
Landlord and approval by Tenant of detailed estimated costs of
construction of the Addition, (c) the setting of an estimated Tenant
occupancy date for the Addition, and (d) issuance by the Issuer and sale
of Additional Bonds (as defined in the Indenture) pursuant to Section 3.2
of the Loan Agreement and Section 2.10 of the Indenture (the "Addition
Additional Bonds") in an amount equal to the full amount of the detailed
estimated costs of construction of the Addition, plus a contingency
reserve and plus a construction period interest reserve, which Addition
Additional Bonds shall be pari passu in ranking and shall share equally
and ratably in all security with the Bonds. At such time as the Addition
Additional Bonds are issued, this Lease shall be amended (subject at all
times to the proviso that, if any of the following specific contemplated
amendments would likely result in Tenant not being allowed to treat this
Lease as amended as an operating lease for Tenant's financial accounting
purposes, the parties hereto shall negotiate alternative amendments in
good faith to allow Tenant to treat this Lease as amended as an operating
lease for Tenant's financial accounting purposes, with such alternative
amendments being as close as possible to the following specific
contemplated amendments) to provide that (a) the Addition shall be part of
the Project; (b) the Primary Term of the Lease shall be extended to end at
the date that is the same date as the stated maturity of the Addition
Additional Bonds; (c) the rent for the Addition during the Primary Term
(i) shall commence on the earlier of the date on which Tenant commences
actual productive use (as distinct from installation of Fixtures and
Equipment) of the Addition as a distribution
28
facility and (10) business days following receipt by Tenant of a copy of
all items specified in Section 4.4 of the Loan Agreement with respect to
the Addition (the "Addition Rental Commencement Date"), (ii) shall be
equal to the sum of all debt service payments (principal, premium, if any
and interest) on the Addition Additional Bonds (after any reduction in the
principal amount thereof by reason of prepayment thereof as a result of
the actual costs of the Addition being less than the original principal
amount of the Addition Additional Bonds) relating to the period after the
Addition Rental Commencement Date (Basic Rent), plus an annual amount
equal to one-half of one percent (0.5%) of the lesser of (A) the original
principal amount of the Addition Additional Bonds and (B) the actual costs
of construction of the Addition (Company Payments), plus all Additional
Rent applicable to the Addition, and (iii) shall, to the fullest extent
possible, be payable as and when Basic Rent, Company Payments and
Additional Rent are payable pursuant to Article II of this Lease; (d) the
rent for the Property and the Improvements during that portion of the
Primary Term (as amended) that extends beyond the end of the Primary Term
as it existed prior to the amendment shall be equal to that rent which
would otherwise be due under the First Option Period or the Second Option
Period had the Primary Term not been extended, i.e., the Global Basic Rent
during years one through ten of the extended Primary Term shall be equal
to the Fair Market Rental of the Project; and (e) the First Option Period
shall commence at the conclusion of the Primary Term as extended.
Such Permanent Improvements shall become part of the Project and shall be
subject to this Lease. In addition, the parties hereto understand and intend
that such Permanent Improvements shall be subject to the lien of the Deed of
Trust.
(b) The parties hereto intend that any Fixtures and Equipment installed by
Tenant for its use during the term hereof shall be and remain personal property,
shall not constitute fixtures and shall not become part of the Project subject
to this Lease, nor shall the lien of the Deed of Trust attach thereto. Any such
items shall be and remain the property of Tenant and may be removed by Tenant
upon the termination of this Lease. Tenant shall effect such removal solely at
Tenant's expense, subject to the following qualifications:
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(i) Tenant at its own expense shall repair any damage to the Project
caused by such removal, including, without limitation, damage caused by
removal of air conditioning installations, equipment, air ducts and vents,
conduits of every nature, false floors and floor ramps, electrical
switches, panels and electrical wiring which were installed by the Tenant.
Such repairs shall include safe and proper covering of any and all exposed
wiring occasioned by removal of any electrical equipment, including
computers. In no event shall Tenant be entitled to remove any items not
installed and paid for by the Tenant.
(ii) Any alterations or improvements installed in accordance with
the terms of this Lease on the Project whether before or after the
Occupancy Commencement Date and not removed by Tenant upon termination of
this Lease shall forthwith become the property of Landlord. However,
should Tenant fail to remove any alterations or improvements to the
Project which Tenant is required to remove, then and in such event,
Landlord may cause the same to be removed at Tenant's expense, and Tenant
shall reimburse Landlord for (A) the reasonable cost of the removal; (B)
the reasonable cost of repairing any damage to the Project caused by such
removal; (C) rent lost from successor lessees during the period of time
reasonably required for such removal; and (D) any other damages suffered
by Landlord as a result thereof.
III.4 Signage. Tenant may install a sign or signs on or in the Project
which sign or signs may be selected by Tenant in its discretion. Tenant shall
remove all such signs at the termination of this Lease and shall promptly
repair, to the reasonable satisfaction of Landlord, any damage to the Project
caused by such removal.
III.5 Liens; Encumbrances. Except as provided in Section 2.4 hereof,
Tenant shall not create or permit to be created or to exist any lien or
encumbrance which might be or become a lien or encumbrance against the Project,
except any lien against Landlord caused by Landlord's actions or inactions and
not by Tenant's actions or inactions. If such lien or encumbrance arises from a
matter other than taxes or assessments by a governmental body, or the payment of
amounts in lieu of taxes to a governmental body, Tenant may defer payment and
suffer the lien to the extent permitted by law so long as the validity or amount
thereof is contested by Tenant in good faith and Tenant has secured a court
order from a court of competent jurisdiction or reasonable assurance from
30
competent legal counsel that in the interim and during said contest no action
can be taken against the Project by the party holding such lien. If at any time
while an Event of Default has occurred hereunder and is continuing a lien or
encumbrance arises from Tenant's acts or omissions, Tenant, if requested by
Landlord or Trustee so to do, shall furnish to Landlord and Trustee a corporate
surety bond or bonds, satisfactory in form and substance to Landlord and
Trustee, in an amount equal to the amount of the lien, plus all applicable
penalties and interest thereon, which are estimated to accrue during the period
of the contest, such bond to be issued by an insurance company satisfactory to
Landlord and Trustee. In the event that while an Event of Default has occurred
and is continuing during the period of Tenant's good faith contest such
penalties and interest increase to an amount beyond the amount of such corporate
surety bond, Tenant shall furnish to Landlord and Trustee such additional bond
or bonds, similarly satisfactory to Landlord and Trustee, in form and substance,
in such amounts as may be necessary to fully cover the lien and all penalties
and interest thereon and likewise issued by an insurance company satisfactory to
Landlord and Trustee.
III.6 Indemnification. Subject to the provisions of Section 10.21, Tenant
does hereby indemnify Landlord against any liability, penalty, expense or
damages which Landlord may incur or to which Landlord may be subjected by reason
of Tenant's possession, occupation, operation, alteration, maintenance, repair
or use of the Project.
III.7 Inspection of Project. Landlord, Issuer and Trustee shall be
entitled to make reasonable visits to examine and inspect the Project during
normal business hours (but shall be under no obligation to make any such visits
or inspections), all in compliance with Section 12.5 of the Loan Agreement. Such
inspections shall be scheduled at least twenty-four (24) hours in advance so as
not to unduly interfere with Tenant's business activities, except that in case
of emergency, Landlord may enter the Project without prior notice to Tenant.
III.8 Landlord's Entry to Project Following Default. At any time following
the tenth (10th) day after Tenant shall have received from Landlord any notice
of default hereunder and continuing until Tenant shall have cured such default,
and at any time within twelve (12) months prior to the termination of the term
of this Lease, Tenant shall permit Landlord and any authorized representatives
of Landlord to enter the Project during normal business hours to exhibit the
same for the purpose of future leasing and to display on the Project usual "For
Lease"
31
signs. At any time during the term of this Lease, Landlord and any authorized
representatives of Landlord may enter the Project during normal business hours
to exhibit the Project for the purpose of sale or of mortgage or other
hypothecation. So long as Tenant is not in default hereunder, Landlord shall
give Tenant at least twenty-four (24) hours prior notice of Landlord's intent to
enter to exhibit the Project, and such entry shall be made so as not
unreasonably to interfere with Tenant's use of the Project.
ARTICLE IV
INSURANCE
IV.1 Insurance Requirements. Tenant shall maintain insurance against such
risks and in such amounts as the Landlord and Trustee shall reasonably determine
to be proper for buildings and commercial facilities of like size and type, and
shall pay as the same become due and payable, all premiums with respect thereto,
including, but not necessarily limited to:
(a) All risk or broad form named perils coverage at all times equal
to one hundred percent (100%) of the replacement cost of the Improvements
exclusive of excavations and foundations. Earthquake coverage equal to one
hundred percent (100%) of the replacement cost of the Improvements
exclusive of excavations and foundations (so long as commercially
available);
(b) comprehensive general liability insurance with $5,000,000.00
minimum single limit for injury to persons or property, but in no event
less than that provided under the Tenant's primary and, if any, excess
coverage;
(c) worker's compensation coverage, disability benefits insurance
and any other type of insurance required by the laws of the State of
Mississippi;
(d) Rental value insurance in an amount equal to twelve (12) months
of all Basic Rent payable hereunder.
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Any of the insurance required in paragraphs (a) through (d), inclusive,
may provide an all risk deductible provision in an amount not exceeding $500,000
and an earthquake deductible provision not to exceed fifteen percent (15%) of
the building's replacement cost value. The Tenant shall be a self-insurer to the
extent of the amount of the deductibles obtained.
Until such time as the construction of the Improvements shall have been
completed, Landlord shall maintain builder's risk insurance to the full
insurable value (with deductible provision not to exceed $500,000) of the
Improvements, and Landlord shall be a self-insurer to the extent of the amount
of the deductible so obtained. During such construction period, Tenant shall
have the responsibility for maintaining any insurance coverage it deems
necessary with respect to the Fixtures and Equipment installed by Tenant at the
Project. Following the Occupancy Commencement Date, Tenant covenants to maintain
insurance coverage in an amount equal to full replacement value with respect to
any of its property located at the Project, with a deductible provision in an
amount not exceeding $500,000.00.
The insurance required of Tenant by this Section 4.1 shall be maintained
in full force and effect at all times following the Occupancy Commencement Date.
Each insurance policy provided in accordance with this Section 4.1 shall
include a provision to the effect that any act or omission of Tenant or
Landlord, as the case may be, shall not prejudice Issuer's or Trustee's rights
thereunder. Any insurance provided for in this Article IV may be effected by a
policy or policies of blanket insurance provided that the amount of the total
insurance allocated to the Improvements shall be such as to furnish in
protection the equivalent of separate policies in the amounts herein required.
Subject to Section 3.2 hereof, Tenant shall remain liable and responsible to
Landlord for keeping the Project in good repair and condition whether or not
covered by insurance and whether or not said insurance coverage is adequate to
repair and/or replace the Improvements.
IV.2 Form of Policy. (a) Each insurance policy required by Section 4.1
hereof (i) shall be issued by a financially responsible insurer (or insurers) of
recognized standing, legally authorized to write the respective
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insurance, (ii) shall be in such form and with such provisions (including,
without limitation, the loss payable clause, the waiver of subrogation clause
and the designation of the named insured parties) as are generally considered
standard provisions for the type of insurance involved, and (iii) shall prohibit
cancellation or modification by the insurer without at least thirty (30) day's
prior written notice to the Landlord and the Trustee. Prior to the expiration of
any such policy, the Tenant shall furnish the Landlord and Trustee satisfactory
evidence that the policy has been renewed or replaced, unless Trustee shall have
informed Tenant in writing that such insurance is no longer required. Without
limiting the generality of the foregoing, all insurance policies maintained
pursuant to Section 4.1(a) hereof shall name the Landlord, Tenant, Issuer and
Trustee as the parties insured thereunder as their respective interests may
appear; all insurance policies maintained pursuant to Section 4.1(b) hereof
shall name the Tenant as the insured and the Landlord and Trustee as additional
insureds; and each such policy shall provide that losses thereunder shall be
adjusted with the insurer by the Tenant or Landlord, on behalf of the insured
parties, in the case of the policy described in Section 4.1(a) hereof, with the
approval of the Trustee as to settlement of any claims in excess of $500,000,
but all such adjustments shall be subject to the provisions hereof. If there is
any claim in excess of $500,000.00 for loss or damage covered under the policy
described in Section 4.1(a) hereof, all proceeds of insurance resulting
therefrom shall be paid directly and solely to the Trustee for application as
provided in Section 7.1 of the Loan Agreement.
(b) Certificates and opinions of the insurers or an agent or agents of the
insurers acceptable to the Trustee, shall be deposited with the Trustee on or
before the Occupancy Commencement Date, upon renewals of policies and at any
other time, at the request of the Trustee.
IV.3 Notice of Damage or Destruction. If the Project shall be damaged or
destroyed (in whole or in part) at any time, Tenant shall promptly give written
notice thereof to the Landlord and the Trustee.
IV.4 Net Proceeds. As used herein, "Net Proceeds," when used with respect
to any insurance or condemnation award, means the gross proceeds from the
insurance or condemnation award with respect to which that term is used
remaining after the payment of all expenses (including reasonable and documented
attorney's fees
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and any Extraordinary Expense [as defined in the Loan Agreement] of the Trustee)
incurred in the collection thereof.
ARTICLE V
CONDEMNATION
V.1 Notice of Condemnation. Forthwith upon receipt by Tenant or Landlord
of any notice of the institution of any proceeding for the taking of the Project
or any part thereof by the exercise of any power of condemnation affecting the
Project or any part thereof, the party receiving such notice shall promptly give
written notice thereof to the other party, and the Trustee. Subject to Section
7.4 of the Loan Agreement, Tenant, in cooperation with Landlord, shall have the
right to participate in any such proceedings and to be represented by counsel
for the purpose of protecting its interest hereunder. Landlord and Tenant shall
each bear their own expenses incurred in such proceeding. Notwithstanding
anything to the contrary above, as long as the Bonds remain Outstanding and the
Indenture has not been released, any awards in excess of $500,000.00 resulting
from the damages to or taking of the Project, including without limitation any
awards for the leasehold estate of the Tenant or the fee estate of the Landlord,
shall be paid solely and directly to Trustee for application in accordance with
Section 7.2(a) of the Loan Agreement.
V.2 Partial Condemnation. (a) If at any time any part of title to, or the
partial use of the Project shall be taken by condemnation or pursuant to the
exercise of the power of eminent domain by any governmental authority
("Condemnation") and any Bonds are still Outstanding, the Loan Agreement has not
been terminated or the Indenture has not been released and satisfied, Net
Proceeds of Condemnation resulting from any award in an amount less than
$500,000 shall be paid to Tenant and used promptly to replace such condemned
portion of the Project. If Net Proceeds of Condemnation are in excess of
$500,000, at any time when Bonds remain Outstanding, the Loan Agreement has not
been terminated and the Indenture has not been released, such amount shall be
paid solely and directly to the Trustee and disbursed in accordance with Section
7.2(a) of the Loan Agreement; at any time the Bonds have been redeemed, the Loan
Agreement has been terminated and the Indenture has been released such amounts
shall be disbursed in accordance with Section 5.2(c). In the event such proceeds
are insufficient to
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restore the Project, subject to Section 5.3, Tenant shall pay the additional
amounts necessary to carry out such restorations, and if Tenant has been
obligated by this Section 5.2 to deposit Net Proceeds of Condemnation with
Trustee, Tenant shall deposit such additional amount with the Trustee. All such
amounts deposited with the Trustee shall be used to promptly restore the Project
(excluding any part thereof not taken by Condemnation) to substantially the same
condition, value and utility as an operating entity as existed prior to such
Condemnation.
(b) If any Bonds remain Outstanding, or the Indenture has not been
released, then any balance of such proceeds of any Condemnation award remaining
after payment of all costs of such restoration shall be used to redeem Bonds at
par pro rata under Section 3.1(f) of the Indenture. Tenant shall be entitled,
under Section 2.6(c) hereof, to a proportionate reduction in the Basic Rent
component of Global Basic Rent.
(c) Any balance of such Net Proceeds of Condemnation remaining after
payment of all costs of such restoration and, if any Bonds are then Outstanding,
after redemption of all such Bonds as provided in the preceding subsection (b),
shall be allocated between Landlord and Tenant in the proportion which the value
of Landlord's fee interest in the Project and the value of Tenant's leasehold
interest in the Project respectively bear to the total amount of the Net
Proceeds of Condemnation.
If both Landlord and Tenant join in an application to the commissioners or
court in the condemnation or eminent domain proceeding praying that allocation
of the award in accordance with the aforesaid formula be made in such
proceeding, and allocation of the award in accordance with the aforesaid formula
is made in such proceeding, the allocation so made shall be conclusive upon
Landlord and Tenant. If such application and/or such allocation shall not be so
made, the valuation of Landlord's and Tenant's interests and the allocation of
the award shall be determined by agreement between them, or, if they are unable
to agree, the values shall be determined by submission to arbitration pursuant
to Article VIII hereof.
V.3 Substantial Condemnation; Condemnation in Excess of $5,000,000. (a) In
the event that a taking by eminent domain or condemnation will affect
substantially all [fifty percent (50%) or more] of the usable floor space in the
Improvements or will have the effect of reducing Tenant's distribution capacity
in the Improvements to fifty
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percent (50%) or less of full, pre-condemnation capacity, Tenant shall have the
option, to be exercised by delivery of a written notice to Landlord and Trustee
within forty-five (45) days after Tenant's receipt of notice from Landlord or
the condemning authority of such taking, to terminate this Lease. While any
Bonds remain Outstanding, upon receipt of such notice, Landlord shall direct the
Trustee to effect a redemption of the Bonds in whole under Section 3.1(a) of the
Indenture with the Net Proceeds of Condemnation. If there is any deficiency in
Net Proceeds necessary to redeem Bonds, Landlord will pay such amounts; any
excess Net Proceeds following redemption shall be allocated between Landlord and
Tenant according to the formula set forth in Section 5.2(c). If Landlord fails
to pay the deficiency, then Tenant shall either: (i) pay such deficiency
required to redeem the Bonds; or (ii) promptly repair or restore the Project in
accordance with Section 7.2 of the Loan Agreement [in which event, Landlord will
indemnify Tenant for any and all costs and expenses incurred by Tenant with
respect thereto, Tenant expressly acknowledging that no right of offset with
respect to payment of Basic Rent to Trustee or the payment of other amounts
(except Company Payments) hereunder shall arise in such event]. Such termination
of this Lease shall only be effective upon the happening of the earlier of the
following events:
(i) The date of delivery of possession to the condemning authority; or
(ii) A date mutually agreed to by Tenant and Landlord which shall not be
less than one (1) year from the date that Tenant gives notice to
Landlord of Tenant's intent to terminate.
(b) Subject to the provisions of Sections 5.2(a) and 5.3 hereof, in the
event that the taking by eminent domain or condemnation will affect less than
fifty percent (50%) of the usable floor space in the Improvements or will not
have the effect of reducing Tenant's distribution capacity in the Improvements
to fifty percent (50%) or less of full, pre-casualty capacity, or in the event
Tenant elects not to exercise the option to terminate set forth in Section
5.3(a) above, this Lease shall remain in full force and effect.
(c) In the event of a taking by eminent domain or Condemnation resulting
in an award of Net Proceeds in excess of $5,000,000, Tenant shall not be
required to repair or restore the Project if, while any Bonds remain Outstanding
the taking is intended to take place during the last year of the Primary Term of
this Lease, or if no
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Bonds remain Outstanding, during the last year of the Primary Term or any Option
Period, unless the Tenant has previously exercised an option to extend for the
next ensuing Option Period (if any then be). If the Tenant has exercised its
option to extend for the next ensuing Option Period, Tenant shall be obligated
to repair and restore the portion of the Project remaining after the
condemnation as provided above. In the event that Tenant has not exercised its
option to extend and is not, therefore, obligated to repair or restore the
Project as provided above, the Landlord shall be required to promptly repair and
restore the Project in accordance with Section 7.2 of the Loan Agreement. If,
while the Bonds remain Outstanding or the Indenture has not been released, such
repair or restoration by Landlord is not commenced and prosecuted promptly,
Tenant agrees to promptly repair and restore the Project [in which event,
Landlord will indemnify Tenant for any and all costs and expenses incurred by
Tenant with respect thereto, Tenant expressly acknowledging that no right of
offset with respect to payment of Basic Rent to Trustee or the payment of other
amounts (except Company Payments) hereunder shall arise in such event]. If the
building is structurally sound and the remaining portions accessible, Tenant
shall have the option to remain in the unrestored building on the Property until
the end of the Primary Term of this Lease, or the then current Option Period, as
the case may be, at which time the Tenant's rights of continued occupancy shall
cease and terminate for all purposes.
(d) All such replacements, repairs, rebuilding, or restoration made
pursuant to Sections 5.2 and 5.3 hereof, whether or not requiring the
expenditure of the Tenant's own money, shall automatically become a part of the
Project, as if the same were specifically described herein.
(e) At all times prior to the termination of this Lease in accordance with
subsection (a) above following total Condemnation of the Project, Tenant shall
remain liable for Global Basic Rent and all other expenses payable by Tenant in
accordance with this Lease (provided, however, that Tenant shall be entitled to
offset against Company Payments any amount due from Landlord to Tenant).
(f) If at any time following an election by Tenant to replace the Project
under this Section, an Event of Default shall occur hereunder and be continuing,
the Trustee must obtain the written consent of sixty-six and two-thirds percent
(66 2/3%) of Bondholders for Tenant to obtain funds from the condemnation trust
account held by
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Trustee pursuant to the Indenture, which consent shall not be unreasonably
withheld or delayed. While obtaining such consent, the Trustee may cease to
honor requisitions for disbursements for costs of replacement and may proceed to
accelerate the Bonds under the Indenture.
ARTICLE VI
SALES, MORTGAGES, ETC. AND GENERAL CONDITIONS
VI.1 Assignment by Tenant. (a) Except as hereinafter provided, and subject
to the Loan Agreement, the Indenture, and the Deed of Trust, and the
Non-Disturbance Agreement, Tenant shall not transfer, assign or hypothecate this
Lease or its interest hereunder without the written consent of Landlord and
Bondholders, which consent shall not be unreasonably withheld; provided that no
transfer, assignment or hypothecation shall release Tenant from any obligation
or liability under this Lease, and the person or persons to whom this Lease may
be transferred or assigned shall also assume all the obligations of Tenant under
this Lease. A copy of any such proposed assignment shall be delivered to
Landlord and Trustee in advance of its consenting thereto. No subletting and no
acceptance by Landlord of any rent or other sum of money from a sublessee, and
no recognition by Landlord of any subletting shall release Tenant from any of
its obligations under this Lease.
(b) Notwithstanding the provisions of the foregoing Section 6.1(a),
subject to the covenants set forth in Section 6.4 hereof, Tenant shall have the
right to transfer or assign this Lease or sublet the Project or any portion
thereof without the Landlord's consent to any corporation more than fifty
percent (50%) of the stock of which is owned by Tenant, or to any corporation
more than fifty percent (50%) of the stock of which is owned by any corporation
owning more than fifty percent (50%) of Tenant's stock, or to any corporation
surviving or resulting from a merger or consolidation to which Tenant may be a
party, or to any corporation succeeding to all or a substantial portion of the
assets of Tenant; provided, that no such transfer or assignment shall relieve or
release Tenant from any obligation or liability under this Lease, and the party
or parties to whom this Lease may be transferred or assigned shall assume all
the obligations of Tenant hereunder. The sale of stock by Tenant or any
shareholder of Tenant shall not constitute an assignment of this Lease.
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VI.2 Exercise of Rights or Remedies by Landlord. No assignment by Tenant
of this Lease or its interest hereunder and no subletting by Tenant of the
Project or any part thereof, whether with or without the consent of Landlord,
shall affect Landlord's right to exercise any of its rights or remedies
hereunder directly against Tenant.
VI.3 Tenant's Right of First Refusal. Subject to the Loan Agreement, the
Indenture, the Deed of Trust, and the Non-Disturbance Agreement, if Landlord
receives a bona fide offer, whether or not solicited by Landlord, to purchase
the Landlord's interest in the Project and Landlord is willing to accept such
offer, Landlord shall give Tenant written notice of the amount and terms of said
offer and the identity of the proposed purchaser. Tenant shall have the option,
exercisable within thirty (30) days after receipt of such notice, to purchase
the Landlord's interest in the Project on the same terms as those contained in
the offer. Landlord may not sell until after said thirty (30) day period and may
then sell only in accordance with the terms and to the party making the original
offer. Any deviation from the original offer constitutes a new offer and must be
submitted to Tenant in accordance with this Section. There shall occur no merger
of the fee and leasehold interests hereunder as a result of acquisition of both
estates by the same party.
VI.4 Financial Covenants of Lessee. For so long as any Bonds remain
Outstanding and the Loan Agreement has not been terminated or the Indenture
released, Tenant agrees:
(a) Not to incur additional Indebtedness or merge or consolidate with any
other entity if, after giving effect to such Indebtedness, merger or
consolidation on a pro forma basis (including pro forma application of the net
proceeds therefrom), the ratio of (i) the sum of (A) the Consolidated Net Income
of the Tenant and its subsidiaries plus (B) an amount equal to any net loss
realized upon the sale or other disposition of any business segment or capital
asset (to the extent such loss was deducted in computing such Consolidated Net
Income), plus (C) any provision for taxes utilized in computing net loss under
clause (B) hereof, plus (D) Consolidated Interest Expense plus one-third (1/3)
of operating lease (including this Lease) base rent (before contingency and
pass-through payments), plus (E) provision for federal and state income taxes to
(ii) Consolidated Interest Expense plus one-third (1/3) of operating lease
(including this Lease) base rent (before contingency/and pass-through payments)
of the Tenant and its subsidiaries for any six (6) (as determined by
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Tenant) of the immediately preceding eight (8) full fiscal quarters immediately
preceding the date of such proposed incurrence of indebtedness, merger or
consolidation, is less than 2.0 to 1.0; provided, however, that the foregoing
restrictions shall not apply to the incurrence by Tenant and its consolidated
subsidiaries of Existing Indebtedness, Permitted Refinancing Indebtedness, and
Indebtedness incurred in connection with Fixtures and Equipment to be located at
the Project (including Fixtures and Equipment to be utilized in connection with
future phases of the Project as outlined in that certain letter from Howard
Lester to Mayor Samuel Rikard of the City of Olive Branch dated July 1, 1998 and
affixed hereto as Exhibit "F"); and further provided, however, that accrual of
interest and accretion of accreted value shall not be deemed to be an incurrence
of Indebtedness for purposes of this Section 6.4(a).
(b) Not to permit the Consolidated Net Worth (plus deferred catalog
charges not to exceed 10% of Consolidated Net Worth) of the Tenant and its
subsidiaries to be less than $120,000,000 plus 25% of cumulative Consolidated
Net Income (if positive) from the first day of the first fiscal quarter of
Tenant beginning after the date hereof to the last day of the fiscal quarter of
Tenant ending immediately prior to the date of measurement.
For purposes of this Section 6.4:
A. "Consolidated Interest Expense" means the sum of (without duplication)
(i) the cash and non-cash interest expense of the Tenant and its consolidated
subsidiaries, determined on a consolidated basis in accordance with Generally
Accepted Accounting Principles (including, without limitation, non-cash interest
payments, all net payments and receipts in respect of Interest Rate Agreements,
and the interest component of rental payments under capital leases), (ii)
amortization of debt discount in connection with any Indebtedness of the Tenant
and its consolidated subsidiaries, and (iii) amortization of costs associated
with the issuance of any Indebtedness of the Tenant and its consolidated
subsidiaries; provided, however, that one-time fees paid in connection with the
issuance of any Permitted Refinancing Indebtedness incurred by the Tenant or a
subsidiary thereof, shall not be included in Consolidated Interest Expense.
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B. "Consolidated Net Income" means, for any period, without duplication,
the aggregate of the Net Income of the Tenant and its subsidiaries for such
period, on a consolidated basis, determined in accordance with Generally
Accepted Accounting Principles; provided, however, that (i) the Net Income of
any entity that is not a subsidiary of the Tenant or a subsidiary or is
accounted for by the equity method of accounting shall be included only to the
extent of the amount of dividends or distributions paid to the Tenant and its
subsidiaries; (ii) the Net Income of any entity that is a subsidiary [other than
a subsidiary of which at least eighty percent (80%) of the capital stock having
ordinary voting power for the Tenant directly or indirectly through one or more
subsidiaries] shall be included only to the extent of the lesser of (a) the
amount of dividends or distributions paid to the Tenant or a subsidiary, and (b)
the Net Income of such entity; (iii) the Net Income of any entity acquired by
the Tenant or a subsidiary in a pooling of interests transaction for any period
prior to the date of such acquisition, shall be excluded; and (iv) there shall
be excluded from such Net Income the Net Income (only if positive) of any
consolidated subsidiary of the Tenant to the extent that the declaration or
payment of dividends or similar distributions by such consolidated subsidiary of
such Net Income is not at the time permitted by operation of the terms of its
charter, or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such subsidiary.
C. "Consolidated Net Worth" means, as of any date, the consolidated equity
of the common and preferred stockholders of the Tenant determined on a
consolidated basis in accordance with Generally Accepted Accounting Principles,
less (i) all write-ups (other than write-ups of assets of a going concern
business made within one year after the acquisition of such business) subsequent
to February 1, 1999 in the book value of any asset owned by the Tenant or a
consolidated subsidiary, (ii) all investments in unconsolidated subsidiaries and
in entities that are not subsidiaries (other than cash equivalents, marketable
securities and other assets held for sale outside of the ordinary course of
business and long term receivables resulting from the sale of assets or
businesses), and (iii) all unamortized debt discount and expense, unamortized
deferred charges (excluding deferred income taxes), goodwill, patents,
trademarks, service marks, trade names, copyrights, organization and
developmental expenses and other intangible items, all of the foregoing as
determined in accordance with Generally Accepted Accounting Principles;
provided, however, that in determining the consolidated equity of any entity,
the Net Income of such entity shall be calculated in the same manner as that
specified for the determination of Net Income.
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D. "Existing Indebtedness" means the Indebtedness of Tenant and its
consolidated subsidiaries set forth on Exhibit "G" hereto.
E. "Indebtedness" means all obligations of Tenant and its consolidated
subsidiaries for borrowed money which in accordance with Generally Accepted
Accounting Principles should be classified on the balance sheet of Tenant and
its consolidated subsidiaries as liabilities, and in any event shall include all
obligations of Tenant and its consolidated subsidiaries for (a) borrowed money;
(b) for the deferred portion of the purchase price of assets (other than trade
payables not more than 120 days past due); (c) secured by any liens upon
property or assets owned by Tenant and its consolidated subsidiaries, even
though Tenant and its consolidated subsidiaries have not assumed or become
liable for the payment of such obligations; (d) created or accruing under any
conditional sale or other title retention agreement with respect to property
acquired by Tenant and its consolidated subsidiaries, notwithstanding the fact
that the rights and remedies of the seller, lender or lessor under such
agreement in the event of default are limited to repossession or sale of the
property sold; (e) the non-interest portion of capitalized lease obligations;
and (f) guaranties of obligations of others of the character referred to in this
definition.
F. "Interest Rate Agreement" shall mean any interest rate protection
agreement, interest rate future, interest rate option, interest rate swap,
interest rate cap or other interest rate hedge arrangement, to or under which
the Tenant or any of its subsidiaries is or becomes a party or beneficiary.
G. "Net Income" for any period means, with respect to an entity, the net
income (loss) for such period, determined in accordance with Generally Accepted
Accounting Principles; provided, however, that (i) the net income of any entity
(other than a subsidiary of such entity) in which such entity has a joint
interest with a third party shall be included only to the extent of the amount
of dividends or distributions paid to such entity by such other entity during
such period, (ii) the net income of any entity (other than a subsidiary of such
entity) acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded, (iii) the net income of such
entity shall be reduced by any net after tax gains from any asset sale which
gains were included in net income during such period, (iv) the net income of
such entity, except as already adjusted pursuant to (iii) above,
43
shall not include, without duplication, any gains which are classified as
extraordinary items in accordance with Generally Accepted Accounting Principles
(other than tax benefits realized in connection with the tax treatment of such
entity's net operating loss carry forwards incurred after the acquisition), and
(v) the net income of such entity shall not include any unrealized gains from
investments other than gains which reverse losses in such period.
H. "Permitted Refinancing Indebtedness" means any Indebtedness of Tenant
and its consolidated subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease, or refund other
Indebtedness of the Tenant and its consolidated subsidiaries permitted to be
incurred under the terms of this Lease, provided, however, that (i) the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount plus accrued
interest (or accreted value, if applicable) and premium (if any) of the
Indebtedness so exchanged, extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable and documented expenses incurred in
connection therewith); (ii) such Permitted Refinancing Indebtedness has a final
stated maturity later than the final maturity of, and has a weighted average
life to maturity equal to or greater than the weighted average life to maturity
of, the Indebtedness being exchanged, extended, refinanced, renewed, replaced,
defeased or refunded; and (iii) such Permitted Refinancing Indebtedness is
incurred either by the Tenant or by the consolidated subsidiary which is the
obligor on the Indebtedness being exchanged, extended, refinanced, renewed,
replaced, defeased or refunded.
VI.5 Compliance with Bond Documents by Landlord. Tenant agrees that no
provision hereof requiring or permitting the action or inaction of the Tenant or
the action or inaction of the Landlord shall be applicable if it should cause
Landlord to fail to comply in any respect with Landlord's obligations under the
Loan Agreement, the Deed of Trust, the Indenture or the Guaranty.
VI.6 Financial Statements of Tenant. For so long as any Bonds remain
Outstanding and the Loan Agreement has not been terminated or the Indenture has
not been released, Tenant agrees to furnish to the Trustee, the Underwriter (as
defined in the Loan Agreement) and each Bondholder within one hundred twenty
(120) days after the end of each fiscal year of the Tenant audited consolidated
financial statements as of the close of such fiscal year for Tenant. Such
audited financial statements, which shall include comparative financial
information
44
for the immediately preceding fiscal year, shall be prepared and certified by
Deloitte & Touche or another nationally recognized independent certified public
accounting firm showing the financial condition of Tenant at the close of such
year and the results of operations of the Tenant during such year; and within
sixty (60) days after the end of each of the first three (3) quarters of each
fiscal year, similar financial statements (but not including consolidating
financial statements) for Tenant to those described above, not audited but
certified by the chief financial officer for the Tenant, such balance sheet to
be as of the end of such quarter and such statements of income and surplus to be
for the period from the beginning of such fiscal year to the end of such
quarter, in each case subject only to year-end adjustments. The quarterly
Tenant-prepared financial statements and the annual audited financial statements
shall be accompanied by statements certified by an authorized Tenant
representative to the effect that (i) with respect to loan agreements (or
equivalent documents) unrelated to the Bonds, it has received no notice of any
defaults thereunder, and (ii) is not currently in default under the Lease or if
such a default exists, describing the default.
ARTICLE VII
DEFAULT
VII.1 Events of Default. The following shall constitute Events of Default
hereunder:
(a) If payment of any Basic Rent or Additional Rent, each as adjusted, is
not made within five (5) days of the date when due or if default shall be made
in the due and punctual payment of any Company Payments, as adjusted, payable
under this Lease or any part thereof when and as the same shall become due and
payable in accordance with the terms of this Lease.
(b) If default shall be made by Tenant in keeping, observing or performing
any of the terms, covenants, agreements, provisions, conditions or limitations
contained in this Lease on Tenant's part to be kept, observed or performed,
other than those referred to in the foregoing subsection (a) of this Section,
and such default shall continue for a period of thirty (30) days after written
notice thereof from Landlord or Trustee to Tenant, or in the case of such a
default or a contingency which cannot with due diligence and in good faith be
cured within said thirty (30) days, the Tenant should fail to proceed promptly
and with due diligence and in good faith to cure the
45
same and thereafter to prosecute the curing of such default with due diligence
and in good faith [it being intended that in connection with a default not
susceptible of being cured with due diligence and in good faith within thirty
(30) days that the time within which to cure the same shall be extended for such
a period as may be necessary for the curing thereof with due diligence and in
good faith]. The foregoing is subject to the proviso that no grace period shall
apply to Tenant's obligations hereunder to keep the Project insured.
(c) An order for relief shall be entered in any federal bankruptcy
proceeding in which the Tenant is the debtor; or bankruptcy, receivership,
insolvency, reorganization, relief, dissolution, liquidation or other similar
proceedings shall be instituted by or against the Tenant or all or any part of
the property of the Tenant under the Federal Bankruptcy Code or any other law of
the United States or any bankruptcy or insolvency law of any state of competent
jurisdiction unless, if such proceedings are instituted against the Tenant, such
proceedings are dismissed or discharged within sixty (60) days after they are
instituted.
(d) The Tenant shall have become insolvent or unable to pay its debts as
they mature, cease doing business as a going concern, make an assignment for the
benefit of creditors, admit in writing its inability to pay its debts as they
become due, or if a trustee, receiver or liquidator shall be appointed for the
Tenant or for any substantial portion of the assets of the Tenant and such
appointment shall not be vacated within sixty (60) days.
(e) If Tenant shall abandon the Project; provided that as long as Tenant
shall continue to pay rent and maintain and protect the Project in accordance
with the terms of this Lease, Tenant shall not be deemed to have abandoned the
Project.
(f) Any certification, representation or warranty made by the Tenant herein
shall prove to have been false when made or deemed to have been made.
VII.2 Landlord Remedies. (a) If an Event of Default shall occur and shall
not have been remedied within any applicable grace period, and in the manner
hereinbefore provided, Landlord, without prejudice to any other right or remedy
of Landlord hereunder or by law, and notwithstanding any waiver of any prior
breach of
46
condition or Event of Default hereunder, may at its option, and without further
demand or notice, the same being expressly waived:
(i) Terminate this Lease and retake possession of the Project, and
thereupon all rights of Tenant hereunder (and of parties claiming
by, through or under Tenant) shall come to an end, as fully as if
such were the last day of the whole term hereinbefore specified, and
Tenant hereby covenants peaceably and quietly to yield up and
surrender to Landlord the Project and all improvements thereon,
consistent with the provisions of this Lease covering such
improvements and modifications; and Tenant shall execute and deliver
to Landlord such instrument or instruments as shall be required by
Landlord to properly evidence termination of Tenant's rights
hereunder and its interest herein. In the event of such termination
of this Lease, Landlord shall have the right to repossess the
Project and such improvements and modifications (consistent with the
provisions of this Lease covering such improvements and
modifications) as well as the right to sue for and recover from
Tenant:
(A) the worth at the time of the award of any unpaid rent which
had been earned at the time of such termination; plus
(B) the worth at the time of the award of the amount by which the
unpaid rent which would have been earned after termination
until the time of award exceeds the amount of such rental loss
Tenant proves could have been reasonably avoided; plus
(C) the worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that Tenant
proves could be reasonably avoided; plus
(D) any other amount necessary to compensate Landlord for all of
the detriment proximately caused by Tenant's failure to
perform its obligations under this Lease or which in the
47
ordinary course of events would be likely to result therefrom
including, but not limited to, payment of any and all
installments for public improvements falling due during the
term of this Lease under Section 2.2(a)(iii) hereof; plus
(E) such other amounts in addition to or in lieu of the foregoing
as may be permitted from time to by time by applicable law.
As used in paragraphs (A), (B) and (C) of this subsection (a)(i), the
"worth at the time of award" is computed by allowing interest at the prime
rate of interest as published from time to time in the "Money Rates"
section of The Wall Street Journal (the "prime rate") plus 1% or by
determining present value using a discount rate equal to the prime rate
plus 1%; or
(ii) Landlord may terminate Tenant's right of possession and may
repossess the Project by forcible entry and detainer suit, by taking
peaceful possession or otherwise, without terminating this Lease,
and may sue for and recover all rents and other sums including
damages at any time and from time to time accruing hereunder and
exercise all such other rights as may be provided by law.
Landlord's efforts to relet the Project or any part thereof or acts
of maintenance or preservation and Landlord's appointment of a
receiver to protect Landlord's interest under this Lease shall not
constitute a termination of Tenant's right to possession; and no
reentry or taking possession of the Project by Landlord shall be
construed an election to terminate this Lease unless a written
notice of such intention be given to Tenant or unless the
termination thereof be decreed by a court of competent
jurisdiction. Notwithstanding any attempted reletting without
termination by Landlord because of any default by Tenant, Landlord
may at any time after such attempt elect to terminate this Lease for
any such default.
In the event of any default by Tenant, Landlord shall also have the right,
with or without terminating this Lease, to reenter the Project and remove all
persons and property from the Project; such property may be removed and stored
in public warehouse or elsewhere at the cost of and for the account of Tenant;
if Tenant does not remove
48
such property from either the Project or the storage area selected by Landlord
in accordance with the above provision within thirty (30) days from the
effective date of said default, such property shall be deemed to be abandoned
and, at the option of Landlord, shall become the property of Landlord.
(b) Mention in this Lease of any particular remedy shall not preclude
Landlord from any other remedy, at law or in equity, including but not limited
to the right of injunction, as if reentry, summary proceedings or other remedies
were not provided for.
(c) The Tenant shall have an affirmative obligation to notify the Trustee
immediately upon its knowledge of the occurrence of any "Event of Default" as
defined in Section 7.1 hereof.
VII.3 Re-Entry. The terms "enter," "re-enter," "entry" and "re-entry," as
used in this Lease, are not restricted to their technical legal meaning.
VII.4 Remedies Cumulative. Each right or remedy of either party provided
for in this Lease shall be cumulative and shall be in addition to every other
right or remedy provided for in this Lease or now or hereafter existing at law
or in equity or by statute or otherwise, and the exercise or the beginning of
the exercise by a party of any one or more of the rights or remedies provided
for in this Lease or now or hereafter existing at law or in equity or by statute
or otherwise shall not preclude the simultaneous or later exercise by that party
of any or all other rights or remedies provided for in this Lease or now or
hereafter existing at law or in equity or by statute or otherwise.
VII.5 Lessee's Indemnification; Attorney Fees. (a) Tenant covenants and
agrees to pay, and to indemnify Landlord against the payment of all costs and
charges, including reasonable counsel fees, incurred by Landlord in obtaining
possession of the Project after default by Tenant or upon expiration or earlier
termination of the term of this Lease, provided Landlord prevails in any action
or proceeding (except arbitration) brought to obtain, or to determine the right
to, possession. This covenant shall include payment of all reasonable and
documented costs and charges of the Issuer and the Trustee, including reasonable
counsel fees of each.
49
(b) Tenant further agrees that if Tenant defaults under any of the
provisions of this Lease and the Issuer or the Trustee on behalf of the
Bondholders or in its individual capacity employs attorneys or incurs other
expenses in connection with such default, including but not limited to, seeking
legal advice with regards to enforcement rights and for the collection of rent
or the enforcement of performance or of observance of any obligation or
agreement on the part of the Tenant herein contained, or legal advice with
respect thereto, the Tenant agrees that it will on demand therefor pay to the
Issuer or the Trustee the reasonable fees of such attorneys and such other
reasonable and documented expenses as may be incurred by the Issuer and the
Trustee.
VII.6 Mutual Indemnification; Costs. Each party ("indemnitor") covenants
and agrees to pay, and to indemnify the other ("indemnitee") against, all costs
and charges, including reasonable counsel fees, incurred by the indemnitee in
enforcing any agreement or covenant of the indemnitor herein contained, provided
the indemnitee prevails in any action or proceeding (except arbitration) brought
to secure such enforcement.
VII.7 Right of Offset. So long as Tenant has not exercised any right to
terminate this Lease as set forth in Section 10.24(a) hereof, any breach by
Landlord of any term or provisions hereof shall, in addition to those rights set
forth in Section 10.24(a) hereof, give Tenant the right to offset sums due
Tenant from Landlord as a result thereof against sums payable hereunder to
Landlord as Company Payments. In addition, Tenant shall have the right to offset
Company Payments owed to Landlord hereunder against sums owed Tenant from time
to time pursuant to that certain Agreement and Indemnification of even date
herewith among Tenant, Landlord, Hewson Properties, Inc. and Gary J. Hewson. So
long as any Bonds remain Outstanding or the Indenture has not been released,
then notwithstanding a breach by Landlord, Tenant shall remain liable for the
payment of all Basic Rent to the Trustee and payment of other amounts (except
Company Payments) hereunder until the termination of this Lease by Tenant as
provided herein.
VII.8 Certification by Subtenants. Upon request by Landlord, Tenant shall
furnish to Landlord (i) written certification from each subtenant of space
within the Project, confirming the amount of rent due under such subtenant's
lease, stating whether any offsets or defenses exist against the sublessor
thereunder, and covering such
50
other matters as Landlord may reasonably require, and (ii) such other
certifications by Tenant as Landlord may reasonably require with respect to the
physical condition of the Project and Tenant's compliance with the provisions
hereof.
ARTICLE VIII
ARBITRATION
VIII.1 Submission to Board of Arbitrators. If at any time, or from time to
time during the term of this Lease, any dispute shall arise between Landlord and
Tenant, and (i) such dispute shall relate to damage, destruction, alterations or
improvements to, or the taking by eminent domain or the condemnation of, the
Project, or (ii) this Lease shall specifically identify such dispute as subject
to arbitration, or (iii) Landlord and Tenant shall have agreed in writing to
resolve such dispute by arbitration; then and only then shall such dispute be
submitted to a board of arbitrators. The board of arbitrators shall be three (3)
in number, one to be named by each of the parties hereto no later than thirty
(30) days after the parties hereto have agreed to submit such dispute to
arbitration or no later than thirty (30) days after the parties hereto shall
agree that such dispute cannot be resolved between themselves, and the third
arbitrator shall be selected by the two arbitrators previously named. The
decision of any two of such arbitrators shall be final and conclusive on the
parties hereto. All arbitrators hereto shall be independent, disinterested
persons with experience in the area of the dispute; any question arising between
the parties hereto related to value of the Project shall be determined by
qualified, licensed appraisers who are members of the American Institute of Real
Estate Appraisers or similarly qualified persons, and all questions concerning
the structure of the building on the Project shall be determined by engineers,
architects or similarly qualified persons. If the two arbitrators designated by
the parties fail to select a third arbitrator within fifteen (15) days after the
appointment by such parties, then the parties may apply to any Chancellor of the
Chancery Court of DeSoto County, Mississippi to designate a third arbitrator. If
either party hereto shall fail to designate an arbitrator within said thirty
(30) days, the other party shall have the right to appoint a second arbitrator.
The parties to the arbitration shall have the right to offer evidence and
testify at the hearings, to be represented by counsel and to cross-examine
witnesses (but the arbitrators may not determine issues and questions not
submitted to arbitration and not framed by the facts and data presented by the
parties during such hearings). Subject to the foregoing, the
51
arbitration shall be conducted in accordance with the then applicable rules of
the American Arbitration Association.
ARTICLE IX
COVENANT OF QUIET ENJOYMENT
IX.1 Quiet Enjoyment; Non-Disturbance. Landlord covenants and agrees that
Tenant, upon paying the rents reserved herein and observing and keeping the
covenants, agreements and stipulations of this Lease on its part to be kept
shall lawfully, peaceably and quietly hold, occupy and enjoy the Project during
the term of this Lease, without hindrance, ejection or molestation by Landlord
or any person or persons claiming under Landlord or claiming by a title superior
to Landlord. Contemporaneously with the execution of this Lease, Landlord and
Tenant have joined in the execution of the Non-Disturbance Agreement.
ARTICLE X
MISCELLANEOUS
X.1 Tenancy Beyond Lease Term. If Landlord has not leased the Project to
others or does not require the use of the Project for itself and if Tenant holds
possession of the Project after the expiration or termination of the term of
this Lease, Tenant shall become a tenant from month to month upon the terms and
conditions herein contained, so far as applicable, at a monthly rental in an
amount equal to one hundred fifty percent (150%) of the average Global Basic
Rent which was in effect during the Primary Term or Option Term, as applicable,
and which shall be payable in advance, and Tenant shall continue to be such a
month to month tenant until thirty (30) days after Tenant shall have given to
Landlord or Landlord shall have given to Tenant a written notice of intention to
terminate such monthly tenancy.
X.2 Notices. All notices, demands and requests which may or are required
to be given to another party hereunder shall be in writing, and each shall be
deemed to have been properly given (a) on the day given when served personally
on an executive officer or general partner of the party to whom such notice is
to be given, (b) on the following Business Day (as defined in the Loan
Agreement) when sent by reputable overnight courier service, or when sent by
telecopy (confirmed promptly by mail), or (c) on the fifth (5th) Business Day
following the
52
Business Day when sent postage prepaid by first class mail, registered or
certified, return receipt requested, by deposit thereof in a duly constituted
United States Post Office or branch thereof located in one of the states of the
United States of America in a sealed envelope addressed as follows:
(i) To Landlord, Hewson Properties, Inc., 4636 E. University Drive,
Suite 265, Phoenix, Arizona 85034, or such other address as Landlord may
from time to time designate.
(ii) To Tenant, at 3250 Van Ness, San Francisco, California 94109,
Attention: President, or such other address as Tenant may from time to
time designate.
(iii) To Trustee, at Union Planters Bank, N.A., Corporate Trust
Dept., 6200 Poplar Avenue, 3rd Floor, Memphis, Tennessee 38117, Attention:
Ms. Delories Duncan.
A duplicate copy of each notice, certificate or other communication given
hereunder to Tenant and/or Landlord shall also be given to Trustee.
X.3 Definition of "Landlord." The term "Landlord" as used in this Lease so
far as covenants and agreements on the part of Landlord are concerned, shall be
limited to mean and include only the owner or owners of the Landlord's interest
in this Lease at the time in question, and in the event of any transfer or
transfers of such interest authorized herein, except a transfer by way of
security, Landlord herein named (and in case of any subsequent transfer, the
then transferor) shall be automatically freed and relieved from and after the
date of such transfer of all personal liability as respects the performance of
any covenants or agreements on the part of Landlord contained in this Lease
thereafter to be performed; provided, that any funds in the hands of Landlord or
the then transferor at the time of such transfer, in which Tenant has an
interest, shall be turned over to the transferee and any amount then due and
payable to Tenant by Landlord or the then transferor under any provision of this
Lease, shall be paid to Tenant; provided further that, upon any such transfer,
the transferee shall be deemed to have assumed, subject to the limitations of
this Section 10.3, all of the covenants, agreements and conditions in the Lease
contained to be performed on the part of Landlord; it being intended hereby that
the covenants and
53
agreements contained in this Lease on the part of Landlord shall subject as
aforesaid, be binding on Landlord, its successors and assigns, only during and
in respect of their respective successive periods of ownership.
X.4 Headings; Table of Contents. The headings of the Articles and the
numberings of the Sections and Subsections in this Lease are inserted as a
matter of convenience to the parties and shall not affect the construction of
this Lease. The wording of this Lease has been agreed upon by both parties
hereto and therefore no party hereto is deemed to be the author thereof.
X.5 Counterparts. This Lease may be executed in any number of
counterparts, each of which shall be an original and the counterparts shall
constitute but one and the same instrument.
X.6 Governing Law. This Lease is to be governed and construed in
accordance with the internal laws of the State of Mississippi, without regard to
principles of conflicts of laws.
X.7 Cure on Behalf of Landlord. In the event that there shall occur a
default under any mortgage, deed of trust, security agreement, reimbursement
agreement, and/or bond affecting Landlord's interest in the Project, or if any
other lien or encumbrance is created which may be prior to Tenant's interest
hereunder and threatens Tenant's interest hereunder, Tenant may, upon giving
Landlord written notice at least ten (10) days prior to doing so, take such
action, including the payment of money, as may be required to cure such defect,
or to discharge such lien or encumbrance, and may deduct such sums and/or its
cost and expenses in taking such action, from the Company Payments due hereunder
as they may become due.
X.8 Binding on Successors and Assigns. Except as otherwise provided
herein, this Lease shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, successors and assigns.
X.9 Authority of Signatories. (a) Landlord represents and warrants that
the person executing this Lease on behalf of Landlord is a duly authorized
member of Landlord or is its or his duly authorized attorney-in-fact.
54
(b) Tenant represents and warrants that all corporate and other
proceedings required to be taken by or on the part of Tenant and its Board of
Directors for the authorization, execution and delivery of this Lease and the
performance of the agreements set forth herein have been duly taken and that the
person executing this Lease on behalf of Tenant has been duly authorized to act
for and in behalf of Tenant.
X.10 Benefits of the Act. Landlord and Tenant acknowledge that the Bonds
are being issued pursuant to the provisions of Section 57-10-401 et seq. of the
Mississippi Code of 1972, as amended (the "Act"), so that Tenant may obtain
certain benefits provided by the Act as set forth in Section 5.6 of the Loan
Agreement. Tenant hereby acknowledges and accepts the obligations set forth in
Section 5.6 of the Loan Agreement on its behalf, and said Section is hereby
incorporated herein by reference. In order to comply with the requirements of
Section 57-10-409 of the Act, Tenant hereby covenants and agrees as follows:
(a) This Lease may be assigned by Tenant (other than to an affiliate
thereof) only upon the prior written consent of the Issuer following the
adoption of a resolution by the Issuer to such effect.
(b) Upon a default by Tenant in the payment of Basic Rent hereunder, the
Trustee, on behalf of the Issuer, may exercise the rights and remedies available
under the Indenture and the Loan Agreement, including but not limited to
acceleration of the Bonds, foreclosure of the Deed of Trust and termination of
this Lease.
X.11 [RESERVED.]
X.12 Waivers. Neither failure by either party to insist upon the strict
performance of any term or condition of this Lease, or to exercise any right or
remedy available on a breach thereof, nor acceptance by Landlord of full or
partial Basic Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or of any such term or condition. No term or condition
of this Lease required to be performed by a party hereto, and no breach thereof,
shall be waived, altered or modified, except by a written instrument executed by
the party making such waiver. No waiver of any breach shall be taken to
constitute a waiver of any other
55
breach, or of a subsequent breach of the same covenants; and each term or
condition shall continue in full force and effect with respect to any other then
existing or subsequent breach thereof.
X.13 Mechanic's Liens. Under no circumstances shall either party create or
permit the creation of or suffer to exist, any mechanic's lien to be filed
against the Project other than Permitted Encumbrances (as defined in the Loan
Agreement), by reason of any work, labor, services or material supplied or
claimed to have been supplied to the Tenant or to the Landlord. Tenant shall
promptly take all steps necessary to discharge and remove any such lien, except
Permitted Encumbrances, created by the action or inaction of Tenant. Nothing in
this Lease shall be construed in any way as constituting the consent or request
of either party, expressed or implied, by inference or otherwise, to any
contractor, subcontractor, laborer or materialman for the performance of any
labor or the furnishing of any materials for any improvement, alteration, or
repair of or to the Project that would give rise to the assertion of any
mechanics' or materialmen's lien claim against the Project, or as giving either
party the right, power or authority to contract for or to permit the rendering
of any service or the furnishing of any material that would give rise to the
filing of any mechanic's lien claim against the Project.
X.14 Utilities. All heat, water, electric current, gas, or other utilities
used in the Project during the Primary Term and the Option Periods shall be paid
for by the Tenant. In addition, should usage of such utilities during the
construction of the Project exceed that occasioned by construction, due to
installation of Equipment and/or Fixtures by Tenant, Tenant agrees to pay such
additional costs.
X.15 [RESERVED.]
X.16 Cure on Behalf of Tenant. If the Tenant shall be in default
hereunder, and the Tenant shall not have cured such default within the
applicable notice period set forth herein, the Landlord may, at its option, in
addition to any other rights and remedies, cure such default on behalf of the
Tenant, in which event the Tenant shall reimburse the Landlord for all sums paid
to effect such cure, together with interest thereon at the Default Rate (as
defined in the Loan Agreement), and together with such reasonable attorney's
fees as the Landlord may have
56
incurred in connection with such matter. Any such sum so paid by the Landlord,
together with any interest and attorney's fees, as above provided, shall be due
on the next rental installment date following the date of such cure by Landlord.
X.17 Severability. If any term or provision of this Lease, or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby; and each
term and provision of this Lease shall be valid and be enforced to the fullest
extent permitted by applicable law.
X.18 Venue. As an integral part of the consideration for the Landlord's
willingness to enter into this Lease, it is expressly understood and agreed that
no suit or action shall be commenced by either party, or by any successor,
personal representative, or assignee of either party, with respect to this Lease
or any of the provisions hereof, other than in a state court of competent
jurisdiction in DeSoto County, Mississippi, or in the United States District
Court for the Northern District of Mississippi, Delta Division, and not
elsewhere.
X.19 [RESERVED.]
X.20 Waiver of Jury Trial. TO THE FARTHEST EXTENT PERMITTED BY APPLICABLE
LAW, EACH PARTY TO THIS LEASE AGREEMENT HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THIS LEASE
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH, OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALING OF THE PARTIES HERETO WITH RESPECT TO THIS LEASE
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING; AND EACH PARTY
57
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO
THIS LEASE AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR COPY OF THIS SECTION
WITH ANY COURT AS EVIDENCE OF SUCH AGREEMENT.
X.21 Waiver of Right of Recovery. Tenant and Landlord hereby waive and
release any and all right of recovery against the other, including employees and
agents, arising during the term of this Lease for any and all loss or damage to
any property located within or constituting a part of the Project which loss or
damage arises from the perils covered by an all risk policy or which right of
recovery arises from loss of earnings or rents resulting from damage caused by
such a peril. This mutual waiver is in addition to any other waiver or release
contained in this Lease. Landlord and Tenant shall each have their insurance
policies issued in such form as to waive any right of subrogation which might
otherwise exist.
X.22 Design and Construction Indemnity. With respect to the manner of
design and construction of the Project, Landlord agrees at Tenant's option, to
save Tenant harmless from and indemnify and defend Tenant against any and all
injury, loss, damage, liability (or any claims in respect of the foregoing),
costs or expenses (including, without limitation, attorney's fees, reasonable
investigation and discovery costs), of whatever nature, to any person or
property caused or claimed to be caused by or resulting from any act, omission
or negligence of Landlord or its employees or agents, provided that Tenant, upon
becoming aware of such claim or damage, shall promptly notify Landlord as soon
as reasonably possible. The provisions of this paragraph as to property damage
shall be subject to the provisions of paragraph 10.21 regarding waiver of
subrogation; and the provisions of this paragraph shall further be subject to
the proviso that any obligation of Landlord to Tenant hereunder with respect to
matters covered by insurance required to be maintained by Tenant hereunder shall
be limited so as to assume that the deductible provision in such policy of
insurance does not exceed (A) $50,000 (thereby limiting Landlord's obligation
hereunder to $50,000 per claim) in the case of insurance coverage required to be
maintained by Tenant under Section 4.1(a)-(d) and (B) $500,000 (thereby limiting
Landlord's liability hereunder to $500,000 per claim) in the case of insurance
coverage on Tenant's personal property required to be maintained by Tenant under
Section 4.1.
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X.23 Landlord Waiver of Liens. Landlord waives such liens, if any, to
which it may have a right with respect to the merchandise, furniture, trade
fixtures and other personal property of Tenant located on or about the Property
and shall from time to time execute such documents as Tenant may reasonably
request to acknowledge such waiver.
X.24 Tenant Right to Terminate. (a) Provided that all Bonds are redeemed,
the Loan Agreement terminated and the Indenture released, if Landlord should be
in default in the performance of any of its obligations under this Lease, which
default continues for a period of more than thirty (30) days after receipt of
written notice from Tenant specifying such default, or if such default is of a
nature to require more than thirty (30) days for remedy and continues beyond the
time reasonably necessary to cure [provided Landlord must have undertaken
procedures to cure the default within such thirty (30) day period and diligently
pursue such efforts to cure to completion], Tenant may, in addition to availing
itself of any other remedies available at law and in equity, at its option, upon
written notice, terminate this Lease, or may incur any reasonable expense
necessary to perform the obligation of Landlord specified in such notice and
deduct such expense from the Company Payments next becoming due.
(b) So long as the Bonds remain Outstanding, or the Indenture has not been
released, the obligation of the Tenant to pay Basic Rent and Additional Rent as
provided herein and to make all other payments (other than Company Payments),
provided for in this Lease and to maintain the Project in accordance with this
Lease and to perform its other obligations under the Lease shall be absolute and
unconditional, irrespective of any defense or any rights of set-off, recoupment
or counterclaim it might otherwise have against the Landlord. During such
period, the Tenant (i) will not suspend or discontinue any such payment (other
than Company Payments), (ii) will perform all of its other agreements under this
Lease, and (iii) will not terminate this Lease [other than such termination as
is provided for hereunder in subparagraph (a)] for any cause including, without
limitation, any acts or circumstances that may constitute an eviction or
constructive eviction, failure of consideration, failure of title, or commercial
frustration of purpose, or any damage to or destruction of the Project, or the
taking by eminent domain of title to or the rights to temporary use of all or
any part of the Project or any change in the tax or other laws of the
59
United States, the State or any political subdivision of either thereof, or any
failure of the Issuer to perform and observe any agreement or covenant, whether
express or implied, or any duty, liability or obligation arising out of or
connected with this Lease. Notwithstanding the foregoing, the Tenant may, at its
own cost and expense, in its own name, prosecute or defend any action or
proceedings or take any other action involving third persons which the Tenant
deems reasonably necessary in order to secure or protect its right of
possession, use and occupancy of the Project and other rights hereunder. Nothing
contained herein shall be construed to prevent or restrict the Tenant from
asserting any rights which the Tenant may have against the Landlord under this
Lease or under any provision of law.
X.25 Litigation. If either party becomes a party to any litigation
concerning this Lease or the Project by reason of any act or omission of the
other party or its authorized representatives, and not by any act or omission of
the party that becomes a party to that litigation or any act or omission of its
authorized representatives, the party that causes the other party to become
involved in the litigation shall be liable to that party for reasonable
attorney's fees, court costs, investigation expenses, discovery costs and costs
of appeal incurred by it in the litigation.
X.26 Costs of Action. If either party commences an action against the
other party arising out of or in connection with this Lease, the prevailing
party shall be entitled to have and recover from the losing party, reasonable
attorney's fees, costs of suit, investigation costs and discovery costs,
including costs of appeal. When this Lease imposes upon a party an obligation to
indemnify the other, the indemnification obligation shall include the obligation
to pay the indemnitee's reasonable attorney's fees, costs and disbursements,
whether the indemnitee be the plaintiff or defendant.
X.27 Nondisturbance. Landlord covenants to obtain from any secured party
benefitting from an encumbrance on the Project [and each lessor, if any, whose
interest in the Project is paramount to Landlord's ("Overlessor")] at the time
of the execution hereof, or at any time prior to the recordation of the
Memorandum of Lease, an executed non-disturbance agreement assuring Tenant that
notwithstanding any default by Landlord to the lender or Overlessor, or any
foreclosure or deed in lieu thereof (or Overlessor's termination proceedings),
Tenant's rights under this Lease shall continue in full force and effect and its
possession of the Project shall remain
60
undisturbed except in accordance with the provisions of this Lease so long as
Tenant is not in default hereunder so as to prevent Lease termination and that
the proceeds of any insurance recovery or condemnation award shall be used for
the purposes stated in this Lease.
X.28 Tenant Subordination of Lease. Tenant shall upon Landlord's request,
subordinate this Lease in the future to any first lien placed by Landlord on the
Project, with an insurance company, bank or any other institutional lender,
provided that such lender executes a non-disturbance agreement providing that if
Tenant is not then in default under this Lease, this Lease shall not terminate
as a result of the foreclosure of such lien, or conveyance in lieu thereof,
Tenant's rights under this Lease shall continue in full force and effect and its
possession be undisturbed except in accordance with the provisions of this
Lease, and that the proceeds of any insurance recovery or condemnation award
shall be used for the purposes stated in this Lease. Tenant will, upon request
of the lienholder, be a party to such an agreement, and will agree that if such
lienholder succeeds to the interests of Landlord, Tenant will recognize said
lienholder (or successor in interest of the lienholder) as its Landlord under
the terms of this Lease.
X.29 Agency. Nothing contained in this Lease shall be deemed or construed
by the parties hereto or by any third person to create the relationship of
principal and agent, or of partnership, or of joint venture, or of any other
association between the parties other than Landlord and Tenant, or to prevent
Landlord or Tenant from entering into ventures in direct competition with the
Project.
61
X.30 Amendment. This Lease may be amended only by a written instrument
executed by the Landlord and the Tenant. Additionally, prior to full payment of
the Bonds (or provision for payment thereof having been made in accordance with
the Indenture), except for amendments entered into in connection with the
Addition, the Landlord and the Tenant shall not alter, modify or amend in any
material respect any of the terms of this Lease without the prior written
approval of the Holders of sixty-six and two-thirds percent (66 2/3%) of the
Bonds, which consent absent the existence and continuance of an Event of Default
by Tenant hereunder, shall not be unreasonably withheld.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
day and year first above written.
HEWSON/DESOTO PHASE I, L.L.C., an
Arizona limited liability company
BY: HEWSON PROPERTIES, INC.,
a California corporation
By: /s/ GARY J. HEWSON
--------------------------------
Gary J. Hewson,
Chief Executive Officer
LANDLORD
WILLIAMS-SONOMA, INC.,
a California corporation
By: /s/ JERRY S. OWENS
---------------------------------
Title: SVP Distribution
---------------------------------
TENANT
62
STATE OF TENNESSEE
COUNTY OF SHELBY
Personally appeared before me, Mary Pelham Hunt, the undersigned authority
in and for the said county and state, on this the 10th day of December, 1998,
within my jurisdiction, the within named JERRY E. OWENS, who acknowledged that
he is Executive Vice President of WILLIAMS-SONOMA, INC. and that for and on
behalf of the said corporation, and as its act and deed, he executed and
delivered the above and foregoing instrument, after first having been duly
authorized by said corporation to do so.
/s/ MARY PELHAM HUNT
------------------------------------------
Notary Public
My Commission Expires:
June 22, 1999
- ---------------------
STATE OF TENNESSEE
COUNTY OF SHELBY
Personally appeared before me, Mary Pelham Hunt, the undersigned authority
in and for the said county and state, on this the 10th day of December, 1998,
within my jurisdiction, the within named GARY J. HEWSON, who acknowledged
himself to be Chief Executive Officer of HEWSON PROPERTIES, INC., a California
corporation, which corporation is the manager of HEWSON/DESOTO PHASE I, L.L.C.,
an Arizona limited liability company (the "Maker"), and that for and on behalf
of said corporation and as its act and deed as manager of the Maker and for and
on behalf of the Maker and as its act and deed, he executed and delivered the
foregoing instrument after having been duly authorized so to do.
/s/ MARY PELHAM HUNT
------------------------------------------
Notary Public
My Commission Expires:
June 22, 1999
- ---------------------
63
EXHIBIT "A"
Real Property Description
TRACT I:
LOCATED IN DESOTO COUNTY, MISSISSIPPI:
BEING A SURVEY OF PART OF THE SOUTHEAST QUARTER OF THE NORTHEAST QUARTER, PART
OF THE SOUTHWEST QUARTER OF THE NORTHEAST QUARTER, PART OF THE NORTHWEST QUARTER
OF THE NORTHEAST QUARTER AND PART OF THE NORTHEAST QUARTER OF THE NORTHEAST
QUARTER, SECTION 25, TOWNSHIP 1 SOUTH, RANGE 6 WEST, DESOTO COUNTY MISSISSIPPI
AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE NORTHEAST CORNER OF SAID SECTION 25; THENCE
S89(Degree)32'11"W ALONG THE NORTH LINE OF SAID SECTION 25 A DISTANCE OF
80.00 FEET TO A POINT; THENCE S00(Degree)31'04"E ALONG A LINE THAT IS
80.00 FEET WEST OF AND PARALLEL TO THE EAST LINE OF SAID SECTION 25 A
DISTANCE OF 491.49 FEET TO THE POINT OF BEGINNING; THENCE CONTINUING
S00(Degree)31'04"E ALONG A LINE THAT IS 80.00 FEET WEST OF AND PARALLEL TO
THE EAST LINE OF SAID SECTION 25 A DISTANCE OF 1485.00 FEET TO A POINT;
THENCE S89(Degree)13'30"W A DISTANCE OF 1957.52 FEET TO A POINT; THENCE
N00(Degree)46'30"W A DISTANCE OF 1484.99 FEET TO A POINT; THENCE
N89(Degree)13'30"E A DISTANCE OF 1964.19 FEET TO THE POINT OF BEGINNING
AND CONTAINING 2,911,841 SQUARE FEET OR 66.847 ACRES.
TRACT II:
THE RIGHTS BENEFITTING THE FOREGOING TRACT I CREATED BY (A) THAT CERTAIN
RECIPROCAL STORM WATER DRAINAGE AGREEMENT DATED AS OF DECEMBER 1, 1998, BY AND
BETWEEN HEWSON/DESOTO SOUTH, L.L.C. AND HEWSON/DESOTO PHASE I, L.L.C., (B) THAT
CERTAIN RECIPROCAL STORM WATER DETENTION AND DRAINAGE AGREEMENT DATED AS OF
DECEMBER 1, 1998, BY AND BETWEEN HEWSON/DESOTO PHASE I, L.L.C., AND
WILLIAMS-SONOMA, INC., AND (C) THAT A CERTAIN RECIPROCAL CONNECTOR EASEMENT
AGREEMENT BY AND BETWEEN HEWSON/DESOTO PHASE I, L.L.C. AND WILLIAMS-SONOMA, INC.
DATED AS OF DECEMBER 1, 1998 AND (D) THAT CERTAIN PARKING EASEMENT AGREEMENT BY
AND BETWEEN HEWSON/DESOTO PHASE I, L.L.C. AND WILLIAMS SONOMA, INC. DATED AS OF
DECEMBER 1, 1998, EACH RECORDED CONTEMPORANEOUSLY HEREWITH IN THE OFFICE OF THE
CHANCERY CLERK OF DESOTO COUNTY, MISSISSIPPI.
A-1
64
EXHIBIT "B"
Plans for Building and Improvements
See Attached
B-1
65
BOOK 79 PAGE 605
EXHIBIT B
- -----------------------------------------------------------------------------------------------------
RETAIL DISTRIBUTION CAMPUS, WILLIAMS SONOMA, OLIVE BRANCH, MS
Plans by OWENS ENGINEERING CO., INC.
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Final
Sheet # Prepared by: Sheet Title Date Revision Date
- -----------------------------------------------------------------------------------------------------
Cover OWENS Drawing Index 11/5/98
- -----------------------------------------------------------------------------------------------------
CE=2.0 RSM Site Plan 10/15/98
- -----------------------------------------------------------------------------------------------------
CE=2.1 RSM Grading & Drainage Plan 11/5/98
- -----------------------------------------------------------------------------------------------------
CE=2.2 RSM Erosion Control Plan 10/15/98
- -----------------------------------------------------------------------------------------------------
CE=2.3 RSM Construction Details 10/15/98
- -----------------------------------------------------------------------------------------------------
LA=1 RSM Key Sheet and Plant Materials List 10/8/98
- -----------------------------------------------------------------------------------------------------
LA=2 RSM Landscaping Planting Plan 10/8/98
- -----------------------------------------------------------------------------------------------------
LA=3 RSM Landscaping Planting Plan 10/8/98
- -----------------------------------------------------------------------------------------------------
LA=4 RSM Landscaping Planting Plan 10/8/98
- -----------------------------------------------------------------------------------------------------
LA=5 RSM Irrigation Plan 10/8/98
- -----------------------------------------------------------------------------------------------------
LA=6 RSM Irrigation Plan 10/8/98
- -----------------------------------------------------------------------------------------------------
LA=7 RSM Irrigation Plan 10/8/98
- -----------------------------------------------------------------------------------------------------
A=1.0 OWENS Paving, Fencing & Sod Plan 10/6/98 10/28/98
- -----------------------------------------------------------------------------------------------------
A=1.1 OWENS Facility Floor Plan 6/15/98 11/9/98
- -----------------------------------------------------------------------------------------------------
A=1.2 OWENS Office Floor Plan 9/1/98 10/7/98
- -----------------------------------------------------------------------------------------------------
A=1.3 OWENS Enlarged Areas Floor Plan 7/6/98 11/6/98
- -----------------------------------------------------------------------------------------------------
A=1.4 OWENS Mezzanine Plan 9/16/98
- -----------------------------------------------------------------------------------------------------
A=1.5 OWENS Pump House and Storage Tanks Plans & Details 8/19/98 10/21/98
- -----------------------------------------------------------------------------------------------------
A=1.6 OWENS Truck Dispatch House Floor Plan & Details 9/15/98
- -----------------------------------------------------------------------------------------------------
A=2.1 OWENS Door Schedules & Details 9/15/98 11/9/98
- -----------------------------------------------------------------------------------------------------
A=2.2 OWENS Room Finish Schedule Door & Window Details 9/15/98 10/7/98
- -----------------------------------------------------------------------------------------------------
A=3.1 OWENS Building Elevations 6/17/98 11/2/98
- -----------------------------------------------------------------------------------------------------
A=3.2 OWENS Enlarged Building Elevations 9/10/98 11/2/98
- -----------------------------------------------------------------------------------------------------
A=3.3 OWENS S. Wall Tilt-Up Panel Elevations 8/14/98 11/10/98
- -----------------------------------------------------------------------------------------------------
A=3.4 OWENS E. Wall Tilt-Up Panel Elevations 8/14/98 9/28/98
- -----------------------------------------------------------------------------------------------------
A=3.5 OWENS N. Wall Tilt-Up Panel Elevations 8/14/98 10/9/98
- -----------------------------------------------------------------------------------------------------
A=3.6 OWENS W. Wall Tilt-Up Panel Elevations 8/14/98 10/28/98
- -----------------------------------------------------------------------------------------------------
A=3.7 OWENS Restroom Elevations 9/3/98
- -----------------------------------------------------------------------------------------------------
A=3.8 OWENS Architectural Details 9/4/98 11/3/98
- -----------------------------------------------------------------------------------------------------
A=4.1 OWENS Wall Sections 7/8/98
- -----------------------------------------------------------------------------------------------------
A=4.2 OWENS Wall Sections 7/20/98
- -----------------------------------------------------------------------------------------------------
A=4.3 OWENS Wall Sections 8/13/98
- -----------------------------------------------------------------------------------------------------
A=4.4 OWENS Wall Sections 9/10/98
- -----------------------------------------------------------------------------------------------------
A=4.5 OWENS Wall Sections 9/14/98
- -----------------------------------------------------------------------------------------------------
A=4.6 OWENS Wall Sections 11/4/98
- -----------------------------------------------------------------------------------------------------
A=5.1 OWENS Detail 7/23/98
- -----------------------------------------------------------------------------------------------------
A=5.2 OWENS Stair Detail 9/25/98 11/5/98
- -----------------------------------------------------------------------------------------------------
A=6.1 OWENS Glass and Glazing Elevations 10/19/98 11/2/98
- -----------------------------------------------------------------------------------------------------
A=6.2 OWENS Glass and Glazing Detail 10/19/98 11/4/98
- -----------------------------------------------------------------------------------------------------
A=7.1 OWENS Roof Plan 8/17/98 9/25/98
- -----------------------------------------------------------------------------------------------------
A=7.2 OWENS Detail Drawings 8/19/98
- -----------------------------------------------------------------------------------------------------
A=8.1 OWENS Roof Opening Plan Sec. A 10/19/98
- -----------------------------------------------------------------------------------------------------
A=8.2 OWENS Roof Opening Plan Sec. B 10/19/98 10/30/98
- -----------------------------------------------------------------------------------------------------
A=8.3 OWENS Roof Opening Plan Sec. C 10/19/98
- -----------------------------------------------------------------------------------------------------
A=8.4 OWENS Roof Opening Plan Sec. D 10/19/98
- -----------------------------------------------------------------------------------------------------
C=1.1 OWENS Foundation Plan 8/19/98 10/20/98
- -----------------------------------------------------------------------------------------------------
66
BOOK 79 PAGE 606
- -----------------------------------------------------------------------------------------------------
C=1.2 OWENS Misc. Foundation Plans 8/19/98 10/20/98
- -----------------------------------------------------------------------------------------------------
C=1.3 OWENS Office Foundation Plan 9/16/98 10/20/98
- -----------------------------------------------------------------------------------------------------
C=2.1 OWENS Sections and Details 8/19/98 9/16/98
- -----------------------------------------------------------------------------------------------------
C=2.2 OWENS Sections and Details 8/19/98 9/16/98
- -----------------------------------------------------------------------------------------------------
S=1.1 OWENS Roof Framing Plans 8/19/98 9/15/98
- -----------------------------------------------------------------------------------------------------
S=1.2 OWENS Misc. Framing Plans 8/19/98 10/20/98
- -----------------------------------------------------------------------------------------------------
S=1.3 OWENS Office Framing Plans 9/16/98
- -----------------------------------------------------------------------------------------------------
S=1.4 OWENS Misc. Framing Plans 10/20/98
- -----------------------------------------------------------------------------------------------------
S=2.1 OWENS Sections and Details 8/19/98 9/16/98
- -----------------------------------------------------------------------------------------------------
S=2.2 OWENS Sections and Details 8/19/98 10/20/98
- -----------------------------------------------------------------------------------------------------
M=1.1 OWENS Site Utilities Plan 8/19/98 11/9/98
- -----------------------------------------------------------------------------------------------------
M=2.1 OWENS Facility Underground Plumbing 7/27/98 9/28/98
- -----------------------------------------------------------------------------------------------------
M=2.2 OWENS Office Underground Plumbing Plan 7/24/98 10/16/98
- -----------------------------------------------------------------------------------------------------
M=2.3 OWENS Enlarged Areas Underground Plumbing Plan 7/27/98 10/16/98
- -----------------------------------------------------------------------------------------------------
M=2.4 OWENS Underground Riser Diagrams 7/29/98 9/23/98
- -----------------------------------------------------------------------------------------------------
M=3.1 OWENS Facility Overhead Plumbing 7/28/98 11/9/98
- -----------------------------------------------------------------------------------------------------
M=3.2 OWENS Office Overhead Plumbing Plan 7/24/98 10/12/98
- -----------------------------------------------------------------------------------------------------
M=3.3 OWENS Enlarged Areas Overhead Plumbing Plan 7/29/98 10/16/98
- -----------------------------------------------------------------------------------------------------
M=3.4 OWENS Overhead Riser Diagrams 7/29/98 9/28/98
- -----------------------------------------------------------------------------------------------------
M=3.5 OWENS Plumbing Details 7/24/98 9/28/98
- -----------------------------------------------------------------------------------------------------
M=4.1 OWENS Facility HVAC Plan 8/5/98
- -----------------------------------------------------------------------------------------------------
M=4.2 OWENS Office HVAC Plan 9/17/98
- -----------------------------------------------------------------------------------------------------
M=4.3 OWENS Enlarged Areas HVAC Plans 9/16/98
- -----------------------------------------------------------------------------------------------------
M=4.4 OWENS HVAC Sections 8/13/98
- -----------------------------------------------------------------------------------------------------
M=4.5 OWENS HVAC Details 9/14/98
- -----------------------------------------------------------------------------------------------------
M=4.6 OWENS HVAC Schedules & Notes 9/1/98
- -----------------------------------------------------------------------------------------------------
M=5.1 OWENS Facility Fire Protection Sprinkler Plan 9/23/98
- -----------------------------------------------------------------------------------------------------
E=1.1 OWENS Electrical Site Plan 9/15/98
- -----------------------------------------------------------------------------------------------------
E=1.2 OWENS Truck Dispatch & Pump House Electrical Plans 9/21/98
- -----------------------------------------------------------------------------------------------------
E=2.1 OWENS Facility Lighting Plan 7/30/98
- -----------------------------------------------------------------------------------------------------
E=2.1.1 OWENS Facility Lighting Plan Section A 7/31/98 11/6/98
- -----------------------------------------------------------------------------------------------------
E=2.1.2 OWENS Facility Lighting Plan Section B 7/31/98 11/6/98
- -----------------------------------------------------------------------------------------------------
E=2.1.3 OWENS Facility Lighting Plan Section C 7/31/98 11/6/98
- -----------------------------------------------------------------------------------------------------
E=2.1.4 OWENS Facility Lighting Plan Section D 7/31/98 11/6/98
- -----------------------------------------------------------------------------------------------------
E=2.2 OWENS Office Lighting Plan 7/30/98 11/10/98
- -----------------------------------------------------------------------------------------------------
E=2.3 OWENS Enlarged Areas Lighting Plans 6/29/98
- -----------------------------------------------------------------------------------------------------
E=2.4 OWENS Underground Shipping Mezzanine Lighting Plans 8/14/98
- -----------------------------------------------------------------------------------------------------
E=2.5 OWENS Lighting Elevations 8/18/98
- -----------------------------------------------------------------------------------------------------
E=2.6 OWENS Luminaire Schedule & Mounting Detail 8/5/98 11/10/98
- -----------------------------------------------------------------------------------------------------
E=3.1 OWENS Facility Grounding & Panel Feeder Plan 6/15/98
- -----------------------------------------------------------------------------------------------------
E=3.1.1 OWENS Facility Power Plan Section A 7/31/98
- -----------------------------------------------------------------------------------------------------
E=3.1.2 OWENS Facility Power Plan Section B 8/27/98
- -----------------------------------------------------------------------------------------------------
E=3.1.3 OWENS Facility Power Plan Section C 8/27/98
- -----------------------------------------------------------------------------------------------------
E=3.1.4 OWENS Facility Power Plan Section D 8/27/98
- -----------------------------------------------------------------------------------------------------
E=3.2 OWENS Office Power Plan 6/29/98
- -----------------------------------------------------------------------------------------------------
E=3.3 OWENS Enlarged Areas Power Plans 6/29/98
- -----------------------------------------------------------------------------------------------------
E=3.4 OWENS Symbol Schedule & Detail 8/5/98
- -----------------------------------------------------------------------------------------------------
E=4.1 OWENS One Line Diagram 8/4/98
- -----------------------------------------------------------------------------------------------------
E=4.2 OWENS "MSB-2" One Line Diagram 8/27/98
- -----------------------------------------------------------------------------------------------------
E=4.3 OWENS Distribution Panel & Fan Control Schedule 8/4/98
- -----------------------------------------------------------------------------------------------------
E=4.4 OWENS Panelboard Schedules 8/4/98
- -----------------------------------------------------------------------------------------------------
E=4.5 OWENS Panelboard Schedules 8/4/98
- -----------------------------------------------------------------------------------------------------
E=4.6 OWENS Panelboard Schedules 9/22/98
- -----------------------------------------------------------------------------------------------------
67
BOOK 79 PAGE 607
- -----------------------------------------------------------------------------------------------------
E=4.7 OWENS Panelboard Schedules 9/16/98
- -----------------------------------------------------------------------------------------------------
E=4.8 OWENS Panelboard Schedules 9/29/98
- -----------------------------------------------------------------------------------------------------
E=5.1 OWENS Facilities System Plan 10/1/98
- -----------------------------------------------------------------------------------------------------
E=5.2 OWENS Office System Plan 10/1/98
- -----------------------------------------------------------------------------------------------------
E=5.3 OWENS Enlarged Areas System Plan 10/1/98
- -----------------------------------------------------------------------------------------------------
E=5.4 OWENS Systems Riser Diagram, Legend & Details 10/1/98
- -----------------------------------------------------------------------------------------------------
E=5.5 OWENS PA System and CCTV System Riser Diagram & Details 10/8/98
- -----------------------------------------------------------------------------------------------------
68
EXHIBIT "C"
Rent Schedule
See Attached
C-1
69
EXHIBIT "C"
GLOBAL
LEASE BASIC COMPANY BASIC
QRTS. DATE INTEREST SINK FUND RENT PAYMENT RENT
- ------------------------------------------------------------------------------------------
04/01/99 $808,000 $0 $808,000 $0 $808,000
0 06/01/99 $0 $0 $0 $12,625 $12,625
1 07/01/99 $606,000 $0 $606,000 $37,875 $643,875
2 10/01/99 $606,000 $0 $606,000 $37,875 $643,875
3 01/01/00 $606,000 $200,000 $806,000 $37,875 $843,875
4 04/01/00 $602,000 $0 $602,000 $37,875 $639,875
5 07/01/00 $602,000 $300,000 $902,000 $37,875 $939,875
6 10/01/00 $596,000 $0 $596,000 $37,875 $633,875
7 01/01/01 $596,000 $300,000 $896,000 $37,875 $933,875
8 04/01/01 $590,000 $0 $590,000 $37,875 $627,875
9 07/01/01 $590,000 $300,000 $890,000 $37,875 $927,875
10 10/01/01 $584,000 $0 $584,000 $37,875 $621,875
11 01/01/02 $584,000 $300,000 $884,000 $37,875 $921,875
12 04/01/02 $578,000 $0 $578,000 $37,875 $615,875
13 07/01/02 $578,000 $300,000 $878,000 $37,875 $915,875
14 10/01/02 $572,000 $0 $572,000 $37,875 $609,875
15 01/01/03 $572,000 $300,000 $872,000 $37,875 $909,875
16 04/01/03 $566,000 $0 $566,000 $37,875 $603,875
17 07/01/03 $566,000 $300,000 $866,000 $37,875 $903,875
18 10/01/03 $560,000 $0 $560,000 $37,875 $597,875
19 01/01/04 $560,000 $300,000 $860,000 $37,875 $897,875
20 04/01/04 $554,000 $0 $554,000 $37,875 $591,875
21 07/01/04 $554,000 $400,000 $954,000 $37,875 $991,875
22 10/01/04 $546,000 $0 $546,000 $37,875 $583,875
23 01/01/05 $546,000 $400,000 $946,000 $37,875 $983,875
24 04/01/05 $538,000 $0 $538,000 $37,875 $575,875
25 07/01/05 $538,000 $400,000 $938,000 $37,875 $975,875
26 10/01/05 $530,000 $0 $530,000 $37,875 $567,875
27 01/01/06 $530,000 $400,000 $930,000 $37,875 $967,875
28 04/01/06 $522,000 $0 $522,000 $37,875 $559,875
29 07/01/06 $522,000 $400,000 $922,000 $37,875 $959,875
30 10/01/06 $514,000 $0 $514,000 $37,875 $551,875
31 01/01/07 $514,000 $400,000 $914,000 $37,875 $951,875
32 04/01/07 $506,000 $0 $506,000 $37,875 $543,875
33 07/01/07 $506,000 $500,000 $1,006,000 $37,875 $1,043,875
34 10/01/07 $496,000 $0 $496,000 $37,875 $533,875
35 01/01/08 $496,000 $500,000 $996,000 $37,875 $1,033,875
70
EXHIBIT "C"
GLOBAL
LEASE BASIC COMPANY BASIC
QRTS. DATE INTEREST SINK FUND RENT PAYMENT RENT
- -----------------------------------------------------------------------------------------
36 04/01/08 $486,000 $0 $486,000 $37,875 $523,875
37 07/01/08 $486,000 $500,000 $986,000 $37,875 $1,023,875
38 10/01/08 $476,000 $0 $476,000 $37,875 $513,875
39 01/01/09 $476,000 $500,000 $976,000 $37,875 $1,013,875
40 04/01/09 $466,000 $0 $466,000 $37,875 $503,875
41 07/01/09 $466,000 $500,000 $966,000 $37,875 $1,003,875
42 10/01/09 $456,000 $0 $456,000 $37,875 $493,875
43 01/01/10 $456,000 $500,000 $956,000 $37,875 $993,875
44 04/01/10 $446,000 $0 $446,000 $37,875 $483,875
45 07/01/10 $446,000 $600,000 $1,046,000 $37,875 $1,083,875
46 10/01/10 $434,000 $0 $434,000 $37,875 $471,875
47 01/01/11 $434,000 $600,000 $1,034,000 $37,875 $1,071,875
48 04/01/11 $422,000 $0 $422,000 $37,875 $459,875
49 07/01/11 $422,000 $600,000 $1,022,000 $37,875 $1,059,875
50 10/01/11 $410,000 $0 $410,000 $37,875 $447,875
51 01/01/12 $410,000 $600,000 $1,010,000 $37,875 $1,047,875
52 04/01/12 $398,000 $0 $398,000 $37,875 $435,875
53 07/01/12 $398,000 $700,000 $1,098,000 $37,875 $1,135,875
54 10/01/12 $384,000 $0 $384,000 $37,875 $421,875
55 01/01/13 $384,000 $700,000 $1,084,000 $37,875 $1,121,875
56 04/01/13 $370,000 $0 $370,000 $37,875 $407,875
57 07/01/13 $370,000 $700,000 $1,070,000 $37,875 $1,107,875
58 10/01/13 $356,000 $0 $356,000 $37,875 $393,875
59 01/01/14 $356,000 $800,000 $1,156,000 $37,875 $1,193,875
60 04/01/14 $340,000 $0 $340,000 $37,875 $377,875
61 07/01/14 $340,000 $800,000 $1,140,000 $37,875 $1,177,875
62 10/01/14 $324,000 $0 $324,000 $37,875 $361,875
63 01/01/15 $324,000 $800,000 $1,124,000 $37,875 $1,161,875
64 04/01/15 $308,000 $0 $308,000 $37,875 $345,875
65 07/01/15 $308,000 $800,000 $1,108,000 $37,875 $1,145,875
66 10/01/15 $292,000 $0 $292,000 $37,875 $329,875
67 01/01/16 $292,000 $900,000 $1,192,000 $37,875 $1,229,875
68 04/01/16 $274,000 $0 $274,000 $37,875 $311,875
69 07/01/16 $274,000 $900,000 $1,174,000 $37,875 $1,211,875
70 10/01/16 $256,000 $0 $256,000 $37,875 $293,875
71 01/01/17 $256,000 $900,000 $1,156,000 $37,875 $1,193,875
72 04/01/17 $238,000 $0 $238,000 $37,875 $275,875
71
EXHIBIT "C"
GLOBAL
LEASE BASIC COMPANY BASIC
QRTS DATE INTEREST SINK FUND RENT PAYMENT RENT
- ----- ---- ------- --------- ----- ------- ------
73 07/01/17 $238,000 $1,000,000 $1,238,000 $37,875 $1,275,875
74 10/01/17 $218,000 $0 $218,000 $37,875 $255,875
75 01/01/18 $218,000 $1,000,000 $1,218,000 $37,875 $1,255,875
76 04/01/18 $198,000 $0 $198,000 $37,875 $235,875
77 07/01/18 $198,000 $1,100,000 $1,298,000 $37,875 $1,335,875
78 10/01/18 $176,000 $0 $176,000 $37,875 $213,875
79 01/01/19 $176,000 $1,100,000 $1,276,000 $37,875 $1,313,875
80 04/01/19 $154,000 $0 $154,000 $37,875 $191,875
81 07/01/19 $154,000 $1,200,000 $1,354,000 $37,875 $1,391,875
85 10/01/19 $130,000 $0 $130,000 $37,875 $167,875
86 01/01/20 $130,000 $1,200,000 $1,330,000 $37,875 $1,367,875
87 04/01/20 $106,000 $0 $106,000 $37,875 $143,875
88 07/01/20 $106,000 $1,200,000 $1,306,000 $37,875 $1,343,875
89 10/01/20 $82,000 $0 $82,000 $37,875 $119,875
90 01/01/21 $82,000 $1,300,000 $1,382,000 $37,875 $1,419,875
91 04/01/21 $56,000 $0 $56,000 $37,875 $93,875
92 07/01/21 $56,000 $1,400,000 $1,456,000 $37,875 $1,493,875
93 10/01/21 $28,000 $0 $28,000 $37,875 $65,875
94 01/01/22 $28,000 $1,400,000 $1,428,000 $0 $1,428,000
$36,902,000 $30,300,000 $67,202,000 $3,421,375 $70,623,375
72
EXHIBIT "D"
Environmental Notices
NONE
D-1
73
EXHIBIT "E"
Easements Affecting Real Property
1. Reciprocal Storm Water Drainage Agreement by and between Hewson/DeSoto
South, L.L.C. and Landlord dated as of the 1st day of December, 1998.
2. Reciprocal Storm Water Detention and Drainage Agreement by and between
Landlord and Tenant dated as of the 1st day of December, 1998.
3. Reciprocal Connector Easement Agreement by and between Landlord and Tenant
dated as of the 1st day of December, 1998.
4. Parking Easement Agreement by and between Landlord and Tenant dated as of
the 1st day of December, 1998.
E-1
74
EXHIBIT "F"
Letter Regarding Future Phases
F-1
75
[WILLIAMS-SONOMA, INC. LETTERHEAD]
July 1, 1998
Mayor Samuel Rikard
City of Olive Branch
9189 Pigeon Roost
Olive Branch, MS 38854
Honorable Mayor Rikard:
This letter is respectfully submitted in fulfillment of the requirements of the
Mississippi Department of Economic Development, Mississippi Business Investment
Act (MBIA) Program. The program is designed to promote business and economic
development through job producing programs and by providing loans and grants to
cities and counties to finance improvements. The program requires that any
private company desiring assistance from a city of a county shall submit a
letter of intent to locate, expand, or build a facility entirely or partially
within the city or county.
As required by the MBIA program, the following sets forth the intention of
Williams-Sonoma, Inc. ("Williams-Sonoma") to locate a distribution facility in
Olive Branch, DeSoto County, Mississippi, subject to the satisfaction of the
following conditions:
i) Satisfactory resolutions of all issues relating to annexation,
utilities, infrastructure, local permits for Williams-Sonoma's
intended use, etc.;
ii) The negotiation and documentation of a lease between Hewson
Properties, Inc. ("Hewson Properties") and Williams-Sonoma on terms
reasonably acceptable to Williams-Sonoma (including the treatment
of the lease as an operating lease for Williams-Sonoma's financial
accounting purposes); and
iii) Completion and delivery of the first building by Hewson Properties
on schedule and in accordance with plans approved by Williams-
Sonoma.
This project is eligible for MBIA assistance as a "job producing facility."
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Mayor Rikard
7-1-98
Page two
- - A commitment regarding the number of net new full-time equivalent jobs to
be created and maintained by the Project.
It is Williams-Sonoma's hope that, as and when fully implemented, the
Project will cause the creation of 540 net new full-time equivalent jobs as
a result of the loan made pursuant to the Mississippi Business Investment
Act. For the purposes of the MBIA loan, however, Williams-Sonoma agrees to
create and maintain a minimum of 134 full-time equivalent jobs for the ten
(10) year duration of the MBIA loan, provided that the conditions set forth
above have been satisfied. The average wages, excluding fringe benefits,
for these jobs is anticipated to be $10 per hour. The 134 full-time
equivalent jobs are anticipated to be created by the end of the fourth year
following the date of the closing of the loan.
- - An acknowledgment of understanding that penalties may be imposed on the
Private Company, pursuant to the Act and Guidelines, if the Private Company
fails to create and maintain the number of jobs specified in the
application.
Williams-Sonoma acknowledges that if the conditions set forth above have
been satisfied and Williams-Sonoma fails to create and maintain the 134
full-time equivalent jobs specified in this letter of intent, it shall be
liable as follows: (a) an interest charge increase equal to the current New
York Prime Interest Rate plus two percent (2%) for the remainder of the
loan, or (b) prepayment of the outstanding loan amount incurred by the City
of Olive Branch for the project's benefit. The penalties or a portion
thereof may be waived by DECD if Williams-Sonoma's failure to satisfy the
job creation requirement is due to circumstances outside tis control. The
penalties or portion thereof shall be payable in such installments as DECD
deems appropriate.
- - Current employment levels at the Project site and statewide employment of
the Private Company.
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Mayor Rikard
7-1-98
Page three
Employment at the project site is zero. Williams-Sonoma
currently employs 15 people statewide
- The estimated dollar costs of the Project and a description of
the private parties investment in the Project and any public or
other private sources of funding.
As you are aware, Hewson Properties is developing the first
building of a two building distribution facility project (the
"Project") for ultimate lease to Williams-Sonoma. The plan is
for this building to be located on a 61 acre parcel east of the
Olive Branch Airport, west of the proposed future Polk Lane,
and north of Goodman Road and the Whispering Woods Golf Course.
At the same time, it is contemplated that Williams-Sonoma will
have the right to acquire an adjacent 61 acre parcel, as the
sites of a future second building (described below).
The first building will be 750,000 square feet and Hewson
Properties has advised us that it will cost approximately
$30,000,000 including land, building and soft costs. In
addition, upon Williams-Sonoma's occupancy of the first building,
Williams-Sonoma will purchase and/or lease approximately
$20,000,000 of equipment for the building. Hewson Properties
informs us that completion and occupancy of this first building
is scheduled for 6/1/99. Upon its occupancy of this phase of
the Project, Williams-Sonoma expects to employ approximately
235 people on an adjusted full-time basis.
The second building occupies 614,000 square feet and we are
informed that it will cost approximately $24,500,000 including
land, building and soft costs. In addition, if and when
Williams-Sonoma occupies the second building, Williams-Sonoma
will purchase and/or lease approximately $11,300,000 of
equipment for the building. While completion and occupancy
of this second building is presently targeted for 6/1/01,
Williams-Sonoma's going forward with implementing plans for
this second building (as well as the expansions of this
building and the first building discussed), as well as definitive
projected occupancy dates, will depend on the continued future
78
Mayor Rikard
7-1-98
Page four
growth of Williams-Sonoma's business. Upon its occupancy of this phase
of the Project, Williams-Sonoma expects to employ an additional
approximately 131 people on an adjusted full-time basis.
Subsequent to the completion and stabilization of the first two
building, plans call for each building to be expanded as and when
Williams-Sonoma's needs require by 318,000 square feet and 380,000
square feet respectively. We have been advised by Hewson Properties
that the costs of such expansion will be approximately $11,100,000 and
$13,300,000 respectively, for building and soft costs. Williams-Sonoma
expects that each such expansion will contain between $7,000,000 and
$8,500,000 of equipment to be purchased and/or leased by
Williams-Sonoma. We anticipate that as and when these two expansions
go forward, employment for another 174 people on an adjusted full-time
basis will be provided.
The total estimated project cost for the first building alone
(including equipment therein) (but not including the second building
or future expansions of the first and second buildings or equipment
therein) is expected to be approximately $50,000,000. For the purpose
of the MBIA loan and the Economic Development Highway Program Grant,
assuming satisfaction of the conditions set forth above, upon
occupancy of the first building, Williams-Sonoma commits to expend
approximately $20,000,000 in equipment lease payments, machinery, and
equipment for the project with the balance of the project costs to be
financed by the project developer and Williams-Sonoma's anticipated
landlord, Hewson Properties. Other project costs (i.e., necessary
public infrastructure) will be met with an MBIA loan totaling
$2,000,000 and an Economic Development Highway Grant totaling
$6,500,000.
- The time schedule for implementation and completion of the Project,
evidencing an expeditious completion of the Project.
Williams-Sonoma is informed that Hewson Properties expects to begin
work on the first building of the project in June 1998 and expects the
first building to be completed by June 1, 1999. If
79
Mayor Rikard
7-1-98
Page five
Williams-Sonoma continues to grow at its current rate, it is
anticipated that Williams-Sonoma will want to take occupancy
of the second building by June 1, 2001.
- A verifiable statement that the Project could not be completed
without the infusion of the requested public funds.
Hewson Properties has advised Williams-Sonoma that without
the infusion of MBIA funds, the completion of the project
would not be feasible.
A statement of intention to operate the Project for a time period equal to
the term of the loan to the Local Sponsor.
- Assuming satisfaction of the conditions set forth above, Williams-
Sonoma intends to operate its Olive Branch, DeSoto County facility for
at least the ten (10) year duration of the loan.
- - Any commitment to pay rental on the Project or to make loan payments to
the Local Sponsor.
- The City of Olive Branch will repay the MBIA loan. Neither Hewson
Properties nor Williams-Sonoma intends to pay rental or make loan
payments to the City of Olive Branch.
- - A statement that the specific improvements are necessary for the efficient
and cost effective operation of the Project, together with supporting
financial and engineering documentation.
- The proceeds of the MBIA loan will be used for the construction of
non-road infrastructure improvements to serve the facility. MBIA
funds are necessary for the efficient and cost effective operation
of the project.
- - A notarized statement of willingness to grant a lien on the facility for
which the improvements are being provided or to otherwise collateralize
the loan. Such lien may be foreclosed in the event that the Private Company
fails to operate the Project in accordance with the terms of any agreements
among the parties involved in the financing of the project.
80
Mayor Rikard
7-1-98
Page six
o The improvements proposed by this project will be publicly owned
infrastructure. Neither Hewson Properties nor Williams-Sonoma will
make loan payments to repay the MBIA loan and, accordingly, neither
Hewson Properties nor Williams-Sonoma will grant any liens on the
facility with respect to such loan.
o A statement of willingness to comply with non-discrimination and equal
employment opportunity requirements.
o Williams-Sonoma will comply with all applicable federal and state laws
governing non-discrimination and equal employment opportunity.
Williams-Sonoma anticipates that Hewson Properties will provide a
similar undertaking.
o Evidence that there will be a Private Match of at least three dollars
($3.00) for every one dollar ($1.00) of MBI assistance.
o The private match ratio is approximately 25 to 1 for the first
building. Other funds - $30,000,000, Hewson Properties land, building
and soft costs, plus $20,000,000 Williams-Sonoma equipment expense.
(Additionally, Economic Development Highway Program will be requested
to provide $6,500,000) and MBIA Funds - $2,000,000.
o Evidence the proposed project will increase at least one (1) net new
full-time equivalent job for every fifteen thousand dollars ($15,000)
either loaned or granted for the Project.
o For the purposes of the MBIA loan and this letter of intent, upon
satisfaction of the conditions set forth above with respect to the
first building, Williams-Sonoma commits to create and maintain 134
jobs on an adjusted full-time basis for a minimum of ten (10) years
after its initial project occupancy. This equals one (1) net new
full-time job for every $15,000 loaned.
o From and after its initial project occupancy, job creation will be
documented by Williams-Sonoma by annually submitting a report entitled
"Statement of Job Creation" to the Mississippi Department of Economic
and Community Development.
81
Mayor Rikard
7-1-98
Page seven
o The actual number of full-time equivalent jobs may well exceed the
minimum commitment. If the second building and further expansions
of the first and second building are realized as anticipated,
approximately 540 full-time equivalent jobs are expected to be
generated by the Project.
Thank you for your willingness to participate in the MBIA program and for your
cooperation and assistance in making this project become a reality.
If additional information is required, please feel free to contact me at your
convenience.
Sincerely,
/s/ W. Howard Lester
- -----------------------
W. Howard Lester
HL/ea
82
EXHIBIT "G"
Existing Indebtedness
83
LEASE EXHIBIT G
WILLIAMS-SONOMA
SCHEDULE OF INDEBTEDNESS
AS OF NOVEMBER 29, 1998
BALANCE AT
NOVEMBER 29, 1998
7.2% Senior Notes due August 8, 2005, as follows:
Teachers Insurance and Annuity Association of America $20,000,000
Transamerica Life Insurance and Annuity Co. $ 9,000,000
Transamerica Occidental Life Insurance Co. $ 1,000,000
New England Mutual Life Insurance Co. $10,000,000
-----------
Total Senior Notes $40,000,000
Mortgage with Bank of America due March 2001 $ 6,310,300
Various capital leases $ 1,460,200
Executive deferred compensation plan $ 2,543,000
Foreign letters of credit outstanding (contingent)* $42,271,000
-----------
TOTAL INDEBTEDNESS $92,584,500
===========
Note: The Company has up to $60 m available in a line of credit facility with
Bank of America, of which $0 was outstanding at November 29, 1998.
* Varies from time to time, as Company's importing of goods varies. These are
more in the nature of "trade payables" than Debt, but are disclosed here in an
abundance of caution.