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FACILITIES LEASE AGREEMENT
between
BRAZOS MARKETS DEVELOPMENT, L.P.
and
RANDALL'S FOOD & DRUGS, INC.
and
RANDALL'S FOOD MARKETS, INC.
Dated as of September 10, 1998
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THIS FACILITIES LEASE AGREEMENT HAS BEEN ASSIGNED
AS SECURITY FOR INDEBTEDNESS OF
BRAZOS MARKETS DEVELOPMENT, L.P.
SEE SECTION 19.10
This Facilities Lease Agreement has been manually executed in 6 counterparts,
numbered consecutively from 1 through 6, of which this is No. ________. To
the extent, if any, that this Facilities Lease Agreement constitutes chattel
paper (as such term is defined in the Uniform Commercial Code as in effect in
any applicable jurisdiction) no security interest in this Facilities Lease
Agreement may be created or perfected through the transfer or possession of
any counterpart other than the original executed counterpart which shall be
the counterpart identified as counterpart No. 1.
TABLE OF CONTENTS
FACILITIES LEASE AGREEMENT
Page
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ARTICLE IDEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1.1. DEFINED TERMS.. . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1.2. FORMS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Section 1.3. RECITALS, TABLE OF CONTENTS, TITLES, AND HEADINGS . . . . . . . .7
Section 1.4. INTERPRETATION. . . . . . . . . . . . . . . . . . . . . . . . . .7
ARTICLE IIREPRESENTATIONS AND WARRANTIES OF LESSEE AND BRAZOS. . . . . . . . . . . .8
Section 2.1. CORPORATE MATTERS.. . . . . . . . . . . . . . . . . . . . . . . .8
Section 2.2. AUTHORIZATION; BINDING AGREEMENT. . . . . . . . . . . . . . . . .8
Section 2.3. POWER AND AUTHORITY.. . . . . . . . . . . . . . . . . . . . . . .8
Section 2.4. CONSENTS, APPROVALS, AUTHORIZATIONS.. . . . . . . . . . . . . . .8
Section 2.5. COMPLIANCE WITH LEGAL REQUIREMENTS AND
INSURANCE REQUIREMENTS. . . . . . . . . . . . . . . . . . . . . .8
Section 2.6. AGREEMENT FOR FACILITIES LEASE. . . . . . . . . . . . . . . . . .9
Section 2.7. NO ENCROACHMENTS. . . . . . . . . . . . . . . . . . . . . . . . .9
Section 2.8. FACILITY AND FF&E LIENS . . . . . . . . . . . . . . . . . . . . .9
Section 2.9. BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Section 2.10. SUITABILITY OF FACILITY AND FF&E . . . . . . . . . . . . . . . .9
Section 2.11. EXISTENCE. . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Section 2.12. PARTNERSHIP POWER. . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.13. AUTHORIZATION AND APPROVALS. . . . . . . . . . . . . . . . . . 10
Section 2.14. ENFORCEABLE OBLIGATIONS. . . . . . . . . . . . . . . . . . . . 10
Section 2.15. PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.16. OTHER ASSETS AND LIABILITIES.. . . . . . . . . . . . . . . . . 10
ARTICLE IIILEASE OF FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.1. LEASE.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.2. FACILITY LEASING RECORD.. . . . . . . . . . . . . . . . . . . . 10
Section 3.3. OWNERSHIP OF THE FACILITY AND FF&E. . . . . . . . . . . . . . . 11
Section 3.4. BRAZOS COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IVDELIVERY AND ACCEPTANCE. . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.1. ACCEPTANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.2. PAYMENTS FINAL. . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.3. NO WARRANTIES OR REPRESENTATIONS. . . . . . . . . . . . . . . . 12
Section 4.4. QUIET ENJOYMENT.. . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.5. OTHER FINANCING REQUIREMENTS. . . . . . . . . . . . . . . . . . 13
ARTICLE VLEASE TERM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.1. LEASE TERM. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.2. INSURABLE INTEREST. . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.3. TERMINATION.. . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VIRENT AND OTHER PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 13
(i)
Section 6.1. BASIC RENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 6.2. OTHER AMOUNTS.. . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 6.3. ADDITIONAL RENT.. . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6.4. PAYMENT IN ADVANCE. . . . . . . . . . . . . . . . . . . . . . . 14
Section 6.5. CREDIT AGREEMENT LOSSES . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VIIRESTRICTED USE; COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . 14
Section 7.1. INSURANCE REQUIREMENT AND LEGAL REQUIREMENT.. . . . . . . . . . 14
Section 7.2. FILINGS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 7.3. COMPLIANCE WITH OTHER REQUIREMENTS. . . . . . . . . . . . . . . 15
Section 7.4. INSPECTION. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 7.5. NO LIENS; ASSIGNMENT AND SUBLETTING.. . . . . . . . . . . . . . 15
Section 7.6. INTERFERENCE. . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 7.7. DELIVERY OF INFORMATION . . . . . . . . . . . . . . . . . . . . 16
Section 7.8 EXECUTION OF DOCUMENTS. . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VIIIMAINTENANCE, IMPROVEMENT AND REPAIR OF FACILITIES . . . . . . . . . . 17
Section 8.1. WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.2. COSTS AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.3. PAYMENT OF TAXES. . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.4. NO MATERIAL ALTERATIONS.. . . . . . . . . . . . . . . . . . . . 18
Section 8.5. MAINTENANCE.. . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 8.6. ADDITIONS AND ALTERATIONS.. . . . . . . . . . . . . . . . . . . 18
Section 8.7. ENVIRONMENTAL REPORTS . . . . . . . . . . . . . . . . . . . . . 18
Section 8.8. OBLIGATIONS OF BRAZOS . . . . . . . . . . . . . . . . . . . . . 18
Section 8.9. CORRECTION OF STRUCTURAL DEFECTS. . . . . . . . . . . . . . . . 19
ARTICLE IXINSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 9.1. LIABILITY AND PROPERTY DAMAGE.. . . . . . . . . . . . . . . . . 19
Section 9.2. ADDITIONAL INSUREDS; NOTICE.. . . . . . . . . . . . . . . . . . 19
Section 9.3. APPLICATION OF PROCEEDS OF LOSS OR SUBSTANTIAL TAKING . . . . . 19
Section 9.4. APPLICATION OF PROCEEDS OF OTHER THAN LOSS OR SUBSTANTIAL
TAKING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 9.5. INVESTMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 9.6. APPLICATION IN DEFAULT. . . . . . . . . . . . . . . . . . . . . 20
Section 9.7. CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 9.8. COVENANT TO KEEP INSURANCE IN FORCE.. . . . . . . . . . . . . . 20
ARTICLE XINDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 10.1. INDEMNIFIED PERSONS. . . . . . . . . . . . . . . . . . . . . . 21
Section 10.2. PAYMENTS.. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 10.3. CONTINUING INDEMNIFICATION.. . . . . . . . . . . . . . . . . . 22
Section 10.4. LIMITATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 10.5. LITIGATION.. . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE XIRENEWAL AND TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 11.1. LESSEE'S RIGHT TO TERMINATE. . . . . . . . . . . . . . . . . . 23
Section 11.2. BRAZOS' RIGHT TO TERMINATE . . . . . . . . . . . . . . . . . . 24
Section 11.3. RENEWAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 11.4. SALES TO THIRD PARTIES . . . . . . . . . . . . . . . . . . . . 25
Section 11.5. ADVISEMENT.. . . . . . . . . . . . . . . . . . . . . . . . . . 26
(ii)
Section 11.6. ADDITIONAL PAYMENTS. . . . . . . . . . . . . . . . . . . . . . 26
Section 11.7. TERMINATION OF FACILITIES LEASE. . . . . . . . . . . . . . . . 27
Section 11.8. SURRENDER OF FACILITY. . . . . . . . . . . . . . . . . . . . . 27
ARTICLE XIIPROCEDURE UPON SALE . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE XIIIEVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 13.1. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . 28
Section 13.2. RIGHTS UPON DEFAULT. . . . . . . . . . . . . . . . . . . . . . 29
Section 13.3. EVENTS OF FACILITY TERMINATION.. . . . . . . . . . . . . . . . 32
Section 13.4. BRAZOS' RIGHT UPON EVENT OF FACILITY TERMINATION.. . . . . . . 33
ARTICLE XIVLOSS OF OR DAMAGE TO FACILITIES . . . . . . . . . . . . . . . . . . . . 34
Section 14.1. LESSEE'S RISK. . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 14.2. REPAIR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 14.3. FACILITY DAMAGED BEYOND REPAIR.. . . . . . . . . . . . . . . . 34
ARTICLE XVCONDEMNATION OF FACILITY . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 15.1. TAKING OF SUBSTANTIALLY ALL OF A FACILITY. . . . . . . . . . . 34
Section 15.2. TAKING OF LESS THAN SUBSTANTIALLY ALL OF A FACILITY. . . . . . 35
Section 15.3. GRANT OF EASEMENTS.. . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE XVILEASEHOLD INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE XVIIINTENTIONALLY OMITTED. . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE XVIIIPERMITTED CONTESTS. . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE XIXMISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 19.1. SURVIVAL.. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 19.2. ENTIRE AGREEMENT.. . . . . . . . . . . . . . . . . . . . . . . 37
Section 19.3. MODIFICATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 19.4. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 19.5. NO OFFSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 19.6. NON-RECOURSE.. . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 19.7. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 19.8. USURY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 19.9. NO MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 19.10. SALE OR ASSIGNMENT BY BRAZOS. . . . . . . . . . . . . . . . . 42
Section 19.11. INCOME TAXES. . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 19.12. TRANSFER ON AS-IS BASIS.. . . . . . . . . . . . . . . . . . . 42
Section 19.13. RIGHT TO PERFORM FOR LESSEE. . . . . . . . . . . . . . . . . 42
Section 19.14. MERGER, CONSOLIDATION OR SALE OF ASSETS.. . . . . . . . . . . 43
Section 19.15. RULE AGAINST PERPETUITIES.. . . . . . . . . . . . . . . . . . 43
Section 19.16. REEXECUTION.. . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 19.17. PURCHASE OR SALE OF PROPERTY. . . . . . . . . . . . . . . . . 43
Section 19.18. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 19.19. INTENTIONALLY OMITTED . . . . . . . . . . . . . . . . . . . . 43
Section 19.20. EXECUTION IN COUNTERPARTS . . . . . . . . . . . . . . . . . . 43
Section 19.21. CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . 43
(iii)
Section 19.22. WAIVER OF LANDLORD'S LIENS. . . . . . . . . . . . . . . . . . 43
Section 19.23. BREAKAGE COSTS ARISING DUE TO BRAZOS DEFAULT. . . . . . . . . 43
Section 19.24. MEMORANDA OF LEASE. . . . . . . . . . . . . . . . . . . . . . 44
(iv)
(v)
List of Exhibits
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Exhibit A Schedule of Insurance
(vi)
FACILITIES LEASE AGREEMENT
THIS FACILITIES LEASE AGREEMENT (this "FACILITIES LEASE") is made and
entered into as of September 10, 1998, by and among BRAZOS MARKETS
DEVELOPMENT, L.P., a Delaware limited partnership (referred to herein as
"BRAZOS"), RANDALL'S FOOD & DRUGS, INC., a Delaware corporation (referred to
herein as "LESSEE") and RANDALL'S FOOD MARKETS, INC., a Texas corporation
(referred to herein as "LESSEE" or Guarantor, as applicable).
W I T N E S S E T H:
WHEREAS, Brazos may hereafter purchase or lease certain equipment and
construct or acquire fee or leasehold interests in certain buildings and
other facilities; and
WHEREAS, on or about the date of this Facilities Lease, Brazos and
Lessee entered into an Agreement for Facilities Lease, providing for the
purchase or lease of equipment and the construction of such buildings and
other facilities from time to time; and
WHEREAS, Lessee wishes to lease or sublease such equipment, buildings
and other facilities under the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Brazos and Lessee hereby agree as follows:
ARTICLE I
DEFINITIONS
Section I.1. DEFINED TERMS. For the purposes of this Facilities Lease
each of the following terms shall have the meaning specified with respect
thereto:
"ACQUIRED FACILITIES LEASE" means each lease entered into by Brazos
under which a leasehold interest in a Facility or FF&E is being leased to
Brazos by the owner of such Facility.
"ACQUISITION COST" means, without duplication, for any Facility or FF&E,
the sum of (i) the amount of the advances under the Credit Agreement and
Article III of the Agreement for Facilities Lease, and (ii) the advance of
Brazos equity made pursuant to Section 3.7 of the Agreement for Facilities
Lease with respect to such Facility or FF&E.
"ADDITIONAL RENT" has the meaning set forth in SECTION 6.3 hereof.
"AFFILIATE" means any other person controlling, controlled by or under
direct or indirect common control with any Person. For the purposes of this
definition, "control," when used with respect to any specified Person, means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"AGENT" means Chase Bank of Texas, National Association.
FACILITIES LEASE AGREEMENT - Page 1
"AGREEMENT FOR FACILITIES LEASE" means the Agreement for Facilities
Lease, dated of even date herewith, between Brazos and Lessee providing for
the construction of each Facility and the acquisition of FF&E, as it may be
further amended, restated, modified or supplemented, from time to time, in
accordance with the terms thereof.
"ASSIGNEE" means any lender or agent for a lender under the Credit
Agreement and each person, firm, corporation or other entity to which any
part of Brazos' interest under this Facilities Lease or in any Facility or
FF&E shall at the time have been assigned, conditionally or otherwise, by
Brazos in accordance with SECTION 19.10 of this Facilities Lease.
"ASSIGNMENT" means each assignment or security agreement referred to in
SECTION 19.10 hereof between Brazos and a third party, pursuant to which
Brazos assigns or grants a security interest in any of its rights under this
Facilities Lease to such third party, as from time to time amended.
"BASIC RENT" means, so long as any borrowings are outstanding under the
Credit Agreement, with respect to any Facility or FF&E, for any applicable
period, the amount computed by multiplying the following:
(i) the Acquisition Cost of such Facility or FF&E outstanding on the
preceding Basic Rent Payment Date (if any) plus (calculated on a
daily basis from the date of any advance for such period) any
advances added to the Acquisition Cost during such period, by
(ii) the Brazos Margin (calculated as a monthly factor and with respect
to advances during a month, a daily factor) for such period plus the
interest rate factor for interest accrued under the Credit Agreement
during such period with respect to outstanding advances previously
made and advances made during such period under (without
duplication) the Agreement for Facilities Lease and the Credit
Agreement towards such Acquisition Cost.
"BASIC RENT PAYMENT DATE" means the applicable payment date under the
Credit Agreement for the applicable accrued interest; provided, however, that
with respect to any Facility under construction, the first Basic Rent Payment
Date shall be the applicable date set forth above first occurring after
Substantial Completion (as defined in the Agreement for Facilities Lease) of
such Facility.
"BRAZOS" means Brazos Markets Development, L.P. or any successor or
successors to all of its rights and obligations hereunder.
"BRAZOS MARGIN" means the margin specified and calculated in accordance
with the letter from Brazos to Lessee dated as of September 10, 1998,
designated therein as the "Brazos Margin Letter".
"BUSINESS DAY" means a day other than a Saturday, Sunday or other day on
which commercial banks in Dallas, Texas or New York City, New York are
authorized or required by law to close.
"CAPITAL LEASE" means a capital lease as determined in accordance with
GAAP.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONSENT" means each consent of Lessee or Guarantor to an Assignment,
pursuant to which, among other things, Lessee or Guarantor, as the case may
be, consents to the terms of such Assignment insofar as they relate to this
Facilities Lease, as from time to time amended.
"CORPORATE CREDIT DOCUMENTS" means the Corporate Credit Documents as
defined in the Credit Agreement.
FACILITIES LEASE AGREEMENT - Page 2
"CREDIT AGREEMENT" means the Credit Agreement dated of even date
herewith and among Brazos, the Agent and the banks named therein for the
financing of the acquisition of Facilities and FF&E by Brazos in connection
with the Agreement for Facilities Lease, as it may be amended, restated,
modified or supplemented, from time to time.
"CREDIT DOCUMENT" shall have the meaning ascribed to such term in the
Credit Agreement.
"EFFECTIVE DATE" means with respect to any Facility, the date on which
such Facility is leased hereunder by Brazos to Lessee, pursuant to SECTION
3.1 hereof, which date shall be set forth in the Facility Leasing Record.
"ENVIRONMENTAL CLAIM" means any third party (including governmental
agencies and employees) action, lawsuit, claim, demand, regulatory action or
proceeding, order, decree, consent agreement or notice of potential or actual
responsibility or violation (including claims or proceedings under the
Occupational Safety and Health Acts or similar laws or requirements relating
to health or safety of employees) which seeks to impose liability under any
Environmental Law relating to any Facility or Property.
"ENVIRONMENTAL LAW" means all Legal Requirements arising from, relating
to, or in connection with the Environment (as defined in 43 U.S.C. Section
9601(8) (1988)), health, or safety, including without limitation (i) the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, and (ii) Legal Requirements relating to (a) pollution,
contamination, injury, destruction, loss, protection, cleanup, reclamation or
restoration of the air, surface water, groundwater, land surface or
subsurface strata, or other natural resources; (b) solid, gaseous or liquid
waste generation, treatment, processing, recycling, reclamation, cleanup,
storage, disposal or transportation; (c) exposure to pollutants,
contaminants, hazardous materials or wastes; (d) the safety or health of
employees; or (e) the manufacture, processing, handling, transportation,
distribution in commerce, use, storage or disposal of hazardous, medical,
infectious, or toxic substances, materials or waste.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 13.1 hereof.
"EVENT OF FACILITY TERMINATION" means any of the events specified in
SECTION 13.3.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and all regulations promulgated by the Securities and Exchange Commission
thereunder.
"EXCLUDED TAXES" shall mean each of the following taxes:
(a) Any federal, state or other estate, inheritance, income or similar
tax of Brazos or any of its partners (other than any gross receipts tax
referred to in CLAUSE (b) of SECTION 8.3 hereof, or tax measured by the net
income of Brazos or any of its partners (including without limitation the
earned surplus component of the Texas franchise tax); PROVIDED, HOWEVER, that
if at any time during the term of this Facilities Lease, the method of
taxation shall be such that there shall be levied, assessed or imposed on
Brazos, in substitution for any other tax, assessment, charge or levy which
Lessee is required to pay pursuant to SECTION 8.3, a capital levy or other
tax directly on the rents received therefrom, or upon the value of any
property or any present or future improvement or improvements on any
Facility, then all such taxes, assessments, levies or charges, or the part
thereof so measured or based, shall be payable by Lessee, but only to the
extent such taxes would be payable if the Facility affected were the only
property of Brazos, and Lessee shall pay and discharge the same as provided
herein.
(b) Any taxes imposed against or payable by Brazos or any of its
partners resulting from, or that would not have been imposed but for, the
gross negligence or willful misconduct of Brazos or its Affiliate or the
default by Brazos in the performance of its obligations hereunder, under any
other Lease Document or under the Credit Documents or the breach by Brazos of
its representations and warranties hereunder, under any other Lease Document
or under the Credit Documents.
FACILITIES LEASE AGREEMENT - Page 3
(c) Taxes imposed on Brazos or any of its partners that result from
any voluntary sale, assignment, transfer or other disposition by Brazos of
its interest in any Facility or any interest therein; PROVIDED, HOWEVER, any
transfer of the interest of Brazos hereunder arising as a result of an Event
of Facility Termination or an Event of Default by Lessee hereunder or
otherwise in accordance with this Facilities Lease shall not constitute a
voluntary transfer by Brazos.
(d) Taxes imposed on or with respect to or payable by Brazos or any
Affiliate thereof because Brazos or such Affiliate is not a United States
person within the meaning of Section 7701(a)(30) of the Internal Revenue Code
of 1986, as amended.
(e) Any interest, penalties or additions to taxes imposed on Brazos or
any of its partners that would not have been imposed or incurred but for the
failure of Brazos or any of its partners to file any return or other document
timely and in the form prescribed by law; PROVIDED, HOWEVER, that this
exclusion shall not apply if such failure is attributable to a failure by
Lessee to fulfill its obligations under this Facilities Lease with respect to
such return.
(f) Taxes imposed on or with respect to or payable by Brazos that
would not have been imposed but for an amendment, supplement, modification,
consent or waiver to the Lease Documents or Credit Documents not initiated,
required or consented to by Lessee unless such amendment, supplement,
modification, consent or waiver (i) is necessary or appropriate to, and in
conformity with, any other amendment to any Lease Document or Credit Document
initiated or requested by or consented to by Lessee, (ii) arises due to, or
in connection with there having occurred, an Event of Default by Lessee, or
(iii) is required by the terms of the Credit Documents or is executed in
connection with any amendment to the Credit Documents required by law.
(g) any franchise tax or similar tax of Brazos or any of its partners
if Brazos or its partners (as the case may be) would have been subject to
such franchise tax in the absence of this transaction.
(h) Any tax imposed by its express terms in lieu of or in substitution
for any tax set forth in subparagraphs (a) through (g) above.
"FACILITY" means all improvements of whatever kind or character now or
hereafter located on, in or under or affixed to an individual Property,
including, without limitation, any utilities, paving, signage or lighting and
all additions, replacements and subsequent replacements thereof, together
with the FF&E installed in such Facility or other building, in which a fee or
leasehold interest has been or will be acquired by Brazos for the purpose of
entering into the Facilities Lease, but excluding all parcels of land on
which such Facility sits.
"FACILITIES LEASE" means this Facilities Lease Agreement and each
Facility Leasing Record.
"FACILITY LEASING RECORD" means an instrument evidencing the lease or
sublease of a Facility or FF&E under this Facilities Lease, as prepared and
executed by Brazos, as lessor or sublessor, accepted and executed by Lessee,
as lessee or sublessee in such form as Lessee, Brazos and Agent may approve.
"FF&E" means fixtures that are permanently attached to the Property or
the Facility and that are necessary for the operation of the Facility for
general retail purposes, such as mechanical, electrical, plumbing, heating,
air conditioning and ventilating equipment and systems, but excluding Trade
Fixtures.
"GAAP" means generally accepted accounting principles set forth from
time to time in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within
the United States accounting profession), which are applicable to the
circumstances as of the date of determination.
FACILITIES LEASE AGREEMENT - Page 4
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or other
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"GROUND LEASE" means, with respect to any Property, the ground lease by and
between Brazos, as lessor, and Lessee, as lessee.
"GUARANTOR" means Randall's Food Markets, Inc., a Texas corporation.
"GUARANTY" means the Guaranty, dated of even date herewith, by and between
Guarantor and Brazos, as it may be further amended, restated, modified or
supplemented, from time to time, in accordance with the terms thereof.
"INDEBTEDNESS" shall have the meaning ascribed to such term in the
Guaranty.
"INDEMNIFIED PERSON" has the meaning set forth in SECTION 10.1 hereof.
"INSURANCE REQUIREMENTS" means all requirements of this Facilities Lease
with respect to insurance, all terms of any insurance policy covering or
applicable to any Facility, all requirements of the issuer of any such policy,
all statutory requirements and all orders, rules, regulations and other
requirements of any governmental body related to insurance applicable to any
Facility.
"LEASE DOCUMENT" shall have the meaning ascribed to such term in the Credit
Agreement.
"LEASE TERM" has the meaning set forth in SECTION 5.1 hereof.
"LEGAL REQUIREMENTS" means all laws, judgments, decrees, ordinances and
regulations and any other governmental rules, orders and determinations and all
requirements having the force of law, now or hereinafter enacted, made or
issued, whether or not presently contemplated, and all agreements, covenants,
conditions and restrictions, applicable to each Facility and FF&E and/or the
ownership, operation or use thereof, including, without limitation, all
requirements of the Americans With Disabilities Act (P.L. 101-335) and
environmental statutes, compliance with which is required at any time during the
Lease Term and any Renewal Term, whether or not such compliance shall require
structural, unforeseen or extraordinary changes to any Facility and FF&E or the
operation, occupancy or use thereof.
"LESSEE" means with respect to this Facilities Lease, Randall's Food &
Drugs, Inc., a Delaware corporation and Randall's Food Markets, Inc., a Texas
corporation, and, with respect to any particular Facility or FF&E, for all
purposes of such Facility or FF&E and with respect to all matters affecting such
Facility or FF&E, shall mean only the one foregoing entity which executes the
Facility Leasing Record with respect to such Property or FF&E. Accordingly,
references in this Facilities Lease to the "Lessee" shall be construed in the
context of such reference to mean, with respect to each particular Facility or
FF&E that is subject to this Agreement, Randall's Food & Drugs, Inc. or
Randall's Food Markets, Inc., as the case may be, as evidenced by a the entity
executing the Facility Leasing Record covering such particular Facility or FF&E
and shall not be construed to include any other entity or Lessee.
"LIEN" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement and any capital lease having substantially the same economic
effect as any of the foregoing).
"LIEN OF RECORD" means, with the exception of the Lien of a lender or
lender's agent under a Credit Agreement, (i) any mechanics' or materialmen's
lien for which Lessee does not hold retainage or trapped funds in amounts
required by applicable law or which is not covered by an adequate payment bond
or is not the subject of a Permitted Contest, (ii) any lien securing the payment
of taxes, assessments or governmental charges and levies which
FACILITIES LEASE AGREEMENT - Page 5
are due, payable and delinquent, (iii) any judgment lien or (iv) any other
filed, recorded, or docketed matter (whether or not the same shall constitute
a Permitted Encumbrance or be the subject of a Permitted Contest) which in
the case of any of the foregoing (a) is reasonably likely to result in a sale
of an interest in all or a portion of the Facility for satisfaction of same,
a loss, forfeiture, reversion of title, or right of reentry with respect to
any Facility or (b) whether or not valid, is reasonably likely to interfere
with the due and timely payment of any sum payable or the exercise of any of
the rights or the performance of any of the duties or responsibilities of
Lessee under this Facilities Lease.
"MATERIAL ADVERSE EFFECT" means a material adverse change in, or a material
adverse effect upon, the operations, business, properties, condition (financial
or otherwise) or prospects of the Guarantor and its Subsidiaries taken as a
whole; if, but only if, such material adverse change or such material adverse
effect has an economic effect (on an after tax basis) which exceeds an amount
equal to the greater of (i) fifteen percent (15%) of the consolidated
stockholders' equity (determined in accordance with GAAP) of the Guarantor at
the time of determination and (ii) $40,000,000.
"MATERIAL ADVERSE LEASE DOCUMENT EFFECT" means (a) a material impairment of
the ability of the Guarantor to perform its obligations under the Guaranty or of
the Lessee to perform its obligations under any Lease Document (as defined in
the Guaranty) or (b) a material adverse effect upon the legality, validity,
binding effect or enforceability in any material respect against the Guarantor
or the Lessee of, respectively, the Guaranty or any Lease Document (as defined
in the Guaranty) if, but only if, such material impairment or such material
adverse effect has an economic effect (on an after tax basis) which exceeds an
amount equal to the greater of (i) fifteen percent (15%) of the consolidated
stockholders' equity (determined in accordance with GAAP) of the Guarantor at
the time of determination and (ii) $40,000,000.00.
"MAXIMUM RATE" has the meaning set forth in SECTION 19.8 hereof.
"PERMITS" means all consents, licenses and building permits required for
construction, completion, and operation of an individual Facility in accordance
with all Legal Requirements of Law affecting the particular Facility, including,
without limitation, all environmental permits.
"PERMITTED CONTEST" means any good-faith contest permitted by and in
accordance with the terms of ARTICLE XVIII.
"PERMITTED ENCUMBRANCES" means the following Liens and other matters
affecting the title or leasehold interest of any Facility or FF&E: (a) subject
to the terms of SECTION 7.5, mechanics' and materialmen's liens incurred in good
faith in the ordinary course of business and securing obligations that are
junior to any Liens of Assignee not exceeding $250,000 for any particular
Facility or FF&E and $2,000,000 in the aggregate which are not yet due or which
are subject to a Permitted Contest; (b) Liens securing the payment of taxes,
assessments and governmental charges or levies, either not delinquent or subject
to a Permitted Contest; (c) zoning and planning restrictions, subdivision and
platting restrictions, easements, rights-of-way, licenses, reservations,
covenants, conditions, waivers, restrictions on the use of property,
encroachments, encumbrances on or irregularities of title which do not, in
Lessee's reasonable judgment, materially impair (i) the intended use of the
Facility or FF&E by Lessee or (ii) the Value of any Facility or FF&E; (d) the
lien created contemporaneously with the acquisition of such Facility or FF&E
pursuant to, and securing the obligations under, a Credit Agreement; (e) any
mechanics' or materialmen's lien for which Lessee holds retainage or trapped
funds in amounts required by and in accordance with applicable law; (f)
outstanding mineral interests; and (g) any other or additional matters; PROVIDED
that such other or additional matters shall be approved in writing by Brazos and
Agent, whose approval shall not be unreasonably withheld or delayed.
"PERSON" means an individual, partnership, corporation, business trust,
joint venture, joint stock company, trust, unincorporated association or
Governmental Authority or other entity of whatever nature.
FACILITIES LEASE AGREEMENT - Page 6
"POTENTIAL DEFAULT" means any event which, but for the lapse of time, or
giving of notice, or both, would constitute an Event of Default.
"POTENTIAL FACILITY TERMINATION" means any event which, but for the lapse
of time, or giving of notice, or both, would constitute an Event of Facility
Termination.
"PROPERTY" means any and all parcels of land in which Brazos has acquired a
fee interest or leasehold interest and leased or subleased under a Ground Lease
to Lessee, in each case for the operation of a Facility thereon, but excluding
FF&E and all improvements thereon and all structures, equipment and materials
affixed thereon or located thereon, therein or thereunder.
"RENEWAL TERM" has the meaning set forth in SECTION 11.3(a) hereof.
"REPORTS" has the meaning set forth in SECTION 8.7 hereof.
"RESIDUAL GUARANTY" means the "Residual Guaranty" as defined in the Credit
Agreement.
"RESPONSIBLE OFFICER" means any officer of any Guarantor or any officer of
a Lessee other than a Guarantor designated as such by a Responsible Officer of
any Guarantor.
"SUBSIDIARY" means with respect to any Person, any corporation of which
voting control or more than fifty percent (50%) of the outstanding capital stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether at such time capital stock of any
other class or classes of such corporation shall or might have voting power upon
the occurrence of any contingency) is at the time directly or indirectly owned
by such Person. With respect to each Lessee, "SUBSIDIARY" shall include any
Subsidiary of such Lessee.
"SURETY INSTRUMENTS" means all letters of credit (including standby),
bankers' acceptances, bank guarantees, shipside bonds, surety bonds and similar
instruments.
"TITLE POLICY" means, with respect to any Facility, the owner policy of
title insurance issued to Lessor as the insured thereunder covering the interest
of Lessor in and to such Facility.
"TRADE FIXTURES" means all removable furniture, equipment and other
personal property that are installed for Lessee's use of the Facility as a
supermarket or for other purposes from time to time operated by Lessee,
including without limitation counters, racks, refrigerators and freezers,
cashier's stands, cash registers, display cases and signs.
"UNEARNED RENT" means any Basic Rent paid by Lessee with respect to a
Facility and attributable to a period after the termination of this Facilities
Lease as to such Facility including, without limitation, upon purchase of such
Facility by Lessee or sale of such Facility to a third party pursuant to the
terms hereof.
"UNECONOMIC NOTICE" has the meaning set forth in SECTION 12.1 hereof.
"UNECONOMIC FACILITY" has the meaning set forth in SECTION 12.1 hereof.
"VALUE" has the meaning set forth in the Agreement for Facilities Lease.
Section 1.2. FORMS. All forms specified by the text hereof or by
reference to exhibits attached hereto shall be substantially as set forth
herein, subject to such changes by Brazos and Lessee by mutual consent that do
not alter the substantive rights of the parties hereto or of the Assignees or as
may be required by applicable laws hereafter enacted.
FACILITIES LEASE AGREEMENT - Page 7
Section 1.3. RECITALS, TABLE OF CONTENTS, TITLES, AND HEADINGS. The terms
and phrases used in the recitals of this Facilities Lease have been included for
convenience of reference only and the meaning, construction, and interpretation
of such words and phrases for purposes of this Facilities Lease shall be
determined solely by reference to SECTION 1.1 hereof. The table of contents,
titles, and headings of the Articles and Sections of this Facilities Lease have
been inserted for convenience of reference only and are not to be considered a
part hereof and shall not in any way modify or restrict any of the terms or
provisions hereof and shall not be considered or given any effect in construing
this Facilities Lease or any provision hereof or in ascertaining intent, if any
question of intent should arise.
Section 1.4. INTERPRETATION. Unless the context requires otherwise, words
of the masculine gender shall be construed to include correlative words of the
feminine and neuter genders and vice versa, and words of the singular number
shall be construed to include correlative words of the plural number and vice
versa. This Facilities Lease, and all the terms and provisions hereof, shall be
liberally construed to effect the purposes set forth herein and to sustain the
validity of this Facilities Lease.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF LESSEE AND BRAZOS
Brazos represents and warrants to Lessee on the date of this Facilities
Lease with respect to SECTIONS 2.11 to 2.16 and Lessee represents and warrants
to Brazos on the date of this Facilities Lease with respect to SECTIONS 2.1 to
2.4 and as of the date the relevant Facility or FF&E is leased pursuant to this
Facilities Lease with respect to SECTIONS 2.1 to 2.10 (it being understood that
all representations and warranties in this ARTICLE II with respect to a Facility
or FF&E shall refer to the Facility or FF&E then being leased pursuant to the
terms of this Facilities Lease) the following:
Section II.1. CORPORATE MATTERS. Lessee has full corporate power and
authority to execute, deliver and perform its obligations under this Facilities
Lease, the Agreement for Facilities Lease and any Consent.
Section II.2. AUTHORIZATION; BINDING AGREEMENT. This Facilities Lease has
been duly authorized, executed and delivered by Lessee and, assuming the due
authorization, execution and delivery of this Facilities Lease by Brazos, this
Facilities Lease is a legal, valid and binding obligation of Lessee, enforceable
against Lessee, subject, as to enforceability, to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and to general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
Section II.3. POWER AND AUTHORITY. The consummation of the transactions
herein contemplated and the performance and observance of Lessee's obligations
under this Facilities Lease and any Consent have been duly authorized by all
necessary corporate action on the part of Lessee. The execution, delivery and
performance by Lessee of this Facilities Lease and any Consent will not result
in any violation of any term of the certificate of incorporation or the by-laws
of Lessee, do not require approval of the board of directors or shareholders of
Lessee or the approval or consent of any trustee or holders of Indebtedness of
Lessee except such as have been obtained prior to the date hereof and will not
conflict with or result in a breach of any terms or provisions of, or constitute
a default under, or result in the creation or imposition of any Lien (other than
a Lien on any Facility or FF&E as may be contemplated herein) upon any property
or assets of Lessee under, any indenture, mortgage or other agreement or
instrument to which Lessee is a party or by which it or any of its property is
bound where such breach or default, singly or in the aggregate, would have a
Material Adverse Effect or would, in the reasonable judgment of Lessee,
materially impair the ability of Lessee to perform its obligations under the
Agreement for Facilities Lease, this Facilities Lease, the Ground Lease or the
Agreement for Ground Lease referred to in the Ground Lease or the Consent
executed by Lessee of even date herewith, or under any existing applicable law,
rule, regulation, license, judgment, order or decree of any Governmental
Authority or court having jurisdiction over Lessee or any of its activities or
properties.
Section II.4. CONSENTS, APPROVALS, AUTHORIZATIONS. There are no consents,
licenses, orders, authorizations or approvals of, or notices to or registrations
with, any Governmental Authority which are required in connection with the
FACILITIES LEASE AGREEMENT - Page 8
valid execution, delivery and performance of this Facilities Lease that have
not been obtained or made, except such permits and licenses as Lessee will be
required to obtain for the construction, installation, occupancy, use or
operation of a specific Facility or FF&E and which, in the ordinary course of
business, are not obtained until just prior to the commencement of such
construction, installation, occupancy, use or operation, and any such
consents, licenses, orders, authorizations, approvals, notices and
registrations that have been obtained or made are in full force and effect.
Section II.5. COMPLIANCE WITH LEGAL REQUIREMENTS AND INSURANCE
REQUIREMENTS. The operation, use and physical condition of the Facilities
comply with the Insurance Requirements and Lessee will not do or permit any act
or thing which is contrary in any material respect (as determined in Lessee's
reasonable judgment) to any Legal Requirements, or which might materially
impair, in the reasonable judgment of Lessee, other than in the normal use
thereof, the Value or usefulness of any Facility or FF&E; PROVIDED, in each
case, that Lessee shall not be required to comply with any Legal Requirements if
(a) in the case of Legal Requirements with respect to laws affecting the
environment, Lessee acts diligently to cure such non-compliance upon becoming
aware of it and (b) in every case such non-compliance, individually or in the
aggregate, (i) would not subject any Facility or FF&E to sale, forfeiture or
loss, as a result of failure to comply therewith, (ii) would not cause either
Brazos or any Assignee to incur (x) civil liability which, in the reasonable
judgment of Brazos or Agent is not adequately indemnified (Lessee's obligations
under ARTICLE X of this Facilities Lease shall be deemed to be adequate
indemnification if no Event of Default, Event of Facility Termination, Potential
Default or Potential Facility Termination exists and if such civil liability is
reasonably likely to be less than $500,000 per Facility or FF&E and $2,000,000
in the aggregate), or (y) any criminal liability as a result of failure to
comply therewith, (iii) is permitted under the provisions of the Acquired
Facilities Lease, if any, on such Facility or FF&E, and (iv) is consistent with
business practices normal in the industry of Lessee or the practices of Lessee
with respect to properties owned by Lessee.
Section II.6. AGREEMENT FOR FACILITIES LEASE. Each Facility built
pursuant to the Agreement for Facilities Lease was built substantially, and
leased, in accordance with the terms of the Agreement for Facilities Lease. The
representations and warranties of Lessee in the Agreement for Facilities Lease
are true and correct on and as of the date made, except as to such matters as
would not, in the reasonable judgment of Lessee, impair the Lessee's abilities
to perform its obligations under this Facilities Lease.
Section II.7. NO ENCROACHMENTS. Each Facility is constructed entirely on
its Property and does not encroach upon or overhang (unless consented to by the
affected property owner) any easement or right-of-way or the land of others, and
is wholly within any building restriction lines, however established, except
such non-structural encroachments or overhanging projections as may be readily
removed or corrected without materially affecting the value or intended use of
the Facility as determined in Lessee's reasonable discretion and encroachments
affirmatively insured over by title insurance covering such Property.
Section II.8. FACILITY AND FF&E LIENS. Except as specifically disclosed
by Lessee in writing to Brazos or except as set forth in the Title Policy for
such Facility, to the best of Lessee's knowledge, no Facility or FF&E is subject
to a Lien of Record, and, to the best of Lessee's knowledge, no Facility or FF&E
is subject to any other Lien, except for Permitted Encumbrances previously
disclosed in writing to Brazos.
Section II.9. BROKERAGE. Except as may be contemplated by the Facilities
Lease or approved by Lessee, no brokerage or other similar fee, commission or
compensation to real estate brokers or agents is to be paid by Brazos in
connection with this Facilities Lease, and Lessee hereby indemnifies Brazos
against any claims for brokerage fees or commissions and agrees to pay all
expenses incurred by Brazos in connection with the defense of any action or
proceeding brought to collect any such brokerage fees or commissions, provided
such claim is made through or under Lessee.
Section II.10. SUITABILITY OF FACILITY AND FF&E. To the best of Lessee's
actual knowledge, each Facility and FF&E is suitable as determined by Lessee in
its sole discretion (including, without limitation, ground conditions,
utilities, and condition of title) for the intended use of the Facility and FF&E
under the Facilities Lease.
FACILITIES LEASE AGREEMENT - Page 9
Section II.11. EXISTENCE. Brazos is a limited partnership duly formed and
validly existing under the laws of the State of Delaware and is in good standing
and qualified to do business in each jurisdiction where its ownership or lease
of property or conduct of its business requires such qualification and where a
failure to be qualified would, in the reasonable judgment of Brazos, impair the
ability of Brazos to perform its obligations under this Facilities Lease. The
General Partner (as defined in the Credit Agreement) is a corporation duly
organized, in good standing, and validly existing under the laws of Delaware and
in good standing and qualified to do business in each jurisdiction where its
ownership or lease of property or conduct of its business requires such
qualification and where a failure to be qualified would, in the reasonable
judgment of Brazos, impair the ability of Brazos to perform its obligations
under this Facilities Lease.
Section II.12. PARTNERSHIP POWER. The execution, delivery, and
performance by Brazos of this Facilities Lease and the consummation of the
transactions contemplated hereby are within Brazos's partnership powers, have
been duly authorized by all necessary partnership action, do not contravene
Brazos's agreement of limited partnership or any law or any contractual
restriction binding on or affecting Brazos, and will not result in or require
the creation or imposition of any lien not contemplated by this Facilities Lease
or the Credit Agreement.
Section II.13. AUTHORIZATION AND APPROVALS. No authorization or approval
or other action by, and no notice to or filing with, any Governmental Authority
is required for the due execution, delivery and performance by Brazos of this
Facilities Lease or the consummation of the transactions contemplated by this
Facilities Lease, subject to the provisions of SECTION 2.4 hereof.
Section II.14. ENFORCEABLE OBLIGATIONS. Brazos has duly executed and
delivered this Facilities Lease, and this Facilities Lease is the legal, valid,
and binding obligation of Brazos enforceable against Brazos in accordance with
its terms subject, as to enforceability, to applicable bankruptcy, insolvency
and similar laws affecting creditors' rights generally and to general principles
of equity (regardless of whether enforcement is sought in a proceeding in equity
or at law).
Section II.15. PROCEEDINGS. There is no pending or, to the best knowledge
of Brazos, threatened action or proceeding affecting Brazos before any court,
Governmental Authority or arbitrator, which would, in the reasonable judgment of
Brazos, have an adverse impact on the Value or intended use of a Property, or
which would affect the legality, validity, binding effect or enforceability of
this Facilities Lease.
Section II.16. OTHER ASSETS AND LIABILITIES. Brazos has no material
assets other than the Properties and Facilities owned and to be acquired
pursuant to the Lease Documents and the commitments of its limited partners to
make capital contributions to Brazos, has no material liabilities other than
pursuant to the Lease Documents and the Credit Documents, and has incurred no
Indebtedness other than pursuant to the Credit Documents.
ARTICLE III
LEASE OF FACILITY
Section III.1. LEASE. Subject to the definitions, terms and conditions
hereof, Brazos hereby leases to Lessee, and Lessee hereby leases from Brazos
pursuant to this Facilities Lease, or sublease in the case of an Acquired
Facilities Lease, any Facility or FF&E, when Brazos makes an advance under the
Agreement for Facilities Lease with respect to such Facility or FF&E and such
Facility or FF&E is acquired under the Agreement for Facilities Lease, or if no
advance is made with respect to a Facility or FF&E under an Acquired Facilities
Lease, when Brazos enters into such Acquired Facilities Lease. The Effective
Date of the lease or sublease of each Facility or FF&E shall be the date of the
initial advance with respect to such Facility or FF&E under the Agreement for
Facilities Lease or the Effective Date of any Acquired Facilities Lease.
FACILITIES LEASE AGREEMENT - Page 10
Section III.2. FACILITY LEASING RECORD.
(a) The lease of each Facility or FF&E shall be evidenced by a Facility
Leasing Record. Each Facility Leasing Record shall give a full description of
the Facility or FF&E covered thereby, the Acquisition Cost of such Facility or
FF&E, the Lease Term for such Facility or FF&E, the location of such Facility or
FF&E and such other details as Brazos, Lessee and any Assignee may from time to
time agree. Lessee shall provide to Brazos the information necessary to
describe in the Facility Leasing Record the Facility or FF&E, except that Brazos
shall provide, pursuant to the terms hereof, the Acquisition Cost and the Lease
Term. Execution and delivery by Lessee of a Facility Leasing Record shall
constitute (i) acknowledgment by Lessee that the Facility specified in such
Facility Leasing Record has been delivered to Lessee in acceptable condition and
has been accepted for lease hereunder by Lessee as of the Effective Date of the
Facility Leasing Record, (ii) acknowledgment by Lessee that the Facility or FF&E
specified in such Facility Leasing Record is subject to all of the covenants,
terms and conditions of this Facilities Lease, and (iii) certification by Lessee
that the representations and warranties of Lessee contained in ARTICLE II of
this Facilities Lease are true and correct on and as of the Effective Date of
the Facility Leasing Record as though made on and as of such date, except as to
such matters as would not, in the reasonable judgment of Lessee, materially
impair the Lessee's abilities to perform its obligations under this Facilities
Lease and that there exists on such date no Event of Default, Event of Facility
Termination, Potential Default or Potential Facility Termination.
(b) Upon the making of additional advances for a Facility or FF&E,
Brazos and Lessee shall execute an updated Facility Leasing Record to reflect
the change in Acquisition Cost for such Facility or FF&E caused by such advance.
(c) Upon the release or disposition of a Facility or FF&E or any portion
thereof and the application of proceeds therefrom in accordance with the Credit
Agreement, Brazos and Lessee shall execute an updated Facility Leasing Record to
reflect the change in Acquisition Cost for such Facility or FF&E caused by such
release or disposition.
Section III.3. OWNERSHIP OF THE FACILITY AND FF&E.
(a) It is the intent of the parties hereto that: (i) this Facilities
Lease constitutes an "operating lease" pursuant to Statement of Financial
Accounting Standards No. 13, as amended, for purposes of Lessee's financial
reporting, and (ii) for purposes of federal, state and local income or franchise
taxes and for any other tax imposed on or measured by income, the transaction
contemplated hereby is a financing arrangement and preserves ownership in the
Facility and FF&E to the Lessee. Nevertheless, the Lessee acknowledges and
agrees that neither the Agent, Brazos nor any Assignee has made any
representations or warranties to the Lessee concerning the tax, accounting or
legal characteristics of the Credit Agreement and Lease Documents (as defined in
the Credit Agreement) and that the Lessee has obtained and relied upon such tax,
accounting and legal advice concerning the Credit Agreement and Lease Documents
(as defined in the Credit Agreement) as it deems appropriate.
(b) Anything to the contrary notwithstanding, Brazos and the Lessee
intend and agree that with respect to the nature of the transactions evidenced
by this Facilities Lease in the context of the exercise of remedies under the
Credit Agreement and Lease Documents, including, without limitation, in the case
of any insolvency or receivership proceedings or a petition under the United
States bankruptcy laws or any other applicable insolvency laws or statute of the
United States of America or any state or commonwealth thereof affecting the
Lessee, Brazos, or any Assignee or any enforcement or collection actions, (i)
the transactions evidenced by this Facilities Lease are loans made by Brazos and
the Agent as unrelated third party lenders to the Lessee secured by the Facility
and FF&E, (ii) the obligations of the Lessee under this Facilities Lease to pay
Basic Rent and Additional Rent or other amounts in connection with a purchase of
the Facility and FF&E pursuant to this Facilities Lease shall be treated as
payments of interest on and principal of, respectively, loans from Brazos and
the Assignees to the Lessee, and (iii) this Facilities Lease grants a security
interest and mortgage or deed of trust or lien, as the case may be, in the
Facility and FF&E to Brazos and the
FACILITIES LEASE AGREEMENT - Page 11
Assignees to secure the Lessee's performance under and payment of all amounts
under this Facilities Lease and the Credit Agreement and Lease Documents (as
defined in the Credit Agreement).
(c) Specifically, without limiting the generality of SUBSECTION (b) of
this Section, Brazos and the Lessee further intend and agree that, for the
purpose of securing the Lessee's obligations for the repayment of the
above-described loans from Brazos and the Agent to the Lessee, (i) this Lease
shall also be deemed to be a security agreement and financing statement
within the meaning of Article 9 of the Uniform Commercial Code (and
specifically, a construction mortgage, as said term is defined in Section
9.313(a)(3) of the Uniform Commercial Code) and a real property mortgage or
deed of trust; (ii) the conveyance provided for in ARTICLE III shall be
deemed to be a grant by the Lessee to Brazos and the Assignees of a mortgage
lien and security interest in all of the Lessee's right, title and interest
in and to the Facility and FF&E and all proceeds of the conversion, voluntary
or involuntary, of the foregoing into cash, investments, securities or other
property, whether in the form of cash, investments, securities or other
property (it being understood that Lessee hereby mortgages and warrants and
grants a security interest in the Facility and FF&E to Brazos and the
Assignees to secure such loans); (iii) the possession by Brazos or any of its
agents of notes and such other items of property as constitute instruments,
money, negotiable documents or chattel paper shall be deemed to be
"possession by the secured party" for purposes of perfecting the security
interest pursuant to Section 9.305 of the Uniform Commercial Code; and (iv)
notifications to Persons holding such property, and acknowledgments, receipts
or confirmations from financial intermediaries, bankers or agents (as
applicable) of the Lessee shall be deemed to have been given for the purpose
of perfecting such security interest under applicable law. Brazos and the
Lessee shall, to the extent consistent with this Facilities Lease, take such
actions and execute, deliver, file and record such other documents, financing
statements, mortgages and deeds of trust as may be necessary to ensure that,
if this Facilities Lease were deemed to create a security interest in the
Facility and FF&E in accordance with this Section, such security interest
would be deemed to be a perfected security interest of first priority under
applicable law and will be maintained as such throughout the term of this
Facilities Lease or any renewal hereof as provided in SECTION 5.1.
(d) Notwithstanding anything to the contrary contained in any of the
Lease Documents, the Trade Fixtures are not the property of Brazos and are not
covered by this Lease, and Brazos shall not grant any Lien covering the Trade
Fixtures.
Section III.4. BRAZOS COVENANTS. In the absence of an Event of Default
which is continuing beyond the applicable grace or curative periods, Brazos
agrees as follows: (i) it will not engage any broker in connection with the
purchase or sale of any Facility or FF&E without Lessee's prior written consent;
(ii) within ninety (90) days after the end of Brazos' fiscal year, Brazos will
provide to each Lessee its unaudited balance sheet dated as of the end of its
fiscal year, prepared in accordance with GAAP, certified by an officer of the
General Partner of Brazos; (iii) Brazos will provide such additional financial
information regarding Brazos or any Facility or FF&E (to the extent such
Facility or FF&E information is maintained by Brazos) as may be reasonably
requested by Lessee; (iv) Brazos shall comply with all of its obligations under
the Credit Documents, except to the extent that compliance is prevented by any
failure on the part of Lessee to perform its obligations under the Lease
Documents; (v) Brazos shall not acquire or own any material assets other than
the Properties and Facilities to be acquired pursuant to the Lease Documents and
the commitment of its limited partner to make capital contributions to Brazos;
(vi) Brazos will not engage in any business other than the ownership and leasing
of the Properties and Facilities to be acquired pursuant to the Lease Documents;
and (vii) Brazos will not incur any Indebtedness or other material obligations
other than those pursuant to the Credit Documents and the Lease Documents.
ARTICLE IV
DELIVERY AND ACCEPTANCE
Section IV.1. ACCEPTANCE. Lessee shall accept Facilities built or
Facilities or FF&E acquired by purchase or lease pursuant to the Agreement for
Facilities Lease. Brazos shall not be liable to Lessee for any failure to build
or obtain, or delay in building or obtaining, any Facility or FF&E or any delay
in the delivery of title or possession thereof to Lessee, unless such failure or
delay is caused by the gross negligence or willful misconduct of Brazos.
FACILITIES LEASE AGREEMENT - Page 12
Section IV.2. PAYMENTS FINAL. Each payment of Basic Rent, Additional Rent
and any other amount due hereunder made by Lessee shall be final, and Lessee,
without waiving any other remedies it may have, will not seek or have any right
to recover all or any part of such payment from Brazos or any Assignee for any
reason whatsoever except as expressly provided herein. The making of payments
under this Facilities Lease by Lessee (including payments pursuant to ARTICLE X)
shall not be deemed to be a waiver of any claim or claims that Lessee may assert
against Brazos or any other person. Brazos agrees to repay Lessee amounts paid
to Brazos to the extent such payments were in error and are not required by the
various terms and provisions of this Facilities Lease.
Section IV.3. NO WARRANTIES OR REPRESENTATIONS. Notwithstanding any other
provision contained in this Facilities Lease, it is specifically understood and
agreed that except as otherwise expressly provided herein, neither Brazos nor
any Assignee nor any Affiliate of either, nor anyone acting on behalf of any of
them makes any warranties or representations hereunder or has any responsibility
to disclose any relevant information hereunder, or has any other responsibility
or duty hereunder, nor, except as expressly set forth in SECTION 3.3 and 19.11
of this Facilities Lease, has Brazos or any Assignee or any Affiliate of either,
or anyone acting on behalf of any of them made any covenants or undertakings, as
to the accounting treatment to be accorded Lessee or as to the U.S. Federal or
any state income or any other tax consequences, if any, to Lessee as a result of
or by virtue of the transactions contemplated by this Facilities Lease.
Section IV.4. QUIET ENJOYMENT. During the Lease Term or Renewal Term, if
any, of any Facility or FF&E hereunder and so long as no Event of Default, Event
of Facility Termination, Potential Default or Potential Facility Termination
shall have occurred and be continuing, Brazos covenants that as between Brazos
and Lessee, Lessee shall have the right to quiet enjoyment of the Facility or
FF&E on the terms and conditions provided in this Facilities Lease without any
interference from Brazos or any party claiming by, through or under Brazos.
Lessee agrees to attorn to any Assignee in the event such Assignee succeeds to
Brazos' interest in the Facility or FF&E, and Lessee will not hold the Assignee
responsible for Brazos' obligations incurred in the period prior to the
succession of the Assignee to Brazos' interest.
Section IV.5. OTHER FINANCING REQUIREMENTS. If Brazos is required by the
Agent pursuant to the terms of the Credit Agreement to provide an appraisal or
other evidence of the value of a Facility or FF&E to the Agent under the Credit
Agreement, Lessee agrees to provide such appraisal or other evidence to Brazos
at Lessee's sole cost and expense.
ARTICLE V
LEASE TERM
Section V.1. LEASE TERM. The "LEASE TERM" with respect to any Facility of
FF&E leased hereunder shall commence on the Effective Date for such Facility and
shall end on September 10, 2003. The lease of any Facility or FF&E may be
renewed for thirty-five (35) renewal terms of one year each, pursuant to, and in
accordance with, SECTION 11.3. The Lease Term or any Renewal Term may be
terminated earlier pursuant to ARTICLES XI, XIII, XIV or XV hereof.
Section V.2. INSURABLE INTEREST. Notwithstanding anything contained in
this ARTICLE V and to the extent that Lessee or any additional insureds named
pursuant to SECTION 9.2 of this Facilities Lease have an insurable interest
therein, the provisions of ARTICLES IX and X and SECTION 13.1 hereof shall apply
with respect to any Facility or FF&E from the time such Facility or FF&E is
acquired by Brazos.
Section V.3. TERMINATION. Notwithstanding anything contained in this
ARTICLE V or ARTICLE XI, this Facilities Lease shall terminate on September 10,
2038, unless earlier terminated.
ARTICLE VI
FACILITIES LEASE AGREEMENT - Page 13
RENT AND OTHER PAYMENTS
Section VI.1. BASIC RENT. Lessee hereby agrees to pay Brazos on each
Basic Rent Payment Date, Basic Rent for the period ending on such Basic Rent
Payment Date. Such Basic Rent shall be due and payable on the later of the
applicable Basic Rent Payment Date or two Business Days after Brazos shall have
given Lessee written notice of the amount of the Basic Rent due with respect to
each Facility or FF&E for such Basic Rent Payment Date. Brazos agrees to
communicate with Lessee in a timely manner and to otherwise cooperate fully with
Lessee concerning all matters and decisions which affect or which could minimize
the amount of Basic Rent payable hereunder. Upon receipt by Brazos of any
notice from Agent pursuant to Section 2.1(b) of the Credit Agreement relating to
any adjustments under Section 2.1(b) under the Credit Agreement, Brazos will
advise Lessee by written notice of such adjustments and the amount of any Basic
Rent which may be due from Lessee or the amount of any credit which may be
applied by Lessee to the Basic Rent payable by Lessee on the next Basic Rent
Payment Date. Brazos agrees that Basic Rent payable hereunder shall be reduced
by the amount of any such credit adjustment. Lessee agrees to pay any
additional Basic Rent which is owing due to such adjustments within five (5)
Business Days of receipt of such written notice from Brazos.
Section VI.2. OTHER AMOUNTS. Except as otherwise specifically provided in
this Facilities Lease, Lessee hereby agrees to pay within thirty (30) days of
written demand all amounts (other than Basic Rent and amounts which are payable
on demand or pursuant to ARTICLES X-XV) due hereunder, including, without
limitation, all amounts payable to any Indemnified Person pursuant to ARTICLE X
hereof.
Section VI.3. ADDITIONAL RENT. Lessee shall pay to Brazos from time to
time, on demand, as additional rent ("ADDITIONAL RENT") (i) subject to Section
5.3 of the Agreement for Facilities Lease, amounts required to reimburse Brazos
for its costs and expenses (not previously included in Basic Rent) incurred in
acquiring, financing and leasing the Facility, and to the extent legally
enforceable, interest on each overdue amount not paid by Lessee to Brazos as
provided in this Facilities Lease from the date such overdue amount was due
until paid at the per annum rate of interest equal to the most recent rate of
interest calculated pursuant to the Credit Agreement or as reasonably
established by Agent in the absence of any borrowing under the Credit Agreement,
plus two percent (2%). Lessee shall also pay to Brazos on demand an amount
equal to any reasonable expenses and attorneys' fees incurred by Brazos in
collecting such unpaid sums and enforcing the obligations for such unpaid sums.
Section VI.4. PAYMENT IN ADVANCE. Basic Rent and Additional Rent and any
other amount payable by Lessee to Brazos shall be paid sufficiently in advance
of the date due to assure that immediately available funds in the full amount
due are available on the date due, to such account of Brazos at such bank, or,
with the consent of Agent, to such account of such other person at such bank, or
otherwise as Brazos may from time to time designate in writing.
Section VI.5. CREDIT AGREEMENT LOSSES. In addition to all other payment
obligations hereunder, if the lease for any Facility is terminated for any
reason other than a default by Brazos prior to the end of the Lease Term or, if
applicable, Renewal Term, then Lessee shall pay to Brazos within five (5)
Business Days after receipt of the billing statement referred to below, an
additional amount compensating Brazos for all penalties, costs and expenses
(including reasonable out-of-pocket costs and expenses) as are incurred by
Brazos under the Credit Agreement in connection with such termination and as are
set forth in a billing statement sent by Brazos to Lessee containing the
calculation thereof in reasonable detail.
ARTICLE VII
RESTRICTED USE; COMPLIANCE WITH LAWS
Section VII.1. INSURANCE REQUIREMENT AND LEGAL REQUIREMENT. So long as no
Event of Default or Event of Facility Termination shall have occurred and be
continuing beyond any applicable grace or curative period, Lessee may use the
Facilities in the regular course of its business for any lawful purpose.
Without limiting the generality of the
FACILITIES LEASE AGREEMENT - Page 14
foregoing, Lessee may offer for sale at the Facility such products and
services as Lessee from time to time offers at any other stores operated by
Lessee or any Affiliate of Lessee. Any assignee or sublessee may use the
Facility for any lawful purpose, subject to the immediately succeeding
sentence. Lessee will not do or permit any act or thing which is contrary to
any Insurance Requirement or which is contrary to any Legal Requirement,
which would, in the reasonable judgment of Lessee, other than in the normal
use thereof, materially impair the Value or usefulness of any Facility;
PROVIDED, that Lessee shall not be required to comply with any Legal
Requirements to the extent provided in SECTION 2.5 of this Facilities Lease.
Section VII.2. FILINGS. Lessee shall promptly and duly execute, deliver,
file and record, at Lessee's expense, all such documents, statements, filings
and registrations, and take such further action as Brazos or any Assignee shall
from time to time reasonably request in order to establish, perfect and maintain
Brazos' or such Assignee's title to and interest in the Facilities and any
Assignee's interest in this Facilities Lease or any Facility as against Lessee
or any third party in any applicable jurisdiction. As FF&E or other fixtures,
furniture and equipment are substituted pursuant to SECTION 8.5 hereof for FF&E
subject to this Facilities Lease, title to such substitute FF&E or other
fixtures, furniture and equipment shall automatically be transferred to Brazos
and such FF&E or other fixtures, furniture and equipment shall be subject to
this Facilities Lease and title to the existing FF&E for which such FF&E or
other fixtures, furniture and equipment is being substituted shall be released
by Brazos; Brazos shall promptly obtain releases of any Liens arising pursuant
to the Credit Agreement or granted by Brazos contrary to the provisions of this
Facilities Lease covering the released FF&E. Lessee may, after thirty (30)
days' written notice in writing to Brazos and each Assignee and at Lessee's own
cost and expense, change the place of principal location of any FF&E; PROVIDED
that prior notice shall not be required in the case of FF&E used for
transportation (such as, without limitation, automobiles and trucks), but in
such event Lessee shall notify Brazos in writing of the change of the principal
location of such transportation FF&E not later than thirty (30) days after such
change is made. Notwithstanding the foregoing, no change of location shall be
undertaken unless and until all Legal Requirements shall have been met;
PROVIDED, that Lessee shall not be required to comply with any Legal
Requirements to the extent provided in SECTION 2.5 of this Facilities Lease.
Section VII.3. COMPLIANCE WITH OTHER REQUIREMENTS. Lessee shall use every
precaution which is commercially reasonable and which is usually employed by
corporations engaged in a business which involves owning or operating similar
property or equipment to prevent loss or damage to Facilities and to prevent
injury to third persons or property of third persons. Lessee shall cooperate
fully with Brazos and all insurance companies providing insurance pursuant to
ARTICLE IX hereof in the investigation and defense of any claims or suits
arising from the ownership or operation of FF&E or ownership, use, or occupancy
of the Facility, PROVIDED that nothing contained in this SECTION 7.3 shall be
construed as imposing on Brazos any duty to investigate or defend any such
claims or suits. Lessee shall comply and shall use commercially reasonable
efforts to cause all persons using or operating FF&E or using or occupying
Facilities to materially comply with all Insurance Requirements and Legal
Requirements regarding acquiring, titling, registering, leasing, insuring,
using, occupying, operating and disposing of Facilities, and, if applicable, the
licensing of operators thereof; PROVIDED, that Lessee shall not be required to
comply with any Legal Requirements to the extent provided in SECTION 2.5 of this
Facilities Lease.
Section VII.4. INSPECTION. Brazos or any Assignee or any authorized
representative of either may, upon five (5) Business Days advance notice, during
reasonable business hours and subject to Lessee's normal safety and security
rules and procedures, from time to time, inspect Facilities and FF&E and deeds,
registration certificates, certificates of title and related documents covering
Facilities and FF&E wherever the same may be located, but neither Brazos nor any
Assignee shall have any duty to make any such inspection. Neither Brazos nor
any Assignee shall incur any liability or obligation by reason of making any
inspection unless and to the extent such party causes damage to any of the
Facility or injury to any person during the course of such inspection. All
inspections shall be at Brazos' or Assignee's own risk.
Section VII.5. NO LIENS; ASSIGNMENT AND SUBLETTING. Lessee shall not
permit or suffer to exist on any Facility or FF&E any Lien, other than Liens
which are the subject of a Permitted Contest, Permitted Encumbrances and Liens
placed thereon by, or arising from, Brazos' own actions or those of any Assignee
or Affiliate of Brazos and in all such
FACILITIES LEASE AGREEMENT - Page 15
cases, approved by Lessee (PROVIDED, that any Liens of Record, other than
Liens placed thereon by, or arising from, Brazos' own actions or those of any
Assignee or Affiliate of Brazos and in all such cases, approved by Lessee,
may not exceed an aggregate amount of $2,000,000 with respect to the
aggregate of the Properties, Facilities and FF&E, and an aggregate amount of
$250,000 with respect to each Facility and related Property & FF&E), nor may
it assign any right or interest herein or in any Facility or FF&E.
Notwithstanding anything to the contrary contained herein, provided that no
Event of Default has occurred and is then continuing beyond any applicable
grace or curative period, Lessee shall have the right, without the prior
written consent of Brazos or any Assignee, to assign this Lease to any
Affiliate of Lessee, and to sublease all or any portion of any one or more
Facilities and FF&E to any Person for any legal use and may otherwise
relinquish possession of Facility to any contractor for use in performing
work for Lessee; PROVIDED that such assignment, sublease or relinquishment of
possession shall in no way affect the obligations of Lessee or the rights of
Brazos hereunder and with respect to the Facility. Any sublease by Lessee
shall be expressly subordinate to this Facilities Lease. Brazos and Assignee
shall have the present and continuing right to collect and enjoy all rents
and other sums of money payable under any such sublease, and Lessee hereby
irrevocably assigns such rents and other sums to Brazos and Assignee for the
benefit and protection of Brazos and Assignee for all amounts due to Brazos
and Assignee under this Facilities Lease; PROVIDED that unless an Event of
Default shall have occurred and be continuing hereunder beyond any applicable
grace or curative period, Lessee shall be entitled to collect and enjoy such
rents and other sums. Lessee shall, within thirty (30) days after the
execution of any such sublease, deliver a conformed copy thereof to Brazos
and Agent. Nothing contained in this Facilities Lease shall be construed as
constituting the consent or request of Brazos, express or implied, to or for
the performance by any contractor, laborer, materialman or vendor of any
labor or services or for the furnishing of any materials for any
construction, alteration, addition, repair or demolition of or to any
Facility or any part thereof. Notice is hereby given that Brazos and Agent
will not be liable for any labor, services or materials furnished or to be
furnished to Lessee, or to anyone holding any Facility or any part thereof
through or under Lessee, and that no mechanics' or other liens for any such
labor, services or materials shall attach to or affect the interest of Brazos
or Assignee in and to the Facility.
In the event a Lien or other matter affecting title to a Facility arises
and such Lien or other matter is a Lien or other matter with respect to which
Brazos is entitled to make a claim under the terms of a Title Policy covering
such Facility, Brazos shall be obligated to remove or discharge, or pay to
Lessee, the amount incurred by Lessee in removing and discharging such Lien or
other matter to the extent (and only to the extent) of any proceeds, damages or
other amounts paid to Brazos under a Title Policy (the "TITLE POLICY PROCEEDS").
In that connection, if such Lien or other matter is discovered, Brazos, upon
Lessee's reasonable request and at Lessee's expense, will make such claims or
institute such proceedings as are appropriate under the terms of such Title
Policy to cause the Title Insurer to either remove such Lien or other matter or
pay any Title Policy Proceeds payable under the Title Policy in respect of such
Lien or other matter. Lessee agrees to indemnify and hold Brazos harmless from
and against all liability, cost and expense which Brazos may sustain or incur in
making any such claim or instituting any such proceeding. In the event that
Brazos is paid any Title Policy Proceeds as a result of such claim or proceeding
prior to the time that Lessee discharges such Lien or other matter, Brazos shall
apply the Title Policy Proceeds to the payment of amounts necessary to remove
and discharge such Lien or other matter to the extent of such proceeds. In the
event that Brazos is paid any Title Policy Proceeds after Lessee discharges such
Lien or other matter, then Brazos agrees to reimburse Lessee to the extent (and
only to the extent) of any proceeds, damages or other amounts paid to Brazos
under a Title Policy for any amounts paid by Lessee to remove or discharge any
such Lien or other matter, including, without limitation, expenses incurred by
Lessee in causing such Lien or other matter to be removed or discharged or
incurred by Lessee under the foregoing indemnity. Any Title Policy Proceeds
exceeding the foregoing amounts shall be paid to Lessee. Any claim by Lessee
against Brazos in accordance with the foregoing provisions shall be strictly
limited to the amount of any Title Policy Proceeds actually paid to Brazos.
Section VII.6. INTERFERENCE. If any Lien or charge of any kind or any
judgment, decree or order of any court or other governmental authority
(including, without limitation, any state or local tax lien affecting the
Facility or FF&E), whether or not valid but exclusive of any Lien granted by
Brazos contrary to the provisions of this Facilities Lease, shall be asserted or
entered which is reasonably likely to interfere with the due and timely payment
of any sum payable or the exercise of any of the rights or the performance of
any of the duties or responsibilities under this Facilities Lease,
FACILITIES LEASE AGREEMENT - Page 16
Lessee shall, upon obtaining knowledge thereof or upon receipt of notice to
that effect from Brazos or Agent, promptly take such action as may be
necessary to prevent or terminate such interference.
Section VII.7. DELIVERY OF INFORMATION. Lessee shall deliver to Brazos
and Agent (i) promptly after a Responsible Officer obtains knowledge of any
Event of Default or Potential Default, a certificate of a Responsible Officer
specifying the nature and period of existence of such Event of Default or
Potential Default, and what action, if any, Lessee has taken, is taking, or
proposes to take with respect thereto, and (ii) promptly after Lessee obtains
knowledge of any and all Liens other than Permitted Encumbrances on any Facility
or FF&E or other matter which may, in the reasonable judgment of Lessee,
materially adversely affect the Value of a Facility or FF&E or intended use of a
Facility or FF&E, a detailed statement describing each such Lien or other
matter. Brazos shall deliver to Lessee, the information and notices provided by
Brazos pursuant to Section 5.6 of the Credit Agreement (other than 5.6(g))
simultaneously with delivering such information to Agent.
Section VII.8 EXECUTION OF DOCUMENTS. Lessee hereby agrees that neither
it nor Guarantor will take or permit to be taken any action on the part of
either of them pursuant to SECTION 8.8 of this Facilities Lease and the powers
granted by Brazos thereunder, if such action would cause a Default (as defined
in the Credit Agreement) under the Credit Agreement.
ARTICLE VIII
MAINTENANCE, IMPROVEMENT AND REPAIR OF FACILITIES
Section VIII.1. WARRANTIES. Brazos, so long as no Event of Default or
Event of Facility Termination shall have occurred and be continuing, hereby
assigns and agrees to make available to Lessee any and all rights Brazos may
have under any vendor's or manufacturer's warranties or undertakings with
respect to any Facility. If any Event of Default or Event of Facility
Termination shall have occurred and be continuing beyond the expiration of any
applicable grace or curative period, the assignment of such rights from Brazos
to Lessee shall be deemed to be terminated, except to the extent that such Event
of Default or Event of Facility Termination is the result of a breach of any
vendor's warranties or undertakings, in which case the foregoing assignment will
remain in full force and effect and Lessee will be allowed a reasonable period
of time to pursue such vendor and to cure the Event of Default or Event of
Facility Termination.
Section VIII.2. COSTS AND EXPENSES. Subject to the provisions of Section
5.3 of the Agreement for Facilities Lease, Lessee shall pay all costs, expenses,
fees and charges incurred in connection with the ownership, use or occupancy of
any Facility or ownership, use and operation of any FF&E during the Lease Term
and Renewal Term, if any, thereof, including, without limitation, any rent under
an Acquired Facilities Lease. Except as otherwise provided in ARTICLE XII
hereof, Lessee shall at all times, at its own expense, and subject to reasonable
wear and tear, keep the Facility and FF&E in good operating order, repair,
condition and appearance. The foregoing undertaking to maintain the Facility and
FF&E in good repair shall apply regardless of the cause necessitating repair,
regardless of the availability or adequacy of insurance or condemnation proceeds
and regardless of whether Lessee has possession of the Facility or FF&E, and as
between Brazos and Lessee all risks of damage to the Facility or FF&E are
assumed by Lessee. With respect to any Facility or FF&E, the undertaking to
maintain in good repair shall include, without limitation, all interior and
exterior repairs, whether structural or nonstructural, foreseen or unforeseen,
ordinary or extraordinary and all common area maintenance including, without
limitation, removal of dirt, snow, ice, rubbish and other obstructions and
maintenance of sidewalks and landscaping in the ordinary course of Lessee's
business. Lessee hereby agrees to indemnify and hold Brazos and any Assignee
harmless from and against all costs, expenses, claims, losses, damages, fines or
penalties, including reasonable counsel fees, arising out of or due to Lessee's
failure to fulfill its obligations under this SECTION 8.2.
Section VIII.3. PAYMENT OF TAXES. With respect to any Facility, except
for Excluded Taxes, Lessee shall make all required reports to the appropriate
taxing authorities and shall pay: (i) all taxes, assessments (which may be
amortized over the maximum period permitted by Law), levies, fees, water and
sewer rents and charges, and all other
FACILITIES LEASE AGREEMENT - Page 17
governmental, quasi-governmental and non-governmental charges, general and
special (which may be amortized over the maximum period permitted by Law),
ordinary and extraordinary, foreseen and unforeseen, which are, at any time
during the Lease Term or any Renewal Term hereof, imposed or levied upon or
assessed against (A) the Facility and FF&E, (B) any Basic Rent, any
Additional Rent or other sum payable hereunder or (C) this Facilities Lease,
the leasehold estate hereby created, or which arises in respect of the
ownership, operation, occupancy, possession or use of the Facility and FF&E,
(ii) all gross receipts or similar taxes (i.e., taxes based upon gross income
which fail to take into account all customary deductions (e.g., depreciation
and interest) relating to any Facility and FF&E) imposed or levied upon,
assessed against or measured by any Basic Rent, or any Additional Rent or
other sum payable hereunder, (iii) all transfer, sales, value added, use and
similar taxes at any time levied, assessed or payable on account of the
acquisition, leasing or use of the Facility and FF&E, (iv) all charges of
utilities and communications services serving the Facility and FF&E and (v)
subject to the exclusions in the definition of "Excluded Taxes", all
franchise taxes and state registration fees or charges levied by any state in
which Brazos is domiciled or in which any Facility or FF&E is located.
Lessee will furnish to Brazos, promptly after demand therefor and when made
available by the taxing authorities, proof of payment of all items referred
to above, the payment of which is the responsibility of Lessee. If any such
assessments may legally be paid in installments, Lessee may pay or permit to
be paid such assessment in installments. So long as, in the reasonable
opinion of Lessee's counsel, Lessee shall have reasonable grounds to contest
the existence, amount, applicability or validity of any tax Lessee is
required to pay pursuant to this Facilities Lease, Lessee may contest such
tax pursuant to the provisions of ARTICLE XVIII of this Facilities Lease so
long as reserves deemed adequate under GAAP are maintained therefor by Lessee.
Section VIII.4. NO MATERIAL ALTERATIONS. Lessee shall not make any
alterations to any Facility which in Lessee's reasonable judgment would
materially adversely affect the value of the Facility or the usefulness of the
Facility for its intended purpose without the prior written consent of Brazos.
Any improvements or additions paid for by Brazos in accordance with the
Agreement for Facilities Lease shall become part of the Facility and shall be
evidenced by an updated Facility Leasing Record. Any improvements or additions
to any Facility not paid for by Brazos shall become and remain the property of
Lessee if it can be removed from such Facility without impairing the functioning
of such Facility or its resale value, excluding such addition.
Section VIII.5. MAINTENANCE. The FF&E shall be maintained, repaired,
refurbished or replaced by Lessee when necessary in order to ensure that all the
FF&E located at each Facility will include the FF&E listed on the Facility
Leasing Record with respect to such Facility or replacements for such FF&E of
the kind, quality and in the quantities included in the Facility Leasing Record
with respect to such Facility (PROVIDED that Lessee may replace FF&E with
equipment of different kind, quality and in different quantities if such
replacement equipment is of equal or greater value in Lessee's good faith
judgment and is included in the FF&E) and will be in such condition and
sufficient to allow such Facility to be operated in accordance with standards at
least substantially equivalent to the operation of facilities owned and operated
by Lessee. As equipment is substituted for FF&E subject to this Facilities
Lease, title to such substitute equipment shall automatically be transferred to
Brazos and such equipment shall be subject to this Facilities Lease and title to
the existing FF&E for which such equipment is being substituted shall be
released by Brazos. Brazos shall promptly obtain releases of any Liens arising
pursuant to the Credit Agreement or granted by Brazos contrary to the provisions
of this Facilities Lease covering the released FF&E.
FACILITIES LEASE AGREEMENT - Page 18
Section VIII.6. ADDITIONS AND ALTERATIONS. So long as no Event of Default
or Event of Facility Termination shall have occurred and be continuing beyond
any applicable grace or curative period, Lessee may, at its expense, make
additions to and alterations to any Facility following the completion of the
initial construction of such Facility; PROVIDED that upon completion of such
additions or alterations (i) in Lessee's reasonable judgment, neither the fair
market value of the Facility shall be materially lessened thereby nor the
condition of such Facility materially impaired, below the value, utility or
condition thereof immediately prior to such action (assuming such Facility was
then of a condition and repair required to be maintained pursuant to SECTION
8.2), (ii) such additions or alternations shall not result in a change of use of
such Facility to a use that is not permitted in this Lease, (iii) such work
shall be completed in a good and workmanlike manner and in compliance with all
applicable Insurance Requirements and upon completion of the work the Facility
shall comply in all respects with the requirements of this Facilities Lease and
any Ground Lease and (iv) no exterior walls of any building or other improvement
constituting a part of a Facility shall be demolished unless Lessee has made
adequate provision according to nationally recognized sound and prudent
engineering and architectural standards to preserve and maintain the structural
integrity of the Facility and for the restoration of such Facility to a
structurally sound architectural whole; PROVIDED, that Lessee shall notify
Brazos of such costs that are in excess of $500,000 for a Facility and shall not
make such additions or alterations that cost more than $500,000 for each
Facility and that such additions or alterations shall not result in any Lien
(except Permitted Encumbrances) upon such Facility. Any and all such additions
and alterations shall be and remain part of the Facility and shall be subject to
this Facilities Lease.
Section VIII.7. ENVIRONMENTAL REPORTS. At any reasonable time and from
time-to-time, upon reasonable notice, Lessee shall furnish Brazos a report or
reports (the "REPORTS") prepared by a qualified independent consultant, at the
expense of Lessee, concerning the condition and status of any Facility in
respect of any Environmental Laws; PROVIDED that the party requesting such
reports (either Brazos or the Assignee) has demonstrable evidence that such
Facility may be adversely affected by a hazardous substance, a hazardous waste
or an Environmental Claim not adequately addressed in any environmental
assessment previously delivered to Brazos or any Assignee in connection with
such Facility.
Section VIII.8. OBLIGATIONS OF BRAZOS. Brazos agrees to promptly deliver
to Lessee all notices, bills, invoices or reports received by Brazos which
relate to any Facility. Further, as owner of a Facility or owner of the
leasehold estate of an Acquired Facilities Lease, Brazos shall execute all such
documents and take all such actions as shall be necessary or as shall reasonably
be requested by Lessee or Guarantor in order to allow Lessee to develop,
construct, use, operate and/or maintain the Facility efficiently or otherwise in
a manner consistent with the purposes for which Lessee acquired an interest in
the Property, including, without limiting the generality of the foregoing,
execution of any architectural contracts, construction contracts, applications
or permits or other documents relating to any construction activities or other
operations or activities on or sought to be undertaken on the Property and
execution of easements, licenses or other such documents relating to the
Property. Brazos hereby appoints Guarantor and Lessee as its agent and
attorney-in-fact in connection with executing all such documents and taking all
such actions described in the sentence directly above. Also, Brazos shall
furnish Lessee or Guarantor promptly upon request with any powers of attorney or
other documents necessary or appropriate to enable Lessee or Guarantor to take
all such actions or execute all such documents on behalf of Brazos as described
in this paragraph. Any power of attorney granted under or pursuant to this
SECTION 8.8 is and shall be coupled with an interest and irrevocable.
Section VIII.9. CORRECTION OF STRUCTURAL DEFECTS. Upon demand of Brazos,
Lessee shall correct any structural defect in any Facility.
ARTICLE IX
INSURANCE
Section IX.1. LIABILITY AND PROPERTY DAMAGE. Lessee shall, at its sole
cost and expense, including through self-insurance, maintain such liability and
property damage insurance with respect to all Facilities and FF&E and
FACILITIES LEASE AGREEMENT - Page 19
insurance against loss or damage to all Facilities and FF&E of the types
usually carried by corporations engaged in the same or a similar business, of
similar size as Lessee, and owning or operating similar equipment and
property and which cover risks of the kind customarily insured against by
such corporations and such other insurance as may be required by law or as
may be reasonably requested by Brazos for purposes of assuring compliance
with this ARTICLE IX, including, without limitation, the insurance described
on the Schedule of Insurance attached hereto as EXHIBIT "A". Such insurance
shall be written by financially sound and reputable companies which are
legally qualified to issue such insurance. Lessee may, at its cost and
expense, prosecute any claim against any insurer or contest any settlement
proposed by any insurer, and Lessee may bring any such prosecution or contest
in the name of Brazos, Lessee, or both, and Brazos will join therein at
Lessee's request; PROVIDED that Lessee shall indemnify Brazos against any
losses, costs or expenses (including reasonable attorneys' fees) which Brazos
may incur in connection with such prosecution or contest. Notwithstanding
the foregoing, Lessee at its sole option, may choose to self-insure in whole
or in part (through deductibles or otherwise) for any liabilities or damages
which are otherwise to be covered by insurance as described herein.
Section IX.2. ADDITIONAL INSUREDS; NOTICE. Any policies of insurance,
other than Workers' Compensation and Employer's Liability Insurance, carried in
accordance with this ARTICLE IX and any policies taken out in substitution or
replacement for any such policies (i) shall name Brazos and Assignee as
additional insureds, as their respective interests may appear (but without
imposing upon any such person any obligation imposed on the insured, including,
without limitation, the liability to pay the premium for any such policy), (ii)
shall have attached to the All Risk direct physical damage policy a lender's
loss payable endorsement for the benefit of Brazos and Assignee as loss payees
and (iii) shall provide that as against Brazos and Assignee the insurers shall
waive any rights of subrogation. Lessee shall request the insurers to give
thirty (30) days advance written notice to Brazos and its assigns of any
cancellation of any insurance to be maintained under this Article. Lessee shall
give a copy to Brazos and any Assignee of any notice received by Lessee
regarding the cancellation or other termination of the insurance included in the
Schedule of Insurance attached hereto as EXHIBIT "A". Each liability policy (A)
shall be primary without right of contribution from any other insurance which is
carried by Brazos with respect to its interest as such in the Facility and (B)
shall expressly provide that all of the provisions thereof, except the limits of
liability, shall operate in the same manner as if there were a separate policy
covering each insured. Any insurance required to be maintained pursuant to this
Lease may, at Lessee's option, be maintained, in whole or in part, as part of
blanket insurance policies covering the Facilities and other properties of
Lessee.
Section IX.3. APPLICATION OF PROCEEDS OF LOSS OR SUBSTANTIAL TAKING. Any
insurance or condemnation proceeds received as the result of the occurrence of
(i) any event of loss described in SECTION 14.3 hereof or (ii) any event of
substantial Taking described in SECTION 15.1 shall be paid to Agent on behalf of
Brazos, and disposed of as contemplated by SECTION 14.3 hereof.
Section IX.4. APPLICATION OF PROCEEDS OF OTHER THAN LOSS OR SUBSTANTIAL
TAKING. As between Lessee and Brazos, if any insurance or condemnation proceeds
received as a result of any loss or Taking, other than a loss described in
SECTION 14.3 or an event of substantial Taking described in SECTION 15.1, is
less than $250,000, it is agreed that such proceeds will be paid to Lessee to be
used for repairs, replacement, reconstruction or restoration in accordance with
the terms of SECTIONS 14.2 and 15.2 hereof. If the proceeds equal or exceed
$250,000, then the proceeds shall be deposited in a special purpose account held
by Assignee, to be used only for the purpose set forth in this paragraph, and
Lessee shall be entitled (i) to receive the amounts so deposited against
certificates, invoices or bills in form reasonably satisfactory to Brazos and
Agent, delivered to Brazos and Assignee from time to time as such work or repair
progresses, and (ii) to direct the investment of the amounts so deposited as
provided in SECTION 9.5. Notwithstanding the foregoing, so long as no Event of
Default has occurred and is then continuing beyond any applicable grace or
curative period, any insurance or condemnation proceeds received as a result of
any loss or Taking, other than a loss to which SECTION 14.3 applies or an event
of substantial Taking described in SECTION 15.1, shall be paid to Lessee and
used by Lessee for repairs, replacement, reconstruction or restoration of the
affected Facility so as to place the same in good operating order, repair,
condition and appearance. Any moneys remaining in the aforesaid account after
final payment for repairs has been made shall be paid to Lessee.
FACILITIES LEASE AGREEMENT - Page 20
Section IX.5. INVESTMENT. Agent, at Lessee's instruction, shall invest
the amounts deposited with Agent pursuant to SECTION 9.4 in the following:
(i) direct obligations of the United States Government;
(ii) interest-bearing time deposits at, or obligations of, any Assignee;
(iii) commercial paper supported by a letter of credit issued by any
Assignee; or
(iv) money market mutual funds that invest only in government obligations
or repurchase agreements secured by government obligations.
Such investments shall mature in such amounts and on such dates so as to provide
that amounts shall be available on the draw dates sufficient to pay the amounts
requested by and due to Lessee. Any interest earned on investments of such
funds shall be paid to Lessee. Brazos and Agent shall not be liable for any
loss resulting from the liquidation of each and every such investment and Lessee
shall be liable for such loss, if any.
Section IX.6. APPLICATION IN DEFAULT. Any amount referred to in SECTIONS
9.3 or 9.4 which is payable to Lessee shall not be paid to Lessee or, if it has
been previously paid to Lessee and not applied by Lessee as provided in SECTIONS
9.3 or 9.4, shall not be retained by Lessee, if at the time of such payment an
Event of Default or Event of Facility Termination shall have occurred and be
continuing beyond any applicable grace or curative period. In such event, all
such amounts shall be paid to and held by Brazos as security for the obligations
of Lessee hereunder or, at Brazos' option, applied by Brazos toward payment of
any of such obligations of Lessee at the time due hereunder as Brazos may elect.
At such time as there shall not be continuing any Event of Default or Event of
Facility Termination, all such amounts at the time held by Brazos in excess of
the amount, if any, which Brazos shall have elected to apply as above provided
shall be applied as provided in SECTIONS 9.3 or 9.4.
Section IX.7. CERTIFICATES. Subject to Lessee's right to self-insure as
set forth hereinabove, on or before the execution of this Facilities Lease, and
annually on or before the anniversary of the date of this Facilities Lease,
Lessee will furnish to Brazos and Agent certificates or other evidence
reasonably acceptable to Brazos and Agent certifying that the insurance then
carried and maintained on each Facility complies with the terms hereof.
Section IX.8. COVENANT TO KEEP INSURANCE IN FORCE. Subject to Lessee's
right to self insure as set forth above, Lessee covenants that it will not use,
occupy or operate any Facility or FF&E or permit the use, occupancy or operation
of any Facility or FF&E at a time when the insurance required by this ARTICLE IX
is not in force with respect to such Facility or FF&E.
ARTICLE X
INDEMNITIES
Section X.1. INDEMNIFIED PERSONS. Lessee shall indemnify and hold
harmless Brazos, each general and limited partner of Brazos, any Assignee, any
successor or successors, and any Affiliate of each of them, and their respective
officers, directors, incorporators, shareholders, partners (general and limited,
including without limitation, the general and limited partners of Brazos),
employees, agents and servants (each of the foregoing, an "INDEMNIFIED PERSON")
from and against all liabilities, losses, obligations, claims, damages,
penalties, causes of action, suits, costs and expenses (including, without
limitation, reasonable attorneys' and accountants' fees and expenses) or
judgments of any nature relating to or in any way arising out of:
(a) Except as provided in SECTION 7.5 with respect to claims under a
Title Policy, the ordering, delivery, acquisition, construction, title on
acquisition, rejection, installation, possession, titling, retitling,
registration, reregistration, custody by Lessee of title and registration
documents, ownership, use, non-use, misuse, lease, operation,
FACILITIES LEASE AGREEMENT - Page 21
transportation, repair, control or disposition of any Facility or FF&E leased
or subleased or to be leased or subleased hereunder, (i) except to the extent
that such costs are included in the Acquisition Cost of such Facility or FF&E
and (ii) except for any general administrative expenses of Brazos;
(b) The assertion of any claim or demand based upon any infringement or
alleged infringement of any patent or other right, by or in respect of any
Facility or FF&E; PROVIDED, HOWEVER, that upon request of Lessee, Brazos will
make available to Lessee Brazos' rights under any similar indemnification
arising from any manufacturer's or vendor's warranties or undertakings with
respect to any Facility or FF&E;
(c) All taxes, assessments and charges that Lessee is obligated to pay
pursuant to SECTION 8.3 above;
(d) Any violation or alleged violation (other than an alleged violation
alleged by Brazos or the Assignee) by Lessee of this Facilities Lease or of any
contracts or agreements to which Lessee is a party or by which it is bound or
any laws, rules, regulations, orders, writs, injunctions, decrees, consents,
approvals, exemptions, authorizations, licenses and withholdings of objection,
of any governmental or public body or authority and all other Legal
Requirements, including, without limitation, any Legal Requirements with respect
to the environment or the regulation of hazardous materials or substances, or
any breach of a representation or warranty by Lessee under this Facilities
Lease;
(e) Any Environmental Claim or requirement of Environmental Law concerning
or relating to any Facility, or the operations or business in respect of any
Facility, other than any Environmental Claim resulting from the gross negligence
or willful misconduct of Brazos or the Assignee; or
(f) Any claim against Brazos' title or Assignee's interest in any Facility
or FF&E to the extent such claim is not fully paid by a Title Policy as provided
in section 7.5.
Section X.2. PAYMENTS. Subject to the terms of Section 10.5, Lessee shall
forthwith upon demand reimburse any Indemnified Person for any sum or sums
expended with respect to any of the items set forth in SECTION 10.1 or, upon
request from any Indemnified Person, shall pay such amounts directly. Any
payment made to or on behalf of any Indemnified Person pursuant to this ARTICLE
X shall be increased to such amount as will, after taking into account all
actual increases in taxes imposed with respect to the accrual or receipt of such
payment (as the same may be increased pursuant to this sentence), equal the
amount of the payment, reduced by the amount of any savings in such taxes
actually realized by the Indemnified Person as a result of the payment or
accrual of the amounts in respect of which the payment to or on behalf of the
Indemnified Person hereunder is made. To the extent that Lessee in fact
indemnifies any Indemnified Person under the indemnity provisions of this
Facilities Lease, Lessee shall be subrogated to such Indemnified Person's rights
in the affected transaction and shall have a right to determine the settlement
of claims therein.
Section X.3. CONTINUING INDEMNIFICATION. The indemnities contained in
this ARTICLE X shall not be affected by and shall survive any termination of
this Facilities Lease as a whole or in respect of any Facility or FF&E leased
hereunder as to all matters arising prior to such termination or any failure or
refusal of Lessee to accept any Facility or FF&E constructed, acquired or
ordered pursuant to the Agreement for Facilities Lease.
FACILITIES LEASE AGREEMENT - Page 22
Section X.4. LIMITATIONS.
(a) Notwithstanding any provisions of this ARTICLE X to the contrary,
Lessee shall not indemnify and hold harmless any Indemnified Person against
liabilities, losses, obligations, claims, damages, penalties, causes of action,
suits, costs and expenses to the extent arising from the gross negligence (as
between such Indemnified Person or an Affiliate of such Indemnified Person and
Lessee) or willful misconduct (as between such Indemnified Person or an
Affiliate of such Indemnified Person and Lessee) of such Indemnified Person, but
shall otherwise indemnify any Indemnified Person against its own negligence, or
against any consequential damages or loss of profit or loss of any fees to
Brazos (except to the extent specified in the letter from Brazos to Lessee dated
as of September 10, 1998, designated therein as the "Brazos Margin Letter").
(b) Brazos and Lessee agree that the terms of any state Law which may
affect the rights of Brazos and Lessee under this ARTICLE X may be set forth in
the Memorandum of Facilities Lease for the affected Facility or FF&E and shall
apply as though set forth in full in this Facilities Lease. Brazos agrees to
release the Memorandum of Facilities Lease for any Facility upon payment of all
amounts and satisfaction of all obligations owing as of the date of sale with
respect to such Facility.
Section X.5. LITIGATION. If any claim, action, proceeding or suit is
brought against an Indemnified Person with respect to which Lessee would be
required to indemnify such Indemnified Person, such Indemnified Person, with
reasonable promptness, shall cause written notice of the assertion of such claim
or the commencement of such proceeding or litigation to be given to Lessee but
failure to so notify Lessee shall not relieve Lessee from any liability
hereunder unless, in the reasonable judgment of Lessee, Lessee is actually and
materially prejudiced thereby and then only to the extent thereof. Upon receipt
of such notice, Lessee shall have the right to assume the defense thereof,
including the employment at its expense of counsel; PROVIDED that Lessee shall
not have such right, to the extent that such Indemnified Person shall deliver to
Lessee a written notice waiving the benefits of the indemnification of such
Indemnified Person provided by this ARTICLE X in connection with such claim,
action, proceeding or suit. Notwithstanding the foregoing, if (i) (A) any
claim, action, proceeding or suit is brought against an Indemnified Person who
is an individual, (B) the action threatens to restrain or adversely affect the
conduct of the business of the Indemnified Person, but not the business of
Brazos' ownership of the Property under this Agreement, and (C) the claim,
action, proceeding or suit seeks damages of more than $500,000, or (ii)
independent counsel to an Indemnified Person shall conclude that there may be
defenses available to the Indemnified Person which may conflict with those
available to Lessee, Lessee shall not have the right to assume the defense of
any such action on behalf of the Indemnified Person if such Indemnified Person
chooses to defend such action (with counsel reasonably acceptable to Lessee),
and all reasonable costs, expenses and attorneys' fees incurred by the
Indemnified Person in defending such action shall be borne by Lessee; provided
however, if there is more than one (1) Indemnified Person having a right to
defend such action as aforesaid, the obligation of Lessee to pay the fees and
expenses of such Indemnified Persons shall be limited to one (1) firm of
attorneys. Notwithstanding the assumption of its defense by Lessee pursuant to
this SECTION 10.5, any Indemnified Person shall have the right to employ
separate counsel and to participate in its defense, but the fees and expenses of
such counsel shall be borne by the Indemnified Person. In addition, Lessee will
not be liable for any settlement of any claim, action, proceeding or suit unless
Lessee has consented thereto in writing. Any decision by an Indemnified Person
to employ its own counsel rather than counsel selected by Lessee (whether or not
at Lessee's expense) shall in no way affect any rights of such Indemnified
Person otherwise arising under this ARTICLE X.
FACILITIES LEASE AGREEMENT - Page 23
ARTICLE XI
RENEWAL AND TERMINATION
Section XI.1. LESSEE'S RIGHT TO TERMINATE.
(a) Regardless of whether any Potential Default, Potential Property
Termination, Event of Default or Event of Facility Termination has occurred and
is continuing, with respect to all Facilities and all FF&E, Lessee shall have
the right, at any time during the Lease Term or any Renewal Term, upon not less
than fifteen (15) days' written notice to Brazos and Assignee, to terminate, on
any date specified in such notice, this Facilities Lease with respect to all
Facilities and all FF&E, and either (i) purchase or cause its designee to
purchase all Facilities and all FF&E, for cash at their respective Acquisition
Cost less any Unearned Rent, together with all other amounts then due and
payable by Lessee to Brazos hereunder or (ii) with the prior written consent of
both Brazos and Agent, arrange, at its own cost and expense, for all Facilities
and all FF&E, to be sold for cash pursuant to SECTION 11.4 and with the
consequences therein provided, except that such sale must occur on the date
stipulated in the written notice contemplated by this SECTION 11.1.
(b) In addition to Lessee's right to terminate this Facilities Lease
with respect to all Facilities and all FF&E pursuant to subsection (a) above, so
long as no Event of Default or Event of Facility Termination (other than an
Event of Facility Termination with respect to the Facility and FF&E to be
purchased pursuant to this subsection (b)) has occurred and is continuing beyond
any applicable grace or curative period, Lessee shall have the right, at any
time during the Lease Term or any Renewal Term, upon not less than fifteen (15)
days' written notice to Brazos and Assignee, to terminate on any date specified
in such notice this Facilities Lease with respect to any one or more Facility
and the related FF&E (each such Facility and related FF&E specified in such
notice being herein called a "PURCHASED FACILITY"), but not with respect to the
remaining Facilities, subject to the following terms and conditions:
(i) On the effective date of such termination with respect to the
Purchased Facility, Lessee or its designee shall purchase the
Purchased Facility for cash equal to the Acquisition Cost less any
Unearned Rent with respect to the applicable Facility and
simultaneously purchase the parcel of land on which the Purchased
Facility is located (or the leasehold interest in such parcel in the
case of an Acquired Ground Lease, as defined in the Ground Lease)
for the Acquisition Cost (as defined in the Ground Lease) of such
parcel of land or Acquired Ground Lessee.
(ii) The conditions of either subsection (iii), (iv) or (v) below have
been satisfied.
(iii) In the good faith judgment of Lessee, the Purchased Facility shall
have become uneconomic for continued use and occupancy by Lessee
(such Facility being hereinafter sometimes called an "UNECONOMIC
FACILITY") and Lessee shall have delivered to Brazos and Assignee a
written notice (an "UNECONOMIC NOTICE") containing a certificate of
an officer of Lessee stating that Lessee has determined that such
Facility has become uneconomic for continued use and occupancy by
Lessee. If Lessee terminates this Facilities Lease with respect to
an Uneconomic Facility, neither Lessee nor any Affiliate of Lessee
shall have the right, for the period commencing six (6) months and
ending one (1) year following the date of the purchase of such
Economic Facility, to use such Uneconomic Facility for the operation
of a retail store by Lessee or such Affiliate.
(iv) In addition to the right to terminate this Facilities Lease with
respect to an Uneconomic Facility, Lessee shall have the right to
terminate this Facilities Lease with respect to Facilities with
respect to which the attributable Acquisition Costs are no more than
twenty percent (20%) of the aggregate Acquisition Costs for all
Facilities then covered by this Facilities Lease.
(v) In addition to Lessee's right to terminate this Facilities Lease
with respect to an Uneconomic Facility pursuant to subsection (iii)
above, or to terminate pursuant to subsection (iv), Lessee shall
have the
FACILITIES LEASE AGREEMENT - Page 24
right to terminate this Facilities Lease with respect to any one
or more Facilities provided that Lessee has delivered to Brazos
and the Assignee, on or prior to the notice of termination with
respect to such Facilities, an appraisal or appraisals, in form
and substance reasonably satisfactory to Brazos and the Assignee,
reflecting that the aggregate fair market value of all Facilities
that will remain subject to this Facilities Lease after such
termination (assuming completion of all such Facilities) and all
Properties that are subject to the Ground Lease after such
termination is no less than the aggregate Acquisition Costs of the
remaining Facilities (including any Acquisition Costs reasonably
expected to be advanced to cause the completion of the remaining
Facilities) and Acquisition Costs (as defined in the Ground Lease)
of the remaining Properties.
Section XI.2. BRAZOS' RIGHT TO TERMINATE. Brazos shall have the right
upon ninety (90) days' prior written notice to Lessee, to terminate the
Facilities Lease of all Facilities and all FF&E as of a Basic Rent Payment Date
stipulated in such notice if at any time: (1) by reason of a nexus between a
state or local taxing jurisdiction and any Facility or FF&E or the activities of
any user (other than Brazos) of the Facility or FF&E, Brazos incurs, or, in its
reasonable judgment, in the future would incur, a state or local tax for which
Brazos is not indemnified, and which, in its reasonable good faith judgment,
renders the Facilities Lease uneconomic, unless Lessee agrees to indemnify
Brazos from such state or local tax; or (2) the Agreement for Facilities Lease
or any other instrument relating to this Facilities Lease shall be deemed to
require the payment or deemed to permit the collection of interest in excess of
the Maximum Rate and any such interest in excess of such Maximum Rate cannot be
spread and allocated either to the preceding or subsequent periods in which such
excess interest is to be paid or collected pursuant to SECTION 19.8 of this
Facilities Lease. In the event of a termination of this Facilities Lease with
respect to all Facilities and all FF&E pursuant to this SECTION 11.2, Lessee
shall either (i) purchase or cause its designee to purchase, on the Basic Rent
Payment Date or other date stipulated in the written notice contemplated by this
SECTION 11.2, all Facilities and all FF&E for cash at their respective
Acquisition Cost less any Unearned Rent or (ii) with the prior written consent
of both Brazos and Agent arrange, at its own cost and expense, for all
Facilities and all FF&E to be sold for cash pursuant to SECTION 11.4 and with
the consequences therein provided, except that such sale must occur on the Basic
Rent Payment Date or other date stipulated in the written notice contemplated by
this SECTION 11.2.
Section XI.3. RENEWAL.
(a) Provided that Lessee has theretofore given notice to Brazos and
Agent of Lessee's desire to renew this Lease, not later than nine months prior
to the end of the Lease Term or six months prior to the end of a Renewal Term,
if any, as applicable, Brazos, with the consent of Agent, shall give notice to
Lessee as to whether it desires to renew the lease with respect to all
Facilities and all FF&E and the terms and conditions (including the rental
amounts) of any such renewal. Not later than six months prior to the end of the
Lease Term or four months prior to the end of a Renewal Term, as applicable,
Lessee shall give notice to Brazos as to whether it will renew or not renew the
lease for each Facility for which Brazos has offered to renew the lease.
Failure of Lessee to give such notice shall be deemed an election not to renew
the lease. If the parties elect to renew the Lease Term as set forth above,
Brazos will use commercially reasonable efforts to obtain financing, on terms
and conditions consistent with the Credit Agreement and partnership agreement of
Brazos or otherwise acceptable to Brazos and Lessee, for the Renewal Term. So
long as (i) no Event of Default or Event of Facility Termination has occurred
and is continuing beyond any applicable grace or curative period, (ii) Brazos
shall have received a commitment for financing on terms satisfactory to Brazos
and Lessee through the last day of the Renewal Term (as defined below) from the
Agent under the Credit Agreement or from a third party, and (iii) Lessee shall
elect to renew this Lease, this Lease shall be renewed for a term (the "RENEWAL
TERM") equal to one year commencing on the first day of the calendar month
following the last day of the Lease Term or Renewal Term, as applicable,
thereof; PROVIDED, HOWEVER, the Lease Term or Renewal Term, as applicable, shall
not be renewed if on the first day of the new Renewal Term the lender(s) fails
to fund under its commitment pursuant to the terms of such commitment for any
reason. Lessee may give advance notice of its intention to renew this
Facilities Lease with respect to all Facilities and all FF&E for successive
Renewal
FACILITIES LEASE AGREEMENT - Page 25
Terms. Upon acceptance by Brazos and Agent of such successive Renewal Terms,
Lessee shall be bound by such renewals for the entire period of successive
Renewal Terms. Upon the request of Lessee, but subject to the other
provisions of this SECTION 11.3, any Renewal Term may be five (5) years,
rather than one (1) year.
(b) If this Facilities Lease is not being renewed, Lessee shall, at its
option, either (i) purchase or cause its designee to purchase all Facilities and
all FF&E for cash at their respective Acquisition Cost (less any Unearned Rent)
during the period from one (1) month before the end of the Lease Term or Renewal
Term, as applicable, to five (5) Business Days before the end of the Lease Term
or Renewal Term, as applicable or (ii) arrange, at its own cost and expense, for
all Facilities and all FF&E to be sold for cash pursuant to SECTION 11.4 and
with the consequences therein provided during the period from six (6) months
before the end of the Lease Term or Renewal Term, as applicable, to one (1)
month before the end of the Lease Term or Renewal Term, as applicable. With
respect to a Facility for which the lease is not being renewed, not later than
eight months prior to the end of the Lease Term or four months prior to the end
of the Renewal Term, as applicable, Lessee shall give notice to Brazos of its
election to either purchase or sell such Facilities and FF&E to a third party.
Any notice given by Lessee pursuant to the preceding sentence shall be
irrevocable, except that Lessee may revoke the election to have a Facility or
FF&E sold to a third party if Lessee purchases such Facility or FF&E.
Section XI.4. SALES TO THIRD PARTIES.
(a) If Lessee exercises its right to arrange for a sale of a Facility to
a third party pursuant to SECTIONS 11.1, 11.2 or 11.3, Brazos shall receive the
proceeds of sale and:
(i) if the proceeds of sale are greater than the Acquisition
Cost of the Facility sold less any Unearned Rent, Brazos
shall pay to Lessee the amount by which such proceeds exceed
such Acquisition Cost less any Unearned Rent;
(ii) if the proceeds of sale are equal to or less than the
Acquisition Cost of the Facility sold less any Unearned
Rent, but greater than or equal to fifteen percent (15%) of
the Acquisition Cost of such Facility, Lessee shall pay to
Brazos an amount equal to (A) such Acquisition Cost less (B)
the proceeds of such sale plus any Unearned Rent; and
(iii) if the proceeds of sale are less than fifteen percent (15%)
of the Acquisition Cost of the Facility sold, Lessee shall
pay to Brazos an amount equal to the sum of (A) eighty-five
percent (85%) of such Acquisition Cost less any Unearned
Rent and (B) the amount specified to Lessee in the notice
delivered pursuant to SECTION 11.5 by which the residual
value of such Facility has been reduced by wear and tear in
excess of that attributable to normal use, plus the amount
by which, in the good faith judgment of Brazos, the proceeds
of sale for such Facility has been reduced due to Liens
(exclusive of any Lien granted by Brazos contrary to the
provisions of this Facilities Lease) attaching to such
Facility at the time of sale.
For purposes of this SECTION 11.4, in connection with the sale of a Facility
"proceeds of sale" shall mean the aggregate proceeds from the sale of such
Facility without reduction for any amounts paid by Lessee.
(b) All payments and credits referred to in paragraph (a) above shall be
made on the date of the sale of such Facility, and the parties shall account to
each other for such payments and credits. In consideration for the receipt by
Brazos of the proceeds of sale and all other amounts then due and owing
hereunder, Brazos shall transfer title to such Facility to the purchaser at the
sale designated by Lessee, free of any Lien created by or under the Credit
Agreement or granted by Brazos contrary to the provisions of this Facilities
Lease, pursuant to a special warranty bill of sale. In the event of a sale
pursuant to this SECTION 11.4, neither Lessee nor any Affiliate of Lessee shall
purchase the Facility. Any Facility sold to a third party pursuant to this
paragraph (b) shall, unless SECTION 11.4 (a)(i) applies, be free of any Liens
(exclusive of any Lien granted by Brazos contrary to the provisions of this
Facilities Lease) at the time of sale,
FACILITIES LEASE AGREEMENT - Page 26
including Liens which would otherwise be Permitted Encumbrances if such Liens
would reduce the Value to the purchaser of such Facility; PROVIDED, HOWEVER,
Lessee shall have the option to obtain affirmative title insurance, if
available, to insure over such Lien or to make other arrangements acceptable
to such purchaser.
(c) If a Facility and the related Property are sold to the same third
party, the proceeds of sale shall be allocated prorata between such Facility and
Property based on the Acquisition Cost of such Facility and the Acquisition Cost
(as defined in the Ground Lease) of such Property unless (a)(iii) above applies,
in which case, Agent may allocate the proceeds in any manner acceptable to
Agent.
(d) In the event Lessee exercises the third party sale option with
respect to a Facility then, as soon as practicable and in all events not less
than sixty (60) days prior to the end of the Lease Term or Renewal Term, as
applicable, Lessee at its expense shall cause to be delivered to Brazos a Phase
I environmental site assessment for each of the Properties recently prepared (no
more than thirty (30) days old prior to the date of delivery) by an independent
recognized professional reasonably acceptable to Brazos and in form, scope and
content reasonably satisfactory to Brazos. In the event that Brazos shall not
have received such environmental site assessment by the date sixty (60) days
prior to the end of the Lease Term or Renewal Term or in the event that such
environmental assessment shall reveal the existence of any material violation of
Environmental Laws, other material environmental violations or potential
material environmental violation (with materiality determined in each case by
Brazos and Agent in their reasonable good faith judgment) with respect to a
Facility, then thirty (30) days prior to the end of the Lease Term or Renewal
Term, as the case may be, Lessee shall pay to Brazos an amount equal to the
Acquisition Cost (less Unearned Rent) and any and all other amounts then due and
owing hereunder for the affected Facility. Upon receipt of such payment and all
other amounts due under the Lease Documents, Brazos shall transfer to Lessee all
of Brazos's right, title and interest in and to the affected Facility in
accordance with this Facilities Lease, free and clear of any Lien created under
the Credit Agreement or any Lien granted by Brazos contrary to the provisions of
this Facilities Lease.
Section XI.5. ADVISEMENT. At least thirty (30) days prior to any sale of
a Facility pursuant to SECTION 11.4, Lessee shall deliver to Brazos a copy of
the purchase contract for such Facility. If such sale will result in the
applicability of SECTION 11.4(a)(iii), Brazos may arrange for a sale of such
Facility to be made to a purchaser designated by Brazos, if such purchaser will
pay an amount sufficient to render SECTION 11.4(a)(iii) inapplicable, or Brazos
may send Lessee a bill as described in the paragraph below for the amount by
which the residual value of such Facility has been reduced by wear and tear in
excess of that attributable to normal use and such amount shall be due and
payable within ten (10) days after receipt of such bill. Unless Brazos shall
arrange for the sale of such Facility and shall give Lessee notice thereof
within thirty (30) days of Brazos' receipt of the purchase contract, Lessee may
proceed with the sale to a purchaser designated by it; PROVIDED that on or
before the date of such sale Lessee shall pay to Brazos the amount set forth in
the bill for excess wear and tear. Within thirty (30) days of Lessee's receipt
of Brazos' notice provided for in the preceding sentence, Lessee may arrange for
such sale to be made to another purchaser designated by it, if such purchaser
shall pay an amount sufficient to render SECTION 11.4(a)(iii) inapplicable. If
Brazos and Lessee do not agree on the amount by which the residual value of a
Facility has been reduced by wear and tear in excess of that attributable to
normal use, such amount shall be determined by an appraisal conducted by a
mutually acceptable disinterested appraiser.
Upon any sale of the Facility or FF&E to any third party hereunder, Lessee
(A) shall abandon the Facility or FF&E to the possession of such third party at
the closing, subject only to the Liens existing at such time, and (B) shall
deliver the Facility or FF&E in the same physical and operating condition as on
the first day of the Lease Term, less wear and tear attributable to normal use
and occupancy for an approved use, and in the manner required hereby. Upon the
end of the Lease Term or any Renewal Term, unless Lessee purchases the Facility
or FF&E, Lessee shall surrender to Brazos all keys to the Facilities and FF&E
and give Brazos the combination of all safes or safes or safe cabinets, if any,
which are to remain in the Facility. If Lessee does not purchase the Facility
or FF&E pursuant to the terms hereof, and fails to relinquish possession of the
Facility or FF&E in the condition required by this Section, Lessee shall pay to
Brazos, as Additional Rent, the greater of (A) the costs and expenses as
reasonably determined by Brazos with the approval of Agent as necessary to
repair and restore the Facility or FF&E to the condition required by this
Section, or
FACILITIES LEASE AGREEMENT - Page 27
(B) the reduction in fair market sales value attributable to such failure to
deliver the Facility or FF&E in the condition required by this Section as
reasonably determined by Brazos with the approval of Agent.
Section XI.6. ADDITIONAL PAYMENTS. In connection with any purchase or
sale of a Facility or FF&E under this ARTICLE XI, on or before the date such
purchase or sale occurs, Lessee shall pay to Brazos, in addition to any purchase
price payable, all Basic Rent payable, any Additional Rent, all amounts owing
under SECTION 11.4, and other amounts owing hereunder to the date of such sale.
Section XI.7. TERMINATION OF FACILITIES LEASE. Upon receipt by Brazos of
the purchase price payable in connection with any sale or purchase of any
Facility or FF&E under this ARTICLE XI, together with all additional payments
required under SECTION 11.6 with respect to such Facility or FF&E, this
Facilities Lease shall terminate with respect to such Facility or FF&E. In the
event a Facility is the subject of an Acquired Facilities Lease and this
Facilities Lease is not being renewed or is being terminated as provided in this
ARTICLE XI with respect to such Facility, the Lessee shall assume all of Brazos'
obligations under such Acquired Facilities Lease as of the end of the term or
the date of termination of this Facilities Lease with respect to such Facility
and this Facilities Lease shall terminate with respect to such Facility.
Section XI.8. SURRENDER OF FACILITY. Subject to the provisions of this
ARTICLE XI and ARTICLES XII, XIII, XIV and XV hereof, upon termination of the
lease of any Facility or FF&E hereunder, Lessee shall surrender such Facility or
FF&E to Brazos.
ARTICLE XII
PROCEDURE UPON SALE
The following procedure shall apply to each sale of a Facility and related
FF&E to Lessee or its designee:
(a) The closing of such sale and purchase shall occur on the date
specified in the written notice of one party to the other regarding
such sale, or on the next Business Day if the date designated in
such notice is not a Business Day.
(b) At such closing, Lessee or its designee shall pay to Brazos and the
Agent the Acquisition Cost and all other amounts then due and owing
hereunder with respect to the Purchased Facility, less any Unearned
Rent with respect to the Purchased Facility.
(c) At such closing, the Lessee or its designee shall assume all of
Brazos' obligations under any Acquired Facilities Lease with respect
to such Purchased Facility.
(d) At such closing, Brazos shall deliver or shall cause to be delivered
to Lessee or its designee the following:
(i) A Special Warranty Deed conveying to the Lessee or its
designee the applicable Purchased Facility and related FF&E,
free and clear of any Liens arising under the Credit
Agreement or created by Brazos contrary to the provisions of
this Facilities Lease and any other encumbrances other than
Permitted Encumbrances.
(ii) A Bill of Sale transferring to Lessee or its designee any of
the related FF&E, free and clear of any Liens arising under
the Credit Agreement or created by Brazos contrary to the
provisions of this Facilities Lease and any encumbrances
other than the Permitted Encumbrances.
FACILITIES LEASE AGREEMENT - Page 28
(iii) An assignment of warranties to Lessee or its designee
affecting all or any portion of the Purchased Facility or
related FF&E.
(iv) To the extent necessary to convey title in accordance with
CLAUSES (i) and (ii) above, releases of all Liens (including
termination statements with respect to any UCC financing
statements) covering the Purchased Facility and related
FF&E, executed by the holders of such Liens or their duly
authorized agent.
ARTICLE XIII
EVENTS OF DEFAULT
Section XIII.1. EVENTS OF DEFAULT. Any of the following events of default
shall constitute an "EVENT OF DEFAULT" and shall give rise to the rights on the
part of Brazos described in SECTION 13.2 hereof:
(a) FAILURE TO MAKE PAYMENTS. Failure of Lessee to pay amounts due to
Brazos at the time of any scheduled sale of a Facility hereunder, failure of
Lessee to pay Basic Rent for more than five (5) Business Days after such payment
is due pursuant to ARTICLE VI hereof or failure of Lessee to pay any other
amount payable by Lessee hereunder when due which failure continues for more
than ten (10) Business Days after written demand for such payment.
(b) FAILURE TO MAINTAIN INSURANCE. Subject to Lessee's rights to self
insure hereunder, failure of Lessee to maintain the insurance required by
ARTICLE IX hereof, or default in the performance of the covenant contained in
SECTION 9.4 hereof which failure or default continues for more than thirty (30)
days after any lapse of insurance or such default.
(c) OTHER DEFAULTS. Lessee shall default in the performance or
observance of any other term, covenant, condition or obligation contained in
this Facilities Lease or any Consent and such default shall (i) continue for
thirty (30) days after written notice shall have been given to Lessee by Brazos
or any Assignee specifying such default and requiring such default to be
remedied or (ii) if such default is of a nature that it is not capable of being
cured within such 30-day period, Lessee shall not have diligently commenced
curing such default and proceeded diligently and in good faith thereafter to
complete curing such default.
(d) BANKRUPTCY. (i) The entry of a decree or order for relief in
respect of Lessee by a court having jurisdiction in the premises in an
involuntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or any other applicable Federal or state bankruptcy, insolvency or
other similar law, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of Lessee or of any substantial part
of Lessee's property, or ordering the winding up or liquidation of Lessee's
affairs, and the continuance of any such decree or order unstayed and in effect
for a period of sixty (60) consecutive days; or (ii) the general suspension or
discontinuance of Lessee's business operations, its insolvency (however
evidenced) or its admission of insolvency or bankruptcy, or the commencement by
Lessee of a voluntary case under the Federal bankruptcy laws, as now or
hereafter constituted, or any other applicable Federal or state bankruptcy,
insolvency or other similar law, or the consent by it to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of Lessee or of any substantial part of
its property, or the making by it of an assignment for the benefit of creditors,
or the failure of Lessee generally to pay its debts as such debts become due, or
the taking of corporate action by Lessee in furtherance of any such action.
(e) PAYMENT OF OBLIGATIONS. A default or event of default which remains
uncured for any applicable grace or curative period, the effect of which is to
permit the holder or holders of any Indebtedness of Lessee, or a trustee or
agent on behalf of such holder or holders, to cause such Indebtedness to become
due prior to its stated maturity shall
FACILITIES LEASE AGREEMENT - Page 29
occur under the provisions of any instrument evidencing Indebtedness in
excess of $20,000,000 of Lessee (or under the provisions of any agreement
pursuant to which such instrument was issued).
(f) MISREPRESENTATIONS. Any representation or warranty made by Lessee
in this Facilities Lease or any Consent or which is contained in any
certificate, document or financial or other statement furnished under or in
connection with this Facilities Lease proves to be false or misleading in any
material respect when made or deemed made and which has a Material Adverse
Effect.
(g) DEFAULT UNDER LEASE DOCUMENTS. An Event of Default (as defined in
the Agreement for Facilities Lease, Agreement for Ground Lease or Ground Lease)
shall occur under the Agreement for Facilities Lease, Agreement for Ground Lease
or Ground Lease, respectively, and be continuing beyond any applicable grace or
curative period.
(h) OTHER AGREEMENTS. Lessee shall default in any material respect in
the performance or observance of any material term, covenant, condition or
obligation contained in any other material written agreement executed by Lessee
with or for the benefit of Brazos or Agent and such default shall not have been
cured within any applicable grace or cure period and which would reasonably be
expected to have a Material Adverse Lease Document Effect.
(i) UNAUTHORIZED ASSIGNMENT. Any assignment by Lessee of any interest
in this Facilities Lease other than in accordance with the terms of this
Facilities Lease.
(j) DEFAULT UNDER THE GUARANTY. An "EVENT OF DEFAULT" (as defined in
the Guaranty) under the Guaranty shall occur and be continuing beyond any
applicable grace or curative period.
(k) DEFAULT UNDER CORPORATE CREDIT DOCUMENTS. The occurrence of any
breach, failure of performance, default, event of default or terminating event
with regard to either Lessee or Guarantor under any of the Corporate Credit
Documents, which remains uncured beyond any applicable grace or cure period, the
effect of which is to permit the holders of any Indebtedness thereunder, or an
agent on behalf of such holder or holders, to cause the Indebtedness evidenced
by the Corporate Credit Documents to become due prior to its stated maturity.
Section XIII.2. RIGHTS UPON DEFAULT. Upon the occurrence and continuation
of any Event of Default Brazos or any Assignee may in its discretion declare
this Facilities Lease to be in default and may, in its discretion, do any one or
more of the following:
(a) Prior to the exercise of any other remedy, terminate this Facilities
Lease as of any date, in which event, Lessee shall have the right and shall be
required as to all Facilities other than the Facility which is the subject of an
Acquired Facilities Lease, to purchase all Facilities at a price equal to the
Acquisition Cost of such Facility and as to all Facilities which are the
subject of an Acquired Facilities Lease, assume all obligations of Brazos under
such Acquired Facilities Lease. In connection with any such purchase under this
SECTION 13.2, on the Basic Rent Payment Date or other date upon which such
purchase shall occur, Lessee shall pay to Brazos, in addition to such
Acquisition Cost, all Basic Rent payable and any Additional Rent and other
amount owing hereunder with respect to such Facility up to the date of such
sale, and reasonable attorneys' fees and expenses and other costs incurred by
Brazos by reason of such Event of Default and exercise of Brazos' rights under
this SECTION 13.2. Any Unearned Rent shall be credited against Lessee's payment
obligations under the foregoing sentences and the balance, if any, shall be
refunded to Lessee. Upon payment of the amount set forth in the foregoing
sentences, Brazos shall transfer all Facilities to Lessee free of any Lien
created pursuant to the Credit Agreement and this Facilities Lease shall
terminate without further obligation or liability of Brazos or Lessee except
where such liability is expressly provided to survive the termination of this
Facilities Lease; PROVIDED, HOWEVER, in no event shall Lessee be liable for any
further damages arising out of the occurrence of such Event of Default.
(b) If and only if Lessee fails to pay the amounts set forth in
subparagraph (a) above, Brazos or any Assignee may, in its discretion, do any
one or more of the following:
FACILITIES LEASE AGREEMENT - Page 30
(i) Whether or not the lease of any Facility is terminated, take
immediate possession of and remove any or all FF&E and other equipment or
property of Brazos in the possession of Lessee, wherever situated, and for such
purpose, enter upon any premises without liability to Lessee for so doing;
(ii) Sell any Facility or Brazos' interest in any Acquired Facilities
Lease (with or without the concurrence or request of Lessee);
(iii) Hold, use, occupy, operate, remove, lease or keep idle any or all
Facility as Brazos in its sole discretion may determine, without any duty to
account to Lessee with respect to any such action or inaction or for any
proceeds thereof;
(iv) Exercise any other right or remedy which may be available under
applicable law and in general proceed by appropriate judicial proceedings,
either at law or in equity, to enforce the terms hereof or to recover damages
for the breach hereof; and
(v) Declare an Event of Facility Termination as to any or all Facilities
and/or FF&E leased hereunder.
Suit or suits for the recovery of any default in the payment of any sum due
hereunder may be brought by Brazos from time to time at Brazos' election, and
nothing herein contained shall be deemed to require Brazos to await the date
whereon this Facilities Lease or the term hereof would have expired by
limitation had there been no such default by Lessee or no such termination or
cancellation.
The receipt of any payments under this Facilities Lease by Brazos with
knowledge of any breach of this Facilities Lease by Lessee or of any default by
Lessee in the performance of any of the terms, covenants or conditions of this
Facilities Lease, shall not be deemed to be a waiver of any provision of this
Facilities Lease.
No receipt of moneys by Brazos from Lessee after the termination or
cancellation hereof in any lawful manner shall reinstate, continue or extend the
Lease Term or any Renewal Term, or affect any notice theretofore given to
Lessee, or operate as a waiver of the right of Brazos to enforce the payment of
Basic Rent or Additional Rent or other charges payable hereunder, or operate as
a waiver of the right of Brazos to recover possession of any Facility or FF&E by
proper suit, action, proceedings or remedy; it being agreed that, after the
service of notice to terminate or cancel this Facilities Lease, and the
expiration of the time therein specified, if the default has not been cured in
the meantime, or after the commencement of suit, action or summary proceedings
or of any other remedy, or after a final order, warrant or judgment for the
possession of the Facility, Brazos may demand, receive and collect any moneys
payable hereunder, without in any manner affecting such notice, proceedings,
suit, action, order, warrant or judgment; and any and all such moneys so
collected shall be deemed to be payments on account for the use, operation and
occupation of the Facility, or at the election of Brazos, on account of Lessee's
liability hereunder. Acceptance of the keys to any Facility, or any similar
act, by Brazos, or any agent or employee, during the term hereof, shall not be
deemed to be an acceptance of a surrender of any Facility unless Brazos shall
consent thereto in writing.
If, after an Event of Default shall have occurred, Lessee fails to
surrender promptly after written request by Brazos or converts or destroys any
Facility, Lessee shall be liable to Brazos for all Basic Rent and Additional
Rent then due and payable with respect to such Facility, all other amounts
payable under this Facilities Lease, the Acquisition Cost of such Facility as of
the date of such request, conversion or destruction and all losses, damages and
expenses (including, without limitation, attorneys' fees and expenses) sustained
by Brazos by reason of such Event of Default and the exercise of Brazos'
remedies with respect thereto.
If, after an Event of Default Brazos repossesses any Facility,
notwithstanding any termination of this Facilities Lease, Lessee shall be liable
for and Brazos may recover from Lessee all Basic Rent accrued and any Additional
Rent owing with respect to such Facility to the date of such repossession, all
other amounts payable under this Facilities Lease, and all losses, damages and
expenses (including, without limitation, reasonable attorneys' fees and
expenses)
FACILITIES LEASE AGREEMENT - Page 31
sustained by Brazos by reason of such Event of Default and the exercise of
Brazos' remedies with respect thereto. In addition, Brazos may sell Brazos'
interest in any Facility upon any terms that Brazos deems satisfactory, free
of any rights of Lessee or any person claiming through or under Lessee. In
the event of such sale, in addition to the amounts payable under the first
sentence of this paragraph, Brazos shall be entitled to recover from Lessee,
as liquidated damages, and not as a penalty, an amount equal to the
Acquisition Cost of any Facility so sold, minus the sum of any Unearned Rent
plus the net proceeds of such sale (deducting from such Unearned Rent and the
gross proceeds of such sale any reasonable legal expenses, commissions, sales
taxes or other costs or expenses associated with such sale) received by
Brazos; PROVIDED, HOWEVER, if the proceeds of such sale plus any Unearned
Rent are in excess of the amount payable to Brazos pursuant hereto, such
excess shall be the property of Lessee.
Subject to the availability of such remedy under applicable law and subject
to the provisions of Section 13.2(a) above, Brazos may (i) sell all or any part
of the Facility or FF&E at public or private sale, as Brazos may determine, free
and clear of any rights of the Lessee and without any duty to account to the
Lessee with respect to such action or inaction or any proceeds with respect
thereto (except to the extent required by clause (ii) below if Brazos shall
elect to exercise its rights thereunder) in which event the Lessee's obligation
to pay Basic Rent hereunder for periods commencing after the date of such sale
shall be terminated or proportionately reduced, as the case may be; and (ii) if
Brazos shall so elect, demand that the Lessee pay to Brazos, and the Lessee
shall pay to Brazos, on the date of such sale, as liquidated damages for loss of
a bargain and not as a penalty (the parties agreeing that Brazos' actual damages
would be difficult to predict, but the aforementioned liquidated damages
represent a reasonable approximation of such amount) (in lieu of Basic Rent due
for periods commencing on or after the Basic Rent Payment Date coinciding with
such date of sale (or, if the sale date is not a Basic Rent Payment Date, the
Basic Rent Payment Date next preceding the date of such sale)), an amount equal
to (A) the excess, if any, of (1) the Acquisition Cost calculated as of such
Basic Rent Payment Date (including all Rent due and unpaid to and including such
Basic Rent Payment Date), over (2) the net proceeds of such sale, if any (that
is, after deducting all costs and expenses incurred by Brazos, the Agent and the
Assignees incident to such conveyance, including, without limitation,
repossession costs, brokerage commissions, prorations, transfer taxes, fees and
expenses for counsel, title insurance fees, survey costs, recording fees, and
any repair or alteration costs); plus (B) any and all additional damages, costs
and expense of Brazos under the Ground Lease; plus (C) interest at the overdue
rate provied in SECTION 6.3 hereof on the foregoing amount from such Basic Rent
Payment Date until the date of payment.
Brazos may exercise any other right or remedy that may be available to it
under applicable law, or proceed by appropriate court action (legal or
equitable) to enforce the terms hereof or to recover damages for the breach
hereof. Separate suits may be brought to collect any such damages for any
period(s), and such suits shall not in any manner prejudice Brazos' right to
collect any such damages for any subsequent period(s), or Brazos may defer any
such suit until after the expiration of the Term, in which event such suit shall
be deemed not to have accrued until the expiration of the Lease Term.
In the event that a court of competent jurisdiction rules that this
Facilities Lease constitutes a mortgage, deed of trust or other secured
financing as is the intent of the parties pursuant to SECTION 3.3, and subject
to the availability of such remedy under applicable law, then Brazos and the
Lessee agree that the Lessee hereby grants, bargains, sells, transfers, assigns
and conveys unto the trustee named as such in the Lien granted by Brazos to
Agent, as trustee and herein referred to as "trustee", and his successors
(Brazos hereby reserving the right to from time to time, with or without cause
and at Brazos' sole discretion, by instrument in writing, substitute a successor
or successors to trustee, which instrument, executed by Brazos duly acknowledged
and recorded in the office of the recorder of the county or counties where the
Facility is situated, shall be conclusive proof of proper substitution of such
successor, who shall, without conveyance from trustee or any successor trustee
to trustee, succeed to all his title, estate, rights, powers and duties), in
trust a lien and security interest against all of Lessee's interest in and to
the Facility, to have and to hold the Facility, together with all and singularly
the rights, hereditaments, and appurtenances in any way appertaining or
belonging thereto, unto such trustee and such trustee's successor or substitute
in such trust, and such trustee's and its or his successors and assigns, in
trust, and that, upon the occurrence of any Event of Default such trustee, at
the direction of Brazos, may proceed with foreclosure, and in such event such
trustee, at the direction of Brazos, is hereby authorized
FACILITIES LEASE AGREEMENT - Page 32
and empowered, and it shall be such trustee's special duty, upon such request
of Brazos, acting upon a request from the Agent or Assignees, to sell the
Facility, or any part thereof, to the highest bidder or bidders for cash or
credit, as directed by Brazos, acting upon a request from the Agent or
Assignees, at the location at the county courthouse specified by the
commissioner's court in the county in the state wherein the Facility then
subject to the lien hereof is situated or, if no such location is specified
by the commissioner's court, then at the location specified in such trustee's
notice of such sale to the Lessee; PROVIDED, that if the Facility is situated
in more than one county, then such sale of the Facility, or part thereof, may
be made in any county in the state wherein any part of the Facility then
subject to the lien hereof is situated. Any such sale shall be made at
public outcry between the hours of ten o'clock (10:00) A.M. and four o'clock
(4:00) P.M. on the first (1st) Tuesday in any month. Written or printed
notice of such sale shall be posted at the courthouse door in the county, or
if more than one, then in each of the counties, wherein the Facility then
subject to the lien hereof is situated. Such notice shall designate the
county where the Facility, or part thereof, will be sold and the earliest
time at which the sale will occur, and such notice shall be posted at least
twenty-one (21) days prior to the date of sale. Such notice shall also be
filed with the county clerk in the county, or if more than one, then in each
of the counties wherein the Facility is located. Trustee shall, at least
twenty-one (21) days preceding the date of sale, serve written notice of the
proposed sale by certified mail on each debtor obligated to pay the
Acquisition Cost and other obligations secured hereby according to the
records of the Agent and Assignees. After such sale, Brazos shall make to the
purchaser or purchasers thereunder good and sufficient assignments, deed,
bills of sale, and other instruments, in the name of Brazos, conveying the
Facility, or part thereof, so sold to the purchaser or purchasers with
general warranty of title by Brazos. Any proceeds of any sale shall be
applied in accordance with applicable law. The sale of a part of the
Facility shall not exhaust the power of sale, but sales may be made from time
to time until the Acquisition Cost and other obligations secured hereby are
paid and performed in full. It shall not be necessary to have present or to
exhibit at any such sale any of the personal property. Upon the occurrence
of a Lease Event of Default, Brazos, in lieu of or in addition to exercising
any power of sale hereinabove given, may proceed by a suit or suits in equity
or at law, whether for a foreclosure hereunder, or for the sale of the
Facility, or against the Lessee on a recourse basis for the Acquisition Cost,
or the specific performance of any covenant or agreement herein contained or
in aid of the execution of any power herein granted, or for the appointment
of a receiver pending any foreclosure hereunder or the sale of the Facility,
or for the enforcement of any other appropriate legal or equitable remedy.
Sales pursuant to this SECTION 13.2, by Brazos of any part of the Facility,
may be by private or public sale, in such order or otherwise in such manner as
Brazos may elect in its sole discretion. Brazos shall have, with respect to the
FF&E, in addition to any other rights and remedies which may be available to it
at law or in equity or pursuant to this Facilities Lease or any other contract
or agreement, all rights and remedies of a secured party under any applicable
version of the Uniform Commercial Code of the relevant jurisdictions relating to
the FF&E, and it is expressly agreed that if Brazos should proceed to dispose of
or utilize the FF&E, or any part thereof, in accordance with the provisions of
said Uniform Commercial Code, ten (10) days' notice by Brazos to Lessee shall be
deemed to be reasonable notice of any such provision requiring such notice. Any
sale of FF&E by Brazos may be made on such terms as it may choose, without
assuming any credit risk and without any obligation to advertise or give notice
of any kind other than that necessary under applicable law. Brazos shall incur
no liability as a result of the sale of the FF&E, or any part thereof, at any
private or public sale. Lessee hereby waives, to the extent permitted by law,
any claims against Brazos arising by reason of the fact that the price at which
the FF&E may have been sold at such private sale was less than the price which
may have been obtained at a public sale or was less than the aggregate account
of the amounts due from Lessee to Brazos hereunder, even if Brazos accepts the
first offer received and does not offer the FF&E to more than one possible
purchaser.
No remedy referred to in this SECTION 13.2 is intended to be exclusive,
but, subject to the provisions of Section 13.2(a) above, each shall be
cumulative and in addition to any other remedy referred to above or otherwise
available to Brazos at law or in equity, and the exercise in whole or in part by
Brazos of any one or more of such remedies shall not preclude the simultaneous
or later exercise by Brazos of any or all such other remedies, subject to the
provisions of Section 13.2(a) above. No waiver by Brazos of any Event of
Default hereunder shall in any way be, or be construed to be, a waiver of any
future or subsequent Event of Default.
FACILITIES LEASE AGREEMENT - Page 33
With respect to the termination of this Facilities Lease as to any Facility
as a result of an Event of Default, Lessee hereby waives service of any notice
of intention to re-enter. Lessee hereby waives any and all rights to recover or
regain possession of any Facility or to reinstate this Facilities Lease as
permitted or provided by or under any statute, law or decision now or hereafter
in force and effect.
Section XIII.3. EVENTS OF FACILITY TERMINATION. The occurrence of any of
the following shall constitute an Event of Facility Termination with respect to
a Facility:
(a) UNSATISFACTORY TITLE. If at any time title to any Facility
is not satisfactory to Brazos or Agent by reason of any Lien or other
defect not disclosed in writing or contained in the Title Policy for such
Facility at the time of any advance (even though the same may have existed
at the time of any such advance), except the Permitted Encumbrances, and
such Lien, encumbrance or other defect would, in the reasonable judgment of
Lessee, have a material adverse effect on the Value or usefulness of the
Facility and is not corrected to the satisfaction of Brazos and Agent
within one hundred eighty (180) days after written notice to Lessee unless
such defect would, in the reasonable judgment of Lessee, cause a loss or
forfeiture of title to a Facility or the loss of priority of any Lien for
the benefit of Agent, in which case such defect shall be cured immediately
and prior to any such loss of title or priority.
(b) NONCONFORMING WORK. If Lessee shall fail to correct any
structural defect in a Facility within a reasonable period of time after
Lessee has actual knowledge of the existence of such structure defect.
(c) NON-COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. If Lessee
fails to materially comply with any requirement of any Governmental
Authority with respect to such Facility and such non-compliance results, in
the reasonable judgment of Lessee, in a material adverse effect on the
Value of the Facility or to contest such requirement by means of a
Permitted Contest under ARTICLE XVIII (i) within thirty (30) days after
notice in writing of such requirement shall have been given to Lessee by
such Governmental Authority or by Brazos or Assignee, or (ii) if such
requirement is of a nature that it cannot be completely complied with
within such 30-day period, if Lessee shall fail after such notice either
diligently to commence complying with such requirement or to proceed
thereafter with reasonable diligence and in good faith to comply with such
requirement; PROVIDED, HOWEVER, that Lessee shall in any event comply with
such requirement prior to the date on which such Facility may be seized or
sold as a result of such non-compliance.
(d) PERMITS. If Lessee shall fail to obtain or be unable to
obtain when needed any material Permit, or if any material Permit shall be
revoked or otherwise cease to be in full force and effect and Lessee shall
not have obtained reinstatement or reissuance of such Permit within thirty
(30) days after the revocation or expiration thereof, or if such
reinstatement or reissuance is of a nature that it cannot be completely
effected within thirty (30) days, Lessee shall not have diligently
commenced application for such reinstatement or reissuance and shall
thereafter be diligently proceeding to complete said reinstatement or
reissuance.
(e) DEFAULT UNDER ACQUIRED FACILITIES LEASE. Lessee shall
default after the expiration of all applicable cure periods under an
Acquired Facilities Lease or as may be allowed under local Law in the
observance or performance of any term, covenant or condition of the
Acquired Facilities Lease relating to such Facility on the part of Brazos,
as tenant thereunder, to be observed or performed, unless any such
observance or performance shall have been waived or not required by the
landlord under the Acquired Facilities Lease, or if any one or more of the
events referred to in the Acquired Facilities Lease shall occur which would
cause the Acquired Facilities Lease to terminate without notice or action
by the landlord thereunder or which would entitle the landlord under the
Acquired Facilities Lease to terminate the Acquired Facilities Lease and
the term thereof by the giving of notice to Brazos, as tenant thereunder,
or if the Acquired Facilities Lease shall be terminated or canceled for any
reason or under any circumstance whatsoever, or if any of the terms,
covenants or conditions of the Acquired Facilities Lease shall in any
manner be modified, changed, supplemented, altered or amended in any
respect without the consent of Brazos.
FACILITIES LEASE AGREEMENT - Page 34
Section XIII.4. BRAZOS' RIGHT UPON EVENT OF FACILITY TERMINATION. If any
Event of Facility Termination with respect to a Facility shall occur, Brazos
may, with Agent's approval, as liquidated damages and not as a penalty, require
Lessee to purchase such Facility on the next Basic Rent Payment Date or on any
other date agreed upon by Brazos and Lessee at a price equal to the Acquisition
Cost for such Facility (less any Unearned Rent) by giving written notice of such
required purchase or require Lessee to assume all obligations of Brazos under an
Acquired Facilities Lease by giving written notice of such required assumption.
Any such notice shall be given no less than thirty (30) days in advance of the
required purchase date. In connection with any such purchase under this SECTION
13.4, on the Basic Rent Payment Date or any other date upon which such purchase
shall occur, Lessee shall pay to Brazos, in addition to such Acquisition Cost
payable, all Basic Rent payable and any Additional Rent and other amounts owing
hereunder with respect to such Facility up to the date of sale. At the time of
such sale, Lessee shall be required to pay to Brazos the obligations, costs,
losses, damages, and expenses (including, without limitation, reasonable
attorneys' fees and expenses) sustained by Brazos by reason of such Event of
Facility Termination and exercise of Brazos' rights under this SECTION 13.4.
Upon payment in full of all such amounts, Brazos shall transfer all of Brazos'
right, title and interest in and to the Facility to Lessee free and clear of any
Lien created pursuant to the Credit Agreement.
ARTICLE XIV
LOSS OF OR DAMAGE TO FACILITIES
Section XIV.1. LESSEE'S RISK. Lessee hereby assumes all risk of loss of
or damage to Facilities, however caused. No loss of or damage to any Facility
shall impair any obligation of Lessee under this Facilities Lease, which shall
continue in full force and effect with respect to any lost or damaged Facility.
Notwithstanding anything to the contrary contained in this Facilities Lease,
Lessee does not assume the risk of loss or damage to Facilities caused by the
gross negligence or willful misconduct of Brazos or any Assignee.
Section XIV.2. REPAIR. In the event of damage of any kind whatsoever to
any Facility (unless the same is determined by Lessee to be damaged beyond
repair as provided in SECTION 14.3 hereof) Lessee, at its own cost and expense,
but subject to the provisions of SECTION 9.4 hereof, shall place the same in
good operating order, repair, condition and appearance.
Section XIV.3. FACILITY DAMAGED BEYOND REPAIR. If more than fifty percent
(50%) of a Facility is unusable for sixty (60) days or more, or if the cost of
repair exceeds fifty percent (50%) of the Acquisition Cost, or if any Facility
is destroyed, lost, stolen, seized, confiscated, rendered unfit for use or
damaged beyond repair (in the reasonable judgment of Lessee), or if the use of
any Facility by Lessee in the ordinary course of business is prevented by the
act of any third person or persons or governmental instrumentality for a period
exceeding ninety (90) days (other than an act which is a Taking which is
substantial as described in SECTION 15.1 of this Facilities Lease), or if the
Acquired Facilities Lease applicable to such Facility is terminated due to
casualty, or if such Facility is attached (other than on a claim against Brazos
as to which Lessee is not obligated to indemnify Brazos) and the attachment is
not removed within ninety (90) days, or if a Taking which is substantial as
described in SECTION 15.1 shall occur, then in any such event, (i) Lessee shall
promptly notify Brazos and Assignee in writing of such event, (ii) on the Basic
Rent Payment Date following such event, unless such Basic Rent Payment Date
occurs within thirty (30) days of such event, in which case on the next Basic
Rent Payment Date or other date agreed to by Brazos and Lessee, Lessee shall pay
to Brazos an amount equal to the Acquisition Cost of such Facility (after
deducting any Unearned Rent and any insurance proceeds received by Brazos in
respect of such event or the net amount after Brazos' expenses of proceeds to
Brazos from any award or sale made in connection with a Taking); PROVIDED that
insurance or net Taking proceeds, if any, received by Brazos in excess of the
Acquisition Cost of the affected Facility (less any Unearned Rent) shall be paid
by Brazos to Lessee, (iii) the Lease Term or Renewal Term of such Facility shall
continue until the date on which Brazos receives payment from Lessee of the
amount payable pursuant to this SECTION 14.3 and the Basic Rent and any
Additional Rent and other amounts then owing hereunder with respect to the
affected Facility, and shall thereupon terminate with respect to the affected
Facility and (iv) Brazos shall on such Basic Rent Payment Date or such other
date transfer title to such
FACILITIES LEASE AGREEMENT - Page 35
Facility to Lessee free of any Lien created pursuant to the Credit Agreement
or created by Brazos contrary to the provisions of this Facilities Lease, and
Lessee shall be subrogated to Brazos' rights in the affected transaction.
Notwithstanding the foregoing, if more than fifty percent (50%) of a Facility
is unusable for sixty (60) days or more, or if the cost of repair exceeds
fifty percent (50%) of the Acquisition Cost, or if the use of any Facility by
Lessee in the ordinary course of business is prevented by the act of any
third person or persons or governmental instrumentality for a period
exceeding ninety (90) days, and Lessee gives notice to Brazos agreeing that
this Lease shall remain in effect with respect to the affected Facility
notwithstanding such conditions, and agrees to repair and restore the
affected Facility to a good operating order, repair, condition and
appearance, the provisions of this SECTION 14.3 shall not apply.
ARTICLE XV
CONDEMNATION OF FACILITY
Section XV.1. TAKING OF SUBSTANTIALLY ALL OF A FACILITY. If Lessee or
Brazos shall receive notice that the use, occupancy or title to all or
substantially all of a Facility is to be taken, requisitioned or sold in, by or
on account of eminent domain proceedings or other action by any person or
authority having the power of eminent domain (such events collectively referred
to as a "TAKING"), and such Taking is substantial, then the Lease Term or
Renewal Term shall terminate as provided in SECTION 14.3. A Taking shall be
deemed substantial if the Facility or the remainder of the Property on which it
is located is unusable for Lessee's ordinary business purposes or the Acquired
Facilities Lease applicable to such Facility is terminated as a result of such
Taking.
Section XV.2. TAKING OF LESS THAN SUBSTANTIALLY ALL OF A FACILITY. If
less than substantially all of a Facility or the Property on which it is located
is subject to a Taking, then this Facilities Lease shall continue in effect as
to such Facility not taken and Lessee, at its own cost and expense, but subject
to the provisions of SECTION 9.4 hereof, shall place the same in good operating
order, repair, condition and appearance. Brazos and Lessee each hereby waives
any statutory or common law right allowing either of them to petition any court
to terminate this Facilities Lease in the event of a Taking of less than
substantially all of the Facility or the Property on which it is located.
Section XV.3. GRANT OF EASEMENTS. So long as no Event of Default or Event
of Facility Termination hereunder has occurred and is continuing beyond any
applicable grace or curative period, Lessee shall have the right to grant
easements and dedications for the benefit of any Facility or which, in the
reasonable judgment of Lessee, are deemed necessary for Lessee's use of the
Facility. If Lessee receives any monetary consideration for such easement or
dedication, Lessee shall be entitled to retain such consideration, subject to
applying same to any restoration costs. Lessee shall have the right and the
power to exercise the above power to grant without the joinder of Brazos, except
that Brazos will cooperate, at Lessee's expense, as necessary and join in the
execution of any appropriate instrument. As a condition precedent to Lessee's
exercise of any of Lessee's powers under this Article, Lessee shall give Brazos
ten (10) days' prior written notice of the proposed action. Upon the giving of
such notice, Lessee shall be deemed to have certified that such action will not
adversely affect either the market value of such Facility or the use of such
Facility for its intended purpose, will not affect Brazos' or any Assignee's
ability to exercise its rights and remedies under this Facilities Lease and that
Lessee undertakes to remain obligated under this Facilities Lease to the same
extent as if Lessee had not exercised its powers under this Article and Lessee
will perform all obligations under such instrument and shall prepare all
required documents and provide all other instruments and certificates as Brazos
may reasonably request.
ARTICLE XVI
LEASEHOLD INTERESTS
The following provisions relate to each lease (an "ACQUIRED FACILITIES
LEASE") under which a leasehold interest in a Facility is being subleased to
Lessee hereunder:
FACILITIES LEASE AGREEMENT - Page 36
(a) This Facilities Lease is subject and subordinate to all of the
terms, covenants, provisions, conditions and agreements contained in each
Acquired Facilities Lease and the matters to which the Acquired Facilities Lease
is subject and subordinate.
(b) Lessee hereunder covenants and agrees to perform and to observe all
of the terms, covenants, provisions, conditions and agreements of the underlying
Acquired Facilities Lease on Brazos' part as lessee thereunder to be performed
and observed including, without limitation, payment of all rent, additional rent
and other amounts payable by Brazos as lessee under the Acquired Facilities
Lease, to the end that all things shall be done which are necessary to keep
unimpaired the rights of Brazos as lessee under the Acquired Facilities Lease.
Each of the parties hereto agree to promptly provide the other with copies of
any notices or other information received in writing from any landlord under an
Acquired Facilities Lease.
(c) Lessee covenants and agrees that it will not do or cause to be done
or suffer or permit any act or thing to be done which would or might cause such
Acquired Facilities Lease or the rights of Brazos as lessee thereunder to be
canceled, terminated or forfeited or which would make Lessee or Brazos liable
for any losses, costs, liabilities, damages, claims, penalties or other
expenses. Brazos covenants and agrees, subject to any limitations on its rights
and obligations hereunder, that it will not do or cause to be done or knowingly
suffer or knowingly permit any act or thing to be done without notice to Lessee
which would or might cause such Acquired Facilities Lease or the rights of
Brazos as lessee thereunder to be canceled, terminated or forfeited or which
would make Lessee or Brazos liable for any losses, costs, liabilities, damages,
claims, penalties or other expenses.
(d) Lessee covenants and agrees pursuant to ARTICLE X hereof to
indemnify and hold harmless Brazos and any Assignee from and against any and all
liability, loss, damage, suits, penalties, claims and demands of every kind and
nature (including, without limitation, reasonable attorneys' fees and expenses)
by reason of Lessee's failure to comply with any Acquired Facilities Lease or
the provisions of this ARTICLE XVI.
(e) Brazos and Lessee agree that any services which are required to be
provided or repairs or restorations which are required to be made in accordance
with the provisions of such Acquired Facilities Lease by the lessor thereunder
will be provided and made by such lessor, and Brazos shall have no obligation to
provide any such services or to make any such repairs or restorations. Brazos
shall in no event be liable to Lessee nor shall the obligations of Lessee
hereunder be impaired or the performance thereof excused because of any failure
or delay on the part of the lessor under the Acquired Facilities Lease in
providing such services or making such restorations or repairs and such failure
or delay shall not constitute a basis for any claim against Brazos or any offset
against any amount payable to Brazos under this Facilities Lease.
(f) If Brazos' interest under any Acquired Facilities Lease shall
expire, terminate or otherwise be extinguished, the Facilities Lease of the
Facility to which such Acquired Facility Lease relates shall thereupon terminate
as provided in this paragraph. Upon such expiration, termination or
extinguishment (i) on the Basic Rent Payment Date next succeeding such event,
Lessee shall pay to Brazos an amount equal to the Acquisition Cost of such
Facility less any Unearned Rent and (ii) the Lease Term or Renewal Term of such
Facility shall continue until the date on which Brazos receives payment from
Lessee of the amount payable pursuant to this paragraph (f) and of all Basic
Rent payable and any Additional Rent and other amounts owing hereunder, and
shall then terminate upon the payment of such amounts and Brazos shall assign to
Lessee the rights, if any, of Brazos under such Acquired Facilities Lease.
(g) The aggregate of the Acquisition Costs attributable to Facilities
covered by an Acquired Facilities Lease and with respect to which a leasehold
interest in such Facility is being subleased to Lessee hereunder (including any
Acquisition Costs reasonably expected to be advanced to cause the completion of
such Facilities) and the Acquisition Costs (as defined in the Ground Lease)
attributable to Properties covered by an Acquired Ground Lease (as defined in
the Ground Lease) and with respect to which a leasehold interest in such
Property is being subleased to Lessee under the Ground Lease shall not, unless
the Agent and the Majority Banks shall otherwise consent in writing, exceed
fifteen percent (15%) of the then current aggregate Acquisition Costs for all
Facilities (including any Acquisition Costs
FACILITIES LEASE AGREEMENT - Page 37
reasonably expected to be advanced to cause the completion of any Facilities)
and Acquisition Costs (as defined in the Ground Lease) for all Properties.
ARTICLE XVII
INTENTIONALLY OMITTED
ARTICLE XVIII
PERMITTED CONTESTS
(a) Lessee shall not be required, nor shall Brazos have the right, to
pay, discharge or remove any tax, assessment, levy, fee, rent, charge, Lien or
encumbrance, or to comply or cause any Facility or FF&E to comply with any Legal
Requirements applicable to any Facility or FF&E or the occupancy, use or
operation thereof, so long as no Event of Default or Event of Facility
Termination exists (and continues beyond any applicable grace or curative
period) under this Facilities Lease with respect to any Facility, and, in the
opinion of Lessee's counsel, Lessee shall have reasonable grounds to contest,
and shall be diligently contesting, the existence, amount, applicability or
validity thereof by appropriate proceedings, which proceedings (i) would not, in
the reasonable judgment of Lessee, subject any Facility or any Basic Rent or any
Additional Rent to sale, forfeiture or loss, as a result of failure to comply
therewith, (ii) shall not affect the payment of any Basic Rent or any Additional
Rent or other sums due and payable hereunder, (iii) unless any criminal
liability could result from a failure to comply therewith, would not cause
either Brazos or any Assignee to incur civil liability which, in the sole
judgment of Brazos or any Assignee, is not adequately indemnified (Lessee's
obligations under ARTICLE X of this Facilities Lease shall be deemed to be
adequate indemnification if no Event of Default, Event of Facility Termination,
Potential Default or Potential Facility Termination exists, and continues beyond
any applicable grace or curative period, and if such civil liability is
reasonably likely to be less than $1,000,000 per Facility or FF&E and $2,000,000
in the aggregate for all Facilities and FF&E), (iv) shall be permitted under the
provisions of the Acquired Facilities Lease, if any, on such Facility, (v) if
involving taxes, shall suspend the collection of taxes, and (vi) shall be
permitted under and be conducted in accordance with the provisions of any other
instrument to which Lessee or the Facility or FF&E is subject and shall not
constitute a default thereunder. Lessee shall conduct all such contests in good
faith and with due diligence and shall promptly after the final determination
(including appeals) of such contest, pay and discharge all amounts which shall
be determined to be payable therein. Notwithstanding anything in this paragraph
(a) to the contrary, Lessee shall not be obligated to actively contest any
mechanics' or materialmens' Lien or claim which does not exceed $500,000;
PROVIDED that the failure to so contest does not violate clauses (i)-(iv) or
(vi) above, PROVIDED FURTHER that such Lien is junior to any Lien of an Assignee
on such Facility, and PROVIDED FURTHER, that Lessee shall in any event
diligently contest and defend against the enforcement of any such Lien or claim
in good faith and with due diligence and shall promptly, after the final
determination (including appeals of such contest), pay and discharge all amounts
which shall be determined to be payable therein.
(b) At least ten (10) days prior to the commencement thereof, Lessee
shall notify Brazos and Agent in writing of any such proceeding in which the
amount in contest exceeds $500,000, and shall describe such proceeding in
reasonable detail. If a taxing authority or subdivision thereof proposes an
additional assessment or levy of any tax for which Lessee is obligated to
reimburse Brazos under this Facilities Lease, or if Brazos is notified of the
commencement of an audit or similar proceeding which could result in such an
additional assessment, then Brazos shall in a timely manner notify Lessee in
writing of such proposed levy or proceeding.
ARTICLE XIX
MISCELLANEOUS
FACILITIES LEASE AGREEMENT - Page 38
Section XIX.1. SURVIVAL. All agreements, indemnities, representations and
warranties, and the obligation to pay Additional Rent contained in this
Facilities Lease shall survive the expiration or other termination hereof.
Section XIX.2. ENTIRE AGREEMENT. This Facilities Lease and the Facility
Leasing Records covering Facilities and FF&E leased pursuant hereto and the
instruments, documents or agreements referred to herein constitute the entire
agreement between the parties and no representations, warranties, promises,
guarantees or agreements, oral or written, express or implied, have been made by
any party hereto with respect to this Facilities Lease or the Facility, except
as provided herein or therein.
Section XIX.3. MODIFICATIONS. This Facilities Lease may not be amended,
modified or terminated, nor may any obligation hereunder be waived orally, and
no such amendment, modification, termination or waiver shall be effective for
any purpose unless it is in writing and is signed by the party against whom
enforcement thereof is sought. A waiver on one occasion shall not be construed
to be a waiver with respect to any other occasion.
Section XIX.4. GOVERNING LAW. THIS FACILITIES LEASE SHALL WITH RESPECT TO
EACH FACILITY IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE IN WHICH SUCH FACILITY IS LOCATED,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. ANY PROVISION
OF THIS FACILITIES LEASE WHICH IS PROHIBITED BY LAW OR UNENFORCEABLE IN ANY
JURISDICTION SHALL, AS TO SUCH JURISDICTION, BE INEFFECTIVE TO THE EXTENT OF
SUCH PROHIBITION OR UNENFORCEABILITY WITHOUT INVALIDATING THE REMAINING
PROVISIONS HEREOF, AND THE PARTIES HERETO SHALL NEGOTIATE IN GOOD FAITH
APPROPRIATE MODIFICATIONS TO REFLECT SUCH CHANGES AS MAY BE REQUIRED BY LAW,
AND, AS NEARLY AS POSSIBLE, TO PRODUCE THE SAME ECONOMIC EFFECTS AS THE
PROVISION WHICH IS PROHIBITED OR UNENFORCEABLE; AND ANY SUCH PROHIBITION OR
UNENFORCEABILITY IN ANY JURISDICTION SHALL NOT INVALIDATE OR RENDER
UNENFORCEABLE SUCH PROVISION IN ANY OTHER JURISDICTION. TO THE EXTENT PERMITTED
BY APPLICABLE LAW, LESSEE AND BRAZOS HEREBY WAIVE ANY PROVISION OF LAW WHICH
RENDERS ANY PROVISION HEREOF PROHIBITED OR UNENFORCEABLE IN ANY RESPECT.
Section XIX.5. NO OFFSETS. The obligations of Lessee to pay all amounts
payable pursuant to this Facilities Lease (including specifically and without
limitation amounts payable due under ARTICLES VI and X hereof) shall be absolute
and unconditional under any and all circumstances of any character, and such
amounts shall be paid without notice, demand, defense, setoff, deduction or
counterclaim and without abatement, suspension, deferment, diminution or
reduction of any kind whatsoever, except as herein expressly otherwise provided.
The obligation of Lessee to lease and pay Basic Rent, Additional Rent or any
other amounts for any and all Facilities is without any warranty or
representation, express or implied, as to any matter whatsoever on the part of
Brazos or any Assignee or any Affiliate of either, or anyone acting on behalf of
any of them.
NEITHER BRAZOS NOR ANY ASSIGNEE NOR ANY AFFILIATE OF EITHER, NOR ANYONE
ACTING ON BEHALF OF ANY OF THEM, MAKES ANY REPRESENTATION OR WARRANTY OF ANY
KIND WHATSOEVER, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, AS TO THE
SAFETY, TITLE, CONDITION, QUALITY, QUANTITY, FITNESS FOR USE, MERCHANTABILITY,
CONFORMITY TO SPECIFICATION, ENVIRONMENTAL CONDITION (INCLUDING THE PRESENCE OR
ABSENCE OF HAZARDOUS MATERIALS), OR ANY OTHER CHARACTERISTIC, OF ANY FACILITY OR
FF&E, OR AS TO WHETHER ANY FACILITY OR FF&E OR THE OWNERSHIP, USE, OCCUPANCY OR
POSSESSION THEREOF COMPLIES WITH ANY LAWS, RULES, REGULATIONS OR REQUIREMENTS OF
ANY KIND.
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, AS BETWEEN BRAZOS AND
LESSEE, ANY ASSIGNEE OR ANY INDEMNIFIED PERSON, AND TO THE EXTENT ALLOWED BY
LAW, LESSEE ASSUMES ALL RISKS AND WAIVES ANY AND ALL DEFENSES, SET-OFFS,
DEDUCTIONS,
FACILITIES LEASE AGREEMENT - Page 39
COUNTERCLAIMS (OR OTHER RIGHTS), EXISTING OR FUTURE, TO ITS OBLIGATION TO PAY
BASIC RENT, ADDITIONAL RENT AND ALL OTHER AMOUNTS PAYABLE HEREUNDER,
INCLUDING, WITHOUT LIMITATION, ANY RELATING TO:
(a) THE SAFETY, TITLE, CONDITION, QUALITY, QUANTITY, FITNESS FOR USE,
MERCHANTABILITY, CONFORMITY TO SPECIFICATION, OR ANY OTHER QUALITY OR
CHARACTERISTIC OF ANY FACILITY OR FF&E, LATENT OR NOT;
(b) ANY SET-OFF, COUNTERCLAIM, RECOUPMENT, ABATEMENT, DEFENSE OR OTHER
RIGHT TO WITHHOLD THE PAYMENT OF BASIC RENT, ADDITIONAL RENT OR OTHER AMOUNTS
HEREUNDER WHICH LESSEE MAY HAVE AGAINST BRAZOS, ANY ASSIGNEE, OR ANY INDEMNIFIED
PERSON FOR ANY REASON WHATSOEVER ARISING OUT OF THIS OR ANY OTHER TRANSACTION OR
MATTER;
(c) EXCEPT AS PROVIDED IN SECTION 7.5 OF THIS FACILITIES LEASE WITH
RESPECT TO CLAIMS UNDER A TITLE POLICY, ANY DEFECT IN TITLE OR OWNERSHIP OF ANY
FACILITY OR FF&E OR ANY TITLE ENCUMBRANCE NOW OR HEREAFTER EXISTING WITH RESPECT
TO THE FACILITY OR FF&E;
(d) ANY FAILURE OR DELAY IN DELIVERY OR ANY LOSS, THEFT OR DESTRUCTION
OF, OR DAMAGE TO, ANY FACILITY OR FF&E, IN WHOLE OR IN PART, OR CESSATION OF THE
USE OR POSSESSION OF ANY FACILITY OR FF&E BY LESSEE FOR ANY REASON WHATSOEVER
AND OF WHATEVER DURATION, OR ANY CONDEMNATION, CONFISCATION, REQUISITION,
SEIZURE, PURCHASE, TAKING OR FORFEITURE OF ANY FACILITY OR FF&E, IN WHOLE OR IN
PART;
(e) ANY INABILITY OR ILLEGALITY WITH RESPECT TO THE USE, OWNERSHIP,
OCCUPANCY OR POSSESSION OF THE FACILITY OR FF&E BY LESSEE;
(f) ANY INSOLVENCY, BANKRUPTCY, REORGANIZATION OR SIMILAR PROCEEDING BY
OR AGAINST LESSEE, GUARANTOR OR BRAZOS;
(g) ANY FAILURE TO OBTAIN, OR EXPIRATION, SUSPENSION OR OTHER
TERMINATION OF, OR INTERRUPTION TO, ANY REQUIRED LICENSES, PERMITS, CONSENTS,
AUTHORIZATIONS, APPROVALS OR OTHER LEGAL REQUIREMENTS;
(h) THE INVALIDITY OR UNENFORCEABILITY OF THIS FACILITIES LEASE OR ANY
OTHER INFIRMITY HEREIN OR ANY LACK OF POWER OR AUTHORITY OF BRAZOS OR LESSEE TO
ENTER INTO THIS FACILITIES LEASE; OR
(i) ANY OTHER CIRCUMSTANCES OR HAPPENING WHATSOEVER, WHETHER OR NOT
SIMILAR TO ANY OF THE FOREGOING.
LESSEE HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHTS WHICH IT MAY NOW HAVE OR WHICH AT ANY TIME HEREAFTER MAY BE CONFERRED
UPON IT, BY STATUTE OR OTHERWISE, TO TERMINATE, CANCEL, QUIT, RESCIND OR
SURRENDER THIS FACILITIES LEASE EXCEPT IN ACCORDANCE WITH THE EXPRESS TERMS
HEREOF.
Section XIX.6. NON-RECOURSE. Brazos' obligations hereunder are intended
to be the limited obligations of the limited partnership and of the corporation
which is the general partner thereof. Notwithstanding any other provision of
this Facilities Lease, Lessee agrees that the personal liability of Brazos and
the partners comprising Brazos shall be strictly and absolutely limited to the
Facilities and FF&E and no recourse for the payment of any amount due under this
FACILITIES LEASE AGREEMENT - Page 40
Facilities Lease or any other agreement contemplated hereby, or for any claim
based thereon or otherwise in respect thereof, shall be had against any other
assets of the limited partnership or of the general or of any limited partner of
Brazos or any incorporator, shareholder, officer, director or Affiliate (past,
present or future) of such general partner or limited partner, or of any
Affiliate of either, or of any successor corporation to any corporate general
partner or any corporate limited partner of Brazos, it being understood that
Brazos is a limited partnership entering into the transactions involved in and
relating to this Facilities Lease on the express understanding aforesaid.
Notwithstanding the foregoing provisions of this SECTION 19.6, nothing contained
in this Lease shall be construed to prevent enforcement of specific performance
of Brazos' obligations hereunder or prevent recourse against Brazos (i) for
Brazos' failure to convey any Facility or FF&E to Lessee or its designee in
accordance with the provisions of this Lease, or to obtain a release of any Lien
created pursuant to the Credit Agreement or created by Brazos contrary to the
provisions of this Facilities Lease covering any Facility or FF&E so purchased,
(ii) for Brazos' failure to make an advance with respect to Acquisition Costs as
and when Lessee is entitled to such advance, (iii) for Brazos' failure to make
insurance proceeds or condemnation awards available to Lessee as and when Lessee
is entitled to such amounts pursuant to this Lease, (iv) for Brazos' breach of
its representations in SECTION 2.16 hereof, (v) for Brazos' failure to comply
with the provisions of SECTION 3.4(v), (vi) AND (vii), SECTION 19.10 or
SECTION 19.14, or (vi) for fraud perpetrated by Brazos.
Section XIX.7. NOTICES.
(a) All notices, consents, requests, approvals, demands and other
communications provided for herein shall be in writing (including telecopy
communications) and mailed, telecopied, sent by overnight courier or delivered:
If to Brazos:
Brazos Markets Development, L.P.
c/o Brazos Markets Management, Inc.
2911 Turtle Creek Blvd., Suite 1240
Dallas, Texas 75219
Attention: Gregory C. Greene
Telephone: (214) 522-7296
Telecopy: (214) 520-2009
If to Agent or Assignee:
Chase Bank of Texas, National Association
712 Main Street
Houston, Texas 77002
Attention: Michael Ondruch
Telephone: (713) 216-5324
Telecopy: (713) 216-6004
with a copy to:
Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.
3400 Chase Tower
600 Travis Street
Houston, Texas 77002-3095
Attention: Stanley B. Haas
Telephone: (713) 226-1247
Telecopy: (713) 223-3717
FACILITIES LEASE AGREEMENT - Page 41
If to Lessee:
Randall's Food & Drugs, Inc.
3663 Briarpark
Houston, Texas 77042
Attention: Lee Straus
Telephone: (713) 268-3617
Telecopy: (713) 268-3605
Randall's Food Markets, Inc.
3663 Briarpark
Houston, Texas 77042
Attention: Lee Straus
Telephone: (713) 268-3617
Telecopy: (713) 268-3605
with copies to
Randall's Properties, Inc.
3663 Briarpark
Houston, Texas 77042
Attention: Mr. Joe R. Rollins
Telephone: (713) 268-3661
Telecopy: (713) 268-3601
and
Vinson & Elkins LLP
2300 First City Tower
1001 Fannin Street
Houston, Texas 77012-6760
Attention: Mr. Sanford A. Weiner
Telephone: (713) 758-2558
Telecopy: (713) 615-5268
or, in the case of any party hereto, such other address or telecopy number as
such party may hereafter specify for such purpose by notice to the other parties
given in accordance with the provisions of this Section.
All communications shall be effective three Business Days after the date
when mailed by certified mail, return receipt requested postage prepaid to any
party at its address specified above, or upon receipt if telecopied to any party
to the telecopy number set forth above, or upon receipt if delivered personally
to any party at its address specified above.
A copy of each communication shall be sent to any Assignee at such address
as such Assignee may specify by written notice to Brazos and Lessee.
(b) Brazos shall within five (5) Business Days give to Lessee a copy of
all notices received by Brazos pursuant to any Credit Agreement or any Acquired
Facility Lease and any other notices received with respect to any Facility.
FACILITIES LEASE AGREEMENT - Page 42
Section XIX.8. USURY. No provision of this Facilities Lease, the
Agreement for Facilities Lease or any other instrument relating to this
Facilities Lease, shall require the payment or permit the collection of interest
in excess of the maximum non-usurious interest rate under applicable law (the
"MAXIMUM RATE"). If any excess interest in such respect is so provided for, or
shall be adjudicated to be so provided for, the provisions of this SECTION 19.8
shall govern, and neither Lessee nor its successors or assigns shall be
obligated to pay the amount of such interest to the extent it is in excess of
the Maximum Rate. In determining the Maximum Rate, any interest shall be spread
over the term of the Facilities Lease to the extent permitted by applicable U.S.
Federal or state law, notwithstanding the actual time for the payment of any
rent or other amounts hereunder. It is expressly stipulated and agreed to be
the intent of Brazos and Lessee at all times to comply with applicable state law
governing the Maximum Rate or the amount of interest payable pursuant to this
Facilities Lease (or applicable U.S. Federal law to the extent that it permits
Brazos to contract for, charge, take, reserve or receive a greater amount of
interest than under state law). If the applicable law is ever judicially
interpreted so as to render usurious any amount called for under the Facilities
Lease, the Agreement for Facilities Lease or any of the other documents relating
to this Facilities Lease or any amount contracted for, charged, taken, reserved
or received with respect to this Facilities Lease, or if Brazos' exercise of any
option contained herein or in any other document to accelerate the payment of
amounts required hereunder results in Lessee having paid any interest in excess
of that permitted by applicable law, then it is Brazos' and Lessee's intent that
all excess amounts theretofore collected by Brazos be credited on the remaining
balance of payments due hereunder (or, if all amounts due hereunder have been or
would thereby be paid in full, refunded to Lessee) and the provisions of this
Facilities Lease shall immediately be deemed reformed and the amounts thereafter
collectible hereunder reduced, without the necessity of the execution of any new
documents, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder and under any
other document relating hereto. If at any time the amount of any interest fora
year, would, but for this SECTION 19.8, exceed the amount of interest that would
have been accrued during such year if the Maximum Rate had from time to time
been in effect, the total interest payable for such year shall be limited to the
amount that would have been accrued if the Maximum Rate had from time to time
been in effect, and to the fullest extent permitted by applicable law, such
excess shall be (i) spread and allocated to the preceding periods in which the
interest paid was less than the interest that would have been accrued at the
Maximum Rate or (ii) spread and allocated to subsequent periods in which the
total payments on account of interest are less than the interest that would have
accrued at the Maximum Rate.
Section XIX.9. NO MERGER. There shall be no merger of this Facilities
Lease or of the leasehold estate hereby created with the fee estate in any
Facility by reason of the fact that the same person acquires or holds, directly
or indirectly, this Facilities Lease or the leasehold estate hereby created or
any interest herein or in such leasehold estate as well as the fee estate in any
Facility or any interest in such fee estate.
Section XIX.10. SALE OR ASSIGNMENT BY BRAZOS. Brazos shall not sell,
mortgage or encumber or assign or otherwise grant any Lien upon its right,
title, interest or obligations in a Facility or FF&E or under this Facilities
Lease, except that Brazos shall have the right to finance the acquisition and
ownership of the Facility and FF&E by selling, assigning or granting a security
interest to the Assignee pursuant to the Credit Documents in (i) its right,
title and interest in this Facilities Lease and (ii) any or all amounts due from
Lessee or any third party under this Facilities Lease, as provided in the Credit
Agreement; PROVIDED that any such sale, assignment or grant of a security
interest shall be subject to the rights and interests of Lessee under this
Facilities Lease. In addition, Brazos shall, at the time each Property or
Facility is acquired by Brazos, execute and deliver to Lessee a Deed of Trust
and Security Agreement (each, a "PURCHASE DEED OF TRUST") covering the
applicable Property and/or Facility and granting to Lessee a Lien covering such
Property and/or Facility to secure performance of Brazos' obligations pursuant
to ARTICLE XII hereof. Each Purchase Deed of Trust shall be subordinate to any
Liens created pursuant to the Credit Documents in favor of the Assignee covering
the applicable Property and/or Facility.
Section XIX.11. INCOME TAXES. Brazos agrees that it will not file any
Federal, state or local income tax returns during the Lease Term or Renewal
Term, if any, with respect to any Facility that are inconsistent with the
treatment of Lessee as owner of such Facility for Federal, state and local
income tax purposes.
FACILITIES LEASE AGREEMENT - Page 43
Section XIX.12. TRANSFER ON AS-IS BASIS. In connection with any sale of
Facility pursuant to this Facilities Lease, when Brazos transfers title, such
transfer shall be on an as-is, non-installment sale basis, without warranty by,
or recourse to, Brazos, but free of the Lien created by a Credit Agreement and
any Lien created by Brazos contrary to the terms of this Facilities Lease.
Section XIX.13. RIGHT TO PERFORM FOR LESSEE.
(a) If an Event of Default occurs by reason of the failure of Lessee to
perform or comply with any of its covenants or agreements contained in this
Facilities Lease and continues beyond any applicable grace or curative period,
Brazos may, upon notice to Lessee but without waiving or releasing any
obligations or default, itself perform or comply with such covenant or
agreement, and the amount of the reasonable expenses of Brazos incurred in
connection with such performance or compliance, shall be payable by Lessee, not
later than ten (10) Business Days after written notice by Brazos.
(b) Without in any way limiting the obligations of Lessee hereunder,
Lessee hereby irrevocably appoints Brazos as its agent and attorney at the time
at which Lessee is obligated to deliver possession of any Facility to Brazos, to
demand and take possession of such Facility in the name and on behalf of Lessee
from whomsoever shall be at the time in possession thereof.
Section XIX.14. MERGER, CONSOLIDATION OR SALE OF ASSETS.
(a) Brazos may not consolidate with or merge into any other Person or
sell all or substantially all of its assets to any Person.
(b) The terms and provisions of this Facilities Lease shall be binding
upon and inure to the benefit of Brazos and Lessee and their respective
successors and assigns.
Section XIX.15. RULE AGAINST PERPETUITIES. The parties hereto do not
intend any interest created by this Facilities Lease to be a perpetuity or to be
subject to invalidation under the perpetuities rule, however, if the rule is to
be applied, then the perpetuities period shall be twenty-one (21) years after
the last to die of the currently living great-grandchildren and/or grandchildren
of George H. W. Bush.
Section XIX.16. REEXECUTION. The parties hereto shall reexecute this
Facilities Lease to the extent necessary to make this Facilities Lease
enforceable under the laws of any State in which a Facility is located.
Section XIX.17. PURCHASE OR SALE OF PROPERTY. Notwithstanding anything to
the contrary herein, Lessee shall not have the right to purchase any Facility or
arrange for the sale of any Facility to a third party unless simultaneous with
such purchase or sale any Property on which such Facility is located is
purchased by Lessee or sold to a third party.
Section XIX.18. SEVERABILITY. In case one or more provisions of this
Facilities Lease shall be invalid, illegal or unenforceable in any respect under
any applicable law, the validity, legality and enforceability of the remaining
provisions contained herein shall not be affected or impaired thereby.
Section XIX.19. INTENTIONALLY OMITTED
Section XIX.20. EXECUTION IN COUNTERPARTS. This Facilities Lease may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
Section XIX.21. CONFIDENTIALITY. Brazos agrees to use reasonable efforts
to keep confidential all information of a confidential nature received by it
from Lessee pursuant to this Facilities Lease; PROVIDED, HOWEVER, that such
FACILITIES LEASE AGREEMENT - Page 44
information may be disclosed: (i) to directors, officers, employees, agents,
representatives or outside counsel of Brazos or of the Agent or any Bank or any
Affiliate of any Bank under any Credit Agreement; (ii) to any auditor,
government official or examiner; (iii) pursuant to any subpoena or other court
order or otherwise as may be required by applicable law; or (iv) to any assignee
of or participant in, or prospective assignee of or participant in, any Bank's
Advances or its Commitment or any part thereof under any Credit Agreement who,
in each case, agrees in writing to be bound by the terms of this Section; and
PROVIDED FURTHER, that no confidentiality obligation shall attach to any
information which (1) is or becomes publicly known, through no wrongful act on
the part of any Person who shall have received such information, (2) is
rightfully received by such Person from a third party, (3) is independently
developed by such Person, or (4) is explicitly approved for release by Lessee.
Section XIX.22. WAIVER OF LANDLORD'S LIENS. Brazos hereby waives,
relinquishes and discharges all liens and rights (statutory, contractual,
consensual or otherwise) that Brazos may have on any personal property or trade
fixtures of Lessee of any kind, and all additions, accessions and substitutions
thereto. This clause shall be self-operative and no other instrument of waiver
need be required by any lienholder of such property or trade fixtures. In
confirmation of such waiver, however, Brazos shall, at Lessee's request, execute
promptly any appropriate certificate or instrument that Lessee may reasonably
request.
Section XIX.23. BREAKAGE COSTS ARISING DUE TO BRAZOS DEFAULT.
Notwithstanding anything to the contrary set forth herein or in any of the other
Lease Documents, Lessee shall not have any obligation to pay or to reimburse
Brazos for the payment of breakage costs payable under Section 2.8 of the Credit
Agreement which arise solely by reason of an acceleration of the maturity of the
Obligations (as defined in the Credit Agreement) following an Event of Default
(as defined in the Credit Agreement) unless an Event of Default (as herein
defined) then exists hereunder which is continuing beyond the expiration of any
applicable grace or curative period.
Section XIX.24. MEMORANDA OF LEASE. Brazos and Lessee each agrees,
promptly upon request by the other party hereto or by Agent, to execute
Memoranda of Lease in recordable form and otherwise in form and substance
satisfactory to Brazos, Lessee and Agent, for all Facilities and all FF&E.
FACILITIES LEASE AGREEMENT - Page 45
IN WITNESS WHEREOF, Brazos and Lessee have caused this Facilities Lease to
be executed and delivered by their duly authorized officers as of the day and
year first above written.
BRAZOS MARKETS DEVELOPMENT, L.P.
a Delaware limited partnership
By: BRAZOS MARKETS MANAGEMENT, INC.,
a Delaware corporation, its General Partner
By: /s/ DANIEL D. BOECKMAN
--------------------------------------------
Daniel D. Boeckman, Executive Vice President
FACILITIES LEASE AGREEMENT - Page 46
RANDALL'S FOOD & DRUGS, INC.,
a Delaware corporation
By: /s/ LEE STRAUS
-------------------------------------------
Lee Straus, Senior Vice President-Finance,
Secretary and Treasurer
RANDALL'S FOOD MARKETS, INC.,
a Texas corporation
By: /s/ LEE STRAUS
-------------------------------------------
Lee Straus, Senior Vice President-Finance,
Secretary and Treasurer
FACILITIES LEASE AGREEMENT - Page 47
STATE OF TEXAS )
)
COUNTY OF DALLAS )
This instrument was acknowledged before me on the 8th day of September,
1998 by Daniel D. Boekman, Executive Vice President of BRAZOS MARKETS
MANAGEMENT, INC., a Delaware corporation, the General Partner of BRAZOS MARKETS
DEVELOPMENT, L.P., a Delaware limited partnership, on behalf of said corporation
and said limited partnership.
/s/ Sharon Kay Koehler
---------------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF T E X A S
[SEAL]
FACILITIES LEASE AGREEMENT - Page 48
[SEAL]
STATE OF TEXAS )
)
COUNTY OF HARRIS )
This instrument was acknowledged before me on the 14th day of September,
1998 by Lee Straus, the Senior Vice President-Finance, Secretary and Treasurer
of RANDALL'S FOOD & DRUGS, INC., a Delaware corporation, on behalf of said
corporation.
/s/ Carol B. Klass
---------------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF T E X A S
My commission expires: Name of Notary Printed:
9-17-02 /s/ Carol B. Klass
-------------------------
[SEAL]
STATE OF TEXAS )
)
COUNTY OF HARRIS )
This instrument was acknowledged before me on the 14th day of September,
1998 by Lee Straus, the Senior Vice President-Finance, Secretary and Treasurer
of RANDALL'S FOOD MARKETS, INC., a Texas corporation, on behalf of said
corporation.
/s/ Carol B. Klass
---------------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF T E X A S
My commission expires: Name of Notary Printed:
9-17-02 /s/ Carol B. Klass
-------------------------
FACILITIES LEASE AGREEMENT - Page 49
EXHIBIT A
SCHEDULE OF INSURANCE
1. All risk direct physical damage insurance for the Property and all
improvements, equipment and structures located thereon in the amounts and
subject to the deductibles and self-insurance provisions that are applicable
under like insurance coverage maintained by Lessee for similar property and
equipment owned, leased or held by Lessee and which are approved by Agent in its
reasonable discretion.
2. Commercial general liability insurance, including, without
limitation, coverage for legal liability against claims for bodily injury, death
or property damage, occurring on, in or about each Property and the
improvements, equipment and structures located thereon, in the minimum amount of
$1,000,000 combined single limit per occurrence for bodily injury and property
damage, $2,000,000 annual aggregate. Liability coverage may be subject to such
deductibles as may be usual and customary for Lessee to carry in its normal
course of business.
3. Workers' compensation and employers' liability insurance covering
Lessee's employees in such amount as is required by law, or if permissible under
state law, any legally appropriate alternative providing substantially similar
compensation for injured workers.
FACILITIES LEASE AGREEMENT - Page 1